A Report

K.Z. LEASING & FINANCE LTD.
RATIO ANALYSIS
1. RESEARCH
METHODOLOGY
This project is titled as “RATIO ANALYSIS OF K. Z.
LEASING AND FINANCE LIMITED”
Research is a systematic Design collection analysis
and reporting to data and finding a specific situation facing
the company. It is an integral part of the whole
management programme with all its many activities
functionally interrelated.
TYPE OF DATA USED:

To complete the report secondary data has been used.
DATA COLLECTION METHOD:

Secondary data required for carrying out project were
obtained from different books and annual reports of K. Z.
LEASING AND FINANCE LIMITED.
SAMPLE UNIT:
The sample unit is K. Z. LEASING AND FINANCE
LIMITED.
PREPARATION OF REPORT:
The base of preparation of the report, knowledge and
guidance provided by our project work in charge Dr. (prof.)
Jayrajsinh Jadeja and he has mentioned the norms in the
syllabus of M.S.Patel institute of management studies,
M.S.University.
M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 1

RATIO ANALYSIS
DATA ANALYSIS TECHNIQUES:
The data obtained from annual reports of K. Z. LEASING

AND FINANCE LTD are analyzed by the use of following
methods:
• Classification and tabulation of data
• Ratio analysis
• Comparative statement analysis
• Practice followed by sample unit.
REASONS TO CHOOSE THIS PROJECT:

As management student it is necessary to understand
the practical working of an organization. Through project
report one can have clear idea about the functioning of the
firm in the real world. Project study is a subject of M.B.A.
but apart from this following reasons are motivating force
to prepare the project report.
• To get a chance of applying theoretical knowledge in

practice
• To develop creativity and innovative thinking
• To understand the co-ordination and co-operation of the
whole organization
• To understand the complexity of organizations work
environment
• To get an idea about how this study will be helpful for
future career.

RATIO ANALYSIS
2. HISTORY AND
DEVELOPMENT
K. Z. LEASING AND FINANCE LTD IS Existing, Profit Making
and Dividend paying company. K. Z. leasing & Finance
Private Ltd was incorporated on August 7, 1986 under the
Companies Act, 1956 and it has been converted into Public
Limited Company on 19th July, 1991. The main objective
behind the establishment of the company is to provide long
term finance to any person or persons, company or
corporation.
The Main Objectives of Company as Set out in the

Memorandum of Association of the Company are As
Follows.
• To carry on the business of purchasing and letting on

lease or hire in any part of India or Aboard all kinds of
machineries, ships, plants, tools, Jigs, fixtures,
agriculture machineries, trawler, vessels, barges,
automobiles vehicles of every kinds and description,
computer, office, equipments of every kind of
construction, Machineries of all Types description, air
condition-ing plant, air-craft and electronic equipment
of all kinds and descriptions.
• To finance hire Purchase requirements of buses,

lorries, ships, air-crafts of all description, machineries,
building, tractors, equipments, ancillaries of the
RATIO ANALYSIS
transport undertaking meaning a company,

corporation or Departmental undertaking which is
engaged in the operations, management, repairs,
maintenance, manufacture or trading of any mode of
transport if by road, sea or air.
• To carry on the business as a shroff and financiers,

capitalists, mortgage-broker, financial agent and
adviser subject to rules regulations of Reserve Bank of
India.
SUBSIDIARY COMPANIES
The company does not have any subsidiary companies.
PROMOTERS AND THEIR BACKGROUND
The company has been promoted by Shri Keshavlal

Zaverchand Patel who is the chairman of the above
company since its corporation. Shri Keshavlal Zaverchand
Patel , being the key person with wide experience as a
promoter and chairman of the company in this line. Shri K.
Z. Patel started his career as shroff and money lender of
M/s K. T. Patel & Co since 1964 then after the name and
style of Keshavlal Zaverchand shroff from 1970. He is
actively engaged as a chairman of the company since
1991.
Shri Pravin Keshavlal Patel is the Managing Director and is

engaged in day to day working of the company apart from
assisting his father chairman of the company in the
decision making and administration of the company.
RATIO ANALYSIS
SNAPSHOT OF THE COMPANY

BOARD OF DIRECTORS
Shri Keshavlal Z. Patel Chairman
Shri Pravinbhai K. Patel Managing Director
Shri Rameshkumar N. Patel Director
Shri Keshavlal K. Patel Director
Shri Gandabhai A. Patel Director
AUDITORS
J. M. Patel & Bros. (M.com, F.C.A.)
402, Harsh Avenue,
Navjivan Press Road,

RATIO ANALYSIS
Navrangpura,
Ahmedabad- 380014.
BANKERS
The Navnirman Co-operative Bank Ltd.
Uco Bank.
HDFC Bank.
REGISTERED OFFICE
1st floor, Deshna Chember,
B/h, Kadva Patidar Wadi,
Ashram Road, Usmanpura,
Ahmedabad- 380014
SHARE HOLDING PATTERN OF K. Z. LEASING AND

FINANCE LTD AS ON 31ST MARCH, 2009
Category No. of Percent

shares
Promoters 337292 11.09%
Bodies Corporate 795881 26.17%
Individuals 1908027 62.74%
TOTAL 3041200 100%

RATIO ANALYSIS
3.RATIO ANALYSIS
THROUGH GRAPHICAL
PRESENTATION AND
INTERPRETATION
NATURE OF RATIO ANALYSIS
Ratio analysis is the powerful tool

of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions” and as “the
relationship between two or more things.” In financial
analysis, a ratio is used as a benchmark for evaluating the
financial position and performance of a firm.
CLASSIFICATION OF ACCOUNTING RATIOS:

RATIO ANALYSIS
Accounting ratios are generally classified as

follows.
1. Traditional classification or classification according to the

type of financial statements.
2. Functional classification.
1. Traditional classification :
The ratios are grouped into
three categories on the basis of the statements from which
the figures are taken for computing the ratios. It is well
known traditional classification and has been so grouped
since the advent of ratio analysis. The ratios according to
this classification are:
a. Revenue Statement Ratios:

There are the ratios
computed on the basis of items taken from revenue
statement i.e. Profit and Loss Account. E.g. Net Profit ratio
is computed by dividing Net Profit by Sales. Here both net
profit and sales are items appearing in Profit and Loss
Account.
b. Balance Sheet Ratios:

When two items or groups of items
appearing in the balance sheet are compared the ratio so
obtained is the balance sheet ratio. E.g. a ratio establishing
relationship between current assets and current liabilities is
a balance sheet ratio.
c. Composite Ratios:
RATIO ANALYSIS
A ratio showing the relationship between

one item taken from Balance Sheet and another taken from
Profit and Loss Account is a Composite Ratio or a Combined
Ratio known as balance sheet and revenue statement ratio.
A return on capital employed shows the proportion of net
profit to capital employed and it is a composite ratio.
1. Functional Classification:
Ratios are also grouped in

accordance with certain tests. On this basis there are four
categories of ratios.
a. Liquidity Ratios
b. Leverage Ratios
c. Activity Ratios
d. Profitability Ratios
STANDARDS OF COMPARISON
• Past ratios, i.e. ratios calculated from the past

financial statements of the same firm.
• Competitors’ ratios, i.e. ratios of some selected
firms, especially the most progressive and successful
competitor, at the same point in time;
• Industry ratios, i.e. ratio of the industry to which
the firm belongs; and
• Projected ratios, i.e. ratios developed using the
projected, or pro forma, financial statements of the
same firm.

