PROJECT REPORT ON

LIQUIDITY AND PROFITABILITY ANALYSIS

THROUGH RATIOS
(A STUDY ON ADARSHA MOTORS - KARIMNAGAR)

SUBMITTED TO KAKATIYA UNIVERSITY

IN PARTIAL FULFILLMENT FOR THE AWARD OF

BACHELOR DEGREE IN BUSINESS MANAGEMENT

SUBMITTED BY

N. APARNA

(H.T.NO: 148-09-1809)

(2008-2011)

UNDER THE GUIDANCE OF

MR. CH. SHANKAR

DEPARTMENT OF COMMERCE AND BUSINESS MANAGEMENT

SREE CHAITANYA DEGREE COLLEGE

AFFILIATED TO KAKATIYA UNIVERSITY WARANGAL

KARIMNAGAR - 505 001 ( A.P)

Estd : 1997 Ph : OHi: 0878-
22548^
(R); 222934

SREE CHAITANYA DEGREE

COLLEGE
(Co-Education, Affiliated to Kakatiya University, Warangal)
<&™£*^______________# 7-2-40, Opp: Petrol Pump, Mankammathota, KARIMNAGAR - 505 001. (A.P.)
G.MALLAREDDYM.SMChe.)
n . . Date:________________
Principal

CERTIFICATE

This is to certify that the project entitled a study on FINANCIAL RATIO

ANALYSIS OF ADARSHA TVS IN KARIMNAGAR is bonified work done by N. APARNA

bearing HT.NO.148-07-1801 of B.B.M III YEAR of this colledge under the guidance of

Mr.CH.SHANKAR.

She has completed his project as for the rules prescribed for partial fulfilment

of BACHELOR DEGREE IN BUSINESS MANAGEMENT to best of her knowledge. She

fulfilled all the conditions prescribed in connection with execution of project.

PROJECT GUIDE HEAD OF THE DEPARTMENT PRINCIPAL

Adarsha TVS_____________________________ TVS jrrrf^,
Authoflsed Mam Dealer - TVS Motor Company limited

CERTIFICATE

This is to certify that N. APARNA student of B.B.M III YEAR

studying in SREE CHAITANYA DEGREE COLLEGE, bearing Roll.No.
(148-09-1809) has undertaken the study on “Liquidity and
profitability analysis through ratios with “ADARSHA TVS" in organisation
for 45 days for the purpose of project work.
And her performance was found to be satisfactory through out her
project work.

BRANCH MANAGER
ADARSHA MOTORS

Adarsha Motors. H.No. &6401. Hyderabad Road. Ranpoor. Kanmnagar-505 001. Andhra Pradesh. Tel: 0878-2277011 /2277012, Fax: 0878-2277013
Email: adarsha.
[email protected] TIN:
28140123897
 ACKNOWLEDGEMENT

I take this opportunity to express my thanks Mr.G.

MALLA REDDY, Principal for their valuable guidance and keen
interest during preparation of project report.

I am thankful to Mr. JANARDHAN, Proprietor of ADARSHA

MOTORS, for giving me permission to do my practical training in their
organization and for his help I rendered during the period of training.

I Would like to place on record my special and sincere thanks to

Mr. K. Srinivas, Head of the department of Commerce and Business
Management for his help and encouragement and I also thankful to
my project guide Mr.CH.SHANKAR For his valuable suggestions
during the preparation of the project work.

N. APARNA

(148-09-1809)
 DECLARATION

I hereby declare that the project work entitled "LIQUIDITY AND

PROFITABILITY ANALYSIS THROUGH RATIOS (A STUDY ON
ADARSHA MOTORS - KARAMANAGAR)" is an original project
submitted by me. The project is being submitted on partial fulfillment
of the requirements for the award of the Bachelor of Business
Management from Kakatiya University, under the guidance of
Mr.CH. SHANKAR.

The contents of this report are based on the in depth study and
analysis of the actual functioning of the firm work done by me during
my tenure at ADARSHA MOTORS.

