International Journal of Trend in Scientific Research and Development (IJTSRD)

Volume 6 Issue 6, September-October 2022 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470

A Study on Ratio Analysis at Srikalahasthi Pieps Ltd

M. Rajagopal1, Dr. P. Basaiah2
1
Student, 2Assistant Professor,
1,2
School of Management Studies & JNTU, Anantapur, Andhra Pradesh, India

ABSTRACT How to cite this paper: M. Rajagopal |

This project “A STUDY ON RATIO ANALYSIS IN Dr. P. Basaiah "A Study on Ratio
SRIKALAHASTHI PIPES LTD., aims to analyse the liquidity and Analysis at Srikalahasthi Pieps Ltd"
financial position of the company using the financial tools. The need Published in
International
of the study is to express the relationship between different financial
Journal of Trend in
aspects in a such way that allows the user to draw conclusions about
Scientific Research
the performance, strengths and weakness of the srikalahasthi Ltd. In and Development
this study, we calculated various ratios to assess the performance of (ijtsrd), ISSN:
SRIKALAHASTHI PIPES LTD using the technique ratio analysis. 2456-6470, IJTSRD51939
Data is collected from secondary source where financial statements Volume-6 | Issue-6,
and balance sheets for the years (2017-2022) Also, this study enables October 2022, pp.702-708, URL:
to find out whether the company is maintaining a minimum amount www.ijtsrd.com/papers/ijtsrd51939.pdf
of working capital to meet the current expenses, also whether the
company is generating adequate profits which represents the growth Copyright © 2022 by author(s) and
of the company which can be ascertained through the profitability International Journal of Trend in
ratios of the company. This ratio analysis often helps and strengthens Scientific Research and Development
Journal. This is an
the company's performance and helps to overcome difficulties to
Open Access article
survive in the market for a long period. distributed under the
terms of the Creative Commons
Attribution License (CC BY 4.0)
(http://creativecommons.org/licenses/by/4.0)

INTRODUCTION
Ratio analysis is a quantitative procedure of obtaining To estimate and determine the possibilities of
a look into a firm’s functional efficiency, liquidity, future growth of business
revenues, and profitability by analyzing its financial To assess and evaluate the firm’s capacity and
records and statements. Ratio analysis is a very ability to repay short- and long- term loans.
important factor that will help in doing an analysis of
Users of Financial Analysis:
the fundamentals of equity. Analysts and investors
Financial analysis is the process of identifying the
make use of the methods for ratio analysis to study financial strengths and weaknesses of the firm by
and evaluate the fiscal wellbeing of businesses by
properly establishing relationship between the items
closely examining the historical performance and
of the balance sheet and profit & loss account. The
monetary statements. Comparative data and analysis
information contained in these statements are used by
can give an insight into the performance of the
management, investors, creditors, suppliers, and
business over a given period of time by comparing it
others to know the operating performance and
with the industry standards. At the same time, it also financial position of firm.
measures how well a business racks up against other
businesses functioning in the same sector. Management of the firm would be interested in every
aspect of the financial analysis. It is their overall
Objectives of Ratio Analysis: responsibility to see that the resources of the firm are
Analysis of financial statements may be made for a used most effectively, and that the firm’s financial
particular purpose in view
condition is sound.
To find out the financial stability and soundness
of the business enterprise. Investors who have invested their money in the
To assess and evaluate the earning capacity of the firm’s shares, are most concerned about the firm’s
business earnings. They restore more confidence in those firms
To estimate and evaluate the fixed assets, stock that shows steady growth in earnings. As such, they
etc., of the concern concentrate on the analysis of the firm’s present and