RATIO ANALYSIS
INTERPRETATION THROUGH RATIOS:

Only calculating ratio is of no use unless
it is interpreted so as to be useful to management in
making policy decision. The following methods are used for
this purpose.
1. Comparison with Ideal Ratio:

No conclusion can be
drawn from any individual ratio. It should be compared with
some generally accepted ideal ratio. E.g. the current ratio
of a firm is found to be 1.5: 1. This ratio does not guide the
management as regards its liquid position but it is
generally believed in financial circles that the ideal current
ratio should be 2: 1. This is considered to be an ideal ratio
and if the current ratio of the said firm is compared with
this ratio, it will indicate that its current ratio is not
satisfactory. There are some ideal ratios in every type of
business with which the individual firm’s ratios are
compared so that useful conclusion can be drawn.
2. Comparison with past Ratios :

If the present ratios of a company
are compared with its past ratios, they will indicate the
trend. It will show whether financial position and
performance of the firm has improved, deteriorated or
remained constant. This will help the management in
taking corrective measures if necessary. The firm can also
arrive at its average ratio for the last 3 to 5 years and can
compare it with industry average.
3. Help of some related ratios :

The analysis and interpretation of
some ratios may be made more meaningful if some related
ratios are also considered. Suppose the current ratio of a
RATIO ANALYSIS
firm is 2:1 showing a comfortable liquid position but if it is

considered along with the liquid ratio and acid test ratio it
will give very clear idea of the liquidity of the business. It
may happen that the current ratio may show a good
position because of large stock contained in the current
assets but it suggests that the sale is very slow and liquid
position is not as comfortable as it appears. Liquid ratio if
used along with current ratio will give clear idea of the
liquidity because it excludes stock in its computation.
4. Comparison with ratios of other firm:

Comparison of firm’s ratio with those
of other firms in the same industry is useful and indicates
strength or weakness of the firm’s position and
performance. The comparison is useful because the firms in
the same industry face similar problems. E.g. If the gross
profit ratio of the textile industry as a whole is 20% and the
same ratio of a particular firm is say, 15%, it reveals and
unsatisfactory position.
USERS OF FINANCIAL ANALYSIS
Financial analysis is the

process of identifying the financial strengths and weakness
of the firm by properly establishing relationships between
the items of the balance sheet and the profit and loss
account.

RATIO ANALYSIS
• Trade creditors are interested in firm’s ability

to meet their claims over a very short period of
time. Their analysis will, therefore, confine to
the evaluation of the firm’s liquidity position.
• Suppliers of long-term debt, on the other

hand, are concerned with the firm’s long-term
solvency and survival. They analysis the firm’s
profitability over time, its ability to generate
cash to be able to pay interest and repay
principal. Long term creditors do analysis the
historical financial statements and also put
stress on the projected financial statements.
• Investors, who have invested their money in

the firm’s shares, are most concerned about the
firm’s earnings. They focus on the analysis of
the firm’s present and future profitability. They
are also interested in firm’s financial structure
to the extent it affects firm’s earning and risk.
• Management of the firm would be interested

in every aspect of the financial analysis. It is
their responsibility to see that the funds are
used most effectively and efficiently, and the
firm’s financial condition is sound.
UTILITY OF RATIO ANALYSIS

RATIO ANALYSIS
The use of ratios was started by

banks for ascertaining the liquidity and profitability of
companies’ business for the purpose of advancing loans to
them. It gradually became popular and other creditors
began to use profitably. Now even the investors calculate
ratios from the published accounts of the company in order
to have an idea about the solvency and profitability of the
company before investing their savings. The ratio analysis
provides useful data to the management which would help
them take important policy decision. Diverse groups of
people make use of ratios, to determine a particular aspect
of the financial position of the company, in which they are
interested.
1. Profitability:
Useful information about the trend of the
profitability is available from the profitability ratios. The
gross profit ratio, net profit ratio and ratio of return on
investment give a good idea about the profitability of the
business. On the basis of these ratios, investors get the
idea about the overall efficiency of the business; the
management gets an idea about the efficiency of the
managers and banks as well as other creditors draw useful
conclusions about repaying capacity of the borrowers.
2. Liquidity:
In fact, the use of ratios was made initially to
ascertain the liquidity of the business. The current ratio,
liquid ratio and acid test ratio will tell whether the business
will be able to meet its current liabilities as and when they
mature. Banks and other lenders will be able to conclude
from these ratios whether the firm will be able to pay
regularly the interest and loan installments.

RATIO ANALYSIS
3. Efficiency:
The turnover ratios are excellent guides to
measure the efficiency of the managers. E.g. the stock turn
over will indicate how efficiently the stock is being made,
the debtors turnover ratio will indicate the efficiency of the
collection department and asset turnover shows the
efficiency with which the assets are used in business. All
such ratios related to sales present a good picture of the
success or otherwise of the business.
4. Inter-firm Comparison:
The absolute ratios of a firm are
not of much use, unless they are compared with similar
ratios of the other firm belonging to the same industry. This
is inter-firm comparison, which shows the strengths and
weakness of the firm as compared to the other firms and
indicates corrective measures.
5. Indicate Trend:
The ratios of the last three to five years will
indicate the trend in the respective fields. For example, the
current ratio of a firm is lower than the industry average,
but if the ratios of the last five years show the improving
trend, it’s an encouraging trend. Reverse may also be true.
A particular ratio of a company for one year may compare
favorably with industry average, but if its trend shows a
deteriorating position, it is not desirable. Only ratio analysis
will provide this information.
6. Useful for Budgetary Control:

RATIO ANALYSIS
Regular budgetary reports

are prepared in a business where the system of budgetary
control is in use. If various ratios are presented in these
reports, it will give a fairly good idea about various aspects
of financial position.
7. Useful for Decision-making:

Ratios guide the
management in making some of the important decisions.
Suppose the liquidity ratios shoe an unsatisfactory position,
the management may decide to get additional liquid funds.
Even for capital expenditure decisions, the ratio of return
on investment will guide the management. The efficiency of
various departments can be judged on the basis of their
profitability ratios and efficiency of each department can be
thus be determined.
LIMITATIONS OF RATIO ANALYSIS
Anyone who draws any conclusion on the basic of

accounting ratios about the financial conditions and earning
of the business must take account of the following
limitations of ratios:
1. Single year’s ratios have limited utility:

The utility of
ratios computed from the financial statements of one year
only is obviously limited. They must be compared with the
past results of the company as also with the results of other
business firms in the same industry.
2. Other factors must be considered:

While comparing
ratios of different firms, it must be remembered that
RATIO ANALYSIS
different firms follow different accountancy plans and

policies. For example, some may use a straight line method
of depreciation, while others may make use of a
diminishing balance method. Hence, great care has to be
exercised before any conclusions are drawn from such
comparison.
3. Limited utility of historical ratios:

While comparing
ratios of past several years, it should be remembered that
changes in price level may render such comparison
useless. An asset purchased some 10 years before may be
shown at its historical value and comparison of these
assets with sales may be of no value as sales are expressed
in current market value.
4. Use of one ratio misleading:

One ratio used with
reference to other ratios may be misleading. If some
conclusions are to be drawn, the combined effect of a few
related ratios must be considered.
5. Lack of standard ratios:

There is no practically standard
ratio against which the actual performance can be
compared. The satisfactory level of various ratios may
differ from one industry to another industry only because
circumstances differ from industry to industry and even
from firm to firm.
6. Other factors important:

RATIO ANALYSIS
Financial results of the

business depend upon a number of factors such as general
economic conditions and competition, local factors and the
policy adopted by the management. Hence, before giving
any opinion on the basis of accounting ratios all such
factors must be kept in mind.
7. Inaccurate base:
The accounting ratios can never be more
correct than the information from which they are
computed. If the accounting data is not accurate, the
accounting ratios based on these figures would give
misleading results.
8. Investigation necessary:
It must be remembered that
accounting ratios are only a preliminary step in
investigation. They suggest areas were investigation or
inquiry is necessary. Hence, before taking any action on the
basis of accounting ratios, a rigorous investigation must be
made.
9. Rigidity harmful:
If in the use of the ratios, the manager
remains rigid and sticks to them, it will lead to dangerous
situation. For example, if the manager believes the current
ratio should not fall below 2:1, then many profitable
opportunities will have to be forgone.
10.Ratios of two irreverent figures:

Ratios must be
established between related matters. It is of no use if the
ratios are found between two figures which have no
RATIO ANALYSIS
relation with each other. E.g. ratio of factory expenses to

selling expenses is illogical and does not give any useful
conclusions.
TYPE OF RATIOS ON THE BASIS OF FUNCTIONAL

CLASSIFICATION
Several ratios, calculated from the accounting

data, can be grouped into various classes according to
financial activity or function to be evaluated. As stated
earlier, the parties interested in financial analysis are short-
and long-term creditors, owners and management. In view
of the requirements of the various users of ratios, we may
classify them into the following four important categories:
• Liquidity ratios
• Leverage ratios
• Activity ratios
• Profitability ratios
A. LIQUIDITY RATIOS
It is extremely essential for a firm to be

able to meet its obligations as they become due. Liquidity
ratios measure the ability of the firm to meet its current
obligations. The failure of a company to meet its obligations
due to lack of sufficient liquidity, will result in a poor
creditworthiness, loss of creditors’ confidence, or even in
legal tangles resulting in the closure of the company. A
very high degree of liquidity is also bad; idle assets earn
nothing. The most common ratios which indicate the extent

RATIO ANALYSIS
of liquidity or lack of it are: (i) current ratio and (ii) quick

ratio.
Current Ratio
The current ratio is calculated by dividing current

assets by current liabilities:
Current ratio = Current assets / Current

liabilities
Current assets include cash and those assets which

can be converted into cash within a year, such as
marketable securities, debtors and inventories, prepaid
expenses. All obligations maturing expenses, short-term
bank loan, income-tax liability and long-term debt maturing
in the current year.
The current ratio is a measure of the firm’s short-term

solvency. It indicates the availability of current assets in
rupees for every one rupee of current liability. A ratio of
greater than one means that the firm has more current
assets than current claims against them.
For KZL, the Current ratios for the last five

years are,
For 2008-2009 = 67165110.35 / 474582 = 141.52 or

141.52: 1
For 2007-2008 = 69298411.69 / 967366 = 71.64 or

71.64: 1
F0r 2006-2007 = 60237158.5 / 971801 = 61.99 or

61.99: 1

RATIO ANALYSIS
For 2005-2006 = 57061866.52 / 826415 = 69.05 or

69.05: 1
For 2004-2005 = 46850261 / 483449 = 96.91 or

96.91: 1
Interpretation:
As a conventional rule, a current ratio of 2

to 1 or more is considered satisfactory but here the
company has maintained far higher current ratio than
needed during the last 5 years. The main reason for that is
the conservative working capital policy adopted by the
company. Apart from fix assets, major part of current
assets was financed by the long term funds. Moreover, you
will find a rather ‘V’ shape in the graph because the %
increase in current liabilities in 05-06 and 06-07 is more
than that in current assets while the % increase in current
assets in 07-08 and 08-09 is more than that in current
liabilities. Overall, the company enjoys a very high liquidity.
Quick Ratio
Quick ratio establishes a relationship between quick, or

liquid, assets and current liabilities. An asset is liquid if it
can be converted into cash immediately or reasonably soon
without a loss of value. Inventories are considered to be
less liquid. Inventories normally require some time for
realizing into cash; their value also has a tendency to
fluctuate. The quick ratio is found out by dividing quick
assets by current liabilities.
Quick ratio = Current assets – Inventories / Current

liabilities
RATIO ANALYSIS
For KZL, the Quick ratios will be same as the Current

ratios, since being the service firm KZL has not any
inventories.
Cash Ratio
Since cash is the most liquid asset, a financial analyst may

examine cash ratio and its equivalent to current liabilities.
Trade investment or marketable securities are equivalent
of cash; therefore, they may be included in the
computation of cash ratio:
Cash ratio = Cash + Marketable securities / Current

liabilities
For KZL, the Cash ratios for the last five years are,
For 2008-2009 = 42505335.85 / 474582 = 89.56 or 89.56:

1 or 8956%
For 2007-2008 = 42546909.19 / 967366 = 43.98 or 43.98:

1 or 4398%
For 2006-2007 = 42502263 / 971801 = 43.74 or 43.74: 1 or

4374%
For 2005-2006 = 27730159.14 / 826415 = 33.55 or 33.55:

1 or 3355%
For 2004-2005 = 32734874.92 / 483449 = 67.71 or 67.71:

1 or 6771%

RATIO ANALYSIS
Interpretation:
The company in our case carries a

huge amount of cash. There is nothing to be worried about
the lack of cash or liquidity in the company. But if the
interest rates are higher in the market, such a high level of
idle cash can raise your opportunity costs.
Net Working Capital Ratio
The difference between current assets and current

liabilities excluding short-term bank borrowing is called net
working capital (NWC) or net current assets (NCA). NWC is
sometimes used as a measure of a firm’s liquidity. It is
considered that, between two firms, the one having the
larger NWC has the greater ability to meet its current
obligations. This is not necessarily so; the measure of
liquidity is a relationship, rather than the difference
between current assets and current liabilities.
NWC ratio = Net working capital (NWC) / Net assets

(NA)
For KZL, the Net Working Capital ratios for the last five
years are,
For 2008-2009 = 66690528.35 / 67390764.35 = 0.99
For 2007-2008 = 68331045.69 / 69075033.69 = 0.99

RATIO ANALYSIS
For 2006-2007 = 59265357.5 / 60029647.5 = 0.99
For 2005-2006 = 56235451.52 / 57005868.52 = 0.99
For 2004-2005 = 46366812 / 47171970 = 0.98
Interpretation:
Over the last 5 years the company has
maintained almost the same 0.99 Net Working Capital ratio
which is reasonably good and indicates good liquidity of the
company. However the reason for same ratio every year is
the same % increase in the company’s Net Working Capital
and Net Assets. Higher NWC ratio cannot be taken as high
liquidity always because it is the test of quantity not the
quality. Liquidity also depends upon the quality of current
assets.
B. LEVERAGE RATIOS
Firm should have a strong short-as well as long-term

financial position. To judge the long-term financial position
of the firm, financial leverage, or capital structure, ratios
are calculated. These ratios indicate mix of funds provided
by owners and lenders. Many variations of these ratios
exist; but all these ratios indicate the same-thing the extent
to which the firm has relied on debt in financing assets.
Debt Ratio

RATIO ANALYSIS
The firm may be interested in knowing the proportion of the

interest-bearing debt (also called funded debt) in the
capital structure. It may, therefore, compute debt ratio by
dividing total debt (TD) by capital employed (CE) or net
assets (NA). Total debt will include short and long-term
borrowing from financial institutions, debentures/bonds,
deferred payment arrangements for buying capital
equipments, bank borrowings, public deposits and other
interest-bearing loan. Capital employed will include total
debt and worth (NW).
Debt ratio = Total debt (TD) / Total debt (TD) + Net

worth (NW)
= Total debt (TD) / Capital employed (CE)
For KZL, the Debt ratios for the last five years
are,
For 2008-2009 = 28870888.23 / (28870888.23 +

63032676.93) = 0.3141 or 31.41%
For 2007-2008 = 29887277.06 / (29887277.06 +

63032676.93) = 0.3216 or 32.16%
For 2006-2007 = 9998284.88 / (9998284.88 + 59093164)

= 0.1447 or 14.47%
For 2005-2006 = 7297150.25 / (7297150.25 +

55412545.08) = 0.1163 or 11.63%
For 2004-2005 = 14062054.19 / (14062054.19 +

51647216.97) = 0.2140 or 21.40%

RATIO ANALYSIS
Interpretation:
From the debt ratio it can be

interpreted that the lenders have financed 31.41%,
32.16%, 14.47%, 11.63% and 21.40% of the company’s net
assets (capital employed) from 2004-2005 to 2008-2009
respectively. It definitely means that the remaining finance
that was 68.59%, 67.84%, 85.53%, 88.37% and 78.6% of
the net assets was funded by the owners for the same
period.
We can say that in 2004-2005, 2007-

2008 and 2008-2009 the owners have depended more on
the external fund or lenders funds.
Debt-Equity Ratio
This relationship describing the lenders’ contribution for

each rupee of the owners’ contribution is called debt-equity
ratio.
Debt-Equity ratio = Total Debt (TD) / Net worth

(NW)
NA-to-NW ratio = Net Assets (NA) / Net worth

(NW)
For KZL, the Debt-Equity (D/E) ratios for the last five
years are,
For 2008-2009 = 28870888.23 / 63032676.93 =

0.4590
For 2007-2008 = 29887277.06 / 63032676.93 =

0.4741
RATIO ANALYSIS
For 2006-2007 = 9998284.88 / 59093164 = 0.1691
For 2005-2006 = 7297150.25 / 55412545.08 = 0.1316
For 2004-2005 = 14062054.19 / 51647216.97 =

0.2722
Interpretation:
From the debt-Equity ratio it is clear

that the owners of K. Z. Finance ltd have contributed more
funds than its lenders in all the years.
It implies that the company has

depended more on equity than debt. This more reliance on
equity restricts the company from taking the advantage of
the tax shield and financial leverage but at the same time it
relives the company from regular payment of interest and
obligations.
Other Debt Ratios
To assess the proportion of total funds-short and long-term

provided by outsiders to finance total assets, the following
ratio may be calculated:
TL-to-TA ratio= Total Liabilities (TL) / Total Assets

(TA)
For KZL, Total assets to total liabilities ratios for the

last five years are,

RATIO ANALYSIS
For 2008-2009 = 29345470.23 / 67865346.35 =

0.4324
For 2007-2008 = 30854643.06 / 70042399.69 =

0.4405
For 2006-2007 = 10970085.88 / 61001448.5 = 0.1798
For 2005-2006 = 8123565.25 / 57832283.52 = 0.1404
For 2004-2005 = 14545503.19 / 47655419 = 0.3052
Interpretation:
The figures in this ratio show the proportion of outsiders’

fund to finance 1 Rs of asset of the company. It has
increased during recent years. In 05-06 and 06-06 it used
to be nearly 15% while in 07-08 and 08-09 it touched to the
tune of nearly 44%.
In addition to debt ratios explained so far, a firm may wish

to calculate leverage ratios in terms of the long-term
capitalization or funds (LTF) alone. Long-term funds or
capitalization will include long-term debt and net worth.
Thus, the firm may calculate the following long-term debt
ratios:
LT-to-LF ratio = Long-term Debt (LD) / Long-term