N. APARNA
(148-09-1809)
 CONTENTS

CHAPTER-I
• Introduction
CHAPTER-II
• Company Profile

CHAPTER-III
• Theoretical Aspects

CHAPTER-IV
• Financial Analysis

CHAPTER-V
• Conclusions and
suggestions

BIBLIOGRAPHY
CHAPTER - 1

INTRODUCTION
 INTRODUCTION

Today a two wheeler plays a vital role in this society, Now a days it

became a pride. Two wheelers are became necessary not only for urban

people have several necessities with this two wheelers. Hence the India

folk have became a major area of market for two wheelers, The life style of

rural youth has been changed and the policy of Govt. To construct road

ways linking all villages with high ways in leading to faster growth and

development of India villages. We can give several reasons that can

attributed to the growing demand for two- wheelers.

With amendment of Motor Vehicles act, which has reduced the age of

18 years for obtaining license for geared vehicles, the manufactures of two

wheelers are planning to increase their models in the geared two wheelers

section in the immediate future.

Two - wheelers will speed up economic active of the people

belonging to rural areas are using Two Wheelers suits best to fulfill the

transportation needs of rural family.

However, with increase in Petroleum prices, the prospective buyers

of Two wheelers are contemplating and searching for Two- wheelers, which

is economical in consumption of Petroleum and durability.

 OBJECTIVES

This project is undertaken with a main object of studying the

sales performance of T.V.S bikes in Karimnagar town. The following are
the objectives of the project work.

1. To analyze the sales performance of T.V.S two-wheeler.

2. To get information about T.V.S show room and its structure.

1. To check whether economic resources and economic obligations

are balanced.

3. To evaluate the firm's position

2. To know what are the factors influencing the customers to buy the
T.V.S brands.

REFERENCE PERIOD:

The period taken into consideration for the study is five financial
years i.e., 2005 to 2010.
METHODOLOGY:
The study basically depends on the data collected. Mainly, the data
is collected in two ways:
1) Primary Data
2) Secondary Data

PRIMARY DATA:
The primary data is collected by interacting with circulation
department officers and other personnel and official at the administrative
office.

SECONDARY DATA:
All the secondary data used for the study has been extracted from
the annual reports and other published material of the company and from
journals.

TECHNIQUES USED FOR ANALYSIS:

The technique of Ratio analysis has been adopted for the purpose of
this study.

Financial ratios such as Liquidity, Turnover Ratios are being

calculated to analyze the general financial position of ADARSHA T.V.S.

SCOPE OF THE STUDY:

The study is confined to ratio analysis. Ratio analysis is an
important technique of analysis and interpretation of financial statements. It
facilitates the comprehension of financial statements and evaluation of
health, profitability and operational efficiency of the company.
LIMITATIONS:

 The study is limited only for five years.

 The most of the data is collected from secondary source.

 The ratios are done only for the liquidity and turn over.
 The study is undertaken for the project includes only all
possible ratios as the technique of analysis.
 The comments made in the study are on the basis of
standards of ratios but they are not perfect indicators as the
standards are not specific standards.
 The ratios are computed are subjected to some assumptions
which have been mentioned elsewhere, in the study.
CHAPTERISATION:
The objectives of the present study necessitated division of the
scheme of present study of five chapters including Introduction and
Conclusions.

The first chapter is titled as "INTRODUCTION" deals with

Introduction of Finance Intermediaries, Objectives of the study,
Methodology, Limitations and Techniques used for the analysis.

The second chapter is devoted to study about the brief history of the
company, objectives of the company and the organization structure.

The third chapter gives an idea about the "THEORITICAL

BACKGROUND OF RATIO ANALYSIS" in which all the theoretical
aspects of Ratios are discussed.

In the fourth chapter efforts are made to analyze the Financial

Ratios of ADARSHA T.V.S.

The last chapter presents "CONCLUSIONS AND SUGGESTIONS

CHAPTER - II
COMPANY PROFILE
ABOUT THE COMPANY:

T.V. Sundaram lyenger and sons limited (TVSs) is the holding

company for the TVS Group of companies engaged in the manufacturing

unit of almost all kinds of automotive components, two wheelers and a few

other industrial products. They are also into the financial services sector.

