SL.No. Page. No.

Teacher’s
Contents sign
1. Comprehensive Project
Study of Rekha’s Enterprises for the
year ending 31st Mar’17 and
preparation of its Financial
Statement and Ratio
Analysis.
2. Specific Project – 1
Segment Analysis of Tata Chemical
Ltd. for the Quarter ended 30th
Mar’17 ofthe Financial year 2016-
17 and doing:
a. Segment-wise Result Analysis
b. Segment-wise Revenue
Analysis
c. Segment-wise Capital
Employed Analysis
3. Specific Project – 2
Study of ITC Ltd. for the period 31st
Mar’16 to 31st Mar’17 and analysis
of its Financial Statements by
doing Ratio Analysis and depicting
it in diagrams.
Comprehensive
Project
 Rekha’s Enterprises
Vandana & Rekha, decided to do business of fashion garments together under
the name of VANDANA TEXTILES. They joined hands as Vandana was a good fashion
designer and Rekha was experienced in marketing such products. They purchased a
commercial space of 500 sq. feet for Rs.5,00,000. The space so purchased was
suitably decorated to make it fit for such trade. They further invested Rs.1,00,000
on decoration. They had invested the above Rs.6,00,000 by borrowing Rs.3,00,000
from State Bank of India and balance amount was brought equally by Vandana and
Rekha. Total amount of bank loan is to be paid in 20 quarterly investments
beginning 30th June, 2016. Annual rate of interest is 12%.

Bank loan and interest repaid in first year are:

-June 30, 2016 = Rs. 15,000 + Rs. 9,000

Sept 30, 2016 = Rs. 15,000 + Rs. 8,550

Dec 31, 2016 = Rs. 15,000 + Rs. 8,100

Mar 31, 2017 = Rs. 15,000 + Rs. 7,650

They started business on 1st April, 2016. Both the partners decide to deposit
Rs.1,00,000 each in Bank. They deposited Rs. 5,000 for electricity connection with
BSES. They paid a deposit of Rs. 2,000 to MTNL. They also purchased furniture for
Rs. 10,000. All the payments were to be made by cheques. All receipts were
deposited into bank on same day.
At the end of the year, their results showed following:

Particular Amount (Rs.)

Total Sales 20,00,000

Total Purchases 17,00,000
Electricity Expense 40,000
Telephone Charges 50,000
Cartage Outwards 60,000
Travelling Expenses 45,000
Entertainment Expenses 5,000
Maintenance Expenses 25,000
Miscellaneous Expenses 15,000
Electricity Expenses Payable 20,000

They withdraw Rs. 2,500 by cheque each month for personal expenses. They
paid bank loan regularly.

1. Journalize the above transactions. Post them into ledger and prepare the Trial
Balance.
2. Prepare Profit and Loss Account.
3. Prepare Balance Sheet
4. Calculate profitability Ratio.
5. They approached the bank for further loan. Compute the ratios that the banker
will required before granting loan.
6. Compute the ratio that you consider appropriate for analyzing the
performance.
7. Prepare Cash Flow Statement.
8. Industry standards are as follows:

Gross Profit Ratio = 30% Proprietary Ratio =1

Net Profit Ratio = 15% Stock Turnover Ratio = 4.50
 Journal
Rekha’s Enterprises
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
Bank A/c Dr. 3,00,000
To Vandana Capital A/c 1,50,000
April 1,
To Rekha Capital A/c 1,50,000
2016
(Being the amount of capital brought by
Vandan and Rekha)
Bank A/c Dr. 3,00,000
April 1,
To Bank Loan A/c 3,00,000
2016
(Being amount of loan taken from Bank)
Building A/c Dr. 5,00,000
April 1,
To Bank A/c 5,00,000
2016
(being commercial space purchased )
Building A/c Dr. 1,00,000
April 1,
To Bank A/c 1,00,000
2016
(being amount spend on building decoration)
Bank A/c Dr. 2,00,000
April 1, To Vandan’s Capital A/c 1,00,000
2016 To Rekha’s Capital A/c 1,00,000
(being the amount of capital further
introduced)
Security Deposit A/c Dr. 7,000
April 1, To Bank A/c 7,000
2016 (Being the amount of security deposit madewith
BSES and MTNL)
Furniture & Fixture A/c Dr. 10,000
April 1,
To Bank A/c 10,000
2016
(Being the furniture purchased)
Bank Loan A/c Dr. 15,000
June 30, Bank Interest A/c Dr. 9,000
2016 To Bank A/c 24,000
(being amount of bank loan paid)
 Bank Loan A/c Dr. 15,000
Sept 30, Bank Interest A/c Dr. 8,550
2016 To Bank A/c 23,550
(Being amount of bank loan paid)
Bank Loan A/c Dr. 15,000
Dec 31, Bank Interest A/c Dr. 8,100
2016 To Bank A/c 23,100
(Being amount of bank loan paid)
Bank Loan A/c Dr. 15,000
Mar 31, Bank Interest A/c Dr. 7,650
2017 To Bank A/c 22,650
(Being amount of bank loan paid)
Bank A/c Dr. 20,00,000
March 31,
To Sales A/c 20,00,000
2017
(Being amount of revenue received)