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 International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
future profitability. They also interested in the firm’s With view to boosting the export, the iron and ductile
financial structure to the extent it influences the export promotion council has urged the government
firm’s ability and risk. to reduce import duty of plastic raw material, supply
indigenous raw materials at international prices, fix
Trade Creditors are interested in firm’s ability to
duty, draw backs on weighted average basis and
meet their claims over a very short period of time.
charge freight rate on plastic products on weights
Their analysis will therefore confine to the evaluation
basis instead of volume basis.
of the firm’s liquidity position.
Suppliers Of Long – Term Debt are concerned with Prospects
The Production of various iron pipes a raw material in
firm’s long-term solvency and survival. They analysis
the country is expected to double by the end of
the firm’s profitability overtime. Its ability to generate
seventh plan, is immense scope for the use of iron in
cash to be able to pay interest and repay principal and
agriculture, electronics, automobile,
the relationship between various sources of funds.
telecommunications and irrigation and thus, the
MEANING OF RATIO ANALYSIS plastic industry is on the threshold of an explosive
Ratio analysis is the comparison of line items in the growth.
financial statements of a business. Ratio analysis is
used to evaluate a number of issues within an entity, Role of Iron in the national economy
Iron is used to produce the various products. A
such as its liquidity, efficiency of operations, and
dominant part of the iron of the present and future to
profitability.
find their utilization in their areas
This type of analysis is particularly useful to analysts Agriculture, forestry and water-management.
outside of a business, since their primary source of Automobile and transportation
information about an organization is its financial Electronics and telecommunications buildings,
statements. Ratio analysis is less useful to corporate construction and.
insiders, who have better access to more detailed Food processing and packaging • Power and gas
operational information about the organization distributor.
Definition: Importance of pipes industry
“The indicated quotient of two mathematical We shall look at the basic data about pipes and
expression “and as “the relationship between two particularly those properties, which are so, fuse in
numbers”. practical working with plastics. Plastics are man-
Accountant’s handbook by Wixon, kell and Bedford, made materials. The oldest raw material for
a ratio “is an expression of the quantitative producing plastics is carbonaceous material obtained
relationship between two numbers”. from coal tar (benzene, phenol).

People use ratios to determine those financial Today the majority of raw materials are obtained
characteristics of the firm in which they are from petrol chemical source and they can be
interested. economically produced in large quantities.

INDUSTRY PROFILE Iron industry is the basis for the development of many
Export of Pipes: industries in the global economy. Such as:
India has emerged top 3 manufacturing hubs of pipes Défense industry
after Europe and Japan. Our country is equipped with Transportation
all kinds of processing machinery and skilled labour Heavy Engineering
to boost export of pipes and products to yield rich Energy
dividend. Construction
Aeronautics
Today India exports pipes and pipe products to as
many as 80 countries all over the world. The exports, REASEACH METODALAGY
which were stagnant at around rest. 60-70 cores per SCOPE OF THE STUDY
annum double to 129 craters. The Plastic industry has This study on ratio analysis is confined to only
taken up the challenge of achieving an export target srikalahasthi pipes limited.
of Rs. 17 cores. The study is based on 5 years data from 2016-17
to 2020-2021.
Major export markets for pipes and pipe products are
Middle East, Africa, Asia, Europe and Latin Objectives of the study
American countries. To study the liquidity position of the srikalhasthi
pipes limited.

