Ratio Analysis About S.R. Steel Industries

A STUDY OF RATIO ANALYSIS WITH REFERENCE TO S. R.
STEEL
INDUSTRIES PVT, LTD.
CHAPTER NO. I
INTRODUCTION
1.1 INTRODUCTION
The ratio analysis is the most powerful tool of financial analysis. Several ratios
calculated from the accounting data can be grouped into various classes according to
financial activity or function to be evaluated. Information about a business
organization, its activities, profitability, financial condition and investment potential
can come from a number of different sources. Foremost amongst these are the firm's
financial reports and therefore it is not surprising to find that traditionally financial
statement analysis has played an important role in providing specialized information
to particular decision makers.
The principal analytical tool employed by financial statement analysts is the ratio,
and as a result ratio analysis has become synonymous with financial statement
analysis. Ratio Analysis is the technique which is used to compare business
performance with other business’ performance. While in same business, it can be
used to measure or compare the business performance of two years. It is systematic
analysis which measures the performance of the business with some determined
formulas. Quantitative analysis of information contained in a company’s financial
statements. Ratio analysis is based on line items in financial statements like the
balance sheet, income statement and cash flow statement, and calculating the ratios
of one item or a combination of items-to another item or combination.
The technique involves the calculation of a number of ratios indicators which attempt
to express the relationships which exist between key financial variables which appear
principally in the published financial statements. The values for individual ratios are
then compared with an appropriate standard to ascertain whether they are satisfactory
or otherwise. Financial statements helps to show the financial performance of
business for year. On that performance Ratio Analysis works to measure or to
compare the performance of the business. It has wider scope. Financial Analysis is
the selection, evaluation and interpretation of financial data, along with other
1|PAGE
A STUDY OF RATIO ANALYSIS WITH REFERENCE TO S. R. STEEL
permanent information, to assist in investment and financial decision making. The

purpose of this project to introduce about Ratio Analysis.
1.2 OBJECTIVE OF THE STUDY

 To study and analyze the financial position of the Company through ratio analysis.
 To analyze the profitability position of the S. R. Steel Industries Ltd.
 To determine the long term solvency position of S. R. Steel Industries Ltd.
1.3 NEED OF THE STUDY

 The study has great significance and provides benefits to various parties whom
directly or indirectly with the company.
 To express the relationship between different financial aspects in such a way that
it allows the user to draw conclusions about the performance, strengths and
weaknesses of the company.
 To diagnose the information contained in financial statement so as to judge the

profitability of the firm.
 The study helps to know a liquidity, solvency, profitability and turnover position
of the company.
1.4 SCOPE OF THE STUDY

The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The study is carried out for 3 years (2017-2016-
2015). The present study is confined to only S. R. Steel Industries Ltd, only.
2|PAGE
1.5 LIMITATIONS OF RATIO ANALYSIS:

The technique of ratio analysis is a very useful device for making a study of the
financial health of a firm. But it has some limitations which must not be lost sight of
before undertaking such analysis. Some of these limitations are:
1. Limitations of Financial Statements:

Ratios are calculated from the information recorded in the financial statements.
But financial statements suffer from a number of limitations and may, therefore,
affect the quality of ratio analysis.
2. Historical Information:
Financial statements provide historical information. They do not reflect current
conditions. Hence, it is not useful in predicting the future.
3. Different Accounting Policies:

Different accounting policies regarding valuation of inventories, charging
depreciation etc. make the accounting data and accounting ratios of two firms non-
comparable.
4. Lack of Standard of Comparison:

No fixed standards can be laid down for ideal ratios. For example, current ratio is
said to be ideal if current assets are twice the current liabilities. But this conclusion
may not be justifiable in case of those concerns which have adequate
arrangements with their bankers for providing funds when they require, it may be
perfectly ideal if current assets are equal to or slightly more than current liabilities.
5. Quantitative Analysis:
Ratios are tools of quantitative analysis only and qualitative factors are ignored
while computing the ratios. For example, a high current ratio may not necessarily
mean sound liquid position when current assets include a large inventory
consisting of mostly obsolete items.
3|PAGE
6. Window-Dressing:
The term ‘window-dressing’ means presenting the financial statements in such a
way to show a better position than what it actually is. If, for instance, low rate of
depreciation is charged, an item of revenue expense is treated as capital
expenditure etc.
7. Changes in Price Level:

Fixed assets show the position statement at cost only. Hence, it does not reflect
the changes in price level. Thus, it makes comparison difficult.
8. Causal Relationship Must:

Proper care should be taken to study only such figures as have a cause-and-effect
relationship; otherwise ratios will only be misleading.
9. Ratios Account for one Variable:

Since ratios account for only one variable, they cannot always give correct picture
since several other variables such Government policy, economic conditions,
availability of resources etc. should be kept in mind while interpreting ratios.
10. Seasonal Factors Affect Financial Data:

Proper care must be taken when interpreting accounting ratios calculated for
seasonal business.
1.6 LIMITATION OF STUDY

The following are the limitation of study:
 The study was limited to only 3 years financial data.
 The study is purely base on the secondary data which were taken primarily
from publish annual report of S. R. Steel Industries Ltd.
 The ratio is calculated from past financial statements and these are not
indicator of future.
4|PAGE
1.7 RESEARCH METHODOLOGY

The main aim of the study is to know the financial performance of the S.R. Steel
Industries Ltd.
1. Research
Any efforts which are directed to study of strategy needed to identify the problems
and selection of best solutions for better results are known as research.
2. Research Design
In view of the objects of the study listed above an exploratory research design has
been adopted. Exploratory research is one which is largely interprets and already
available information and it lays particular emphasis on analysis and interpretation
of the existing and available information.
3. Research Design Objective