March 31, Purchase A/c Dr. 17,00,000

To Bank A/c 17,00,000
2017
(Being amount paid for purchase)
March 31, Vandana’s Capital A/c Dr. 30,000
2017 Rekha’s Capital A/c Dr. 30,000
To Bank A/c 60,000
(Being amount withdrawn by partners)
March 31, Electricity Expenses A/c Dr. 40,000
2017 Telephone Charges A/c Dr. 50,000
Cartage Outwards A/c Dr.
60,000
Travelling Expenses A/c Dr.
Entertainment Expenses A/c Dr. 45,000
Maintenance Expenses A/c Dr. 5,000
Miscellaneous Expenses A/c Dr. 25,000
To Bank A/c 15,000
(Being amount of expenses paid) 2,40,000
March 31, Depreciation A/c Dr. 31,000
2017 To Building A/c 30,000
To Furniture A/c 1,000
(being amount of depreciation @ 5% on
Building and @10% on Furniture)
March 31, Electricity Expenses A/c Dr. 20,000
2017 To Electricity Expenses Payable A/c 20,000
(Being the amount of provision for
expenses payable)
 Ledgers
Bank Account
Dr. Cr.
Date Particulars L.F Amount Date Particulars L. Amount
. F.
2016 2016
Apr 1 To Vandana’s Capital 1,50,000 Apr 1 By Building A/c 5,00,000
A/c By Building A/c 1,00,000
Apr 1 To Rekha’s Capital 1,50,000 Apr 1 By Security Deposit A/c 7,000
A/c By Furniture A/c 10,000
Apr 1 To Bank Loan A/c 3,00,000 Apr 1
By Bank Loan A/c 15,000
Apr 1 To Vandana’s 1,00,000 Apr 1
By Bank Interest A/c 9,000
Apr 1 Capital A/cTo 1,00,000 June 30
By Bank Loan A/c 15,000
Rekha’s Capital A/c
June 30
By Bank Interest A/c 8,550
2017
By Bank Loan A/c 15,000
Mar 31 To Sales A/c 20,00,000 Sept 30
Sept 30 By Bank Interest A/c 8,100
Dec 31
Dec 31

Bay Bank Loan A/c 15,000

2017 By Bank Interest A/c 7,550
Mar 31 By Vandana’s Drawing A/c 30,000
Mar 31 By Rekha’s Drawing A/c By 30,000
Mar 31 Purchase A/c 17,00,000
Mar 31 By Electricity Expenses A/c 40,000
By Telephone Charges A/c 50,000
Mar 31
By Cartage Outwards A/c By 60,000
Mar 31
Travelling Expenses A/c By 45,000
Mar 31 Entertainment ExpensesA/c 5,000
Mar 31 By Maintenance Expenses A/c
Mar 31 By Miscellaneous Expenses 25,000
Mar 31 A/c 15,000
By Balance c/d
Mar 31 89,700

28,00,000 28,00,000
To Balance B/d 89,700 __________
2017
Apr 1
 Vandana’s Capital Account
Dr. Cr.
Date Particulars L.F Amount Date Particulars L. Amount
. F.
2017 2016
Mar 31 To Drawings A/c 30,000 April 1 By Bank A/c 1,50,000
Mar31 To Balance c/d 2,20,000 April 1 By Bank A/c 1,00,000
2,50,000 2,50,000
2017
April 1 By Balance b/d 2,20,000

