TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO.

1 Introduction

1.3 Company Profile

2

3 RESEARCH METHODOLOGY
3.1 Introduction
3.2 Statement of the problem
3.3 Objectives of the study
3.4 Scope of the study

4 DATA ANALYSIS AND INTERPRETATION

4.1 Ratio analysis
5 FINDINGS, SUGGESTIONS AND CONCLUSION
5.1 Findings of the Study
5.2 Suggestions
5.3 Limitations of the study
5.4. Conclusion
 CHAPTER 1 – INTRODUCTION

1.1. INTRODUCTION

RATIO ANALYSIS

A ratio analysis is a quantitative analysis of information contained in a company’s

financial statements. Ratio analysis is based on line items in financial statements like
the balance sheet, income statement and cash flow statement; the ratios of one item –
or a combination of items - to another item or combination are then calculated. Ratio
analysis is used to evaluate various aspects of a company’s operating and financial
performance such as its efficiency, liquidity, profitability and solvency. The trend of
these ratios over time is studied to check whether they are improving or deteriorating.
Ratios are also compared across different companies in the same sector to see how
they stack up, and to get an idea of comparative valuations. Ratio analysis is a
cornerstone of analysis. Ratio analysis refers to the analysis and interpretation of the
figures appearing in the financial statements (i.e., Profit and Loss Account, Balance
Sheet and Fund Flow statement etc.). It is a process of comparison of one figure against
another. It enables the users like shareholders, investors, creditors, Government, and
analysts etc. to get better understanding of financial statements.

DEFINITION
Khan and Jain define the term ratio analysis as “the systematic use of ratios to
interpret the financial statements so that the strengths and weaknesses of a firm as well
as its historical performance and current financial conditions can be determined.”
1.3 COMPANY PROFILE

Fabsys Technologies Private Limited, established in the year 2004 Fabsys is a

professional software development company based in Chennai, South India. Company
provides solutions for web design and development, Web application development,
SEO based Digital Marketing, Creative Multimedia Works and Hosting Services.
Company’s rich portfolio justifies the fact that Fabsys functions as a world class offshore
web development Company. Company believes good service is good business our
aspects are to focus the needs of our clients and provide 100% satisfaction.

Company’s passion is to provide a world class web designs to all the startups and large
organizations. they deliver website designing and development services ranging from
simple static to interactive dynamic, responsive website. web design process always
takes into consideration the requirements, suggestion and continuous feedback from
clients in order to deliver web work that not only satisfies them but exceeds their
expectations.

Why Fabsys?

For over ten years Fabsys have been delivering beautiful, standards compliant web
sites and has emerged as a premium website design company in Chennai. With a deep
commitment to designing the best possible experience for the end user it comes as no
surprise that their work is showcased around the web. web portfolio speaks for itself.
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CHAPTER 3 – RESEARCH METHODOLOGY
3.1 INTRODUCTION

Research Methodology is a systematic way to solve a research problem. It includes

various steps that are generally adopted by a researcher in studying the problem along
with the logic behind them. The present study was conducted at Fabsys Technologies
Private Limited. The study depends mainly on the secondary data namely the annual
reports of the company. Five years annual reports had been collected from the
company. Data had also been collected from text books, journals, newspapers,
magazines and internet.

3.2 STATEMENT OF THE PROBLEM

Ratio analysis is used to evaluate various aspects of a company’s operating and

financial performance such as its efficiency, liquidity, profitability and solvency. The
trend of these ratios over time is studied to check whether they are improving or
deteriorating. Ratio analysis is widely used as a powerful tool of financial statement
analysis to check the company’s operations or financial performance is difficult task by
some other tools for the company. So, the study on ratio analysis at Fabsys
Technologies Private Limited, is taken as the study to measure the performance of the
company.

3.3 OBJECTIVES THE STUDY

Primary objective

To study on ratio analysis towards the Fabsys Technologies Private Limited.

Secondary objectives

 To study the short-term liquidity positions of company.

 To study the efficiency of inventory management.

 To study the effectiveness of credit management of the company.

 To analyse the long-term solvency of the business concern.

