SUMMER TRAINING REPORT

ON
“RATIO ANALYSIS”
AT
OMAX AUTOS LTD.

Submitted in partial fulfillment of the requirement of degree

of
Bachelor of Business Administration (CAM)
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
(Session 2017-18)

SUBMITTED TO: SUBMITTED BY:

MRS. RITA DAGAR HIMANSHI BHATI
(Asstt.Prof. BBA Dept.) BBA CAM 5thSEM
Roll No.- 28055
University Roll No.
Registration No.1511342530

DAV CENTENARY COLLEGE N.I.T, NH3

FARIDABAD (121001)
 DECLARATION

I Himanshi Bhati a Student of BBA (CAM) 5th Semester of DAV Centenary College
having College Roll Number 28055 hereby declare that I have taken summer training in
OMAX AUTOS LTD. I have shown my full interest and have completed my work
whatever assigned to me within given time. My data is primary and not secondary and is
not available anywhere else. I have taken training in FINANCE DEPARTMENT on the
topic “FINANCIAL ANALAYSIS THROUGH ACCOUNTING RATIO”.

2
 PREFACE

Books are the treasure of knowledge and a theoretical base is important for understanding
the realities of practical field. But at the same time, practical knowledge is critical for
having an insight into the implementation of the theory in corporate world.

With the privilege of an opportunity provided to me by OMAX AUTO LIMITED, for the
fulfillment of the purpose of “bridging the gap between theory and practical”. I undertook
a summer training project at finance department of Omax auto Limited. This report is a
product of a training undertaken from 1 June 2017 to 15 July 2017.

The main objective for preparing this project report is to understand the whole scenario of
capital budgeting. The analyses of this report enable me to understand how Omax auto
limited control their budgets.

3
 ACKNOWLEDGEMENT

A project report has never been the sale product of the person whose name appears on the
cover. There are always some people whose guidance proves to be of immense help in
giving its final shape. So, it is my first duty to express my gratitude towards all of them.

Success in my endeavor calls for co-operation and the valuable for senior and colleagues.
First, of all I would like to convey my heart full gratitude to Maharshi Dayanand
University for giving me permission to work on a project in this organization

I am also thankful to Dr Brijmohan Lal Munjal who has provided me supervision and
guidance during my project work. I cherish to record my thanks to management of
OMAX AUTOS LIMITED

I am also thankful to my mentor Mrs Rita Dagar for valuable guidance constructive
criticism and suggestion, which helped me a lot in solving my problems.

Last but not the least; I am extremely thankful to god who is the ultimate guide providing
mewith valuable insist, courage and determination at every doorstep, if I don’t mention
here that love, affection & co-operation which I received from my family members. They
too helped me a lot in completing this report.

HIMANSHI BHATI

4
 TABLE OF CONTENTS

S. NO TOPICS PAGE NO.

1. INTRODUCTION TO THE STUDY

2. INDUSTRY & COMPANY PROFILE

3. REVIEW OF LITERATURE

RESEARCH OF METHODOLOGY
 Objective of the study
 Scope of the study
4.  Research design
(a)data collection methods
(b)method of data analysis
 Limitations of the study

5. DATA ANALYSIS & INTERPRETATION

6. CONCLUSION & SUGGESTIONS

5
 CHAPTER-1
INTRODUCTION
OF
THE STUDY

6
 INTRODUCTION

Title: Financial Statement Analysis through Accounting Ratios.

‘RATIO ANALYSIS’ of a company helps in estimating the true burden of the debt and
the company’s ability to repay it.

‘FINANCIAL ANALYSIS’ is done for the purpose of presenting a periodically review

or report on progress by management and deal with status of investment in the business
and the result achieved during the period under review.

FINANCIAL STATEMENT ANALYSIS

DEFINITION
According To John N. Myers
“Financial statement analysis is largely a study of relationship among the various
financial factors in a business, as disclosed by a single set of statements and a study of the
trends of these factors as shown in a series of statement.’’

On the basis of above mentioned definition, the main features of financial statement
analysis are:-
 To present the complex data contained in financial statement in simple and
understandable form.
 To classify the items contained in financial statement in convenient and rational
groups.
 To make comparisons between various groups to draw various conclusion.

7
The project is concerned with studying the various functions of different sections in
finance department .As a student of finance it is very important to get practical
Knowledge of the finance department. A study of various section of the department will
give an insight of various functions, its nature and the procedure followed in problem
solving and decision-making.

In the interest of sound financial policy, every company should also analyze its accounts
periodically. The analysis and interpretation of the financial statement results in the
presentation of information that will aid in decision making by business managers,
investors and creditors as well as other groups who are interested in financial status and
operating statement in modern times is the ‘Ratio Analysis’. It is a principal technique so
far known to judge the condition portrayed by the financial statement .the analyst can
judge by its use the financial growth, development and present condition of a business
enterprise.

A financial ratio is a relationship that indicates something about a company's activities,

such as the ratio between the company's current assets and its current liabilities or
between its debtors and its turnover.
The basic source of these ratios is the company's profit & loss account and balance sheet
that contain all kinds of important information about that company. The ratios really help
to bring those details to light and identify the financial strengths and weaknesses of the
company.
When assessing ratios, it is important that the results are compared with other companies
in the same industry and not to be taken in isolation. What may seem like a poor ratio at
first glance may well be normal for that industry and, of course, the reverse applies, in
that what may seem a good ratio on its own, could be below average for that industry.

8
TYPES OF FINANCIAL STATEMENT
In the traditional sense, the term financial statements include only two statements, i.e.,
income statement and balance sheet. However, in modern times, two other statements are
also generally added in financial statements. They are the statement of retained earnings
and the statement of changes in financial position. Thus, a complete set of financial
statements must include:
(1) Income statement or profit & loss account
(2) Statement of financial position or balance sheet
(3) Statement of retained earnings or profit & loss appropriation account.
(4) Statement of changes in financial position (Fund flow statement and cash flow
statement)
Moreover, to supplement the data contained in the above financial statements,
certain schedules are also prepared, such as schedule of fixed assets, schedule
of debtors, schedule of creditors, schedule of inventories, schedule of long-
term investment etc. These schedule are considered as part of the financial
statements.
(1) Income statement (or profit & loss account)
It matches the revenues and expenses of enterprise for a particular period
in order to determine the profit earned or loss suffered during the period.
Accounting to Harry G. Guthmann :
“The statement of profit and loss is the condensed and classified record of
the gains and losses causing changes in the owner’s interest in the business
According to the nature of business, the income statement may be sub-
divided into four parts:
(1) Manufacturing Account
(2) Trading Account
(3) Profit and Loss Account, and
(4) Profit and Loss Appropriation Account

9
(2) Statement of financial position (or balance sheet)

It is prepared to depict the financial position of a concern at a specified point of time. It is

known as statement of financial position because it reports the position of assets,
Liabilities and capital on a particular date. The main difference between profit & loss
account and balance sheet is that whereas profit & loss account is prepared for a
particular period, the balance sheet is prepared on a particular date.

According to Howard and Upton,“Balance sheet is a statement which reports the

property values owned by the enterprise and the claims of creditors and owners against
these properties.”
According to John N. Myer,“The Balance sheet is thus a detailed form of the
fundamental or structural equation, it sets forth the financial structure of an enterprise.
It states the nature and amount of each of the various assets, of each of liabilities, and of
the owners.”
The important characteristics of balance sheet are as under:
(1) It portrays the relationship between the assets and liabilities. The assets are shown
on the other side. Total of both sides is always equal.
(2) It is prepared on a particular date and not for a period. It is true only for the date
on which it is prepared because even a single transaction would cause a change in
assets and liabilities.
(3) It shows the financial position of the business according to the going concern
concept.
(4) It is not based on absolute facts but is influenced by accounting assumptions and
personal judgements.