Rekha’s Capital Account

Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2017 2016
Mar 31 To Drawings A/c 30,000 April 1 By Bank A/c 1,50,000
Mar31 To Balance c/d 2,20,000 April 1 By Bank A/c 1,00,000
2,50,000 2,50,000
2017
April 1 By Balance b/d 2,20,000

Sales Account
Dr. Cr.
L.F L.
Date Particulars .
Amount Date Particulars F.
Amount
2017 2017
Mar 31 To Trading A/c 20,00,000 Mar 31 By Bank A/c 20,00,000
20,00,000 April 1 20,00,000

Building Account
Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2016 2017
April 1 To Bank A/c 5,00,000 Mar 31 By Depreciation A/c 30,000
April 1 To Bank A/c 1,00,000 Mar 31 By Balance c/d 5,70,000
6,00,000 6,00,000
2017
April 1 To Balance b/d 5,70,000
 Security Deposit Account
Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2016 2017
April 1 To Bank A/c 7,000 Mar 31 By Balance c/d 7,000
7,000 7,000
2017
April 1 To Balance b/d 7,000

Electricity Charges Account

Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2017 2017
Mar 31 To Bank A/c 40,000
Mar 31 To Electricity expense A/c 20,000 Mar 31 By Profit/Loss A/c 60,000
60,000 60,000

Furniture & Fittings Account

Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2016 2017
April 1 To Bank A/c 10,000 Mar 31 By Depreciation A/c 1,000
Mar 31 By Balance c/d 9,000
10,000 10,000
2017
April 1 To Bank b/d 9,000

Purchase Account
Dr. Cr.
L.F L.
Date Particulars .
Amount Date Particulars F.
Amount
2017 2017
Mar 31 To Bank A/c 17,00,000 Mar 31 By Trading A/c 17,00,000
17,00,000 17,00,000

Telephone Charges Account

Dr. Cr.
Date Particulars L.F Amount Date Particulars L. Amount
. F.
2017 2017
Mar 31 To Bank A/c 50,000 Mar 31 By Profit/Loss A/c 50,000
50,000 50,000
 Cartage Outward Account
Dr. Cr.

L.F L.
Date Particulars .
Amount Date Particulars F.
Amount
2017 2017
Mar 31 To Bank A/c 60,000 Mar 31 By Profit/Loss A/c 60,000
60,000 60,000

Travelling Expense Account

Dr. Cr.
L.F L.
Date Particulars .
Amount Date Particulars F.
Amount
2017 2017
Mar 31 To Bank A/c 45,000 Mar 31 By Profit/Loss A/c 45,000
45,000 45,000

Entertainment Expense Account

Dr. Cr.

L.F L.
Date Particulars .
Amount Date Particulars F.
Amount
2017 2017
Mar 31 To Bank A/c 5,000 Mar 31 By Profit/Loss A/c 5,000
5,000 5,000

miscellaneous Expense Account

Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2017 2017
Mar 31 To Bank A/c 15,000 Mar 31 By Profit/Loss A/c 15,000
15,000 15,000

Bank Interest Account

Dr. Cr.

Date Particulars L.F Amount Date Particulars L. Amount

. F.
2016 2017
June 30 To Bank A/c 9,000 Mar 31 By Profit/Loss A/c 33,300
Sept 30 To Bank A/c 8,550
Dec 31 To Bank A/c 8,100
2017
Mar 31 To Bank A/c 7,650
33,300 33,300

Vandana’s Drawing Account

L.F L.
Date Particulars .
Amount Date Particulars F.
Amount
2017 2017
Mar 31 To Bank A/c 30,000 Mar 31 By Capital A/c 30,000
30,000 30,000

Rekha’s Drawing Account

Date Particulars L.F Amount Date Particulars L. Amount
. F.
2017 2017
Mar D
31r. To Bank A/c 30,000 Mar 31 By Capital A/c 30,000
30,000
30,000

Depreciation Account
Cr.
Dr.