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 3.4 SCOPE OF THE STUDY

 The scope of the study defined below in terms of concept adopted and period
under focus.

 The study of management of working capital is only the Fabsys Technologies

Private Limited., Chennai.

 Thus, the whole purpose of the project is to analyze the past and present
performance of the company on various financial areas like cash, inventories and
receivables.

Since the past performance data essential for predicting future planning process

RATIO ANALYSIS

A ratio is the quotient of two mathematical expressions and the relationship between
two or more numbers. In financial analysis, a ratio is used as an index or yardstick for
evaluating the financial position and performance of a firm. The relationship between
the two accounting figures expressed mathematically is known as a financial ratio. Itt
involves comparison for a useful interpretation of the financial statements and it should
be compared with some standards

 Working capital ratio

 Inventory Turnover ratio

 Debtors’ turnover ratio

 Average collection period

 Net profit ratio

 Return on total assets

 Return on investment

 Return on shareholders’ Funds

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  Solvency ratio

 Gross profit ratio

 Return on assets ratio

 Operating profit ratio

CHAPTER 4 – DATA ANALYSIS AND INTERPRETATION

WORKING CAPITAL RATIO

The working capital ratio, also called the current ratio, is a liquidity ratio that
measures a firm’s ability to pay off its current liabilities with current assets. The
working capital ratio is important to creditors because it shows the liquidity of the
company.
Net working capital
Working capital ratio = ---------------------------
Net assets

Net
Working
capital
Year Net assets Ratio
2016-2017 22.91 117.92 0.19

2017-2018 22.72 127.80 0.18

2018-2019 11.92 124.38 0.10

2019-2020 12.46 133.73 0.09

2020-2021 1.83 132.51 0.01

TABLE NO: 4.1.1 -WORKING CAPITAL RATIO

Interpretation

The above table indicates that the Working capital ratio is 0.19 in the year of 201617.
It has decreased to 0.18 in the year of 2017-18. It has decreased to 0.10 in the year

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 of 2018-19. It has further decreased to 0.09 and 0.01in the year of 2019-2020 and
2020-21 respectively.

2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021

Year

CHART NO: 4.1.1- WORKING CAPITAL RATIO

INVENTORY TURNOVER RATIO

This ratio indicates the efficiency of the firm in producing and selling its product. This
ratio indicates the number of times inventory is replaced during the year. It measures
how quickly inventory is sold. The inventory turnover reflects the efficiency of the
firm in producing and selling its products. This ratio indicates the velocity or the
movement of goods during the year. It is calculated as follows.
Cost of goods sold
Inventory turnover ratio --------------------------------
Average inventory

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 TABLE NO 4.1.2.

INVENTORY TURNOVER RATIO

Cost of goods
Year Average inventory Ratio
sold
2016-
2017
213.30 283.54 0.75
2017-
2018
3.42 56.69 0.06
2018-
2019
1.09 52.72 0.02
2019-
2020
-19.01 61.14 -0.31
2020-
2021
20.10 70.10 0.29
Interpretation

The above table indicates that the inventory turnover ratio is 0.75 in the year of
201617. It has decreased to 0.06 in the year of 2017-18. It has further decreased to
0.02 and -0.31 in the year of 2018-19 and 2019-20 respectively. It has increased to
0.29 in the year of 2020-21.

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 2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021
Year

CHART NO 4.1.2 INVENTORY TURNOVER RATIO

DEBTORS TURNOVER RATIO

Ratio of net credit sales to average trade debtors is called debtors turnover ratio.
It is also known as receivables turnover ratio. This ratio is expressed in times. It
can be calculated as

Debtors turnover ratio = sales

debtors
TABLE NO: 4.1.3

DEBTORS TURNOVER RATIO

Year Sales Debtors Ratio

2016-2017 208.95 31.44 6.65

2017-2018 205.42 33.58 6.12

2018-2019 242.33 27.00 8.98

2019-2020 255.96 27.98 9.15

2020-2021 217.49 20.46 10.63

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Interpretation

The above table indicates that the debtor’s turnover ratio is 6.65 in the year of
201617. It has decreased to 6.12 in the year of 2017-18. It has increased to 8.98 in
the year of 2018-19. It has further increased to 9.15 and 10.63 in the year of 2019-
20 and 2020-21 respectively.

