A Study On Profitability Ratio Analysis of The Sundaram Finance LTD in Chennai

Volume 2, Issue 5, May 2017 International Journal of Innovative Science and Research Technology
ISSN No: - 2456 - 2165
A study on Profitability Ratio Analysis of the Sundaram

Finance Ltd in Chennai
Dr. V.BALAKRISHNAN Prof. G. KOTHANDAPANI M. krithika
Department of commerce M.com., M.phil., Department of commerce
T.U.K. Arts college karainthai, Department of commerce PRIST UNIVERSITY
Thanjour-2 PRIST UNIVERSITY Thanjavur - 613 403
E-mail:[email protected] Thanjavur - 613 403
ABSTRACT :- The financial statement provides the basic The focus of financial analysis is on key figures in the
data for financial performance analysis. The financial financial statements and the significant relationship that exists
statements provide a summarized view of the financial between them. The analysis of financial statements is a
position and operations of a firm. Financial analysis (also process of evaluating relationship between component parts of
referred to as financial statement analysis or accounting financial statements to obtain a better understanding of the
analysis) refers to an assessment of the viability, stability firms position and performance.
and profitability of a business. Financial analysis is the
process of identifying the financial strengths and weakness II. OBJECTIVES OF THE STUDY
of the firm from the available accounting data and
financial statements. Profitability Ratio measured as an To know the profitability position of Sundaram finance
ability to make maximum profit from optimum utilization limited...
of resources by a business concern is termed as To forecast the annual growth rate of income of the
profitability. This analysis reveals the nature and strength company with the help of regression analysis.
of the relationship between each predictor variable and the
outcome, independent of the influence from all other III. SCOPE OF THE STUDY
predictors. The researcher depends on existing data for his
research work. The analysis revolves round the material The study is based on the accounting information of the
collected or available. SUNDARAM FINANCE LIMITED, CHENNAI. The study
covers the period of 2015-2016 for analyzing the financial
Key words: Gross profit, Net profit and Regression Analysis. statement such as income statements and balance sheet. The
scope of the study involves the various factors that affect the
financial efficiency of the company. To increase the profit and
I. INTRODUCTION
sales growth of the company, this study finds out the
The financial statement provides the basic data for financial operational efficiency of the organization and allocation of
performance analysis. The financial statements provide a resources to improve the efficiency of the organization. The
summarized view of the financial position and operations of a data of the past three years are taken into account for the
firm. Financial analysis (also referred to as financial statement study. The performance is compared within those periods.
analysis or accounting analysis) refers to an assessment of the This study finds out the areas where Sundaram Finance Ltd
viability, stability and profitability of a business. The analyst can improve to increase the efficiency of its assets and funds
first identifies the information relevant to the decision under employed.
consideration from the total information contained in the
financial statements. Therefore, much can be learnt about a A. Function of sundarm finance limited
firm from a careful examination of its financial statements as
1. Depositors confidence
invaluable documents and performance reports.
2. Hire Purchasing
3. Leasing
The analysis of financial statements is an important aid to
4. Investor safety
financial analysis. They provide information on how the firm
5. Employee loyalty
has performed in the past and what is its current financial
position. Financial analysis is the process of identifying the
B. Research methodology
financial strengths and weakness of the firm from the available
accounting data and financial statements. The analysis is done Research can be defined as A Scientific and Systemic Search
by establishing relationship between the different items of
for pertinent information on a specific topic. Therefore,
financial statements.
research could be understood as an organized activity with
specific objectives on a problem or issues supported by
IJISRT17MY11 www.ijisrt.com 135

ISSN No: - 2456 - 2165
compilation of related data and facts, involving application of
relevant tools of analysis and deriving logically on originality. Table 1 Gross profit ratio
Years Gross Profit Net sales Ratio (In
C. Research design (Rs.) (Rs.) %)
2013- 30,290 90,176 34
Research Design is the arrangement of condition for collection 2014
and analysis of data in manner that aims to combine relevance 2014- 21,971 1,08,278 20
to the research purpose with the economy in procedure. 2015
Research Design is important primarily because of the 2015- 32,348 1,18,189 27
increased complexity in the market as well as marketing 2016
approaches available to the researchers. A research design
specifies the methods and procedures for conducting a Chart 1.1 Gross profit ratios
particular study.
35,000
III. RESEARCH TYPE 30,000
25,000
A. Analytical Research 20,000
15,000
Gross Profit (Rs.)
10,000
In this type of research has to use facts or information already
5,000 Ratio (In %)
available, and analyze these to make a critical evaluation of
0
the material. The researcher depends on existing data for his
research work. The analysis revolves round the material
collected or available.
Secondary data
Secondary Data refers to the information or facts already