Date Particulars L. Amount Date Particulars L. Amount

F. F.
2017 2017
Mar 31 To Building A/c 30,000 Mar 31 By Profit & Loss A/c 31,000
Mar 31 To Furniture & Fixture A/c 1,000
31,000 31,000
 Trial Balance
S. No. Name of Account L.F. Dr. (Rs.) Cr. (Rs.)
1. Bank A/c 89,700
2. Vandana’s Capital A/c 2,20,000
3. Rekha’s Capital A/c 2,20,000
4. Bank Loan A/c 2,40,000
5. Building A/c 5,70,000
6. Security Deposit A/c 7,000
7. Furniture & Fixture A/c 9,000
8. Sales A/c 20,00,000
9. Purchase A/c 17,00,000
10. Electricity Expenses A/c 60,000
11. Telephone Charges A/c 50,000
12. Travelling Expenses A/c 45,000
13. Entertainment Expenses A/c 5,000
14. Maintenance Expenses A/c 25,000
15. Miscellaneous Expenses A/c 15,000
16. Cartage Outwards A/c 60,000
17. Bank Interest A/c 33,300
18. Depreciation A/c 31,000
19. Electricity Expenses Payable A/c 20,000
27,00,000 27,00,000
 Trading & P rofit & L oss A/c
For the year ended on 31 st
March, 2017
Particulars Amount Particulars Amount
To Purchases 17,00,000 By Sales 20,00,000
To Gross Profit c/d 8,50,000 By Closing Stock 5,50,000
25,50,000 25,50,000
To Electricity Expenses A/c 60,000 By Gross Profit b/d 8,50,000
To Telephone Charges A/c 50,000
To Travelling Expenses A/c 45,000
To Entertainment Expenses A/c 5,000
To Maintenance Expenses A/c 25,000
To Miscellaneous Expenses A/c 15,000
To Cartage Outwards A/c 60,000
To Bank Interest A/c 33,300
To Depreciation A/c 31,000
To Net Profit Transferred to the
Capital A/c
Vandana 2,62,850
Rekha 2,62,850 5,25,700
8,50,000 8,50,000

Balance Sheet
As on 31 st M arch, 2017
Liabilities Amount (Rs.) Assets Amount (Rs.)
Capital A/c Building 6,00,000
Vandana 2,50,000 (-) Depreciation 30,000 5,70,000
(-) Drawing (30,000)
(+) Net Profit 2,62,850 4,82,850 Furniture 10,000
(-) Depreciation 1,000 9,000
Rekha 2,50,000 Security Deposit 7,000
(-) Drawing (30,000) Cash at Bank 89,700
(+) Net Profit 2,62,850 4,82,850 Closing Stock 5,50,000
Bank Loan 2,40,000
Electricity Expenses Payable 20,000
12,25,700 12,25,700
Ratios
1. Stock Turnover Ratio
Stock Turnover = Cost of Goods Sold
Average Stock
= 11,50,000 = 2.09 times
5,50,000
2. Working Capital Turnover Ratio
Working Capital Turnover Ratio = Cost of Goods Sold
Working Capital
= 11,50,000 = 1.86 times
6,19,700
3. Gross Profit Ratio
Gross Profit Ratio = Gross Profit x 100
Net Sales
= 8,50,000 x 100 = 42.5%
20,00,000
4. Net Profit Ratio
Net Profit Ratio = Net Profit x 100
Net Sales
= 5,25,000 x 100 = 26.29%
20,00,000
5. Proprietary Ratio
Proprietary Ratio = Proprietary Fund
Total Assets
= 9,67,500 = 0.79
12,25,700
 Cash Flow Statement
Particulars Amount( Rs.)
1) Cash flow from Operating Activity
Net Profit as per P & L A/c 5,25,000
Add: Non-Cash Expenditure
Depreciation 31,000
Add: Bank Interest 33,300 64,300
Operating Profit before working capital changes 5,90,000
Add: Increase in Current Liabilities

Electricity expenses payables 20,000

6,10,000
Less: Increase in Current Asset
Security Deposit 7,000
Closing Stock 5,50,000 5,70,000
Net Cash generated from operating activity (i)
53,000
2) Cash flow from investing activity
Purchase of Building (6,00,000)
Purchase of Furniture (10,000)
Net Cash used in Investing Activity (ii) (6,10,000)
3) Cash Flow from financing activity 5,00,000
Capital introduced by partners 3,00,000
Bank Loan
8,00,000
Less : Drawing by Partners 69,000
Bank Loan repaid 60,000
Interest on Bank Loan 33,300 1,53,300
Net cash from financing activity(iii) 6,46,700
4) Net increase in cash and cash equivalents (I + ii + iii)
Add: cash and cash equivalents in beginning 89,700
-

cash and cash equivalents at the end

89,700
Specific Project - 1
 Segment -wise Result Analysis

for the year ended 31st March 2017

Segments Revenue as at 31st March Percentage
2017(Rs. In Crores)
a. Inorganic chemicals 3556.83 54.42 %
b. Fertilizers 2288.33 35.010 %
c. Other agri inputs 316.39 4.84 %
d. Others 374.83 5.73 %
Total 6536.38 100 %