Significance of ratio anaylsis

Ratios are exceptionally useful tools with which one can judge financial performance of
the enterprise over a period of time. The efficiency of the enterprise can also be judged
against the industry average. In vertical analysis ratios help the analyst to form a

10
judgment whether performance of the firm at a point of time is good, questionable or
poor.

Likewise, use of ratios in horizontal analysis indicates whether the financial condition of
the firm is improving or deteriorating and whether the cost, profitability or efficiency is

showing an upward or downward trend. A study of the trend of strategic ratios may help
the management in the task of planning and forecasting. At times, the investment
decisions are based on the condition revealed by certain ratios. In this way it serves as
handmaid to the management.

LIMITATIONS OF RATIO ANALYSIS

Ratios should be used with extreme care and considered judgment because they suffer
from certain serious drawbacks.

Some of these are listed below:

(1) Ratios can sometimes be misleading if an analyst does not know the reliability and
soundness of the figures from which they are computed and the financial position of
the business at other times of the year. A business firm, for example, may have an
acceptable current ratio of 3: 1 but a larger part of the accounts receivable comprising
a great portion of the current assets may be uncollectible and of no value. When these
are deducted, the ratio might be 2: 1.
(2) The mechanics of ratio construction is not as important as the proper interpretation of
the ratios. As a matter of fact, ratios are only a preliminary step in interpretation.
They call attention to certain aspects of the business which needs detailed
investigation before arriving at any final conclusion.
(3) Ratios can never be the substitute of raw figures. At the timeof interpretation,
therefore, raw figures should also be referred to.

11
(4) Inter-firm comparison on the basis of ratio analysis is distorted because of the
different practices followed by different firms in respect of allocation of the cost of
fixed assets and inventory utilisation as also of the selling and intangible costs
between different time periods. Unless there is consistency in adoption of accounting
methods, ratios may not prove of great use.
(5) Price level changes make ratio analysis difficult.

12
 CHAPTER-2
COMPANY PROFILE

13
 OMAX AUTOS LIMITED

Omax Autos Limited was incorporated in 1983 with a vision to emerge as a niche player
in Auto Industry and has grown exponentially into truly diversified and globalised
corporate entity since then. In the last Twenty-Seven years of its existence, the Omax
Autos Group has created and executed projects that were a part to touch every walk of
life and human endeavor, while setting new benchmarks in quality. Today the Group
enjoys a Gross Turnover Rs. 974.95 crores, spanning its horizon and providing fulfilled
management. The group enjoys huge reserves of goodwill that has led to some of the
biggest names in the corporate world putting their trust in us and constantly strives to
provide products and services that enhance the quality of life and work, and to address a
gamut of human needs.

OMAX Autos Ltd is in the business of manufacturing auto components. Omax is one of
the largest manufacturers of Sheet Metal parts, Machined Tubular, Electroplated &
painted components, Welding Facilities with integrated world-class features in India.

With growing opportunities & enhanced experience base Omax Autos has strengthen
horizontally. In the last 27 years the company has widened its customer base and
products by entering into 4 wheeler industry, producing for central railways and defense
and producing home accessories apart from 2 wheeler industry. Not only within the
domestic market footsteps have also left their mark globally through IKEA, TENNECO,
PIAGGIO & TOYOTA.

Though the Company has moved towards new frontiers in the last 27 successful years,
yet it nourishes old relationships with undying passion and perseverance. With 10 plants
as facilities, a strong infrastructure base and enlightened human resource the organization
has reached the zenith of success.

14
 Through continuous and aggressive strategy building and disciplined execution of the
same it has been possible to attain high level of growth and experience. The key features
of the strategy are –
 To make major improvements towards customer's satisfaction.
 To develop a competitive edge - to optimize its cost and move up in value
chain.
 To progress through a strong base laid on in depth research and development

The Company has also made significantly major changes namely –

The Manesar Unit got registered for in-house R&D activity with DSIR, Govt. of India,
New Delhi.

Exploring projects in Hydro, Solar & Wind as Renewable Source of Energy and have:-
a) Successfully installed & commissioned 100 kwp Capacity Solar Roof Top
Photovoltaic System at Manesar and Dharuhera plants for Captive use.
Ordered 2 Gas Based Generator sets of 1364 kwp& have signed agreement with GAIL
for supplying 20000 SCM of Gas Per Day to units located at Manesar & Dharuhera
plants, which will result in considerable cost saving.

Commenced commercial production of chassis of commercial vehicles for Tata Motors

Limited at Lucknow plant.
Set up dedicated facilities at Gurgaon plant to manufacture parts and components for
Indian Railways.
Set up plant at Bawal to manufacture Home Furnishing products.

MILESTONES

1983: The year marked the beginning of the name "Omax Autos Limited".
1985: The first unit started in Dharuhera as an ancillary supplier to Hero Honda
for Sheet Metal and Tubular Welded components.
1986: Omax Autos Limited went public with more than 7500 shareholders.

15
1988: Established its second unit Automax in Gurgaon.
1989: Diversified its customer base by roping in Carrier Aircon Ltd. in Air
Conditioning Components.
1997: Bagged ISO 9002 certificate from TUV of Germany.
1999: Established its third unit- Speedomax in Sidhrawali.
Tied up with Honda- Siel Cars India Ltd. and New Holland Tractors Ltd. For
supply of Body and Axle parts.
2000: Set up the ultra modern Paint Shop with latest technology from ABB India
Ltd.
2001: A new phase of Kaizen activity- Various Training & HR activities started in
all plants.
2002: Established its Fourth Plant at IMT Manesar with a capital outlay of Rs.
200 million equipped with modern Tool Room, R&D Centre with state of
the art machinery began production.
2003: Established its Fifth Plant- Sprocket division in Dharuhera. Bagged
ISO/TS- 16949, ISO 14001 & OHSAS- 18001 Certification from UL India
for all plants.
2004: Established its Sixth Plant at Bangalore having machining & sheet metal
Manufacturing facilities.
Established its Seventh Plant- Indital at Dharuhera. Started Exports to
North America and Europe with clients such as Delphi, Tenneco,
Cummins, Piaggio etc.

2005: Established its Eighth Plant at Binola, Gurgaon for catering export clients.
2006: SAP rolled out in all Eight plants across India.
2007: Automax, Gurgaon-Sohna Road Plant merged with Binola Plant.
2008: Established its latest Plant at Lucknow to manufacture chassis for
Commercial vehicles for Tata Motors.
Established new Corporate Office in Gurgaon.
2009: Tied up with IKEA for supply of Metal Houseware Products.
Reached the remarkable heights of 26 years of manufacturing and

16
 Rendering quality products & services to customers.
2010: Commercial production started at Lucknow plant.
Set up plant at Bawal to manufacture Home Furnishing products.
Installed 100 kwp Solar PV System at Dharuhera&Manesar plant for
Captive use.

ORGANISATION’S VISION:-
“Highly customer oriented, humane and system run global organization with a concern
for society“

ORGANISATION’S MISSION:-
“To be a dedicated, proactive, loyal & accountable group of people with a quest for
excellence through latest technology, people

IMS (INTEGERATED MANGEMENT SYSTEM) POLICY:-

“In line with organizations Vision & Mission, to remain committed for total satisfaction
of the customers, associates and society at large, through excellence in quality, value for
money, on time deliveries and continual improvement. While achieving this, to remain
committed to comply with legal and other requirements relating to Environment, Health
& Safety, for prevention of pollution, ill-health & injury.

CORE VALUES:-
 Human Dignity
 Honesty
 Commitment
 Sincerity

ASPIRATIONS:-
 To build a world class Company through reliability and be a great place to work.

17
  Company’s vision is to make the Company the best in class in whatever they do,
globally.
 The products and services they offer should be comparable to the best in the
world,
 Company’s business process and systems should set benchmark for others.
 To earn the respect of the competitors and be loved by our stakeholders.
 The Company should be the most preferred company to work for, for any
employee.

OMAX STRENGHT IT’S EMPLOYEES

HR MISSION:-
“To promote and sustain the culture of developing world class leaders for value addition
in every sphere of original activities while fulfilling employees’ professional and
personal satisfaction.”