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To study the long- term solvency position of the better performance of the company in the year
solvency position of srikalahasthi pipes ltd. 2019-20 than 2018-2019.
To determine the profitability position of
2. QUICK RATIO:
srikalahasthi pipes ltd.
Current Quick
To improve the overall efficiency of the Year Quick assets
liabilities ratio
srikalahasthi pipes ltd.
2016-17 25,784,798 13,122,726 1.96
Research methodology 2017-18 40,326,253 20,207,449 1.99
The analysis is done using secondary data i.e, from 2018-19 36,516,321 18,430,917 1.98
annual reports of the company, journals, articles etc. 2019-20 41,349,046 31,908,564 1.29
The analysis is done using secondary data i.e., 2020-21 45,717,041 34,910,413 1.30
from annual reports of the company, journals,
articles etc.
Website: https://www.srikalahasthipipes.com
TOOLS AND TECHNIQUES
Liquidity ratios
Profitability ratios
Leverage ratios
Activity ratios
Bar charts
LIMITATIONS OF THE STUDY
The study is limited to 5 years data, i.e., from 2016- INTERPRETATION: The Quick ratio is more
17 to 2020-21 of Srikalahasthi Pipes Ltd. DATA penetrating test of liquidity than the current ratio. The
ANALYSIS & INTERPRETATION standard norm of the quick ratio is 1:1. During the
period 2015-20, the Quick Ratio of the company is
A. LIQUIDIY RATIO: 1.96, 1.99, 1.98, 1.29 and 1.3. In the year 2019-20,
1. CURRENT RATIO the Quick Ratio is 1ncreased to 1.3 so the Standard
Current assets norm is satisfactory.
Current ratio = ----------------------------
Current liabilities Table 3: CASH RATIO
Cash
Current liabilities Current Cash
Year marketable
Years Total debt Capital employed Ratio liabilities ratio
securities
2016-17 14,070,838 38,437,415 0.36 2016-17 2,560,002 13,122,726 0.19
2017-18 31,626,205 64,936,350 0.48 2017-18 5,114,537 20,207,449 0.25
2018-19 28,587,099 69,145,742 0.41 2018-19 7,028,518 18,430,917 0.38
2019-20 9,118,944 63,483,216 0.14 2019-20 6,246,724 31,908,564 0.19
2020-21 9,504,602 74,097,321 0.12 2020-21 4,020,841 34,910,413 0.11

INTERPRETATION: Current ratio is useful to

measure the firm’s short-term solvency. The standard
norm of the current ratio is 2:1. During the period INTERPRETATION: In all the above years the Cash
2015-20 the Current Ratio of the company is 2.67, Ratio is very low. The standard norm for Cash ratio is
2.95, 2.85, 1.97 and 2.12. In the year 2019-20 the 1:2. The company is failed in keeping sufficient cash,
Current ratio is Increased from1.9 to 2.12. It shows bank balances and marketable securities.

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B. LEVERAGE RATIOS: INTERPRETATION:
1. DEBT RATIO The Debt-Equity ratio gives results relating to Capital
Capital Debt structure of a firm. The Debt Equity ratio is 0.58 in
year Total debt
employed ratio the year 2015-16, and it is increased to 0.95 in the
2016-17 14,070,838 38,437,415 0.36 year 2016-17, and it is decreased to 0.70 in the year
2017-18 31,626,205 64,936,350 0.48 2017-18, it is decreased to 0.17 in the year 2018-19
2018-19 28,587,099 69,145,742 0.41 and it again decreased to 0.14 in the year 2019-20.
2019-20 9,118,944 63,483,216 0.14 The company depends on the debt fund is decreased.
2020-21 9,504,602 74,097,321 0.12 INTEREST COVERAGE RATIO
Interest
Year EBIT Interest coverage
ratio
2016-17 6,810,601 309,242 22.02
2017-18 13,300,725 1,293,088 10.28
2018-19 10,442,203 1,823,657 5.72
2019-20 24,786,331 677,155 36.60
2020-21 21,956,081 145,204 151.20