Inference
collected such data are collected with the objectives of
understanding the past status of any variable or the data The Gross Profit for the financial year 2013-2014 was
collected and reported by some source is accessed and used recorded as per the ratio is 34%, where as the years between
for the objective of a study. Normally in research, the scholars 2014-2015 went through a change in the ratio of 20% and the
collect published data, journals, annual reports and websites. companies profit went upward in 2015-2016 with the ratio of
27%. Thus, it is showing the steady growth in the company
Ratio analysis profile.
(1). Profitability Ratio Analysis Net profit ratio
(2). Regression Analysis
It measures of management efficiency in operating the
Profitability ratio business successfully from the owners point of view. It
indicates the return on shareholders investment. Higher the
Profitability Ratio measured as an ability to make maximum ratio better is the operational efficiency of business concern.
profit from optimum utilization of resources by a business
concern is termed as profitability.
Gross profit ratio
This ratio is also known as Gross Margin or Trading Margin

Ratio. Gross Profit Ratio includes the difference between sales Table 2 Net profit ratio
and direct costs. Years Net Profit Net sales Ratio (In
(Rs.) (Rs.) %)
2013-2014 21,254 90,177 24
2014-2015 15,073 1,08,278 14
2015-2016 22,675 1,18,189 19

ISSN No: - 2456 - 2165
Chart 2.1 Net profit ratios 0 a + 2 b = 28013 --------------- (2)
25,000 Solving (1) and (2) We get,

20,000
15,000 a = 105548
10,000 Net Profit (Rs.)
5,000 b = 14006
0 Ratio (In %)
When X = 2, Y2017 = 105548 + 14006 ( 2 )
Y2017 = Rs. 133561 (in Lakhs )
When X = 3, Y2018 = 105548 + 14006 ( 3 )

Inference
Y2018 = Rs. 147567 (in Lakhs )
The Net Profit Ratio depicts that the company had a good
Inference
profit in 2013-2014 is 24% where it had a good yield profit.
Comparing to the year 2014-2015 is 14%, the sales of the The net sales during the year 2014 were 90176 (Rs. in Lakhs)
company have a steady attitude and increase upwards to 19% which has been increased to 108278 (Rs. in Lakhs) during
in 2015-2016. This indicates that there is an improvement in 2015 which also raised to 118189 (Rs. in Lakhs) during 2016.
the operational efficient of the business and it leads to the The projection is made for the fore coming years 2017 and
increase in the profitability of the firm. 2018 where the net sales would be 133561 (Rs. in Lakhs)
during the year 2017 and the net sales during the financial year
B. Regression analysis
2012 will be 147567 (Rs. in Lakhs).
A fundamental and versatile research technique that seeks to
explain an outcome variable in terms of multiple predictor IV. CONCLUSION
variables. This analysis reveals the nature and strength of the
In the study of profitability ratio analysis of Sundaram Finance
relationship between each predictor variable and the outcome,
Limited Chennai, it is clear that the companys financial
independent of the influence from all other predictors.
performance is satisfactory. The company has stable growth
Regression Equation Y on X is given as: and it better performance in all the areas it works.
Y = a + bX REFERENCES
[1].George Foster, Financial Statement Analysis, 2nd
Equations to find constants a and b are given as: Edition, 57 94.
[2]. Greninger et al.(1996), Fundamentals of Financial
Y = Na + bX Management, 5th Edition, 4.1-4.18.
XY = aX + b [3]. John J.Wild, K.R.Subramanyam & Robert F.Halsey
(2006), Financial Statement Analysis, 9th Edition, 2-90.
[4]. Khan M Y & Jain P K, Financial Management, 4th
Table 3 Regression analysis Edition , 2006, 6.1 - 6.81
[5]. Pandey I M, A Management Guide for Managing
Sales Rs( in Companys Funds and Profits, 6th Edition, 1 58
Year X Lakhs )Y XY X2 [6]. Peeler J. Patsula, Successful Business Analysis,2006,
2014 1 90,176 90,176 1 18-19
2015 0 1,08,278 0 0 [7] Salmi, T. and T. Martikainen (1994), "A review of the
2016 1 1,18,189 1,18,189 1 theoretical and empirical basis of financial ratio analysis", The
Total x = 0 y= 316643 x y= X2 Finnish Journal of Business Economics 43:4, 426-448.
28013 =2
Websites:
Y=Na+bX
www.sundaramfinance.in
XY = a X + b X2 http://scholar.google.com
www.managementparadise.com
Y=a+bX
3 a + 0 b = 316643 --------------- (1)

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Volume 2, Issue 5, May 2017 International Journal of Innovative Science and Research Technology

ISSN No: - 2456 - 2165

A study on Profitability Ratio Analysis of the Sundaram

IJISRT17MY11 www.ijisrt.com 135

Secondary Data refers to the information or facts already

Gross profit ratio

This ratio is also known as Gross Margin or Trading Margin

IJISRT17MY11 www.ijisrt.com 136

25,000 Solving (1) and (2) We get,

Y2017 = Rs. 133561 (in Lakhs )

When X = 3, Y2018 = 105548 + 14006 ( 3 )

3 a + 0 b = 316643 --------------- (1)

IJISRT17MY11 www.ijisrt.com 137

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