OMAX INFRASTRUCTURE

 10Manufacturing Plants situated across India, which forms the backbone of the
structure called "OMAX AUTOS LIMITED".

 10Facilities including Stamping Facility; CNC Pipe Bending Facility, Welding

Facility; Sprocket Facility; Machining Facility; Piston Rod Manufacturing
Facility; Tri Nickel Chrome Plating Facility; Tool Room Facility; Induction
Hardening Facility and Tube Manufacturing facility.

 35Main Products that form the vital & significant component and accessories for
two wheeler, four wheeler, commercial vehicles and home furnishing.

 52Customers / Clients that include OEMs & Tier I Manufacturers, provided with
timely and quality product delivery.

18
R&D Centre:-
“To facilitate research & development of new products, designs and equipments as well as
to improve the existing products by technical up gradation and cost minimization”.

CORPORATE INFORMATION

CHAIRMAN EMERITUS:-

Dr. Brijmohan Lal munjal

BOARD OF DIRECTORS:-
 Mr. Suresh Mathur Chairman
 Dr. Ramesh C Vaish Director
 Dr. T.N. Kapoor Director
 Mr. Salil Bhandari Director
 Mr. Verinder Kumar Director
 Mr. Atul Raheja Director
 Mr. Lalit Bhasin Director
 Mr. K.C. Chawla Whole Time Director
 Mr. Jatender Kumar Mehta Managing Director
 Mr. Ravinder Mehta Managing Director

19
AUDIT COMMITTEE:-
 Mr. Salil Bhandari Chairman
 Dr. T.N. Kapoor Member
 Mr. Atul Raheja Member
 Mr. Jatender Kumar Member

AUDITORS:-
 M/s A. Kumar Gupta& Co.,
 Chartered Accountants, Ludhiana

INTERNAL AUDITORS:-
 M/s KRA & Associates
 M/s Singhi Chugh& Kumar
 M/s Doogar & Associates

SECRETARIAL AUDITORS:-
o M/s Chandrasekaran Associates,
o Company Secretaries

SENIOR MANAGEMENT EXECUTIVES:-

 Mr. N.P. Singh ED (Human Resource)
 Mr. V.K.Gupta ED (Commercial)
 Mr. Sharad Jain Chief Financial Officer
 Mr. Kishor Karnataki CEO (Commercial Vehicle)
 Mr. Manoj MishraPresident (Passenger Car)

BANKERS:-
 Canara Bank
 State Bank of India

20
  Citi Bank
 United Bank of India
 Royal Bank of Scotland N.V. (India)
 HDFC Bank Limited
 Deutsche Bank
 ICICI Bank Limited

CUSTOMERS OF OMAX AUTOS LTD

INDIAN CUSTOMERS (OEMS):-

 Hero Honda Motors Ltd.
 Maruti Udyog Ltd. (Suzuki J.V.)
 Honda Motorcycle & Scooters India Pvt.
 TVS Motors Ltd.
 Suzuki Motorcycle Ltd.
 New Holland Tractors (India) Ltd
 Yamaha Motors India Pvt. Ltd.
 Hero Motors Ltd.

INDIAN CUSTOMERS (TIER 1):-

 Bharat Seats Ltd.
 Carraro india Ltd.
 Caparo Maruti
 Deiphi Automotives
 Denso India Ltd.
 Gabrial India Ltd.
 Honeywell
 IKEA
 India-Nippon Electricals Ltd.
 Mitsuba Sical India Ltd.

21
  Sundram Clayton Ltd.
 Tata Motors Limited
 Toyota (India)

EUROPEAN CUSTOMERS:-
 Delphi-Spain
 Delphi-Poland
 Honeywell
 Piaggio
 Tenneco Automotive-Belgium
 Supersprox-Czech

NORTH AMERICAN CUSTOMERS:-

 Delphi Automotive Inc. USA
 Tenneco Automotive (Mexico)

BUSINESS AREAS PRODUCT MANUFCTURES BY OMAX

AUTOS LIMITED

AUTOMOTIVE:-

22
TWO WHEELER:-
 Tubular Welded Component
 Sprocket
 Welded Component in all
 Sheet Metal Component in all
PASSENGER CARS:-
 Neck fuel filters
 Steering column shafts
 Frame assemblies
 Transmission shafts
 Back plates for brake shoes
 Piston rods for damper assembly

SEGMENT WISE SHARE IN 2013-2014 AS PER DOMESTIC

SHARE

ENGINEERING:-

23
Company has entered into Joint Venture Agreement with COC (China Oghiara
Corporation) tooling and stampings, Taiwan for world class tool room.

PRODUCT MANUFACTURED:-
Assemblies &Sub assemblies of stamped/Welded components including surface
treatment, Sub Assemblies of Machine Components & SprocketsTools & dies.
3D-TOOL MODEL BY UG-NX4

RAILWAY SUPPLIES:-

24
OMAX is registered supplier to railway.
Various products are under development for supplies to various locations of India.

METAL HOME FURNISHINGS:-

 Carbon Steel
 Stainless Steel

CORPORATE OFFICE:-
Plot No. B-26, Institutional Area,
32, Gurgaon – 122001

OMAX AUTOS LIMITED:-

25
Registered Office &Dharuhera Plant Address:
69 K.M.Stone, Delhi Jaipur Highway,
Dharuhera, Rewari (Haryana)- 122106

OMAX AUTO PLANT:-

Automax (A unit of Omax Autos Limited)
Delhi- Jaipur Highway, Village & P.O Binola

26
CHAPTER-3
REVIEW
OF
LITERATURE

27
 RATIO 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
benchmark for evaluating the financial position and performance of a firm. Ratios help to
summarize large quantities of financial data and to make qualitative judgment about the
firm’s financial performance.

Ratio analysis involves comparison for a useful interpretation of the financial statements.
Single ratio in itself does not indicate favorable or unfavorable condition. Therefore in
this report it is compared with:

 Past ratios, i.e. ratios calculated from the past financial statements of the same
company.
 Competitor’s ratios, i.e. Ratio of the major competitor at the same point in time.
 Projected ratios, i.e., ratios developed using the projected, Performa, financial
statements of the same firm.

Since liquidity ratios and Activity ratios help to measure the firm’s ability to meet current
obligations and firm’s efficiency in utilizing its assets respectively, these two have been
used.

OBJECTIVES OF RATIO ANALYSIS

 It is helpful in analysis of financial statement.

 It helps in simplification of accounting data.
 Helpful in comparative studies.
 It helps in locating weak spots of the business.
 Helpful in forecasting.

28
TYPES OF RATIO:-
There is four types of ratio which is used for calculating the firm financial
position

RATIO
ANALYSIS

LIQUIDITY ACTIVITY PROFITABILITY LEVERAGE

RATIO RATIO
RATIO RATIO

1. Liquidity Ratios
Liquidity ratios measure the ability of the firm to meet its current obligations. It is
necessary to strike a proper balance between high liquidity and lack of liquidity. A high
degree of liquidity means that a firm’s fund will be unnecessarily tied up in current
assets. Whereas lack of liquidity, implies failure of a company to meet its obligations due
to lack of sufficient liquidity.
It includes:
 Current Ratio
 Quick Ratio
CURRENT RATIO

LIQUIDITY
RATIOS

QUICK RATIO
29
Current ratio
Current ratio is calculated by dividing current assets by current liabilities:
Current ratio = Current Assets
Current Liabilities

Significance: - As a conventional rule a current ratio of 2 to 1 or more is considered

satisfactory because in a worse situation, even if the value of current assets become half,
the firm will be able to meet its obligation. Current ratio refers to the margin of safety for
creditors therefore higher the current ratio, the greater the margin of safety.

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 therefore for
calculating quick ratio they are deducted from current assets.