The turnover of the entire group was close to $2 billion in 2003.

The TVS Motor Company was founded by T.V. Sundraram lyenger in

1911.

It is only automotive manufacturer in India to get the prestigious

Deming Prize. One of its subsidiaries Sundaram Clayton was the first

company in India to receive the Deming Prize. This was quickly followed by

Sundaram brake Linings also getting the Deming Prize. This Prize "given to

organizations or division of organizations that have achieved districtive

performances improvement through the application of TQM in a designated

year". Sundaram Clayton went on to be awarded the Japan Quality Medal.

The TVS group of Companies is mainly situated in Padi, Tamil Nadu,

in the outskirts of Chennai (formerly madras).

TVS Motors:

In 1929 T.V. Sundaram Jyenger established the parent company. In

1962 T.V. Sundaram Lyenger & Sons Collaborated with Calyton Devandre

and established Sundaram clayton Limited at Chennai to manufacture

automotive air brake system. In 1980 Sundaram Clayton Limited Diversities

and opens its Moped Plant at Harita, Housr. In 1983 Sudnaram Clayton

Limited collaborated with Suzuki Motors Corporation of Japan and

established IND-SUZUKI motorcycle manufactured Limited at Harita,

Housr. In 1984 the first IND-SUZUKI AX-100 motorcycle manufacture by

IND-SUZUKI Limited in September. In 1986 IND-SUZUKI Motorcycle

Manufactured by IND-SUZUKI Motorcycle Limited rebnamed itself as TVS

SUZUKI Limited in September. In 1987 TVS SUZUKI Limited purchased

the Mope Division from Sundaram Clayton Limited in September.

In 1980 TVS so, India's first two-seater moped rolled out of the

factory at Housr in Tail Nadu, Southern India. A byword for reliability, the

TVS 50 had proved itself promising and successful in every test and paved

a way for many successes for TVS SUZUKI. Likewise the TVS Champ and

Super Champ gave a reliable and sturdy two wheeler to public, who

wanted looks fused with economy. These two wheelers together redefined

the category of moped in India. TVS later left its collaboration with Suzuki

and started to manufacture its own vehicles.

 TVS Motors Company is currently

the third largest two wheeler company in

India with sales of 107,117 units (as of

June 2007). The company exported 9,133

units of two wheelers in June 2007.

Known traditionally for their conservative attitude. TVS made modest

but reliable bikes. Hero Honda and Bajaj forayed into the power biking

segment with the CBZ and Pulsar respectively. TVS along with Suzuki, had

earlier been the leading bike maker with the Shaolins, Shoguns etc. but

they were left biting dirty by Bajaj's Pulsar. Soon TVS launched Fiero series

of bikes. But that wasn't enough. The Fiero's looks did not appeal to most

people. They came out a bike name "Apache". Followed it up with Apache

RTR. The rest is history. It is only a matter of time before the Pulsar 150

gets eaten up alive!!!

TVS Apache Bike of the year 2006 by Business Standard Motoring.

International certifications like QS 9000, ISO 9000 and TS 16949.

TVS Motors is the third largest two-wheeler manufacturer in India

and has reached tenth position among the world listing. Its dealer and

customer network is widely spreaded in India, which included over 700

dealers.

As per information available TVS Company spends 25% for

advertisement. It is a tuff competitor to BAJAJ.

THE PRESENT:

TVS Group Company is India's Largest Automobile ancillary

manufacture group. It is one among the top 15 largest industrial group of
India.

1. It is one of the largest two-wheeler company of India

2. Pioneer later introduced latest 100 CC Bikes in India

3. First to introduce Catolyte converters in two wheelers collaboration

with one of the world two wheelers leaders, Suzuki Motors Co-
operation of Japan.