Working note for calculation of percentageRevenue

Percentage Revenue = Segment Revenue as at 31st March 2017 x 100

Total Revenue

Inorganic chemicals = 3556.83 x 100 = 54.42%

6536.38
Fertilizers = 2288.33 x 100 = 35.010%
6536.38

Other agri inputs = 316.39 x 100 = 4.84%

6536.38
Other = 374.83 x 100 = 5.73%
6536.38
Percentage

Inorganic chemicals
Fertilisers
Other agri inputs
Others
 Segment -wise Result Analysis

for the year ended 31st March 2017

Segments Result as at 31st March Percentage

2017(Rs. In Crores)
a. Inorganic chemicals 960.99 96.05%
b. Fertilisers 115.72 11.57%
c. Other agri inputs 9.98 1%
d. Others (86.25) (8.62)%
Total 1000.44 100%

Working note for calculation of percentage

Results:

Percentage Result = Segment Result as at 31st March 2017 x 100

Total Result

Inorganic chemicals = 960.99 x 100 = 96.05%

1000.44
Fertilizers = 115.72 x 100 = 11.57%
1000.44
Other agri inputs = 9.98 x 100 = 1%
1000.44
Other = (86.25) x 100 = (8.62%)
1000.44
 Percentage
120

100

80

60

Percentage

40

20

0
Inorganic chemicals Fertilisers Other agri inputs Others

-20
 Segment -wise Capital Employed

for the year ended 31 st March 2017

Segments Capital Employed as at Percentage

31st March 2017(Rs. In
Crores)
a. Inorganic chemicals 1404.62 59.27%
b. Fertilizers 846.86 35.73%
c. Other agri inputs 16.46 0.70%
d. Others 101.95 4.3%
Total 2369.89 100%

Working note for calculation of percentage

Capital Employed:

Percentage Capital Employed

= Segment Capital Employed as at 31st March 2017 x 100
Capital Employed
Inorganic chemicals = 1404.62 x 100 = 59.27%
2369.89
Fertilisers = 846.86 x 100 = 35.73%
2369.89
Other agri inputs = 16.46 x 100 = 0.70%
2369.89
Other = 101.95 x 100 = 4.3%
2369.89
 Percentage
70

60

50

40

Percentage
30

20

10

0
Inorganic chemicals Fertilisers Other agri inputs Others
Segment wise Revenue, Result & Capital Employed
Analysis

We can see that the Tata Chemical Ltd. receive

maximum revenue & results from the InorganicChemicals
segment. But the company also has the highest capital
employed in the Inorganic Chemicals segment. The
company would have been considered more efficient if for
a lower capital employed in the segment; higher results&
revenues are received. In the fertilizers segment the
capital employed & revenue is sufficient but results is not
yielding profit as desired. In other agree input segment
though the result & capital employed are not much but
this sector is still yielding considerable revenue. The
company can allocate resources from otheragri input to
fertilizers for better growth in this sector. In other
segment result is not holding profit as desired even
though the revenue & capital employed are sufficient.
120

100

80

60
Revenue
Result
40
Capital Employed

20

0
Inorganic Fertilisers Other agri inputs Others
chemicals

-20
Specific Project - 2
 Accounting Ratios
Current Ratio
Ratio 31st March 2016 31st March 2017
Current Ratio
= Current Assets = 23233.92 = 24537.39
Current Liabilities 6354.27 6830.07
= 3.65: 1 = 3.59 : 1

Comment: This ratio shows relationship of current assets to

current liabilities and is calculated to assess the financial position
of the firm. A current ratio of 2: 1 is considered ideal.
 Quick Ratio
Quick Ratio
= Quick Assets = 23233.92 – 8519.82 = 24537.39 – 7863.99
Current Liabilities 6354.27 6830.07
= 2.31 : 1 = 2.44 : 1

Comment: This ratio indicate short-term solvency and debt-

paying capacity of the enterprise. Hence it is a good indicator of
liquidity. An ideal quick ratio is 1: 1.
 Proprietary Ratio
Proprietary Ratio
= Shareholder’s Fund = 41656.43 = 45340.96
Total Assets 50031.28 54215.95
= 0.83 = 0.83