Quick Ratio = Current Assets – Inventory

Current Liabilities
Significance: Generally, the quick ratio of 1:1 is considered to be satisfactory. Quick
ratio thus more rigorous test of liquidity than the current ratio and, when used together
with current ratio, it gives a better picture of short term financial position of the firm.

2. Activity Ratios
Activity Ratios are used to evaluate the efficiency with which the firm manages and
utilizes its assets. These ratios are also called turnover ratios as they indicate the speed
with which the firm manages and utilizes its assets.

Activity ratios, which are used to analyze Escorts effectiveness in Asset utilization,
are:

30
  Inventory Turnover
 Debtor Turnover
 Net Assets Turnover
 Current Asset Turnover
 Creditor Turnover

INVENTOTY TURNOVER

DEBTOR TURNOVER

ACTIVITY
RATIOS NET ASSEST TURNOVER

CURRENT ASSEST TURNOVER

CREDITOR TURNOVER

Inventory Turnover
It indicates the efficiency of the firm in producing and selling its product. It is calculated
by dividing Sales by average inventory. In a manufacturing company inventory of
finished goods is used to calculate inventory turnover.

Inventory Turnover = Sales

Average Inventory
Significance:-
This ratio indicates whether or not the stock has been efficiently utilised. It shows the
speed with which the stock is rotated into sales. The higher the ratio, the better it is, since
it indicates that the stock is selling quickly. In business where stock turnover is high
goods can be sold at low margin of profit and even then the profitability can be high.

31
Debtors Turnover Ratio
Debtors’ turnover indicates the number of times debtors’ turnover each year. Higher the
value of Debtors turnover, the more efficient is the management of credit. The liquidity
position of the firm depends
on the quality of the debtors to a great extent. Two ratios being used in the report to
analyze liquidity of debtors are:
 Debtors Turnover
 Collection Period

Debtors Turnover = Net credit sales

Average debtor

Collection Period = Debtors x no. of days

Gross Sales

Significance: This ratio indicates the speed with which the amount is collected from
debtors. The higher the ratio, the better it is, since it indicates that amount from debtors is
being collected more quickly. The less the risk from bad debt, and so the lower the
expenses of collection and increase in the liquidity of the firm

The shorter the average collection period, the better the quality of debtors, since a short
collection period implies prompt payments by debtors. Although Escorts has a zero debt
credit policy but through channel finance facility by means of hundi it is giving credit up
to 90 days, comparing this with the average collection period, its collection and credit
efficiency appears to be satisfactory.

A too low collection period is also not necessarily favorable as it may indicate a very
restrictive collection and credit policy. Because of the fear of bad debt loses the firm may
be selling to those only whose financial conditions are undoubtedly sound and who are

32
very prompt in making the payment. Such a policy succeeds in avoiding the bad debt
loses, but it curtails sales so severely that overall profits are reduced.

Current Assets and net working capital turnover ratio

This ratio shows the efficiency with which the firm is utilizing its current assets.

Current Assets Turnover = Sales

Current Assets

Net working capital turnover ratio = Sales / Net Working Capital

Creditors turnover ratio

Creditors turnover = Net credit purchase
Average Creditors

3. Profitability Ratio
A company should earn profits to survive and grow over a long period of time. Profit is
the measurement of the efficiency of the business.
Generally there are two types of profitability ratios calculated:
 Profitability in relation to sales.
 Profitability in relation to investment.
Profitability ratios, which are used to analyze profitability, are:
 Gross Profit Ratio
 Net Profit Ratio
 Operating profit Ratio
 Return On Equity
 Rate of Return

GROSS PROFIT RATIO

NET PROFIT RATIO

33
PROFITABILITY
RATIO
OPERATING PROFIT RATIO

RETURN ON EQUITY

RATE OF RETURN

Gross Profit Ratio:

Gross margin, Gross profit margin or Gross Profit Rate can be defined as the amount of
contribution to the business enterprise, after paying for direct-fixed and direct-variable
unit costs, required to cover overheads (fixed commitments) and provide a buffer for
unknown items. It expresses the relationship between gross profit and sales revenue.

The ratio shows the relationship between gross profit and sales.

Gross Profit
Gross Profit Ratio = * 100
Net Sales
Net Sales = Sales – Sales Return

Net Profit Ratio:

Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of
profitability. It is calculated by finding the net profit as a percentage of the revenue.

Net Profit
(a) Net Profit Ratio = *100
Net Sales

34
Significance: - The profit margin is mostly used for internal comparison. It is difficult
to accurately compare the net profit ratio for different entities. A low profit margin
indicates a low margin of safety: higher risk that a decline in sales will erase profits and
result in a net loss.

Operating Profit Ratio:

In business, operating margin, operating income margin, operating profit margin or return
on sales (ROS) is the ratio of operating income divided by net sales, usually presented in
percent.

Operating Net Profit

Operating Profit Ratio = Net sales*100

Operating net profit = Net profit+ Non operating expenses-non operating income

Return On Equity (ROE):

Equity shareholders of a company are more interested in knowing the earning capacity of
their funds in the business. As such, this ratio measures the profitability of the funds
belonging to the equity shareholders. Since the profit available to equity shareholders will
be the profit left after payment of interest, taxes and dividend on preference share capital.

Net profit after interest, tax and dividend

Return on Equity Shareholder’s Funds =
*100
Equity Shareholder’s Fund

For e.g.: Net worth =1crore

35
 Loan @10%=30 lacks
Tax rate =30%
Share =1 lacks
Profit =10 lacks (before interest and tax)
Profit after interest but before tax =10 lacks- 3 lacks=7 lacks
Profit after tax =7lacks- 2.10lacks=4.9lacks
Return on equity = 4.9-2=2.9 lacks

Equity Shareholder’s Funds = Equity Share Capital + All Reserves + P/L a/c balance -
fictitious assets - debit balance of the P/L a/c.

Significance: This ratio measures how efficiently the equity shareholder’s funds are
being used in the business. It is true measure of the efficiency of the management since it
shows what the earning capacity of the equity shareholders funds. The higher the ratio,
the better it is, because in such a case equity shareholders may be given a higher
dividend.
Comment:-Omax autos ltd Equity shareholder fund is increase in current year in
compare to previous year so it is good because the earning of share holder is increase .
But the graph is fluctuating; this shows that the shareholders are not getting constant
return on their investments. So company have to stable there Equity shareholder fund
ratio.

Rate of return:
In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit
or sometimes just return, is the ratio of money gained or lost (whether realized or
unrealized) on an investment relative to the amount of money invested. The amount of
money gained or lost may be referred to as interest, profit/loss, gain/loss, or net
income/loss. The money invested may be referred to as the asset, capital, principal, or the
cost basis of the investment. ROI is usually expressed as a percentage rather than a
fraction.
Profit before tax, interest and dividends

36
 Return on investment = *100
Net Worth
Profit before interest, tax and dividend = Profit after interest but before tax + interest paid
- interest income
YEAR 2012-13 2013-14 2014-15
ROR 11.72 4.61 6.82

Significance: This ratio helps in taking decisions regarding capital investment in the
new projects. The new projects will be commenced only if the rate of return on capital
employed/ net worth in such projects is expected to be more than the rate of borrowings.
Comment: The rate of return of Omax Autos ltd is increase current year in compare to
previous year which is significance.

4. LEVERAGE RATIOS
Long term creditors like the debentures holders; financial institutions etc. are interested in
the firm’s long-term financial strength. These ratios are calculated to assess the ability of
the firm to meet its long-term liability as and when they become due.

To judge the financial position of the firm, financial leverage, or capital structure ratio
are calculated. These ratios indicate mix of funds provided by owners and lenders.
Leverage ratio for find the long term liability of OMAX AUTOS are:

 Debt –Equity Ratio

 Debt to total fund ratio
 Proprietary ratio

37
DEBT-EQUITY RATIO
DEBT EQUITY
RATIO

DEBT TO TOTAL
LEVERAGE FUND RATIO
RATIO

PROPRIETARY
RATIO

Several debt ratios may be used to analyse the long term solvency of the firm. The firm
may be interested in knowing the portion of the interest-bearing debt (also called funding
debt) in the capital structure. It indicates the proportion of funds which are acquired by
long term borrowing in comparison to shareholders funds.