Debt (LD) + Net worth
LT-to-NW ratio= Long-term Debt (LD) / Net worth

(NW)
Coverage Ratios
RATIO ANALYSIS
The interest coverage ratio or the times-interest-earned

used to test the firm’s debt-servicing capacity.
Interest coverage= EBIT / Interest
For KZL, Coverage ratios for the last five years

are,
For 2008-2009 = (2510097.59) / 1689391 = -1.4858

times
For 2007-2008 = 5558167.21 / 976198.86 = 5.69368

times
For 2006-2007 = 4349941.13 / 673139 = 6.46217

times
For 2005-2006 = 3901300.76 / 481277 = 8.1061

times
For 2004-2005 = 2798417.7 / 310886 = 9.0014 times
Interpretation:
The graph shows that this ratio is

decreasing over the last 5 years. This downward trend in
interest coverage ratio indicates the excessive use of debt
or inefficiency in operations. Here the company is operating
with low debt so it needs to improve its operating
efficiency.
The interest coverage ratio shows the number of times the

interest charges are covered by funds that are ordinarily
available for their payment. Since taxes are compute after
RATIO ANALYSIS
interest, interest coverage is calculated in relation to before

tax earnings. Depreciation is a non-cash item. Therefore,
funds equal to depreciation are also available to pay
interest charges. We can calculate the interest average
ratio as earnings before depreciation, interest and taxes
(EBDIT) divided by interest:
This ratio indicates the extent to which earnings may fall

without causing any embarrassment to the firm regarding
the payment of the interest charges. A higher ratio is
desirable; but too high ratio indicates that the firm is very
conservative in using debt, and that it is not using credit to
best advantage of shareholders.
C. ACTIVITY RATIOS
Activity ratios are employed to evaluate the efficiency with

which the firm manages and utilizes its assets. These ratios
are also called turnover ratios because they indicate the
speed with which assets are being converted or turned over
into sales.
Inventory Turnover
Inventory turnover ratio indicates the efficiency of the firm
in producing and selling its product. It is calculated by
dividing the cost of goods sold by the average inventory:
Inventory turnover = Cost of goods sold /

Average inventory

RATIO ANALYSIS
Components of Inventory
The manufacturing firm’s inventory consists of two more
components: (i) raw materials and (ii) work-(stock)-in-
process. An analyst may also be interested in examining
the efficiency with which the firm converts raw materials
into work-in-process into finished goods.
Raw material inventory turnover:

= Material consumed / Average raw material
inventory
Work-in-process inventory turnover:

= Cost of production / Average work-in-
process inventory
Here in our case the company K. Z. leasing and finance ltd

is the service firm not the manufacturing firm. So there are
no ratios calculated regarding Inventory.
Debtors (Accounts Receivable) Turnover Ratios
The liquidity position of the firm depends on the quality of

debtors to a great extent. Financial analysts apply three
ratios to judge the quality or liquidity of debtors: (a)
debtors turnover, (b) collection period, and (c) aging
schedule of debtors.
Debtors Turnover
Debtors’ turnover is found out by dividing credit sales by

average debtors:

RATIO ANALYSIS
Debtors turnover = Credit sales / Average

debtors
Debtors turnover indicates the number of times debtors
turnover each year, generally, the higher the value of
debtors turnover, the more efficient is the management of
credit.
Collection Period
ACP = 360 / Debtors turnover = Debtors*
360 / Sales
The collection period ratio thus helps an analyst in two

respects:
• In determining the collectability of debtors and thus,
the efficiency of collection efforts, and
• In ascertaining the firm’s comparative strength and
advantage relative to its credit policy and
performance vis’-a-vis’ the competitors’ credit
policies and performance.
Aging Schedule
The average collection period measures the quality of
debtors in an aggregative way. We can have detailed idea
of the quality of debtors through the aging schedule. The
aging schedule breaks down debtors according to the
length of time for which they have been outstanding. A
hypothetical example of the aging schedule is given in
below Table.
EXAMPLE OF DEBTORS AGING

SCHEDULE______________________________________________

RATIO ANALYSIS
Outstanding Period Outstanding Amount of

Debtors Percentage of Total Debtors
(Days) Rs.
Rs.
0-25 200000 50.0

26-35 100000
25.0
36-45 50000
12.5
46-60 30000
7.5
Over 60 20000
5.0
400000
100.0
Assets Turnover Ratios

Assets are used to generate sales. The relationship
between sales and assets is called assets turnover.
Net Assets Turnover

The firm compute net assets turnover simply by dividing
sales by net assets (NA).
Net assets turnover = Sales / Net
assets

RATIO ANALYSIS
For KZL, Net assets Turn Over ratios for the last five years
are,
For 2008-2009 = 5158284.41 / 67390764.35 =

0.0765428
For 2007-2008 = 7334097.7 / 69075033.69 =

0.106175
For 2006-2007 = 7943512.63 / 60029647.5 =

0.132327
For 2005-2006 = 7570112.87 / 57005868.52 =

0.13279
For 2004-2005 = 6987376 / 47171970 = 0.14812
It may be recalled that net assets (NA) include net fixed

assets (NFA) and net current assets (NCA) that is, current
assets (CA) minus current liabilities (CL).
Interpretation:
The net assets turn over ratios of the
company for the last 5 years do not show good result. It is
decreasing YoY. Last year’s ratio of 0.076 Rs implies that
the company is generating only 0.0765428 Rs for One
Rupee of Capital employed in net asset. There is a great
need to boost income from the operations and utilize the
net asset very well.