INTERPRETATION: The Debt ratio gives results

relating to Capital structure of a firm. The Debt ratio
is 0.36 in the year 2015-16, and it is increased to 0.48
in the year 2016-17, and it is decreased to 0.41 in the
year 2017-18, and again it is decreased to 0.14 in the
year 2018- 19 and again it is decreased to 0.12 in the
year 2019-20. From the above fluctuating trend, we
can say that, the company much not dependence on
debt because debt is decreased
2. DEBT-EQUITY RATIO:
Debt- INTERPRETATION:
Years Total debt Net worth Years equity Interest Coverage ratio is 22.02 in the year 2015-16,
ratio again it is decreased to 10.28 in the year 2016-17, and
2016- 2016- again it is decreased 5.72 in the year 2017-18. It is
14,070,838 24,366,576 0.58 increased to 36.60 in the year 2018-19, again it is
17 17
2017- 2017- increased to 151.2 in the year 2019- 20. In this
31,626,205 33,310,144 0.95 position, outside investors are interested to invest the
18 18
2018- 2018- money in this company.
28,587,099 40,558,643 0.70
19 19 C. ACTIVITY RATIOS:
2019- 2019- 1. WORKING CAPITAL TURNOVER RATIO
9,118,944 54,364,271 0.17
20 20 Working
2020- 2020- Working capital
9,504,602 64,592,718 0.14 Years Net sales
2021 2021 capital turnover
ratio
2016-17 59,580,164 21,879,206 2.72
2017-18 108,332,569 39,552,160 2.73
2018-19 131,317,881 34,168,091 3.85
2019-20 146,520,967 31,197,717 4.69
2020-21 176,112,067 39,276,291 4.48

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3. FIXED ASSETS TURNOVER RATIO:
Fixed
Net fixed assets
Year Net sales
assets turnover
ratio
2016-17 59,580,163 15,683,045 3.79
2017-18 108,332,569 18,885,084 5.73
2018-19 131,317,881 28,132,423 4.66
2019-20 146,520,967 30,572,552 4.79
2020-21 176,112,067 31,508,696 5.58

INTERPRETATION:
Working capital turnover ratio is useful to measure
the operating efficiency of the firm. Working capital
turnover ratio is 2.72 in the year 2015-16. It increased
from the year 2016-17(2.73) to 2018-19(4.69) but it
decreased to 4.48 in the year 2019-20.
2. CURRENT ASSETS TURNOVER RATIO:
Current
Current assets
Year Net sales INTERPRETATION: Fixed Assets Turnover ratio is
assets turnover
ratio high in the year 2016-17, i.e., 5.73. It is decreased to
2016-17 59,580,163 35,001,932 1.70 4.66 in the year 2017-18. It Is Increased to 4.79 in the
2017-18 108,332,569 59,759,610 1.81 year 2018-19. Again, is Increased to 5.58 in the year
2018-19 131,317,881 52,599,008 2.49 2019-20. It shows the effective utilization of fixed
2019-20 146,520,967 63,106,281 2.32 TOTAL ASSETS TURNOVER RATIO:
2020-21 176,112,067 74,186,704 2.37 Total
assets
Years Net sales Total assets
turnover
ratio
2016-17 59,580,163 52,921,071 1.13
2017-18 108,332,569 86,838,860 1.25
2018-19 131,317,881 89,401,743 1.46
2019-20 146,520,967 97,555,310 1.50
2020-21 176,112,067 111,057,071 1.58

INTERPRETATION:
During the period 2015-20, Current Asset Turnover
ratios are 1.70, 1.81, 2.49 and 2.32,2.37 From the
year 2015-16, it is increasing, and it is decreased to
2.32 in the year 2018-19and again it is increased to
2.37 in the year 2019-20.

INTERPRETATION:
During the period 2015-20, Total Assets Turnover
ratio is increasing from the value 1.13 to 1.58. It
shows the effective capacity of the total assets.