Debt Long Term Loans

Debt Equity Ratio = OR
Equity Shareholder’s Funds

Long-term Loans: - Debentures + Mortgage Loans + Bank Loan+ Loan from Financial
Institutions and Public Deposits.
Shareholders Funds: - Equity Share Capital + Preference Share Capital + Share
Premium + General Reserves + Capital Reserves + Credit Balance of Profit and Loss
Accounts and Accumulated Losses and Fictitious Assets are deducted.

Debt To Total Funds Ratio

This ratio expresses the relationship between long term debt and shareholder’s fund. It
indicates the proportion of funds which are acquired by long term borrowings in
comparison to shareholder’s funds. This ratio is calculated to assess the ability of the firm
to meet its long term liabilities.

38
Debt Long term loans
Debt to total funds Ratio = OR
Debt + Equity Long term loans + Shareholder’s Fund

Long Term Loans = Debentures + Mortgage Loans + Bank Loans + Loan from
Financial Institutions + Public Deposits.

Shareholder’s fund = Equity Share Capital + Preference Share Capital + Share Premium
+ General Reserve + Capital Reserve + Other Reserves + Credit Balance of P/L account -
Accumulated Losses -Fictitious Assets - Debit balance of P/L account.

FOR E.G.= long term loan= 1 lack

Share holder fund=2 lack
Debt Equity ratio= .33
Or
Long term loan = 2 lack
Share holder fund = 1 lack
Debt equity ratio= .666

Limitations of Ratio analysis

 It is difficult to decide on the proper basis of comparison.

 The comparison is rendered difficult because of differences in situations of two
companies or of one company over years.
 Price level changes make the interpretation of ratios invalid.
 The differences in the definition of items in the balance sheet and profit and loss
account make the interpretation of ratios difficult.
 The results are based on highly summarized information. Consequently, situations
that require control might not be apparent or situations that do not want
significant efforts might be unnecessarily highlighted.

39
 Advantages Of Ratio Analysis:-

1. Forecasting and Planning:

The trend in costs, sales, profits and other facts can be known by computing ratios of

relevant accounting figures of last few years. This trend analysis with the help of ratios
may be useful for forecasting and planning future business activities.

2. Budgeting:
Budget is an estimate of future activities on the basis of past experience. Accounting

ratios help to estimate budgeted figures. For example, sales budget may be prepared with

the help of analysis of past sales.

3. Measurement of Operating Efficiency:

Ratio analysis indicates the degree of efficiency in the management and utilisation of its

assets. Different activity ratios indicate the operational efficiency. In fact, solvency of a
firm depends upon the sales revenues generated by utilizing its assets.

4. Communication:
Ratios are effective means of communication and play a vital role in informing the
position of and progress made by the business concern to the owners or other parties.

5. Control of Performance and Cost:

Ratios may also be used for control of performances of the different divisions or

departments of an undertaking as well as control of costs.

6. Inter-firm Comparison:
Comparison of performance of two or more firms reveals efficient and inefficient firms,

thereby enabling the inefficient firms to adopt suitable measures for improving their

40
efficiency. The best way of inter-firm comparison is to compare the relevant ratios of the
organisation with the average ratios of the industry.

7. Indication of Liquidity Position:

Ratio analysis helps to assess the liquidity position i.e., short-term debt paying ability of a

firm. Liquidity ratios indicate the ability of the firm to pay and help in credit analysis by
banks, creditors and other suppliers of short-term loans.

8. Indication of Long-term Solvency Position:

Ratio analysis is also used to assess the long-term debt-paying capacity of a firm. Long-

term solvency position of a borrower is a prime concern to the long-term creditors,

security analysts and the present and potential owners of a business. It is measured by the

leverage/capital structure and profitability ratios which indicate the earning power and

operating efficiency. Ratio analysis shows the strength and weakness of a firm in this

respect.

9. Indication of Overall Profitability:

The management is always concerned with the overall profitability of the firm. They

want to know whether the firm has the ability to meet its short-term as well as long-term

obligations to its creditors, to ensure a reasonable return to its owners and secure
optimum utilisation of the assets of the firm. This is possible if all the ratios are

considered together.

10. Signal of Corporate Sickness:

41
A company is sick when it fails to generate profit on a continuous basis and suffers a
severe liquidity crisis. Proper ratio analysis can give signal of corporate sickness in
advance so that timely measures can be taken to prevent the occurrence of such sickness.

Importance Of Ratio Analysis:-

Helpful in assessing operating efficiency of the Business

The ratio can be used as the measuring rod of efficiency. With the help of this, the
evaluation of changes during different period can be performed. In this way, the
comparative efficiency of company can be informed.

Helpful in Measuring financial solvency

Ratios are useful tools for evaluating the liquidity and solvency position of a concern.
They point out the liquidity position of an organization to meet its short and long term
obligations.

Helpful in future forecasting

Ration analysis is very helpful in financial forecasting and planning. The ration
calculation of past years works guide line for the future.

Helpful in decision making

Ratio analysis is also very helpful for decision making. The information provided by
ration analysis is very useful for making decision on any financial activity.

Helpful in corrective action

Ratio analysis can also point out the deficiencies of the business so that corrective steps
may be taken accordingly.

Helpful in comparing inter firm performance

42
Due to inter firm comparison, ratio analysis also serves as a stepping stone to remedial
measures. It helps management evolving future 'market strategies'.

Helpful in communication
Ratio is an effective means of communication. Different financial ratios communicate the
strength and financial standing of the firm to the internal and external parties.

Helpful in cost control

From the use of ratio, it is possible to control the different costs of the concern.

Uses of Ratio Analysis :-

(1) Utility to Shareholders/Investors:

An investor in the company will like to assess the financial position of the concern where

he is going to invest. His first interest will be the security of his investment and then a

return in the form of dividend or interest. For the first purpose he will try to assess the

value of fixed assets and the loans raised against them. The investor will feel satisfied

only if the concern has sufficient amount of assets.

Long-term solvency ratios will help him in assessing financial position of the concern.

Profitability ratios, on the other hand, will be useful to determine profitability position.

Ratio analysis will be useful to the investor in making up his mind whether present

financial position of the concern warrants further investment or not.

(2) Utility to Creditors:

43
The creditors or suppliers extend short-term credit to the concern. They are interested to

know whether financial position of the concern warrants their payments at a specified

time or not. The concern pays short- term creditor, out of its current assets. If the current

assets are quite sufficient to meet current liabilities then the creditor will not hesitate in

extending credit facilities. Current and acid-test ratios will give an idea about the current

financial position of the concern.

(3) Utility to Employees:

The employees are also interested in the financial position of the concern especially

profitability. Their wage increases and amount of fringe benefits are related to the volume

of profits earned by the concern. The employees make use of information available in

financial statements. Various profitability ratios relating to gross profit, operating profit,

net profit, etc. enable employees to put forward their viewpoint for the increase of wages

and other benefits.

(4) Utility to Government:

Government is interested to know the overall strength of the industry. Various financial

statements published by industrial units are used to calculate ratios for determining short-

term, long-term and overall financial position of the concerns. Profitability indexes can

also be prepared with the help of ratios. Government may base its future policies on the

basis of industrial information available from various units. The ratios may be used as

indicators of overall financial strength of public as well as private sector, in the absence

of the reliable economic information, governmental plans and policies may not prove
successful.

44
(5) Tax Audit Requirements:
Section 44 AB was inserted in the Income Tax Act by the Finance Act, 1984. Under this

section every assess engaged in any business and having turnover or gross receipts

exceeding Rs.40 lakh is required to get the accounts audited by a chartered accountant

and submit the tax audit report before the due date for filing the return of income under

Section 139. In case of a professional, a similar report is required if the gross receipts

exceed Rs.10 lakh.