RATIO ANALYSIS
Total Assets Turnover

Some analysts like to compute the total assets turnover in
addition to or instead of the net assets turnover. This ratio
shows the firm’s ability in generating sales from all financial
resources committed to total assets. Thus:
Total assets turnover = Sales / Total
assets
For KZL, Total assets Turn Over ratios for the last
five years are,
For 2008-2009 = 5158284.41 / 67865346.35 =

0.07600
For 2007-2008 = 7334097.7 / 70042399.69 =

0.104709
For 2006-2007 = 7943512.63 / 61001448.5 =

0.130218
For 2005-2006 = 7570112.87 / 57832283.52 =

0.130897
For 2004-2005 = 6987376 / 47655419 = 0.146622
Total assets (TA) include net fixed assets (NFA) and current
assets (CA) (TA = NFA + CA).
Interpretation:
RATIO ANALYSIS
Even in this ratio of total asset the

picture is almost same as that in Net asset. Total asset
turnover ratio is gradually decreasing YoY. Last year’s
figure of 0.076 implies that the company generates only
0.076 Rupees of income for One Rupee invested in Fixed
and Current assets together.
One reason for the above both ratios being almost same is
that the company has very low current liabilities in all the
last 5 years.
Fixed and Current Assets Turnover

The firm may wish to know its efficiency of utilizing fixed
assets and current assets separately.
Fixed assets turnover = Sales / Net
fixed assets
And the current assets turnover is:
Current assets turnover = Sales /
Current assets
For KZL, Net Fixed Assets Turn Over ratios for the last
five years are,
For 2008-2009 = 5158284.41 / 700236 = 7.366
For 2007-2008 = 7334097.7 / 743988 = 9.857
For 2006-2007 = 7943512.63 / 769290 = 10.393
For 2005-2006 = 7570112.87 / 770417 = 9.82599
For 2004-2005 = 6987376 / 805158 = 8.671

RATIO ANALYSIS
For KZL, Current assets Turn Over ratios for the

For 2008-2009 = 5158284.41 / 67165110.35 = 0.0768
For 2007-2008 = 7334097.7 / 69298411.69 = 0.1058
For 2006-2007 = 7943512.63 / 60237158.5 = 0.1319
For 2005-2006 = 7570112.87 / 57061866.52 = 0.1327
For 2004-2005 = 6987376 / 46850261 = 0.14891
Interpretation:
Here the company turns over fixed
assets faster than current assets. Interpreting the
reciprocal of these ratios of the last year we can say that
the company needs to invest Rs 0.14 in fixed assets and Rs
13.15 in current assets.
The need to invest in current assets has
been increasing for the last 5 years.
Working Capital Turnover

A firm may also like to relate net current assets (or net
working capital gap) to sales.
Net current assets turnover = Sales / Net
current assets

RATIO ANALYSIS
For KZL, Working Capital Turn Over ratios for the

For 2008-2009 = 5158284.41 / 66690528.35 =

0.077346581
For 2007-2008 = 7334097.7 / 68331045.69 =

0.107331852
For 2006-2007 = 7943512.63 / 59265357.5 =

0.13403298
For 2005-2006 = 7570112.87 / 56235451.52 =

0.13461460
For 2004-2005 = 6987376 / 46366812 =

0.150697787
Interpretation:
The picture in Working Capital turnover
ratio is no different from Current assets turnover because
the company’s Current assets and Net current assets are
almost same. (due to less current liabilities)
A. PROFITABILITY RATIOS
A company should earn profits to survive and

grow over a long period of time. The financial manager
should continuously evaluate the efficiency of the company
in term of profits. The profitability ratios are calculated to
measure the operating efficiency of the company.

RATIO ANALYSIS
Generally, two major types of profitability ratios are

calculated:
• Profitability in relation to sales
• Profitability in relation to investment.
Gross Profit Margin
The first profitability ratio in relation to sales is the gross

profit margin (or simply gross margin ratio). It is calculated
by dividing the gross profit by sales:
Gross profit margin = Sales – Cost of goods sold / Sales

= Gross profit / Sales
The gross profit margin reflects the efficiency with which

management produces each unit of product.
A high gross profit ratio is a sign of good management. A

gross margin ratio may increase due to any of the following
factors; 1) higher sales prices, cost of goods sold remaining
constant, 2) lower cost of goods sold, sales prices
remaining constant, 3) a combination of variations in sales
prices and costs, the margin widening, and 4) an increase
in the proportionate volume of higher margin item.

RATIO ANALYSIS
Net Profit Margin
Net profit is obtained when operating expenses, interest

and taxes are subtracted from the gross profit. The net
profit margin ratio is measured by dividing profit after tax
by sales:
Net profit margin = Profit after tax / Sales
For KZL, Net Profit ratios for the last five years
are,
For 2008-2009 = (4199488.59) / 5158284.41 =

-81.84%
For 2007-2008 = 3939562.35 / 7334097.7 = 53.72%
For 2006-2007 = 3680619.5 / 7943512.63 = 46.33%
For 2005-2006 = 3765328.11 / 7570112.87 = 49.74%
For 2004-2005 = 2487531.70 / 6987376 = 35.60%
Net profit margin ratio establishes a relationship between

net profit and sales indicates management’s efficiency in
manufacturing, administering and selling the products. This
ratio is the overall measure of the firm’s ability to turn each
rupee sales into the profit.

RATIO ANALYSIS
This ratio also indicates the firm’s capacity to withstand

adverse economic conditions. A firm with a high net margin
ratio would be in an advantageous position to survive in the
face of falling selling prices, rising cost of production or
declining demand for the products. It would be really
difficult for a low net margin firm to withstand these
adversities.
Interpretation:
The graph shows good trend in net profit
margin up to 2007-2008 but in 2008-2009 there is a
sudden downfall in net profit margin.
During 2004 to 2008 the company is
earning a good Profit after tax and able to control its
expenditures while in 2008-2009 the company’s
expenditure is nearly double its Income in that year.
Moreover as we all know that 2008-2009 was a huge
recession year. K. Z. ltd was also hit by the economic
slowdown. That is the major reason why the company has
its net profit ratio in negative in 2008-2009.
Operating Expense Ratio
The operating expense ratio explains the changes in the

profit margin (EBIT to Sales) ratio. This ratio is computed by
dividing operating expenses viz., cost of goods sold plus
selling expenses and general and administrative expenses
(excluding interest) by sales:
Operating expenses ratio = Operating expenses / Sales
Return on Investment (ROI)