4. First to introduce new radical style Four Stroke Scooter.

5. First to introduce a Digital CDI and Intelligent carburetor in the

latest Four Stroke Motor Cycle i.e., "TVS FIERO".
 THE MAJOR PRODUCTS

MOTOR CYCLES:

 TVS Star

 TVS Star City

 TVS Star City Deluce

 TVS Star Sports

 TVSFieroF2

 TVS Centra

 TVS Victor (110 cc)

 TVS Victor GLX (125 cc)

 TVS Victor EDGE (125 cc)

 TVS Flame (125 cc)

 TVS Apache (150 cc, 13.7 Ps @8500 rpm)

 TVS Apache RTR 160

 TVS Apache RTR 160 EFI (Electronic Fuel Injection)

SCOOTERS:
 Spectra DX (150 cc)
 Spectra Ax (150 cc)

SCOOTERETTES:
 TVS Scooty ES (60 cc)
 TVS Scooty KS (60 cc)
  TVS Scooty Pep (75 cc)

 TVS Scooty Pep + (90 cc)

 TVSTeenz

LAUNCH:
8 December 2006, Engine Volume : 65 cc, Top Speed : 70 km/h,
Mileage : 40-45 km/1, Colors : Black, Red, Violet.

MOPEDS:
 TVS 50 XL (50 cc)

 TVS XL (60 cc)

 TVS XL Super (60 cc)

 TVS Champ (60 cc)

 TVS Super Champ (60 cc)

BRANCHES OF TVS BIKES

NORTH ZONE:
> CHANDIGARH
> NEW DELHI

> JAIPUR

> LUCKNOW
SOUTH ZONE:
 BANGLORE

 CHENNAI

 COCHIN

 COIMBATORE

 HYDERABAD

EAST ZONE:

 BHUVANESHWAR

 KOLKATTA

 PATNA

WEST ZONE:
 BARODA

 BHOPAL

 MUMBAI

 PUNE

 NAGPUR

 RAJKOT
 DISTRIBUTION CHANNEL

INDUSTRY

DISTIRBUTION CENTER

SHOW ROOM

CUSTOMER
 PROFILE OF ADARSHA SHOWROOM

TVS Showroom in Karimnagar has been established in the year

1996 November & Physically it is located Kothirampur. In 1999 it has been

taken by ADARSHA MOTORS.

The proprietor of TVS showroom is Mr. Satyanarayana Goud &

Manager is Mr. Thirupathi Goud, Mainly the Showroom has been

established for sales of two wheelers and spare parts of TVS company

Bikes.

TVS Showroom has been providing good services to the

customers from the last 4 years. The TVS showroom has got good

reputation in Karimnagar. The Showroom is located in Karimnagar town &

it has all kind of good equipment for servicing. It gives response to the

customers & takes good care of them. And also it is convenient to all

customers.
OBJECTIVES OF TVS SHOW ROOM:

The main objectives of TVS showroom is to sell TVS products.

1. Their first objectives are to improve the sales of TVS two wheeler
vehicles in Karimnagar.

2. To motivate the consumers to purchase TVS two wheelers

vehicles by providing promotional schemes.

3. To satisfy the customers by providing technical services.

4. Attracting the new customers by advertisements in Magazines,

Newspapers 86 Televisions etc.

5. To spread their TVS two wheelers all over the states 8s

everywhere.
 ORGANIZATION STURCTURE OF TVS SHOWROOM

MANAGER

ASSISTANT MANAGER

Sales Manager Spares Manager accountant Work Manager

Sales Person Spares Assistant Cashier Computer operator

&

Computer Operator Computer Operator

Clerk

&
Senior Mechanics
Computer Operator

Mechanics

Helpers
 CHAPTER - III
THEORITICAL ASPECTS
 RATIO ANALYSIS
Ratio analysis is a powerful tool or techniques of financial analysis. A
ratio is defined as the numerical or quantitative relationship between two or
more things. The relationship between to accounting figures, expressed
mathematically is known as financial ratio. A ratio helps to summarize to
large quantities of financial data and make qualitative judgement about the
firm's financial performance.

Ratio may be expressed in either of the three ways.