45
CHAPTER-4
RESEARCH
METHODOLOGY

46
RESEARCH METHODOLOGY

“Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a researcher in studying his research problem
along with the logic behind them. It is necessary for the researcher to know not only the
research methods/techniques but also the methodology.

OBJECTIVES OF STUDY

 To do the comparative analysis of different ratios of last four years .

 To know the about the quick ratio in the last four year
 To get information about the debtor turnover ratio of last four year
 To know the size of net working capital turnover of last three year
 To get information about the creditor turn over of last three year

SCOPE OF THE STUDY

This study is confined to the subject of financial management on ratio analysis at omax
autos private limited. In this study I cover various ratio:- current ratio, quick ratio, Debtor
turnover ratio, Net working capital turnover ratio.
 Estimating the Requirement of Funds: Businesses make forecast on funds needed
in both short run and long run, hence, they can improve the efficiency of funding.
The estimation is based on the budget e.g. sales budget, production budget.
 Determining the Capital Structure: Capital structure is how a firm finances its
overall operations and growth by using different sources of funds.Once the
requirement of funds has estimated, the financial manager should decide the mix
of debt and equity and also types of debt.

47
  Investment Fund: A good investment plan can bring businesses huge returns.

RESEARCH DESIGN:-
The formidable problem that follows the task of defining the research problem is the
preparation of the design of the research project, popularly known as the “Research
Design”. Decisions regarding what, where, when, how much, by what means concerning
and inquiry or a research study constitute a research design. “A research design is the
arrangement of conditions for collection and analysis of data in a manner that aims to
combine relevance to the research purpose with economy in procedure”. In fact, the
research design is the conceptual structure within which research is conducted. It
constitutes the blue print for the collection, measurement and analysis of data. As such
the design includes an outline of what the researcher will do from writing the hypothesis
and its operational implications to the final analysis of data.

TYPES OF RESEARCH
Types of Research

Exploratory Research Descriptive Research

Exploratory Research:-
It is a type of research conducted for a problem that has not been clearly defined.
Exploratory research helps determine the best research design, data collection method
and selection of subjects. It should draw definitive conclusions only with extreme
caution. Given its fundamental nature, exploratory research often concludes that a
perceived problem does not actually exist. Exploratory research often relies on secondary
research such as informal discussions with consumers, employees, management or
competitors, and more formal approaches through in-depth interviews.

48
Descriptive Research:-
This research is also known as statistical research, describes data and characteristics
about the population or phenomenon being studied. Descriptive research answers the
questions who, what, where, when and how.
Although the data description is factual, accurate and systematic, the research cannot
describe what caused a situation. Thus, Descriptive research cannot be used to create a
causal relationship, where one variable affects another. In other words, descriptive
research can be said to have a low requirement for internal validity.
The present research project is based on descriptive research design.

TYPES OF DATA
 Primary Data: -
The primary data are those which are collected a fresh and for the first
time and thus happen to be original in character.

 Secondary Data: -
The secondary data are those which have already been collected by someone else
and which have already been passed through the statistical process.

DATA COLLECTION METHOD:-

DATA COLLECTION METHOD

Primary Methods Secondary Methods

49
Sources by which primary data can be collected:
 Observation
 Interview
 Questionnaire
 Schedules
 Tests

Sources by which secondary data can be collected:

 Magazines
 Newspapers
 Internet
 Historical documents, etc

DATA ANALYSIS:-
In the present report data analysis is done with the help of tables and graphs.

LIMITATIONS OF THE STUDY

 Limited period of time.

 Most of the information may be kept secret due to its confidential nature.

 Price level changes make the interpretation of ratios invalid.

 The differences in the definition of items in the balance sheet and profit and loss
account make the interpretation of ratios difficult.
 The results are based on highly summarized information. Consequently, situations
that require control might not be apparent or situations that do not want
significant efforts might be unnecessarily highlighted.

50
 CHAPTER-5
DATA ANALYSIS
AND
INTERPRETATION

51
 1. CURRENT RATIO:
Current ratio is calculated by dividing current assets by current liabilities:
Current ratio = Current Assets
Current Liabilities

Year Current Assets Current Liabilities Ratio

2013-14 48468.47 21582.46 2.2:1
2014-15 51764.02 27739.78 1.8:1
2015-16 49807.77 32808.36 1.5:1

Interpretation:-
The current ratio of the firm measures the short term solvency. It indicates the rupees of
current asset available for each rupee of current liabilities.The above chart shows that
decline trend from the F.Y. 2013 to F.Y. 2014.This is mainly due to increasing creditors
from F.Y. 2013 to F.Y. 2016. In the F.Y. 2013-14 it shows 2.2:1 which was higher than
the standard ratio i.e. 2:1.
There was continuous decline in the current ratio which is not good sign for the company

52
2. QUICK RATIO
Quick ratio indicates whether the firm is in position to pay its current liabilities within a
month or immediately.
Quick Ratio = Current Assets – Inventory
Current Liabilities
Stock is excluded from liquid assets because it has to be sold before it can be converted
into cash.

Year 2012-13 2013-14 2014-15 2015-16

Quick ratio 0.81

1.04 0.98 0.82

Interpretation:-
Omax auto limited quick ratio in the current year has decreased in comparison to
previous year. Although quick ratio is more penetrating test of liquidity than current ratio,

53
3. DEBTORS TURNOVER RATIO
Debtors’ turnover indicates the number of times debtors’ turnover each year. Higher the
value of Debtors turnover, the more efficient is the management of credit. The liquidity
position of the firm depends on the quality of the debtors to a great extent. Two ratios
being used in the report to analyze liquidity of debtors are:
 Debtors Turnover
 Collection Period
Debtors Turnover = Net credit sales
Average debtor

Year 2012-13 2013-14 2014-15 2015-16

Debtors
1.5 2 3.5 6
turnover

Collection Period= Debtors x no of days

Gross Sales
NOTE: For calculating the collection period, the number of days have been taken as
365 instead of 300.
Interpretation:
As it can be seen from the graph that the debtor’s turnover ratio is increasing. So it can be
interpreted that debtors show good faith in the organizations and money is timely
collected.

54
 4. NET WORKING CAPITAL TURNOVER
Year 2012-13 2013-14 2014-2015
Net working capital turnover ratio 13.00 11.19 4.8

14 13
12 11.19 10.51
10
8 year
6 NWCT
4
2
0 0 0
0
1 2 3 4

Interpretation:-
Interpreting the reciprocals of these ratios Omax autos ltd need Rs 0.095 investments in
current assets for generating a sale of one rupee.

In case of working capital turnover Omax autos ltd has significantly improved. It needs
of net current assets for generating sale of one rupee which has increase from Rs 0.089 in
2011-2012.

55
 5. CREDITORS TURNOVER RATIO
Creditors turnover = Net credit purchase
Average Creditors

Year 2012-13 2013-14 2014-2015

C.T 0.37 0.52 0.46

0.6 0.52
0.5 0.46
0.37
0.4
year
0.3
CTR
0.2
0.1
0 0 0
0
1 2 3 4

Interpretation:
Omax autos credit turnover ratio is in increase in 2012-13 as compare to previous year
which is good for the company. Because in this year the time period of payment is
greater but the ratio is going to decrease in 2013-14 as compare to previous year.

56
 6. GROSS PROFIT RATIO:
This ratio expresses the relationship between gross profit and sales revenue.
It shows the relationship between gross profit and sales.

Gross Profit
Gross Profit Ratio = * 100
Net Sales

Net Sales = Sales – Sales Return

Year 2012-13 2013-14 2014-15 2015-16

GPR 14 12.86 25 30

Interpretation:-
As the figure constitute that the Gross profit of the company is continuously increases
which is very significant result but still company have to find out new way to increase
there profit.