 To know the financial status of the company.
 To know the credit worthiness of the company.
 To offer suggestions based on research finding.
4. Data Collection Methods

1. Primary Data
 Information collected from internal guide and finance manager.
2. Secondary data
 Company balance sheet and profit and loss account.
 Company’s annual reports
 Books :- Financial Account
5|PAGE
CHAPTER NO. II
THEORETICAL BACKGROUND
2.1 THEORETICAL BACKGROUND

Financial statements aim at providing financial information about a business
enterprise to meet the information needs of the decision-makers. Financial
statements prepared by a business enterprise in the corporate sector are published
and are available to the decision-makers. These statements provide financial data
which require analysis, comparison and interpretation for taking decision by the
external as well as internal users of accounting information.
This act is termed as financial statement analysis. It is regarded as an integral

and important part of accounting. As indicated in the previous chapter, the most
commonly used techniques of financial statements analysis are comparative
statements, common size statements, trend analysis, accounting ratios and cash
flow analysis. The first three have been discussed in detail in the previous
chapter. This chapter covers the technique of accounting ratios for analyzing the
information contained in financial statements for assessing the solvency,
efficiency and profitability of the enterprises.
2.2 FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and weakness
of the firm. It is done by establishing relationships between the items of financial
statements viz., balance sheet and profit and loss account. Financial analysis can be
undertaken by management of the firm, viz., owners, creditors, investors and others.
2.3 NATURE OF RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the
indicated quotient of mathematical expression" and as "the relationship between two
or more things". A ratio is used as benchmark for evaluating the financial position
and performance of the firm. The relationship between two accounting figures,
expressed mathematically, is known as a financial ratio. Ratio helps to summarizes
6|PAGE
large quantities of financial data and to make qualitative judgment about the firm's
financial performance. The persons interested in the analysis of financial statements
can be grouped under three head owners (or) investors who are desired primarily a
basis for estimating earning capacity. Creditors are the people who are concerned
primarily with Liquidity and ability to pay interest and redeem loan within a specified
period. Management is interested in evolving analytical tools that will measure costs,
efficiency, liquidity and profitability with a view to make intelligent decisions.
2.4 STANDARDS OF COMPARISON

The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio in itself does not indicate favorable or unfavorable
condition. It should be compared with some standard. Standards of comparison are:
 Past Ratios
 Competitor's Ratios
 Projected Ratios
1. Past Ratios:
Ratios calculated from the past financial statements of the same firm.
2. Competitor's Ratios:
Ratios of some selected firms, especially the most progressive and successful
competitor at the same point in time. Industry Ratios: Ratios of the industry to
which the firm belongs.
3. Projected Ratios:
Ratios developed using the projected financial statements of the same firm.
2.5 TIME SERIES ANALYSIS

The easiest way to evaluate the performance of a firm is to compare its present ratios
with past ratios. When financial ratios over a period of time are compared, it is known
as the time series analysis or trend analysis. It gives an indication of the direction of
7|PAGE
change and reflects whether the firm's financial performance has improved,
deteriorated or remind constant over time.
2.6 CROSS SECTIONAL ANALYSIS

Another way to comparison is to compare ratios of one firm with some selected firms
in the industry at the same point in time. This kind of comparison is known as the
cross-sectional analysis. It is more useful to compare the firm's ratios with ratios of a
few carefully selected competitors, who have similar operations.
2.7 INDUSTRY ANALYSIS

Its ratio may be compared with average ratios of the industry of which the firm is a
member. This type of analysis is known as industry analysis and also it helps to
ascertain the financial standing and capability of the firm & other firms in the
industry. Industry ratios are important standards in view of the fact that each industry
has its characteristics which influence the financial and operating relationships.
2.8 METHODS OF ANALYSIS

A financial analyst can adopt the following tools for analysis of the financial
statements. These are also termed as methods of financial analysis.
 Comparative statement analysis
 Common-size statement analysis
 Trend analysis
 Funds flow analysis
 Ratio analysis
Parties interested in financial analysis

The users of financial analysis can be divided into two broad groups.
1. Internal users
 Financial executives
 Top management
8|PAGE
2. External users
 Investors
 Creditor
 Workers
 Customers
 Government
 Public
 Researchers
2.9 ADVANTAGES OF RATIO ANALYSIS

Ratio analysis is widely used as a powerful tool of financial statement analysis. It
establishes the numerical or quantitative relationship between two figures of a
financial statement to ascertain strengths and weaknesses of a firm as well as its
current financial position and historical performance. It helps various interested
parties to make an evaluation of certain aspect of a firm’s performance.
The following are the principal 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 utilization
of its assets. Different activity ratios indicate the operational efficiency.
9|PAGE
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 efficiency.
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.
9. Indication of Overall Profitability:

The management 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 utilization of the assets of the firm.
10. Signal of Corporate Sickness:

A company is sick when it fails to generate profit on a continuous basis and suffers
a severe liquidity crisis.
10 | P A G E
11. Aid to Decision-making:

Ratio analysis helps to take decisions like whether to supply goods on credit to a
firm, whether bank loans will be made available etc.
2.10 SIGNIFICANCE OF FINANCIAL ANALYSIS

Financial analysis serves the following purpose:
 To know the operational efficiency of the business
The financial analysis enables the management to find out the overall efficiency
of the firm.
 Helpful in measuring the solvency of the firm