2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021

Year

CHART NO 4.1.3 DEBTORS TURNOVER RATIO

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NET PROFIT RATIO

Net profit is obtained when operating expenses interest and taxes are subtracted
from the gross profit. The ratio is measured as

Net profit margin = profit after tax

Sales

This ratio is established a relationship between net profit and sales and indicates
managements efficiency in manufacturing, administrating and selling the products.
This ratio is the overall measure of the firm’s ability to turn each rupee sales into net
profit.

TABLE NO: 4.1.5

NET PROFIT RATIO

Year Net profit Net sales Ratio

2016-2017 8.15 208.95 3.90

2017-2018 0.42 205.42 0.20

2018-2019 3.46 242.33 1.43

2019-2020 9.37 255.96 3.66

2020-2021 9.11 217.49 4.19

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Interpretation

The above table indicates that the net profit ratio is 3.90 in the year of 2016-17. It
has decreased to 0.20 in the year of 2017-18. It has increased to 1.43 in the year of
2018-19. It has increased to 3.66 in the year of 2019-20. It has further increased to
4.19 in the year of 2020-2021.

2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021

Year

CHART NO: 4.1.5 - NET PROFIT RATIO

Return on total assets

Return on assets is a measure of how effectively the firm's assets are being used to
generate profits. It is defined as:
Net profit
Return on Assets = -----------------------------
Total Assets

TABLE NO: 4.1.6

RETURN ON TOTAL ASSETS

Year Net profit Total assets Ratio

2016-2017 8.15 117.92 6.91

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 2017-2018 0.42 127.80 0.33

2018-2019 3.46 124.38 2.78

2019-2020 9.37 133.73 7.01

2020-2021 9.11 132.51 6.87

Interpretation

The above indicates that the return on total assets ratio is 6.91 in the year of 201617.
It has decreased to 0.33 in the year of 2017-18. It has increased to 2.72 in the year
of 2018-19. It has further increased to 7.01 in the year of 2019-20. It has decreased
to 6.87 in the year of 2020-2021

2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021

CHART NO: 4.1.6 RETURN ON TOTAL ASSETS

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Solvency ratio

Solvency ratio is a key metric used to measure an enterprise’s ability to meet its debt and other
obligations. The solvency ratio indicates whether a company’s cash flow is sufficient to meet its
short-term and long-term liabilities. The lower a company's solvency ratio, the greater the
probability that it will default on its debt obligations.
Total debt
Solvency ratio = -----------------------------
Total tangible assets

TABLE NO: 4.1.9

SOLVENCY RATIO
Total tangible
assets
Year Total debt Ratio

2016-2017 61.69 168.71 0.37

2017-2018 78.01 176.40 0.44

2018-2019 74.33 182.26 0.41

2019-2020 86.18 205.75 0.42

2020-2021 93.29 190.70 0.49

Interpretation

The above table 4.9 indicates that the solvency ratio is 10.37 in the year of 2016-17. It has
increased to 0.44 in the year of 2017-18. It has decreased to 0.41 in the year of 2018-19. It has
increased to 0.42 in the year of 2019-20. It has further increased to 0.49 in the year of 2020-21.

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 2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021
Year

CHART NO: 4.1.9 SOLVENCY RATIO

GROSS PROFT RATIO

The first profitability ratio in relation to sales is the gross profit margin. It is calculated as
Gross Profit
Gross profit margin = -----------------------
Sales
This ratio indicates the average spread between the cost of goods sold and sales revenue. A high
gross profit margin ratio is a sign of goods management. It is relative to the industry average implies
the firm able to produce at relatively lower cost.

TABLE NO: 4.1.10

GROSS PROFIT RATIO

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 Year Gross profit Net sales Ratio

2016-2017 65.73 208.95 31.46

2017-2018 53.46 205.42 26.02

2018-2019 70.92 242.33 29.27

2019-2020 69.97 255.96 27.34

2020-2021 69.93 217.49 32.15

Interpretation

The above table indicates that the gross profit ratio is 31.46 in the year of 2016-17. It has
decreased to 26.02 in the year of 2017-18. It has increased to 29.27 in the year of 2018-19. It
has decreased to 27.34 in the year of 2019-20. It has increased to 32.15 in the year of 2020-21.