57
 7. NET PROFIT RATIO:
Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of
profitability. It is calculated by finding the net profit as a percentage of the revenue.
Net Profit
(a) Net Profit Ratio = * 100
Net Sales

YEAR 2012-13 2013-14 2014-15 2015-16

NPR 1.08 -0.31 -0.4 2.21

Interpretation:-
Omax autos net profit is negative in 2012-13 but in 2013-14 it is 2.21.The ratio in the
current year is quite significance.
.

8. DEBT TO TOTAL FUNDS RATIO

58
 Debt Long term loans
Or
Debt to total funds Ratio =
Debt + Equity Long term loans + Shareholder’s Fund

Year 2012-13 2013-14 2014-15 2015-16

Debt To 0.65 0.74 0.47 0.21
Total Fund
Ratio

Interpretation:
Debt-Equity ratio of Escorts is decreasing from 2011-2012 which is satisfactory. From
the above example we can say that the debt equity ratio is less than in compare to
previous year .this graph shows that the long term loan is less than the share holder fund
which is good for the company.

9. INVENTORY TURNOVER RATIO

59
This ratio indicates the relationship between cost of goods sold during the year and
average stock kept during that year.

Inventory Turnover = Sales

Average Inventory

Interpretation:
As it can be seen from the graph that the stock turnover ratio is increasing .So it can be
interpreted that the stock is being efficiently utilized.

60
 10. DEBT-EQUITY RATIO:
.
Debt Long Term Loans
Debt Equity Ratio = OR
Equity Shareholder’s Fund

Year 2012-13 2013-14 2014-15 2015-16

Debt Equity 0.60 0.42 0.89 0.28
Ratio

Interpretation:-
As we can see that the firm debt-equity ratio is decreasing from 2008-09.so we can say
that the firm financial position is good to pay it’s long term debt.

61
 CHAPTER-6
CONCLUSION&
SUGGESTIONS

CONCLUSION

After analyzing the ratios of Omaxautos the main thing to be noted is that the company
has improved its performance very well as compared to its previous years ratios.

62
But on the other side, the analysis shows that with the continuous improvement in
performance of Omax autos, Omax autos is still in backward position if compared it with
OMAX AUTOS LTD. sassand VST Tillers.

But we can also say that because of its continuous improvement Omax autos is also
giving them a tougher competition and will definitely acquire a better position in the
future.

SUGGESTIONS

Market share:The Company’s main motive should be to increase their market

share. Manyinvestors before investing see the market share in the market. So if the
company wants to increasethe value they have to increase the market share. This can be

63
achieved by creating a competitive edgeover its competitors. The company has to
increase its sales by various means like maintaining goodrelationships with the
customers, allowing good credit facility and also by reducing cost so as toprovide a
competitive price in the market. Proper marketing strategies can also help the company
inhaving good sales.

Investments:The Company has invested in various fields whichis good as it

has diverse its risk but there are some loop holes in the investment too. The company
should also invest in there isfreereturn also. The company didn’t invest in either of the
risk free return. The company should invest inthe government securities and debentures
so that the company should be risk free up to somepercentage.
Collection period:Omax autos have a low debtor turnover ratio and a very high
collection period of 90 days which implies excessive blockage of funds as debt which
might result in stagnation of the business.

64
 CHAPTER-7
ANNEXURE

FINANCIAL HIGHLIGHTS AND GRAPHS OF OMAX

AUTOS

FINANCIAL PERFORMANCE:-
March March
Year ended March 2011 March 2011 March 2012
2013 2014

65
Gross Sales 71,069 84,840 88,103 98,095 97,495

Net Sales 58,610 69,944 73,044 83,435 87,558

Export Sales 2,656 3,076 3,408 5,266 8,500

Gross Profit (PBITD) 5,730 7,710 7,367 7,991 7,789

Net Profit (PAT) 2,003 2,366 1,584 543 1,430

Net Worth 11,371 13,333 14,567 14,561 16,139

Capital Employed 19,590 20,262 24,578 30,962 30,687

Fixed Assets (Net

22,639 26,804 31,769 33,390 35,422
block)

KEY INDICATORS:-

March March March March

Year ended March2011
2010 2012 2013 2014

Gross Profit Margin

9.78 11.02 10.09 9.62 8.90
(%)

66
 Net Profit Margin (%) 3.42 3.38 2.17 0.65 1.63

Export Sales/Net Sales

4.53 4.40 4.67 6.25 9.71
(%)

Debt/Equity 0.74 0.52 0.69 1.13 0.90

Earning Per Share (Rs) 8.84 12.17 7.53 3.17 6.64

Dividend Per Share

2.00 2.25 1.50 1.00 1.50
(Rs)

Book Value/Share (Rs) 52.70 62.34 68.11 68.08 75.46

PERFORMANCE IN COMPARISON TO BOARD BASED

INDICES- BSE SENSEX:-
Month NSE BSE

Share Prices Nifty Share Prices Sensex

High Low High Low High Low High Low
April, 2013 28.00 17.25 3517.25 2965.70 27.75 18.05 11492.10 9546.29

67
 May 37.00 21.55 4509.40 3478.70 37.30 21.60 14930.54 11621.30

June 43.50 31.25 4693.20 4143.25 44.00 31.40 15600.30 14016.95

July 39.45 27.00 4669.75 3918.75 39.00 27.00 15732.81 13219.99

August 51.70 35.50 4743.75 4353.45 51.85 36.00 16002.46 14684.45

Sept 52.85 44.90 5087.60 4576.60 52.60 45.00 17142.52 15356.72

Oct 55.95 47.00 5181.95 4687.50 56.15 46.85 17493.17 15805.20

Nov 61.75 45.60 5138.00 4538.50 61.75 44.70 17290.48 15330.56

Dec 61.00 54.15 5221.85 4943.95 62.00 54.00 17530.94 16577.78

Jan, 2014 71.00 49.45 5310.85 4766.00 71.00 49.10 17790.33 15982.08

Feb 61.00 45.35 4992.00 4675.40 61.20 45.15 16669.25 15651.99

DISTRIBUTION OF SHARE HOLDINGS AS ON MARCH 31, 2014:-

Nominal Value Total face

%Total % Total face
of shares No of holders value
holders Value
(In Rupees) (In Rupees)

1-5000 11,890 80.16 1,72,26,300 8.05

68
 10001-20000 672 4.53 97,59,100 4.56

20001-30000 189 1.27 49,33,880 2.31

30001-40000 76 0.51 7,07,550 1.7

40001-50000 71 0.48 32,58,810 1.52

50001-100000 97 0.65 67,09,620 3.14

100001&above 94 0.63 15,66,28,350 73.23

Total 14835 100.00 21,38,82,130 100.00

SHARE HOLDINGS PATTERN AS ON MARCH 31, 2014:-

S.No. Category No. of % of

Shares shareholdin
1
Promoters 'Holding

69
 2
Indian Promoters 72,68,350 33.98

3
Bodies Corporate 38,94,504 18.21

4
Non Promoters' Holding

5
Mutual Funds and UTI 0 0.00

6
Banks, FIs, Insurance Companies 0 0.00

7
Foreign Institutional Investors 88,939 041

8
Private Corporate Bodies 36,07,399 16.87

9
Indian Public 63,35,149 29.62

10
NRIs/OCBs 1,93,872 0.91

TOTAL 21388213 100.00

BIBLIOGRAPHY

BOOKS:

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 PandeyI .m, Financial Management, New Delhi, Vikas Publishing House Private
Limited, 1999, 8th edition, 807-809 pp.
 Khan M.Y & Jain P.K, Financial Management, Text, Problem & Cases, New Delhi,
Tata MC Graw-Hill, Publishing House Private Limited, 1981,4th edition, 27.1-27.8
pp.
 ChandnaPrasanna (1984): “Financial Management- Theory and practices.” Tata
McGraw hill, Publishing Company Ltd, New Delhi.