The financial analysis helps the decision makers in taking appropriate decisions
for strengthening the short-term as well as long-term solvency of the firm.
 Comparison of past and present results

Financial statements of the previous years can be compared and the trend
regarding various expenses, purchases, sales, gross profit and net profit can be
ascertained.
 Helps in measuring the profitability

Financial statements show the gross profit, & net profit.
 Inter‐firm comparison
The financial analysis makes it easy to make inter-firm comparison. This
comparison can also be made for various time periods.
 Bankruptcy and Failure

Financial statement analysis is significant tool in predicting the bankruptcy and
the failure of the business enterprise.
11 | P A G E
2.11 TYPES OF CLASSIFICATION OF RATIO

TYPES OF RATIOS
Traditional Functional
Statement of Profit And Loss

Ratios
Balance Sheet Ratios
Composite Ratios
Activity Turnover
Liquidity Ratio Solvency Ratio Profitability Ratio
Ratio
Debt Equity Inventory Gross Profit

Current Ratio
Ratio Turnover Ratio
Debt to Capital Trade Receivable

Quick Ratio Operating Ratio
Employed Ratio Turnover Ratio
Trade Payable Operating Profit

Proprietary Ratio
Turnover Ratio Ratio
Net Assets or
Total Assets To
Capital Employed Net profit ratio
Debt Ratio
Turnover Ratio
Return On
Interest Coverage Capital Employed
Ratio Or Investment
Ratio
Earnings Per
Share Ratio
Books Value Per

Share Ratio
Price Earnings
Ratio
12 | P A G E
 There is a two way classification of ratios:

1. Traditional classification
2. Functional classification
1. The Traditional Classification of Ratio:-

The traditional classification has been on the basis of financial statements
to which the determinants of ratios belong.
 Statement of Profit and Loss Ratios:

A ratio of two variables from the statement of profit and loss is known as
statement of profit and loss ratio. For example, ratio of gross profit to
revenue from operations is known as gross profit ratio.
 Balance Sheet Ratios:

In case both variables are from the balance sheet, it is classified as balance
sheet ratios. For example, ratio of current assets to current liabilities
known as current ratio.
 Composite Ratios:
If a ratio is computed with one variable from the statement of profit and
loss and another variable from the balance sheet, it is called composite
ratio. For example, ratio of credit revenue from operations to trade
receivables is calculated using one figure from the statement of profit and
loss and another figure from the balance sheet. Although accounting ratios
are calculated by taking data from financial statements but classification
of ratios on the basis of financial statements is rarely used in practice.
2. Functional Classification of Ratios:-

 Liquidity Ratios:
To meet its commitments, business needs liquid funds. The ability of the
business to pay the amount due to stakeholders as and when it is due is
known as liquidity, and the ratios calculated to measure it are known as
‘Liquidity Ratios’. These are essentially short-term in nature.
13 | P A G E
 Solvency Ratios:
Solvency of business is determined by its ability to meet its contractual
obligations towards stakeholders, particularly towards external
stakeholders, and the ratios calculated to measure solvency position are
known as ‘Solvency Ratios’. These are essentially long-term in nature.
 Activity (or Turnover) Ratios:

This refers to the ratios that are calculated for measuring the efficiency of
operations of business based on effective utilization of resources. Hence,
these are also known as ‘Efficiency Ratios’.
 Profitability Ratios:
It refers to the analysis of profits in relation to revenue from operations or
funds employed in the business and the ratios calculated to meet this
objective are known as ‘Profitability Ratios’.
2.12 TYPES RATIOS

1. Liquidity Ratios
Liquidity ratios are calculated to measure the short-term solvency of the
business, i.e. the firm’s ability to meet its current obligations. These are
analyzed by looking at the amounts of current assets and current liabilities
in the balance sheet. The two ratios included in this category are current ratio
and liquidity ratio.
a. Current Ratio
Current ratio is the proportion of current assets to current liabilities. It is
expressed as follows
Current Assets
Current Ratio =
Current Liabilities
14 | P A G E
Current assets include current investments, inventories, trade receivables,

cash and cash equivalents, short-term loans and advances and other current
assets such as prepaid expenses, advance tax and accrued income, etc. Current
liabilities include short-term borrowings, trade payables, other current
liabilities and short-term provisions.
Significance:
It provides a measure of degree to which current assets cover current
liabilities. The excess of current assets over current liabilities provides a
measure of safety margin available against uncertainty in realization of
current assets and flow of funds. The ratio should be reasonable. It should
neither be very high or very low. Both the situations have their inherent
disadvantages. A very high current ratio implies heavy investment in current
assets which is not a good sign as it reflects under-utilization or improper
utilization of resources. A low ratio endangers the business and puts it at risk
of facing a situation where it will not be able to pay its short-term debt on
time. If this problem persists, it may affect firm’s credit worthiness adversely.
Normally, it is safe to have this ratio within the range of 2:1.
b. Quick Ratio
The quick assets are defined as those assets which are quickly convertible into
cash. While calculating quick assets we exclude the inventories at the end and
other current assets such as prepaid expenses, advance tax, etc., from the
current assets. Because of exclusion of non-liquid current assets it is
considered better than current ratio as a measure of liquidity position of the
business. It is calculated to serve as a supplementary check on liquidity
position of the business and is therefore, also known as ‘Acid-Test Ratio’
Quick Assets
Quick ratio =
Quick Liabilities
15 | P A G E
Significance:
The ratio provides a measure of the capacity of the business to meet its short -
term obligations without any flaw. Normally, it is advocated to be safe to have
a ratio of 1:1 as unnecessarily low ratio will be very risky and a high ratio
suggests unnecessarily deployment of resources in otherwise less profitable
short-term investments.
2. Solvency Ratios
The persons who have advanced money to the business on long-term basis are
interested in safety of their periodic payment of interest as well as the
repayment of principal amount at the end of the loan period. Solvency ratios
are calculated to determine the ability of the business to service its debt in the
long run. The following ratios are normally computed for evaluating solvency
of the business.
a. Debt-Equity Ratio
Debt-Equity Ratio measures the relationship between long-term debt and
equity. If debt component of the total long-term funds employed is small,
outsiders feel more secure. From security point of view, capital structure with
less debt and more equity is considered favorable as it reduces the chances of
bankruptcy. Normally, it is considered to be safe if debt equity ratio is 2:1.
However, it may vary from industry to industry. It is computed as follows:
Long term loan