Comment: It shows the relationship between proprietor’s funds

and total assets. It indicates the extent to which the shareholders
own the business.
A higher proprietary ratio is generally treated as indicator of
sound financial position from long-term point of view,On the
other hand, a low proprietary ratio is a danger signal as it
indicates lower margin of safety available for the long-term
lenders. It shall be taken as safe if it is above 50%.
 Gross Profit Ratio
Gross Profit Ratio
= Gross Profit x 100 = 51944.57 – (11054.75 = 55448.46 – (11765.56 + 3566.57
Net Sales + 2591.80 + 196.55 + 15361.90) – 644.17 + 15359.78)
Gross Profit = Revenue from 51944.57 55448.46
Operation - COGS = 43.78% = 45.81%

Comment: This ratio establishes a relationship between gross

profit and revenue from operations, i.e., net sales. This ratio is
computed and presented in percentage.
Higher the ratio lower cost of goods sold.
 Net Profit Ratio
Net Profit Ratio
= Net Profit x 100 = 9328.37 x 100 = 10200.90 x 100
Net Sales 51944.57 55448.46
= 17.96% = 18.40%

Comment: This ratio shows the relationship between net profit

and net revenue from operations. It shows the percentage of
Net Profit earned on Revenue from Operations.
Higher the net profit ratio, better the business.
 Stock Turnover Ratio
Stock Turnover Ratio
= COGS = 11054.75 + 2591.80 + 196.55 = 11765.56 + 3566.57
Average Stock + 15361.90 – 644.17 + 15359.78
[7863.99+8519.82]/2 [8519.82+7836.76]/ 2
= 3.56 times = 3.67 times

Comment: This ratio indicates the relationship between the cost

of revenue from operations during the year and average
inventory kept during that year.
The higher the ratio, the better it is, since it indicates that
inventory is selling quickly.
 Working Capital Ratio
Working Capital Ratio
= Net Sales = 51944.57 = 55448.46
Working Capital 23233.92 – 6354.27 24537.39 – 6830.07
= 3.08 times = 3.13 times

Comment: Working Capital Turnover Ratio shows the

relationship between working capital and revenue from
operation.
A high working capital turnover ratio shows efficient use of
working capital and quick turnover of current assets like
inventory and trade receivables.
 Analysis & Interpretation
Liquidity Ratios
The Current Ratio of the company analyzed is 3.65 to 3.59
from 31st March 16 to 31st March 17 and the Quick Ratio of the
company is 2.31 to 2.44 from 31st March 16 to 31st March 17.
Both the ratios are more than ideal. Therefore, the company is
in the position to meet its short term liabilities in time.

Solvency Ratios
Proprietary Ratio of the company is also low, is 0.83: 1 to
0.83:1from 31st March 16 to 31st March 17. This ratio indicates
that the firm is depending more on shareholder’s funds than
externalequities. It indicates the lower or inadequate safety to
creditors.

Profitability Ratios

The Gross Profit Ratio is 43.78% to 45.81% from 31st March

16 to 31st March 17 & Net Profit Ratio is 17.96% to 18.40% from
31st March 16 to 31st March 17. As the gross profit ratio is
higher shows the low cost of goods sold. Gross profit ratio is
adequate enough to cover the operating expense and provided
for depreciation, interest on loans, dividends and creation of
reserves. As increase in the Net Profit ratio over the previous
period shows improvement in the operational efficiency and
decline means otherwise.
 Activity Ratios

The Inventory Turnover Ratio is 3.56 to 3.67 from 31st March

16 to 31st March 17 & the Working Capital Turnover Ratio is
3.08 to 3.13 from 31st March 16 to 31st March 17.
The ratio is higher therefore the company is in a better position;
it indicates that inventory is selling quickly. Higher inventory
turnover ratio shows that goods can be sold at a low margin of
profit and even then the profitability may be quite high. The
company also has a high working capital turnover ratio which
shows efficient use of working capital and quick turnover of
current assets like inventory and trade receivables.
 CONCLUSION
Ratio Analysis is the basic tool of financial analysis and
Financial analysis itself as an important part of any business planning
process as SWOT being basic tool of the strategic analysis plays a vital
role in a business planning process and no SWOT analysis would be
complete without an analysis of company’s financial position. In this
way Ratio Analysis is very important part of whole business strategic
planning.
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20inventory%20turnovers.

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