RATIO:
Ratios are proportion, which are arrived at by the simple division of
one number by another. Eg: current assets to current liabilities ratio i.e. 2:1

TIMES:
When one value is divided by another, the unit used to express the
quotient is termed as "tomes". For example , it out of 100 students in a
class, so are present, the attendance ratio can be expressed as:
= 80/100=0.8 times

PERCENTAGE:
If the quotient obtained is multiplied by 100, the unit of expression is
termed as "Percentage". For instance, in the above example the
attendance ratio as a percentage of the total number of student is as
follows. = 0.8x 100 = 80%
 ADVANTAGES OF RATIO ANALYSIS

The following are the various advantages of ratio analysis

♦ Ratio analysis simplifies the comprehension of financial statements.

Ratios tell the whole story of charges in the financial conditions of
the business.

♦ Ratio analysis provides data for inter firm comparison. Ratio

highlights the factors associated with successful and unsuccessful
firms. They reveal strong firms and weak firms over - valued and
under valued firms.

♦ Ratio analysis also makes possible comparison the performance of

the different divisions of the firm.

♦ Ratio analysis helps in planning and forecasting over a period of time

a firm or industry develops certain norms that may indicate future
success or failure

♦ Ratio analysis helps the management indecision making. It shows

light on the degree of efficiency of management and utilization of
assets.

♦ Ratios are the instruments of the management control, particularly in

the areas of sales and control.

♦ Ratios are helpful in accessing the financial position and profitability

of a concern

♦ Ratio analysis also helps in effective control of a business measuring

performance, control of cost etc., effective control is a keystone of
better management.

♦ Ratio analysis helps the investors in making investment decisions to

make a profitable investment.
LIMITATIONS OF RATIO ANALYSIS:

Accounting ratio subject to the certain limitations. They are,

COMPARATIVE STUDY IS REQUIRED:

Ratios are useful in judging the efficiency of the business only when they
are compared with the past results of the business or with the result of similar
business, however, such a comparison only provides a glimpse of the past
performance and forecasts for future may not be correct since several other
factors like market conditions, management policies, etc., may effect the future
operations.

RATIOS 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.

WINDOW DRESSING:
Window dressing means manipulation of accounts in a way so as to
conceal vital facts and present a better picture of its financial and profitability
position to the outsider. Financial statements can easily be windows dressed.
Hence one must be very cautions in drawings conclusions from the ratios.

PRICE LEVEL CHANGE:

Due to changes in the price level of various, comparison of ratios of such
years cannot give correct conclusions. A change in price level can seriously affect
the validity of ratio computer for different periods.
LIMITATIONS OF FINANCIAL STATEMENTS:
Ratios are based only the information which has been recorded in the
financial statement. As the financial statements suffer from a number of
limitations, the ratio derived there from, there are also subject to those
limitations.

NO FIXED STATEMENTS:
No fixed standards can be laid down for ideal ratios. For example,
current ratio is generally considered to be ideal if current assets are twice the
current liabilities.
CLASSIFICATION OF RATIOS:
♦ LIQUIDITY RATIOS

♦ LEVERAGE/STRUCTURAL RATIOS

♦ COVERAGE RATIOS

♦ ACITIVITY RATIOS

♦ PROFITABILITY RATIOS.

LIQUIDITY RATIOS:
The importance of adequate liquidity in the sense is the ability of a firm to
meet current or short term obligations then become due for payment. In fact
liquidity is a pre requisite for the very survival of the firm.

ACTIVITY RATIOS:
Activity ratios are concerned with measuring the efficiency in asset
management. Sometimes, these ratios are also called efficiency ratios or asset
utilization ratios or turnover ratios. The efficiency with which the asset are used
would be reflected in the speed and rapidity with which the assets are converted
into sales. The greater the rate of turnover or conversion, the efficiently the
utilization or management when other thing are being equal so these ratios are
also designated as turnover ratios.

LEVERAGE RATIO:
The long term solvency of a firm can be examined by using leverage or
capital structure ratios. The long term creditors would judge the soundness of a
firm on the basis of the long term financial strengths measure in terms of its ability
to pay the interest regularly as well as re pay the installments of the principle on
due dates or in jump sum at the time of the maturity. This ratios throw a light on
the long term solvency of a
firm reflected it is ability to assure the long term creditors with regard to
periodic payments of interest during the period of the loan and the payment
of principal on maturity or in pre-determined installments at due dates.