Debt-equity ratio =
Shareholders fund
Where;
 Shareholders’ Funds (Equity) =
Share capital + Reserves and Surplus + Money received against share
warrants
 Share Capital = Equity share capital + Preference share capital
Or
16 | P A G E
 Shareholders’ Funds (Equity) = Non-current assets + Working capital

– Non-current liabilities
 Working Capital = Current Assets – Current Liabilities
Significance:
This ratio measures the degree of indebtedness of an enterprise and gives an
idea to the long-term lender regarding extent of security of the debt. As
indicated earlier, a low debt equity ratio reflects more security. A high ratio,
on the other hand, is considered risky as it may put the firm into difficulty in
meeting its obligations to outsiders. However, from the perspective of the
owners, greater use of debt may help in ensuring higher returns for them if the
rate of earnings on capital employed is higher than the rate of interest payable.
b. Debt to Capital Employed Ratio

The Debt to capital employed ratio refers to the ratio of long-term debt to the
total of external and internal funds. It is computed as follows:
Long term debt

Debt to capital employed ratio =
Capital employed (net assets)
Capital employed=
Long-term debt + shareholders’ funds. Alternatively, it may be taken as net
assets which are equal to the “total assets – current liabilities”
Significance:
Like debt-equity ratio, it shows proportion of long-term debts in capital
employed. Low ratio provides security to lenders and high ratio helps
management in trading on equity. In the above case, the debt to Capital
Employed ratio is less than half which indicates reasonable funding by debt
and adequate security of debt. It may be noted that Debt to Capital Employed
Ratio can also be computed in relation to total assets.In that case, it usually
17 | P A G E
refers to the ratio of total debts to total assets, i.e., total of non-current and
current assets and is expressed as:
Total debt
Total assets
c. Proprietary Ratio
Proprietary ratio expresses relationship of proprietor’s (shareholders) funds to
net assets and is calculated as follows:
Shareholders’ funds
Proprietary ratio =
Significance:
Higher proportion of shareholders’ funds in financing the assets is a positive
feature as it provides security to creditors. This ratio can also be computed in
relation to total assets instead of net assets. It may be noted that the total of
debt to capital employed ratio and proprietary ratio is equal to 1.
d. Total Assets to Debt Ratio

This ratio measures the extent of the coverage of long-term debts by assets. It
is calculated as
Total assets
Total assets to debt ratio =
Long term debts
The higher ratio indicates that assets have been mainly financed by owner’s
funds and the long-term loan is adequately covered by assets. It is better to
take the net assets instead of total assets for computing this ratio also.
18 | P A G E
Significance:
This ratio primarily indicates the rate of external funds in financing the assets
and the extent of coverage of their debts are covered by assets.
e. Interest Coverage Ratio

It is a ratio which deals with the servicing of interest on loan. It is a measure
of security of interest payable on long-term debts. It is calculated as follows:
Net profit before interest and tax

Interest coverage ratio =
Interest on long term debts
Significance:
It reveals the number of times interest on long-term debts is covered by the
profits available for interest. A higher ratio ensures safety of interest on debts.
3. Activity (or Turnover) Ratio

These ratios indicate the speed at which, activities of the business are being
performed. The activity ratios express the number of times assets employed,
or, for that matter, any constituent of assets, is turned into sales during an
accounting period. Higher turnover ratio means better utilization of assets and
signifies improved efficiency and profitability, and as such are known as
efficiency ratios.
a. Inventory Turnover Ratio

It determines the number of times inventory is converted into revenue from
operations during the accounting period under consideration. It expresses the
relationship between the cost of revenue from operations and average
inventory. The formula for its calculation is as follows:
Cost of revenue from operations
Inventory turnover ratio =
Average inventory
19 | P A G E
Where average inventory refers to arithmetic average of opening and closing

inventory, and the cost of revenue from operations means revenue from
operations less gross profit.
Significance:
It studies the frequency of conversion of inventory of finished goods into
revenue from operations. It is also a measure of liquidity. It determines how
many times inventory is purchased or replaced during a year. Low turnover of
inventory may be due to bad buying, obsolete inventory, etc., and is a danger
signal. High turnover is good but it must be carefully interpreted as it may be
due to buying in small lots or selling quickly at low margin to realize cash.
Thus, it throws light on utilization of inventory of goods.
b. Trade Receivables Turnover Ratio

It expresses the relationship between credit revenue from operations and trade
receivable. It is calculated as follows:
Net credit revenue from operations

Trade receivable turnover ratio =
Average trade receivable
Where,
(Opening Debtors and Bills Receivable