2016-2017 2017 -2018 2018 – 2019 2019 – 2020 2020 – 2021

Year

CHART NO: 4.1.10 GROSS PROFIT RATIO

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CHAPTER 5 – FINDINGS, SUGGESTIONS AND CONCLUSION

5.1. FINDINGS

 The working capital ratio is 0.19 in the year of 2017 and it has decreased to 0.18
in the year of 2018.
 The inventory turnover has decreased to 0.06 in the year of 2017 and it has
decreased to 0.02 in the year of 2019.
 The debtor’s turnover ratio has increased to 8.98 in the year of 2019 and it has
increased to 9.15 in the year of 2020.
 The average collection period has decreased to 39.90 in the year of 2020 and it
has decreased to 34.34 in the year of 2021.
 The net profit ratio has decreased to 0.20 in the year of 2018 and it has increased
to 1.43 in the year of 2019.
 The return on total assets ratio is 6.91 in the year of 2017 and it has decreased to
0.33 in the year of 2018.
 The return-on-investment ratio has increased to 0.68 in the year of 2019 and it has
increased to 0.98 in the year of 2020.
 The return on shareholders’ ratio has increased to 19.71 in the year of 2020 and it
has increased to 0.79 in the year of 2021.
 The solvency ratio has increased to 0.44 in the year of 2018 and it has decreased
to 0.41 in the year of 2019.
 The gross profit ratio is 31.46 in the year of 2017 and it has decreased to 26.02 in
the year of 2018.
 The operation profit ratio has increased to 14.95 in the year of 2020 and it has
increased to 17.78 in the year of 2021.

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5.2 SUGGESTIONS

 the Fabsys Technologies Private Limited., Chennai within a short span of time is
making very good progress. The company trademark was its highest ever turns
over during the progress, further the capacity utilization of the plants and the
various operational efficiency achievements further the capacity signifies growth of
the organization .it can take up the following suggestions based on the study.
 Liquidity ratio here reflects the firm ability to meet short term current obligation.
Aanalysis of these ratio revealed that the liquidity position has been satisfactory.
 Turnover ratio indicates the turnover position of the company, here ratio reflects
high turnover on the basis of five years is good.
 The financial performance of the company is good, so this company capture high
market share and growth.
 Fund is proper allocated to fixed assets and current assets. It should possible for
the company to carry on the work smoothly.

5.3 LIMITATIONS OF THE STUDY

 The project work study was mainly based upon the information from the secondary,
mainly balance sheet, profit and loss account, the annual report and accounts book
by only giving limited information regarding the performance of the company.

 The study has been restricted span of time 5 years only.

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5.4. CONCLUSION

A Successful management of the working capital in any concern will ensure the success
of business. In The Fabsys Technologies Private Limited., working capital management
is in good condition. the level of profit is increasing in nature. However, to show the better
business result, the management may concentrate on increases of sales, sales level
before changing credit policy variable, credit policy helps to retained its old customer and
create new customer by coming them away from competitors. Better co-ordination
between each department is very important, like sales, production, purchase because it
helps to avoid the credit risk and it decrease the debt collection days.

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REFERENCES
BOOKS
 S.N. Maheswari, Financial Management, (2006), Sultan Chand & Sons.
 Charles T. Horngreen, Alnoor Bhimani, Srikant M. Datar, and George foster
Management and Cost Accounting, (2004), Financial Times/Prentic Hall.
 Terry Lucey, Management Accounting, (2003), Cengage Learning.
 I.M.Pandy, “Financial Management” Vikas Publishing House Private Ltd.8 th edition.
 C.R.K. Kothari, “Research Methodology” Vishura Publishers Chennai. 2 nd edition
2000.
 R. K Sharma & Shashi K.Gupta, “ Financial Management” Kalyani Publishers, New
delhi.

WEBSITES

 www.fabsys.com
 www.websiteindustry.com
 www.industrytrend.com
 www.mbanotes.com

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