COVERAGE RATIO:
The second of leverage ratio is coverage ratios. These are computed
from profit & loss account. Generally the claims of creditors are not met out
of the sale proceeds of the permanent tassels of the firm. The obligations
are normally met-out of the earnings or operating profits. E.g. interest on
loans, preference dividend, etc. the soundness of a firm. From the view
point of long-term creditors, lies in its ability to service their claims the
ability is indicated by the coverage rations. The coverage ratio measure the
relationship between normally available from operations of the firms and
the claims of the outsiders.

PROFITABILITY RATIO:
Profitability is an indicators of the efficiency with which the operations
of the business are carried on. Poor operational performance may indicate
poor sales and hence poor profits. A lower profitability may arise due to the
lack of control over the expenses bankers, financial institutions and other
creditors look out the profitability ratios as an indicator whether or pays
interest for the use of borrowed funds and whether the ultimate repayment
of their debt appears reasonably certain. The management of the firm in
naturally eager to measure it's operating efficiency. Similarly the owners
are interested to know the profitability as it indicates the return which they
can get on their investment.
 CHAPTER - IV
DATA ANALYSIS & INTERPRETATION
LIQUIDITY RATIOS:

1) CURRENT RATIO:

Current Assets

Current Ratio =
Current Liabilities

Current
Year Current assets Ratio
liabilities

2005-06 26723000 4502000 5.93

2006-07 36305000 2200100 1.65

2007-08 34580000 19690000 1.75

2008-09 37158000 17773000 2.09

2009-10 51440000 21844150 2.35

 7

4
Ratio
3 5.93

1 2.09 2.35
1.65 1.75

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The current ration is fluctuating form year to year. As per the rule of

the current ratio it should be 2:1 in 2009-2010. It is up to mark and in the

years 2006-07, 2007-08, it is not up to the mark. But it is maintaining its

liquidity position.

In the year 2005-06, the current ratio is 5.93 which is against the

rules.
 2. QUICK RATIO:

Quick Assets
Quick Ratio =
Quick Liabilities

Quick Assets Quick Liabilities = Current Assets - (Stock + Prepaid exp)

Current Liabilities - Bank Overdraft

Year Quick Assets Quick Liabilities Ratio

2005-06 14085000 4502000 3.12

2006-07 13420000 2200100 0.61

2007-08 23473000 19690000 1.19

2008-09 24127000 17773000 1.38

2009-10 36352000 213880100 1.70

 3.5

2.5

Ratio
1.5 3.12

1
1.7
1.38
1.19
0.5
0.61

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

Quick ratio of 1 is usually considered as ideal. A quick ratio of less

than L indicates .the inadequate liquidity of the business. In 2007-08,
2008-09, 2009-10 is increasing. It indicates that the enterprise is meeting
its current obligations in them.

In the year 2005-06, the quick ratio is 3-12 which is against the
rules. In 2006-07 quick ratio has been decreased due to ability of concern
in meeting it needs. But it doesn't mean that the concern has bad liquidity
position.
 3. SUPER QUICK RATIO OR ABSOLUTE LIQUID
RATIO:

Super Quick Ratio = Absolute Liquid Assets

Current Liabilities

Absolute liquid assets = Cash in hand + Cash at bank + Short

term investments.

Absolute Liquid
Year Current liabilities Ratio
Assets

2005-06 966000 4502000 0.21

2006-07 1510000 22001000 0.06
2007-08 1501000 19690000 0.76

2008-09 1658000 17773000 0.09

2009-10 1732000 21844150 0.08
 0.8

0.7

0.6

0.5

0.4 0.76 Ratio

0.3

0.2

0.1 0.21
0.06 0.09 0.08
0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

Cash ratio indicates that the firm can pay its current Liabilities
immediately. The current ratio in 2005-06, 2007-08 is going on. But in 2006-07,
2008-09, 2009-10 there is a decrease in cash ratio. Though there is decrease
the company meets its emergency obligations.
PROFITABILITY RATIOS:

1. GROSS PROFIT RATIO:

Gross Profit Ratio = Gross Profit X 100

Net Sales

Gross Profit = Net Sales - Cost of Goods Sold

Year Gross Profit Net Sales Ratio

2005-06 7144861 33381132 0.21

2006-07 7382163 42084165 0.18

2007-08 7379048 46394158 0.16

2008-09 7441687 56474102 0.13

2009-10 8724019 62180144 0.14

 0.25

0.2

0.15

Ratio
0.1 0.21
0.18
0.16
0.13 0.14
0.05

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The gross profit ratio of TVS Adarsha has been reducing year by year
which is not a good sign this may due to increase in cost of goods sold. The
higher the ratio the better will be the performance of business.
 2. NET PROFIT RATIO:

Profit After Tax

Net Profit Ratio =________________X 100
Net Sales

Year Profit After Tax Net Sales Ratio

2005-06 358367 3338132 1.07

2006-07 490146 42084165 1.16

2007-08 689548 46394158 1.49

2008-09 833545 56474102 1.47

2009-10 1411863 62180144 2.27

 2.5

1.5

2.27 Ratio
1

1.49 1.47
1.07 1.16
0.5

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The net profit ratio of TVS Adarsha has been increasing year by year
which is a good sign this may due to increase in sales The higher the ratio the
better will be the performance of business.
 3. OPERATING PROFIT RATIO:

Operating Profit
Operating Profit Ratio = ____________________ X 100
Net Sales

Year Operating Profit Net Sales Ratio

2005-06 1948395 33381132 5.83

2006-07 2247163 42084165 5.34

2007-08 2766552 46394158 5.96

2008-09 3103372 56474102 5.49

2009-10 4227175 62180144 6.80

 8

4
Ratio
6.8
3 5.83 5.96
5.34 5.49
2

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The Operating profit ratio of TVS Adarsha has been fluctuating year by
year which is not a good sign this may due to decrease in gross profit. The
higher the ratio the better will be the performance of business.
4. OPERATING RATIO:

Operating cost
Operating ratio =_________________X 100
Net sales

Operating cost = Sales - Operating profit

Year Operating Cost Net Sales Ratio

2005-06 31432737 33381132 94.16

2006-07 39837002 42084165 94.66

2007-08 43627606 46394158 94.04

2008-09 53370730 56474102 94.50

2009-10 57952969 62180144 93.20

 95

94.5

94

93.5
Ratio
94.66
94.5
94.16 94.04
93

93.2
92.5

92
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The operating ratio of TVS Adarsha was 94.16 in 2005-06 and decreased
to 93.20 in 2009-10. A low ratio refers to better performance of business but
here the firm doesn’t have control over operating cost.
 5. RETURN ON INVESTMENT:
Profit After Tax
Return on Investment = _________________________X 100

Capital Employed

Capital employed = Long term debts + Net worth

Year Profit After Tax Capital Employed Ratio

2005-06 358367 4067000 8.81

2006-07 490146 4759000 10.30

2007-08 689548 4617000 14.93

2008-09 833545 6209000 13.42

2009-10 1411863 7375000 19.14

 25

20

15

Ratio
10 19.14
14.93
13.42
5 10.3
8.81

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The Return on investment of TVS Adarsha was 8.81 in 2005-06 and

increased to 19.14 in 2009-10. There is a high growth in the ratio. A high
ratio refers to better performance of business.
6. RETURN ON NETWORTH:

Profit After Tax

Return on Networth = X 100
Net Worth

Net Worth = Equity - Fictitious Assets

Equity = Equity share capital + Preference share capital + General reserves +

Undistributed Profits.