+
Closing Debtors and Bills Receivable)
Average trade receivable =
2
It needs to be noted that debtors should be taken before making any provision
for doubtful debts.
20 | P A G E
Significance:
The liquidity position of the firm depends upon the speed with which trade
receivables are realized. This ratio indicates the number of times the
receivables are turned over and converted into cash in an accounting period.
Higher turnover means speedy collection from trade receivable. This ratio also
helps in working out the average collection period. The ratio is calculated by
dividing the days or months in a year by trade receivables turnover ratio.
c. Trade Payable Turnover Ratio

Trade payables turnover ratio indicates the pattern of payment of trade
payable. As trade payable arise on account of credit purchases, it expresses
relationship between credit purchases and trade payable. It is calculated as
follows:
Net credit purchases

Trade Payable Turnover Ratio =
Average trade payable
Significance:
It reveals average payment period. Lower ratio means credit allowed by the
supplier is for a long period or it may reflect delayed payment to suppliers
which is not a very good policy as it may affect the reputation of the business.
d. Net Assets or Capital Employed Turnover Ratio

It reflects relationship between revenue from operations and net assets in the
business. Higher turnover means better activity and profitabilit y. It is
calculated as follows:
Net Assets Revenue from operation

Or =
Capital Employed Turnover ratio Capital employed
21 | P A G E
Capital employed turnover ratio which studies turnover of capital employed

is analyzed further by following two turnover ratios:
a. Fixed Assets Turnover Ratio: It is computed as follows:
Net revenue from operation

Fixed asset turnover Ratio =
Net fixed assets
b. Working Capital Turnover Ratio: It is calculated as follows:
Net revenue from operation

Working Capital Turnover Ratio =
Working Capital
Significance:
High turnover of capital employed, working capital and fixed assets is a good
sign and implies efficient utilization of resources. Utilization of capital
employed or, for that matter, any of its components is revealed by the turnover
ratios. Higher turnover reflects efficient utilization resulting in higher
liquidity and profitability in the business.
4. Profitability Ratios
The profitability or financial performance is mainly summarized in the
statement of profit and loss. Profitability ratios are calculated to analyses the
earning capacity of the business which is the outcome of utilization of
resources employed in the business. There is a close relationship between the
profit and the efficiency with which the resources employed in the business
are utilized. The various ratios which are commonly used to analyses the
profitability of the business are:
22 | P A G E
a. Gross Profit Ratio

Gross profit ratio as a percentage of revenue from operations is computed to
have an idea about gross margin. It is computed as follows:
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations
Significance:
It indicates gross margin on products sold. It also indicates the margin
available to cover operating expenses, non-operating expenses, etc. Change in
gross profit ratio may be due to change in selling price or cost of revenue from
operations or a combination of both. A low ratio may indicate unfavorable
purchase and sales policy.
b. Operating Ratio
It is computed to analyses cost of operation in relation to revenue from
operations. It is calculated as follows:
(Cost of Revenue from Operations

+
Operating Expenses)
Operating Ratio = X 100
Net Revenue from Operations
Operating expenses include office expenses, administrative expenses, selling

expenses, distribution expenses, depreciation and employee benefit expenses
etc. Cost of operation is determined by excluding non-operating incomes and
expenses such as loss on sale of assets, interest paid, dividend received, loss
by fire, speculation gain and so on.
23 | P A G E
c. Operating Profit Ratio

It is calculated to reveal operating margin. It may be computed directly or as
a residual of operating ratio.
Operating Profit Ratio = 100 – Operating Ratio
Alternatively, it is calculated as under:
Operating Profit
Operating Profit Ratio = X 100
Revenue from operations
Where,
Operating Profit = Revenue from operations - Operating Profit
Significance:
Operating ratio is computed to express cost of operations excluding financial
charges in relation to revenue from operations. A corollary of it is ‘Operating
Profit Ratio’. It helps to analyze the performance of business and throws light
on the operational efficiency of the business. It is very useful for inter-firm as
well as intra-firm comparisons. Lower operating ratio is a very healthy sign.
d. Net profit ratio

It is based on all inclusive concept of profit. It relates revenue from operations
to net profit after operational as well as non-operational expenses and
incomes. It is calculated as under:
Net Profit
Net Profit Ratio = X 100
24 | P A G E
Significance:
It is a measure of net profit margin in relation to revenue from operations.
Besides revealing profitability, it is the main variable in computation of
Return on Investment.
e. Return on Capital Employed or Investment

It explains the overall utilization of funds by a business enterprise. Capital
employed means the long-term funds employed in the business and includes
shareholders’ funds, debentures and long-term loans. Alternatively, capital
employed may be taken as the total of non-current assets and working capital.
Thus, it is computed as follows:
Profit before interest and tax

ROCE = X 100
Capital employed
Significance:
It measures return on capital employed in the business. It reveals the
efficiency of the business in utilization of funds entrusted to it by
shareholders, debenture-holders and long-term loans.
f. Return on Shareholders’ Funds

This ratio is very important from shareholders’ point of view in assessing
whether their investment in the firm generates a reasonable return or not. It
should be higher than the return on investment otherwise it would imply that
company’s funds have not been employed profitably. A better measure of
profitability from shareholders point of view is obtained by determining return
on total shareholders’ funds, itis calculated as under:
Profit after tax

Return on Shareholders’ Fund =
Shareholders fund
25 | P A G E
g. Earnings per Share

The ratio is computed as:
Profit available for equity shareholders

EPS =
No. of equity shares
In this context, earnings refer to profit available for equity shareholders which
is worked out as. Profit after Tax – Dividend on Preference Shares. This ratio
is very important from equity shareholders point of view and also for the share
price in the stock market.
h. Book Value per Share