WEBSITES
 www.omaxautos.com
 www.economictimes.com
 www.businessfinancemag.com
 www.gtnews.com
 www.investopedia.com
 www.planware.com

TRADING AND PROFIT& LOSS A/C

PARTICULAR AMOUNT AMOUNT AMOUNT
SALEAS 70000
(-) Sales return (800) 69200

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(-) Cost of sales
Opening stock 4000
(+)Purchase 36800
(-)Return inward (1300)
(+)Carriage inward 35500 39500
(-)Closing stock (5500)
(34000)
GROSS PROFIT $35200

Less expenses
Wages 8500
Light&heating 1400
Printing &stationary 900
Telephone 600
Carriage outwards
Advertising 2500
Motor expenses 1800
Provision expenses 4000
Interest payable 200 (19900)
15300
Commission received
Discount received
NET PROFIT $15300

RATIO ANALYSIS OF INCOME STATEMENT AND

BALANCE SHEET

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 These are tools for analyzing (i.e.: calculating percentages and ratios) and
interpreting (i.e.: comparing percentages and ratios to determine the meaning and
significance of the analysis) the financial soundness of a hospitality company.
 For ratios to be meaningful, they shall be compared against:
 Prior-period percentages and ratios
 Industry and trade association percentages and ratios
 Budgeted percentages and ratios

I- Ratio Analysis of the Income Statement:

1. Profit Margin Ratio:

The Profit Margin Ratio is used as a Measure of Profitability. Moreover, it can be
computed for revenue generators as well as the hotel in general

Profit Margin Ratio = Hotel (or Departmental) Income / Net Sales

 Rooms Division Department: (692,261 / 897,500) * 100 = 77.13 %

 Food & Beverage Department: (87,377 / 518,170) * 100 = 16.86 %
 Telephone Department: (-27,623 / 51,140) * 100 = - 54.01 %
 Hotel Doro: (60,544 / 1,597,493) * 100 = 3.79 %

2. Labor Cost Percentage:

The Labor Cost Percentage is used as a measure of Operating Efficiency. Moreover, it
can be computed for each department or for the hotel in General

Labor Cost Percentage = Total Payroll and Related Expenses / Net Sales

 Rooms Division Department: (143,100 / 897,500) * 100 = 15.94 %

 Food & Beverage Department: (204,180 / 518,170) * 100 = 39.40 %
 Telephone Department: (17,132 / 51,140) * 100 = - 33.50 %
 Hotel Doro: (568,102 / 1,597,493) * 100 = 35.56 %

3. Food (or Beverage) Cost Percentage:

Food (or Beverage) Cost Percentage = Cost of Food (or Beverage) Sold / Net Food (or
Beverage Sold)

 Food Cost Percentage: (135,200 / 358,300) * 100 = 37.73 %

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 Beverage Cost Percentage: (40,510 / 159,870) * 100 = 25.34 %
 Food & Beverage Cost Percentage: (175,710 / 518,170) * 100 = 33.91 %
4. Prime Cost Percentage:

Refers to the Total Labor and Materials used in the Production or

Selling Process

Prime Cost Percentage = Total Cost of Sales + Total Payroll and Related Expenses / Net
Sales

 Rooms Division Department: ((0 + 143,140) / (897,500)) * 100 = 15.94 %

 Food & Beverage Department: ((175,710 + 204,180) / (518,170)) * 100 = 73.31 %
 Telephone Department: ((60,044 + 17,132) / 51,140) * 100 = 150.91 %
 Hotel Doro: ((248,701 + 568,102) / 1,597,493) * 100 = 51.13 %

5. Average Food (or Beverage) Check:

Represents the Average Sales per cover

Average Food (or Beverage Check) = Net Food (or Beverage) Sales / Covers

 Average Food Check* = 358,300 / 14,332 = $ 25.00

 Average Beverage Check** = 159,870 / 4,000 = $ 39.97
 Avergae Food & Beverage Check = 518,170 / (14,332 + 4,000) = $ 28.27

(*): Assume total Food Covers is 14,332

(**): Assume total Beverage Covers is 4,000

6. Return On Equity Ratio:

The Return On Equity Ration measures the Profits after Taxes of the Hospitality
Company relative to the Equity of its Owners (I.e. Shareholders)

Return On Equity Ratio = Net Income / Average Equity

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Where Average Equity = (Equity at the Beginning of the Year + Equity at the End of the
Year) / 2

 Hotel Doro (19X2) : (60,544 / ((1,068,662 + 1,028,118) / 2)) * 100 = 5.77 %

7. Return On Assets Ratio:

The Return On Assets Ratio measures how productively the Assets have been to generate
Net Income

Return On Assets Ratio = Net Income / Average Total Assets

 Where Average Total Assets = (Total Assets at the Beginning of the Year + Total
Assets at the End of the Year) / 2

 Hotel Doro (19X2) : (60,544 / ((3,247,412 + 3,292,371) / 2)) * 100 = 1.85 %

8. Occupancy Percentage:
The Occupancy Percentage measures Room Sales in terms of the Hotel’s Capacity to
generate Rooms Sold

Occupancy Percentage = (Total Number of Rooms Occupied / Total Number of Rooms

Available for Sale) * 100

II-Ratio Analysis of the Balance Sheet:

1.Liquidity Ratios:
Show the company’s ability to pay its current liabilities.

 Current Ratio = Current Assets / Current Liabilities

 Quick Ratio = (Cash + Marketable Securities + Net Receivables) / Current Liabilities

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 Current Ratio (19X1) : 147,654 / 139,253 = 1.06
 Current Ratio (19X2) : 147,888 / 123,750 = 1.20
 Quick Ratio (19X1) : (147,654 – (10,143 + 12,165)) / 139,253 = 0.90
 Quick Ratio (19X2) : (147,888 – (11,000 + 13,192) / 123,750 = 1.00

2.Asset Management Ratios:

Show how a company effectively and efficiently manages its assets.

 Accounts Receivable Turnover Ratio = Net Revenue / (Net Average Accounts

Receivable)
 Average Collection Period Ratio = 365 / (Accounts Receivable Turnover Ratio)
 Inventory Turnover Ratio = (Cost of Goods Used) / (Average Goods Inventory)
 Inventory Turnover Period = 365 / (Inventory Turnover Ratio)
Where:

 Net Average Accounts Receivable = (Net Accounts Receivable at the Beginning of

the Year + Net Accounts Receivable at the End of the Year) / 2
 Average Goods Inventory = (Goods Inventory at the Beginning of the Year + Goods
Inventory at the End of the Year) / 2

 A/R Turnover Ratio (19X2) = (1,597,493 / ((40,196 + 38,840) / 2) = 40.42 times

 Average Collection Period (19X2) = 365 / 40.42 = 9.03 days
 Inventory Turnover Ratio* (19X2) = (248,701 / ((7,500 + 8,000) / 2) = 32.09 times
 Inventory Turnover Period (19X2) = 365 / 32.09 = 11.37 days

(*): Assume Goods inventory amounted $ 7,500 & $ 8,000 at the end of 19X1 & 19X2
respectively.

3.Debt Management Ratios:

Measure Company’s solvency (i.e.: company’s ability to meet its long-term obligations)

 Debt-to-Equity Ratio = (Total Liabilities) / (Total Equity)

 Assets-to-Liabilities Ratio = (Total Assets) / (Total Liabilities)

 Debt-to-Equity Ratio (19X1) = 2,264,253 / 1,028,118 = 2.20

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 Debt-to-Equity Ratio (19X2) = 2,178,750 / 1,068,662 = 2.04
 Assets-to-Liabilities Ratio (19X1) = 3,292,371 / 2,264,253 = 1.45
 Assets-to-Liabilities Ratio (19X2) = 3.247,412 / 2,178,750 = 1.49

List of figures

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S.NO PARTICULARS PAGE NO.
Figure-1 Current ratio
Figure-2 Quick ratio
Figure-3 Debtor turnover ratio
Figure-4 Net working capital turnover ratio
Figure-5 Creditor turnover ratio
Figure-6 Gross profit ratio
Figure-7 Net profit ratio
Figure-8 Debt to total fund ratio
Figure-9 Inventory turnover ratio
Figure-10 Debt equity ratio

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