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DEBTORS TURNOVER RATIO: 11.95, 13.47, 9.34, 17.3 and 12.54. In the year 2019-
Debtors 20 the gross profit ratio is decreased to12.54.
Average
YEARS Net sales turnover NET PROFIT RATIO:
debtors
ratio
Net profit
2016-17 59,580,163 14,595,449 4.08 Years Net profit Sales
ratio
2017-18 108,332,569 22,646,820 4.78 2016-17 4704,345 59580163 7.89
2018-19 131,317,881 20,784,930 6.31 2017-18 94363151 108332569 8.71
2019-20 146,520,967 24,229,547 6.04 2018-19 80,478,67 131317881 6.12
2020-21 176,112,067 30,566,239 5.76 2019-20 167,033,38 146520967 11.39
2020-21 148,096,39 176112067 8.40

INTERPRETATION:
During the period 2015-2020, Debtors Turnover
ratios are 4.08, 4.78, 6.31 ,6.04 and 5.76. Debtors’ INTERPRETATION:
Turnover ratio is high in the year 2017-18, after it is During the period 2015-20, the Net profits are 7.89,
decreased to 5.76 in the year 2019-20 so company 8.71, 6.12,11.39 and 8.4. In the year 2018-19 ARBL
decreased credit sales and increased cash sales. have large amount of profits, but it is decreased to 8.4
in the year 2019-20.
INVENTORY TURNOVER RATIO:
inventory FINDINGS, SUGGESIONS AND
Cost of Average CONCLUSIONS
Years turnover
goods sold inventory FINDINGS
ratio
2016-17 59,580,163 7,468,378 7.97 Company has reached the standard ratio in the
2017-18 108,332,569 14,325,245 7.56 present year i.e., 2:1. So the company is in a
2018-19 131,317,881 17,758,021 7.39 position to repayment of its short-term liabilities.
2019-20 146,520,967 18,919,961 7.74 In the year 2020-21 the Current ratio is Increased
2020-21 176,112,067 25,113,449 7.01 from1.9 to 2.12.

INTERPRETATION: The company is maintaining quick assets over the

Inventory Turnover ratio is 7.97 in the year 2015-16. quick ratio. So, the quick assets would meet the
In the years 2016-17, the ratios are decreased i.e., quick liabilities. In the year 2020-21, the Quick
7.56, 7.39. And it is increased to 7.74 in the year Ratio is 1ncreased to 1.3.
2018-19, 55 after it is decreased to 7.01 in the year By observing the cash ratio, the company is failed
2019-20. so that in this ratio fluctuations are high. in keeping the sufficient cash, bank balances .so
D. PROFITABILITY RATIOS: the company cash performance is in down
Gross position. In the year 2020-21 the cash ratio is
Gross 0.11.
Years Sales profit
profit
ratio The company depended more on the debt fund in
2016-17 7,119,844 59,580,163 11.95 previous. Now it is decreased in the present year.
2017-18 14,593,814 108,332,569 13.47 And decreased to 0.14 in the year 2019-20 and
2018-19 12,265,860 131,317,881 9.34 again it is decreased to 0.12 in the year 2020-21.
2019-20 25,463,487 146,520,967 17.37 Interest coverage ratio is high in the present year.
2020-21 22,101,285 176,112,067 12.54 So, investors are interested to invest the money in
INTERPRETATION: this company. It is increased to 36.60 in the year
This ratio indicates the relationship of gross profits on 2019-20, again it is increased to 151.2 in the year.
sales. During the period 2015-20, the gross profits are

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Working capital turnover ratio is decreased in the The company is utilizing the fixed assets, which
present year. majorly help to the growth of the organization.
Fixed assets turnover ratio is gradually increasing The company should maintain it consistently.
from 2016-17. So, the company generating more Srikalahasthi Pipes Ltd has to increase its Gross
sales. profits and Net profits to support the
diversification of the company.
Debtor’s turnover ratio is decreased in the present
year. So, the company reduced its credit sales and It is suggested that company needs to improve its
increased its cash sales. utilization of working capital
The Gross profit & Net profits are decreased in CONCLUSION
the present year i.e., 2019-20. So the company It is observed that the company’s financial position is
should have good control over the operating good because the company’s leverage, activity and
expenses. profitability positions are good, and the company
have to increase its liquidity position for better
SUGGESTIONS
The company is paying high interest rate. Heavy performance in future
costs of capital affect the profitability of the firm.

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