This ratio is calculated as:
Equity shareholders fund

Book Value per share =
No. of equity shares
Equity shareholders’ fund refers to Shareholders’ Funds – Preference Share

Capital. This ratio is again very important from equity shareholders point of
view as it gives an idea about the value of their holding and affects market
price of the shares.
i. Dividend Payout Ratio

This refers to the proportion of earning that are distributed to the shareholders.
It is calculated as
Dividend per share

Dividend Payout Ratio =
Earnings per share
This reflects company’s dividend policy and growth in owner’s equity.
26 | P A G E
j. Price / Earnings Ratio

The ratio is computed as
Market price of a share

P/E Ratio =
Earnings per share
27 | P A G E
CHAPTER NO. III

COMPANY PROFILE
3.1 COMPANY PROFILE

An ISO 9000-2008 Certified Company
S.R. Industries
Quality and Suitability
Company Profile
Quality and Suitability
3.2 VISION
To be most respectful and successful company with slandered quality products and
services in the steel fabrication furniture, contractions industry and it’s always front
lender in development of human society.
3.3 STRATEGY
To produces high quality, innovated and affordable products with expert resources
and talent.
3.4 BUSINESSES
With main focus on steel fabrication pipe line laying and fabrication, furniture and
constructions businesses; we serve industry related markets through four over lapping
sectors: fabrication, interiors, construction works and labour supply services.
Throughout our portfolio, we demonstrate our innovation capacity by translating
customer insights into meaningful technology and applications that improve the
quality of people’s lives and final outcome to the benefit of all our shareholders.
28 | P A G E
3.5 INDUSTRIES MAIN BUSINESSES

1. S.R. Steel Industries
 Structures fabrication, pipeline laying and fabrication, playground equipment’s
and developments.
2. S.R. Interior a nd furniture

 Steel, stainless steel, wooden and powder coated furniture also interior designer
and contractor, kitchens and modular kitchens etc.
3. Mauli Association
 Industrial services painting, job work, labour contracts, transport and storage
facilities, electrical contracts.
4. Sahara Construction
 Civil construction works, plot development, road works, reservoir construction.
3.6 INDUSTRIES CLIENTS
SR. NO. S.R. STEEL INDUSTRIES VALUABLE COSTUMERS

1 TATA Metallica’s LTD, Redi.
2 Caterpillar India.
3 Pratibha industries LTD.
4 Gammon India LTD.
5 H.C.C. LTD.
6 IVRCL LTD, Mumbai.
7 CMS (I) Pvt. Ltd, Banda, Goa.
8 Power Engineer (P) Ltd, Goa.
9 Mahalsa Rentals (P) Ltd, Goa.
10 SOMA Developers Ltd, Thane.
11 Bank Of India.
12 Bank Of Baroda.
13 State Bank Of India.
14 MSSIDC LTD, Mumbai.
15 MSSIDC LTD, Sindhudurg.
16 Das Off Shore Pvt. Ltd.
17 Sheyam Restore Ltd.
18 West Coast Land Base (P) Ltd.
19 Z.P. Sindhudurg.
20 Z.P. Kolhapur.
29 | P A G E
3.7 HISTORY OF COMPANY

1. Name of the Firm : S. R. Steel Industries Pvt. Ltd.
2. Year of Establishment : 1999 – 2000
3. Types of Organization : Partnership
4. Details of The Company Registration : Small Scale Industries
5. Name of The Registering Authority : Directorate of Industries
6. Register Number And Date : Government of Maharashtra
7. Service Tax Register Number :
8. PAN Number :
9. VAT Number :
10. Name and Address of Bakers : State Bank of India,

Bank of India,
11. Total Staff Strength : Management Staff – 6, Supervisor – 9

a. Administrative Staff – 11
b. Worker 69 (Skilled & Semi-Skilled
Workers)
30 | P A G E
3.8 COMPANY CONTRACTS

1. Office
 Ground Floor, Shree Ganesh Apartment
3. Show room
 S. R. Steel Industries,
 S. R. Enterprises
 Suman Enterprises
4. Management
 Rajesh : Partner of industry
 Pratima: Partner of industry
 Rawool : Head of Account Department
 Negi : Head of Purchase Department
5. Contract Person
 Name of Person : Rajesh
 Mob. No. :
 E-mail :
31 | P A G E
3.9 NOTE FORMING PART OF THE ACCOUNT

1. Information of Company
The partnership firm is engaged in the business of trading in furniture items,
manufacturing of furniture, execution of construction contracts and related
services, in the name and style as S.R. industries.
2. Statement of Significant Accounting Policies