RATIO ANALYSIS
The term investment may refer to total assets or net

assets.
The conventional approach of calculating return on

investment (ROI) is to divide PAT by investment.
Investment report pool of funds supplied by shareholders
and lenders, while PAT represent residue income of
shareholders; therefore, it is conceptually unsound to use
PAT in the calculation of ROI. Also, as discussed earlier, PAT
is affected by capital structure.
ROI = ROTA = EBIT (1 – T) / Total assets = EBIT (1 - T)/NA
ROI = RONA = EBIT (1 – T) / Net assets = EBIT (1 - T)/NA
For KZL, Return on Total assets ratios for the last

five years are,
For 2008-2009 = (2510097.59) / 67865346.35 =

-0.03698644 or 3.70%
For 2007-2008 = 5558167.21 / 70042399.69 =

0.07935432 or 7.94%
For 2006-2007 = 4349941.13 / 61001448.5 = 0.0713088

or 7.13%
For 2005-2006 = 3901300.76 / 57832283.52 =

0.0674588 or 6.75%
For 2004-2005 = 2798417.7 / 47655419 = 0.058721919

or 5.87%
RATIO ANALYSIS
For KZL, Return on Net assets ratios for the last

five years are,
For 2008-2009 = (2510097.59) / 67390764.35 =

0.0372469 or 3.72%
For 2007-2008 = 5558167.21 / 69075033.69 =

0.0804656 or 8.05%
For 2006-2007 = 4349941.13 / 60029647.5 =

0.072463217 or 7.25%
For 2005-2006 = 3901300.76 / 57005868.52

=0.0684368 or 6.84%
For 2004-2005 = 2798417.7 / 47171970 =

0.05932374 or 5.93%
Interpretation:
We can easily observe the similarity in
Return on Total assets and Net assets. The reason behind
that is very low level of current liability.
Company’s EBIT has increased 39.41%,
11.50% and 27.77% in 05-06, 06-07 and 07-08 respectively
resulting into YoY increase in the ratio but owing to the loss
in slowdown year 08-09 the ratio goes into negative.
Excluding the year 08-09, we can say that
the company has utilized its assets very well to earn return
on it.
Return on Equity (ROE)

RATIO ANALYSIS
A return on shareholders’ equity is calculated to see the

profitability of owners’ investment.
ROE = Profit after taxes / Net worth = PAT / NW
For KZL, Return on Equity ratios for the last five

years are,
For 2008-2009 = (4199488.59) / 63032676.93 =

-0.0666239 or 6.66%
For 2007-2008 = 3939562.35 / 63032676.93 =

0.062500317 or 6.25%
For 2006-2007 = 3680619.5 / 59093164 = 0.0622850 or

6.23%
For 2005-2006 = 3765328.11 / 55412545.08 =

0.0679508 or 6.80%
For 2004-2005 = 2487531.7 / 51647216.97 =

0.048163905 or 4.82%
ROE indicates how well the firm has used the resources of
owners.
This ratio is, thus, of great interest to the present as well as
the prospective shareholders and also of great concern to
management, which has the responsibility of maximizing
the owners’ welfare.
Interpretation:
RATIO ANALYSIS
Company has maintained Return on

Equity around 6% for the last 4 years and that is only good.
Company needs to improve its PAT by improving its
efficiency or restricting its expenses (specially looking at
the last year’s slowdown effect) because ROE is the
barometer that gives idea to fund owners about how
efficiently their funds are being used in the company.
Based on the ROE, they decide to invest in the firm.
Earnings per Share (EPS)
The profitability of the common shareholders’ investment

can also be measured in many other ways.
One such measure is to calculate the earnings per share.
EPS = Profit after tax / Number of common shares

outstanding
For KZL, EPS ratios for the last five years are,
For 2008-2009 = (4199488.59) / 3041200 = (1.38086)
For 2007-2008 = 3939562.35 / 3041200 = 1.29539
For 2006-2007 = 3680619.5 / 3041200 = 1.21025
For 2005-2006 = 3765328.11 / 3041200 = 1.2381
For 2004-2005 = 2487531.7 / = 0.8179
The EPS of the company should be compared with the

industry average and the earning per share of other firms.

RATIO ANALYSIS
It does not reflect how much is paid as dividend and how

much is retained in the business.
Interpretation:
Like ROE shows earning on equity basis
same way EPS shows the profitability of the firm a per
share basis. The firm’s earning power has not changed
majorly for the last three years being nearly 1.20 Rupees
per share which cannot be said very well. The reason for
that is the high level of Equity Share capital compared to its
debt level. Company can improve it if it decides to buy
back its shares or it has to try hard to raise its Profit.
Dividend per share (DPS)
The Income which the shareholders really receive is the

amount of earning distributed as cash dividends. Therefore,
a large number of present and potential investors may be
interested in DPS, rather than EPS.
DPS = Earning paid to shareholders (Dividends) / Number

of ordinary shares outstanding
Interpretation:
K. Z. ltd’s Board of Directors feels that

there is tough competition in finance business and that’s
why it is in the interest of the firm not to declare any
dividend and invest the profit back into the Business. With
this belief in their mind, they have not declared any
dividend for the last 5 years.

RATIO ANALYSIS
However Board’s this decision can cause

trouble for the firm because the investment decisions made
by the investors are affected by their attitude. Some
investors invest for dividend while some for capital gain.
Investors’ looking for capital gain support firm’s decision to
invest profit or reserve back into business but those looking
for dividend do not.
Dividend Pay-out Ratio
The dividend Pay-out ratio (or simply the pay-out ratio) is

DPS (or total dividends) divided by the EPS (or the Profit
after tax).
Pay-out Ratio = Dividend per share (DPS) / Earning per

share (EPS)
Interpretation:
Since there is no dividend paying policy in

the company, there is no Dividend Pay-out ratio.
Dividend and Earning Yields
The dividend yield is the dividend per share divided by the

market value per share and the earning yield is the earning
per share divided by the market value per share. That is:
Dividend yield = Dividend per share (DPS) / Market value

per share (MV)

RATIO ANALYSIS
Earning yield = Earnings per share (EPS) / Market value per

share (MV)
The dividend yield and the earning yield evaluate the

shareholders’ return in relation to the market value per
share. The earnings yield is also called the earning price E/P
ratio.
For KZL, the Earning Yield ratios for the last five years
are,
For 2008-2009 = (1.38086) / 53.10 = -0.026 or -2.6%
For 2007-2008 = 1.29539 / 4.63 = 0.2798 or 27.98%
For 2006-2007 = 1.21025 / 4.18 = 0.2895 or 28.95%
For 2005-2006 =1.2381 / 3.80 = 0.3258 or 32.58%
For 2004-2005 =0.8179 / 1.74 = 0.47 or 47%
Interpretation:
There has been downfall in Earning

Yield 30.68%, 11.14% and 3.35% in 05-06, 06-07 and 07-08
respectively. This implies the decrease in the shareholders’
return in relation to the market value of shares. Moreover
due to the loss in the year 08-09 and high market value,
the EPS is negative and that forced Earning yield also to be

RATIO ANALYSIS
negative. Firm needs to perform better to increase its EPS

by raising its PAT.
However since there is no dividend, there

is no Dividend Yield.
Price Earnings Ratio
The reciprocal of the earning yield is called the price

earning P/E ratio. Thus:
Price earnings ratio = Market value per share (MV) /

Earning per share (EPS)
The price earnings ratio is widely used by the security

analysts to value the firm’s performance as expected by
the investors. It indicates investors’ judgment or
expectations about the firm’s performance.
P/E ratio reflects investors’ expectations about the growth

in the firm’s earnings.
For KZL, the Price Earnings ratios for the last five
years are 2.13, 3.125, 3.33, 3.45 and -38.46 respectively
from 04-05 to 08-09.
Market Value-to-Book Value (MV/BV) Ratio
MV/BV is the ratio of share price to book value per share.