Year Profit After Tax Net Worth Ratio

2005-06 358367 7898014 4.54

2006-07 490146 8587614 5.70

2007-08
689548 9989023 6.90

2008-09 833545 13266440 6.28

2009-10 1411863 15149060 9.32

 10

5
9.32 Ratio
4
6.9
3 6.28
5.7
4.54
2

0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The Return on networth of TVS Adarsha was 4.54 in 2005-06 and

increased to 9.32 in 2009-08. There is a high growth in the ratio. A high ratio
refers to better performance of business.
 7. RETURN ON ASSETS:

Profit After Tax

Return on Assets = __________________X 100
Total Assets

Total Assets = Current Assets + Fixed Assets - Fictitious Assets

Year Profit After Tax Total Assets Ratio

2005-06 358367 28972000 1.24

2006-07 490146 29615000 1.66

2007-08 689548 40001000 1,72

2008-09 833545 37877000 2.20

2009-10 1411863 39958000 3.53

 10
9
8
7
6
5
9.32 Ratio
4
6.9
3 6.28
5.7
4.54
2
1
0
2005-06 2006-07 2007-08 2008-09 2009-10

INTERPRETATION:

The Return on assets of TVS Adarsha was 1.24 in 2005-06 and increased to
3.53 in 2009-10. There is a high growth in the ratio. A high ratio refers to better
performance of business. It means firm employed assets in the business very
effectively.
 CHAPTER -V

CONCLUSIONS & SUGGESTIONS

 CONCLUSIONS & SUGGESTIONS

6. LIQUIDITY OR SHORT TERM SOLVENCY

RATIOS:

1) CURENT RATIO:
The current ratio of TVS ADARSHS was 5.93 in 2005-06 and
it is decreased to 2.35 in 2009-10. From these we can conclude the
current assets are excess of current liabilities. But it is found that this
ratio is decreasing year by year. It should be controlled.

2) QUICK RATIO:
The quick ratio was 3.12 in the year 2005-06 and it is
decreased to 1.70 in 2009-10. It is maintaining quick ratio more than
1, it means it is meeting its current obligations in time. But is
decreasing year by year. It should be controlled to meet current
obligations in time.

3) SUPER QUICK RATIO:

The super quick ratio of TVS ADARSHA is very low.
However, it meets its emergency obligations. But it should improve its
cash ratio position.

PROFITABILITY RATIOS:

1) GROSS PROFIT RATIO:

The gross profit ratio of TVS ADARSHA has been reducing
year by year from 0.21 in 2005-06 to 0.14 in 2009-10. It is because a
higher increase in cost of goods sold than sales volume. It is better
to control the cost of goods sold.
 2) NET PROFIT RATIO:
The net profit ratio of TVS Adarsha has been fluctuating
year by year which is not a good sign this may due to decrease in
gross profit. The higher the ratio the better will be the performance of
business.

3) OPERATING PROFIT RATIO:

The Operating profit ratio of TVS Adarsha has been

fluctuating year by year which is not a good sign this may due to
decrease in gross profit. The higher the ratio the better will be the
performance of business.

4) OPERATING RATIO:
The operating ratio of TVS Adarsha was 94.16 in 2005-06 and
decreased to 93.20 slightly in 2009-10. A low ratio refers to better
performance of business but here the firm don't have control over
operating cost.

5) RETURN ON INVESTMENT:

The Return on investment of TVS Adarsha was 8.81 in 2005-

06 and increased to 19.14 in 2009-10. There is a high growth in the
ratio. A high ratio refers to better performance of business. It is
maintaining a good ratio for its survival.

6) RETURN ON NETWORTH:

The Return on networth of TVS Adarsha was 4.54 in 2005-06

and increased to 9.32 in 2009-10. There is a high growth in the ratio.
A high ratio refers to better performance of business. Though, the
ratio is good it has to improve more to earn on more return on
networth.

7) RETURN ON ASSETS:
The Return on assets of TVS Adarsha was 1.24 in 2005-06
and increased to 3.53 in 2009-10. There is a high growth in the ratio.
A high ratio refers to better performance of business. It means firm
employed assets in the business very effectively.
BIBLIOGRAPHY
 BIBLIOGRAPHY

NAME OF THE BOOK AUTHOR

FINANCIAL MANAGEMENT, VIKAS PUBLISHERS I.M PANDEY

8th EDITION

MANAGEMENT ACCOUNTING, KALYANI PUBLISHERS R.K. SHARMA &

8 th EDITION SHASHI.K.GUPTA

FINANCIAL MANAGEMENT PRASANNA CHANDRA

5th EDITION

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