The financial statement are prepared by following going concern under historical
cost convention on an accrual basis and are in accordance with the statutory
provision of income tax act 1661 and accounting standard as specified therein. The
accounting policies have been consistently applied by the firm and except for
changes in accounting policy discussed more fully below, are consistent with those
used in the previous year. The preparation of financial statement in conformity
with generally accepted accounting principle requires management to make
estimates and assumption that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial statement and
the result of operation during the reporting period. Although these estimate are
based upon management best knowledge of current events and actions actual result
could differ from these estimates
a. Fixed Assets
Fixed asset are stated at cost of acquisition less depreciation as per income tax act.
Cost include purchase price, inward freight, duties and taxes (net of credits) and
incidental expenses incurred related to acquisition and bringing the asset in
present location and condition for its intended use.
b. Depreciation
Depreciation on fixed assets is provided on written down value method at the rates
prescribed under to income tax act, 1961. Depreciation on fixed asset disposed of
during the year is not provided and depreciation is provided at half rate, for
additions during the year, which are put to use for less than 180 days.
32 | P A G E
c. Inventories
The stock of traded goods, raw material and work in progress are valued at cost
or net realizable value of whichever is lower. Cost is determined on the first in
first out method.
d. Revenue Recognition
Revenue is recognized to the extent that is it probable that that the economic
benefit will flow the firm and the revenue can be reliably measured.
Revenues/income and cost / expenditure are generally accounted on accrual as
they are earned or incurred. Sale of good is recognized on transfer of significant
risk and reward of ownership which is generally on dispatch of goods. Gross sales
exclusive excise and sales tax.
e. Borrowing Cost
Borrowing cost that are attributable to acquisition / construction or production of
a qualifying assets are capitalized as part of cost of such assets till such time as
the asset is put to use. All other borrowing cost is recognized as an expense in the
year in which they incurred. Borrowing cost consist of interest and other cost that
an entity incurs In connection with the borrowing of funds
f. Taxes On Income
 Current Tax :
tax on income for the current period is determine on the basis of the taxable
income and tax credit computed for the year in accordance with the provision
of income tax act 1961
 Differed Tax :
Differed tax is recognized subject to consideration of materiality, prudence,
on timing difference, being the difference between taxable incomes and
accounting income that originated in one period and are capable of reversal in
one or more subsequent period. Defied tax asset arising on accounts of
unabsorbed depreciation are recognized only to the extent that there is virtual
certainty of its realization.
33 | P A G E
g. Foreign Exchange Transaction

 Initial recognition transaction in foreign currency entered into by the company
are accounted at the exchange rates prevailing on the date of transaction or at
rates that closely approximate the rate at the date of transaction.
 Measurement of foreign currency monetary items t the balance sheet date

foreign currency monetary items of the company outstanding at the balance
sheet date are restated at the closing rate i.e. rate on the balance sheet date.
 Treatment of exchange differences: exchange differences arising on settlement

or restatement of monitory items are transferred to statement of profit and loss
a/c through foreign exchange different a/c and is either shown in other expenses
non-operating income other mislenious expenses /income as the case may be.
h. Provision Contingent Liabilities And Contingent Assets

A provision is recognized it as a result of a past event the firm has a present legal
obligation that can be estimated reliably and it’s probable that an out flow of
economics benefits will be required to settle the obligation. Provisions are
determined by the best estimate of the outflow of economic benefit required to
settle the obligation at the reporting date. Where no reliable estimate can be made,
a disclosure is made as contingent liability. A disclosure for contingent liability is
also made when there is a possible obligation or a present obligation that may, but
probably will not, required an out flow of resources. Where there is a possible
obligation in a respect of which the likelihood of outflow of resources is remote,
provisions, contingent liability and contingent assets are reviewed at each, balance
sheet date.
 Government Grants
Assesses has not received any government grants during the year.
 Investment
Current investment is stated at cost or fair market value whichever is lower.
Long term investment are stated at cost.
34 | P A G E
 Retirement Benefits:
The concern provide only short term employee benefits which have been
accounted for as an expenses if paid and the unpaid part has been shown as a
liability. No post-employment benefits are being provided by the concern.
 Intangible Assets:
Intangible assets, if any, have been recognized as a part of fixed assets and
are depreciated at the rate prescribed under the applicable act.
3.10 QUANTITATIVE INFORMATION

Quantitate Information Regarding Goods Traded (As Certified By
Management)
In a view of nature of the business it was not feasible to furnish details of the
quantities due to heterogeneity of the items involved.
35 | P A G E
CHAPTER NO. IV
DATA ANALYSIS AND INTERPRETATION
BALANCE SHEET
TABLE NO. 1
Particulars Years
2017 2016 2015
Equity and liabilities
Share capital 1,039,939,765 1,039,939,765 1,039,939,765
Reserve and surplus 1,289,920,931 1,330,242,671 1,410,215,741
2,329,860,696 2,370,182,436 2,450,155,506
Share application money pending
allotment
Non-current liabilities
Long term borrowing 375,971,569 355,690,357 346,441,847
Deferred tax liabilities (net) - -
Other long term liabilities 218,124,972 32,57,88,979 372,623,974
Long term provisions 27,321,161 25,228,322 26,682,000
621,417,702 706,707,658 747,747,821
Current liabilities
Short term borrowing 368,495,542 300,023,735 304,516,203
Trade payables 1,245,675,628 1,986,490,310 1,967,479,731
Other current liabilities 150,822,775 39,530,439 73,078,406
Short term provisions 134,135,450 136,119,389 116,664,877
1,899,129,395 2,462,163,873 246,17,39,216
Total 4,850,407,793 5,539,053,967 565,96,42,543
Assets
Non-current assets
a) Fixed assets
i) Tangible assets 2,477,506,139 2,314,858,681 2,280,511,429
ii) Intangible assets 4,163,925 5,656,703
iii) Capital work in progress 176,337,360 191,824,040
2,481,670,064 2,496,852,743 2,472,335,469
b) Non-current investments 21,476,940 21,476,940 21,476,940
c) Deferred tax assets (net) 1,78,03,360 36,108,849
d) Long term loans and advances 184,974,747 191,934,988 188,055,228
e) Other non-current assets 66,464,805 281,516,301 422,055,338
2,754,586,556 3,009,584,333 3,140,031,824
Current assets
a) Current investments
b) Inventories 1,087,588,405 1,356,407,164 1,664,150,391
c) Trade receivables 400,497,644 659,223,336 411,433,969
d) Cash and cash equivalents 18,566,728 29,996,457 25,768,781
e) Short term loans and advances 304,298,359 184,714,405 157,518,135
f) Other current assets 28,4,870,101 299,128,273 260,739,443
2,095,821,237 2,529,469,634 2,519,610,720
Total 4,850,407,793 5,539,053,967 5,659,642,543
36 | P A G E
PROFIT AND LOSS ACCOUNT