RATIO ANALYSIS
MV/BV Ratio = Market Value per share (MV) / Book value

per share (BV)
For KZL, the Market value-To-Book value ratios for the

For 2008-2009 = 53.10 / 10 = 5.31 times
For 2007-2008 = 4.63 / 10 = 0.46 times
F0r 2006-2007 = 4.18 / 10 = 0.42 times
For 2005-2006 = 3.80 / 10 = 0.38 times
For 2004-2005 = 0.8179 / 10 = 0.082 times
Interpretation:
We can observe the gradual increase

in MV to BV ratio of the firm because the market value of
the company’s shares is increasing YoY while the book
value of the company is same RS 10 in all the 5 years.
Tobin’s q
Tobin’s q is the ratio of the market of a firm’s assets (or

equity & debt) to its assets’ replacement costs. Thus
Tobin’s q = Market value of assets / Replacement cost of

assets
It is argued that the firm will have incentive to invest when

q is greater than 1. Investors will be reluctant to invest
once q becomes equal to 1.

RATIO ANALYSIS
4. FINDINGS
K. Z. finance and leasing ltd is a service firm located at
Usmanpura, Ahmedabad. The Findings of the firm have
been summarized as below.
1. The company has a good liquidity in the business even
more than needed.
2. The company has adopted Conservative Working Policy.
It has funded major part of its current assets with long term
funds, apart from funding the whole part of fixed assets
with the same.
3. Company holds a lot of cash which is useful for paying
obligation but that increases the opportunity costs.
4. Company has high liquidity but the quality of its current
assets remains to be seen.
5. The owner of the firm depends more on the internal
funds than external funds.
6. Company depends more on equity than debt and
believes in playing safely without taking risk.
7. Due to the effect of last year’s recession, the company
has failed to enjoy the taste of profit and its operating
efficiency has got influenced badly.
8. Company’s sales for Rs 1 invested in Capital Employed or
Net fixed assets or Current assets or Net Working capital is
on a decreasing trend.

RATIO ANALYSIS
9. Company depends more on fixed assets than on current

assets.
10. Company has very little current liabilities to fund its
current assets. So its Net Working Capital and Working
Capital are almost similar.
11. Company has not declared or paid any dividend for the
last 5 years.
12. Utilization of the firm’s assets has been reasonably
successful in earning profit.
13. Excluding the last year, the slowdown year, the ROE
has been nearly 6%.
14. Low EPS and comparatively high market value have
caused decline in Earning Yield.
15. The market value of Company’s share has been around
Rs 4 which shot up to 53 last year leading to soaring MV to
BV ratio.

RATIO ANALYSIS
5. SUGGESTIONS
1. First of all the company needs to come out of the last years
slowdown effects and improve its PAT by increasing its
efficiency and curbing the operating expenses down.
2. Firm should start relying on external financial debt so as to

take the advantage of Tax Shield.
3. If possible, firm should go for buy back of its shares so as to

increase its EPS and attract more and more investors.
4. In that way the firm can also increase ROE and Earning
Yield.
5. Company has maintained a good level of liquidity but it

requires reviewing the quality of its assets from time to
time.
6. Company can strategically invest its surplus cash it always

has just to lower its opportunity costs.

RATIO ANALYSIS
7. Since the company has started to concentrate on its

financing and credit business than on leasing, it needs to
stress more on its current assets than on fixed assets.
8. Company can declare dividend to lure investors who always

look for dividends, especially small investors.
6.BIBLIOGRAPHY
• ANNUAL REPORT OF 2004-05
• ANNUAL REPORTS OF 2007-08
• ANNUAL REPORTS OF 2008-09
• PROSPECTUS (HANDBOOK) OF THE COMPANY

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K.Z. LEASING & FINANCE LTD.

TYPE OF DATA USED:

DATA COLLECTION METHOD:

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 1

DATA ANALYSIS TECHNIQUES:

The data obtained from annual reports of K. Z. LEASING

REASONS TO CHOOSE THIS PROJECT:

• To get a chance of applying theoretical knowledge in

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 2

The Main Objectives of Company as Set out in the

• To carry on the business of purchasing and letting on

• To finance hire Purchase requirements of buses,

transport undertaking meaning a company,

• To carry on the business as a shroff and financiers,

The company does not have any subsidiary companies.

PROMOTERS AND THEIR BACKGROUND

The company has been promoted by Shri Keshavlal

Shri Pravin Keshavlal Patel is the Managing Director and is

SNAPSHOT OF THE COMPANY

Shri Keshavlal Z. Patel Chairman

Shri Pravinbhai K. Patel Managing Director

Shri Rameshkumar N. Patel Director

Shri Keshavlal K. Patel Director

Shri Gandabhai A. Patel Director

J. M. Patel & Bros. (M.com, F.C.A.)

402, Harsh Avenue,

Navjivan Press Road,

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 5

The Navnirman Co-operative Bank Ltd.

1st floor, Deshna Chember,

B/h, Kadva Patidar Wadi,

Ashram Road, Usmanpura,

SHARE HOLDING PATTERN OF K. Z. LEASING AND

Category No. of Percent

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 6

NATURE OF RATIO ANALYSIS

Ratio analysis is the powerful tool

CLASSIFICATION OF ACCOUNTING RATIOS:

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 7

Accounting ratios are generally classified as

1. Traditional classification or classification according to the

a. Revenue Statement Ratios:

b. Balance Sheet Ratios:

A ratio showing the relationship between

Ratios are also grouped in

• Past ratios, i.e. ratios calculated from the past

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 9

INTERPRETATION THROUGH RATIOS:

1. Comparison with Ideal Ratio:

2. Comparison with past Ratios :

3. Help of some related ratios :

firm is 2:1 showing a comfortable liquid position but if it is

4. Comparison with ratios of other firm:

USERS OF FINANCIAL ANALYSIS

Financial analysis is the

M.S. PATEL INSTITUTE OF MANAGEMENT,MSU Page 11

• Trade creditors are interested in firm’s ability

• Suppliers of long-term debt, on the other