TABLE NO. 2
Sr.
Particulars Years
No.
2017 2016 2015
Income
1 Revenue from operation (gross) 5,734,806,718 6,336,048,456 10,944,649,232
Less:- Excise duty 6,05,143,905 497,174,792 560,098,922
Revenue from operation (net) 512,96,62,813 583,88,73,663 10,384,550,310
2 Other income 52,146,810 104,709,272 99,003,129
3 Total revenue (1+2) 5,181,809,623 5,943,582,936 10,483,553,439
4 Expenditure
a) Cost of materials consumed 3,805,290,777 3,163,101,843 4,434,090,575
b) Purchase of stock in trade 323,565,623 1,770,185,893 5,073,013,743
c) Changes in investments of
finished goods, work in progress and -333,578,325 -335,995,134 -589,541,198
stock in trade
d) Employee benefits expense 178,732,303 213,615,124 207,677,447
e) Finance costs 110,298,251 98,572,432 94,797,735
f) Depreciation and amortization
153,088,368 179,198,892 183,628,723
expense
g) Other expenses 923,639,402 832,308,251 1,017,816,953
Total expenses 5,161,033,399 5,920,987,301 10,421,483,978
Profit/loss before exceptional and
5 20,776,224 22,595,635 62,069,461
extraordinary items and tax (3-4)
6 Exceptional items
Profit/loss before extraordinary
7 20,776,224 22,595,635 62,069,461
items and tax (5+6)
8 Extraordinary items
9 Profit/loss before tax (7+8) 20,776,224 22,595,635 62,069,461
10 Tax expenses:-
a) Current tax expenses for current
year
b) Less:- MAT credit ( where
applicable)
c) Current tax expense relating to
-324,625
prior years 430,000
d) Net current tax expense 430,000 -324,625
e) Deferred tax 17,803,360 18,305,489
430,000 17,803,360 17,980,864
11 Profit/loss after tax (9+10) 21,206,224 40,398,995 80,050,325
Earning per equity share of face
value of 1/- each
Basic and diluted (in Rs.) 0.05 0.1 0.2
37 | P A G E
4.1 DATA ANALYSIS AND INTERPRETATION
1. CURRENT RATIO
Formula:-
Current Assets
Current Ratio =
Current Liabilities
TABLE NO. 4.1

Particulars Years
2017 2016 2015
Current Assets 2,095,821,237 2,529,469,634 2,519,610,720
Current Liabilities 1,899,129,395 2,462,163,873 2,461,739,216
Total Ratio 1.10 1.03 1.02
GRAPH NO. 4.1
Current Ratio
32% 35%
2017
2016
2015
33%
Interpretation:-
This graph is shows to current financial position of S.R. Steel Industries Pvt, Ltd.
on the basis of current ratio. In 2015 the current ratio is 32 % and 2016 the current
ratio is 33% will be increase with the value of 1 % on previous year. In 2017 the
current ratio is 35% will be increase with the value of 2 % on previous year.
38 | P A G E
2. QUICK RATIO
Formula:-
Quick Assets
Quick ratio =
Quick Liabilities
TABLE NO. 4.2

Particulars Years
2017 2016 2015
Quick Assets 723,362,731 873,934,198 594,720,885
Quick Liabilities 1,899,129,395 2,462,163,873 2,461,739,216
Total Ratio 0.38 0.35 0.24
GRAPH NO. 4.2
Quick Ratio
25%
39% 2017
2016
2015
36%
Interpretation:-
This graph is related to quick ratio of S.R. Steel Industries Pvt, Ltd. In 2015 the
quick ratio is 25 % and 2016 the quick ratio is 36 % will be increase with the value
of 11 % on previous year. In 2017 the quick ratio 39 % will be increase with the
value of 3 % on previous year.
39 | P A G E
3. DEBT-EQUITY RATIO
Formula:-
Long term loan
Debt-equity ratio =
Shareholders fund
TABLE NO. 4.3

Particulars Years
2017 2016 2015
Long Term Loan 744,467,111 655,714,092 650,958,050
Shareholders’ funds 2,329,860,696 2,370,182,436 2,450,155,506
Total Ratio 0.32 0.28 0.27
GRAPH NO. 4.3
Debt-Equity Ratio
31%
37%
2017
2016
2015
32%
Interpretation:-
This graph shows debt-equity ratio of S.R. Steel Industries Pvt, ltd. In 2015 the
debt-equity ratio is 31 % and 2016 the debt-equity ratio is 32 % will be increase
with the value of 1 % on previous year. In 2017 the debt-equity ratio 37 % will be
increase with the value of 5 % on previous year.
40 | P A G E
4. DEBT TO CAPITAL EMPLOYED RATIO
Formula:-
Long term debt

TABLE NO. 4
Particulars Years
2017 2016 2015
Long Term Debt 375,971,569 355,690,357 346,441,847
Net Assets 196,691,842 67,305,761 57,871,504
Total Ratio 1.91 5.28 5.99
GRAPH NO. 4.4
Debt to Capital Employeed Ratio
15%
2017
45%
2016
2015
40%
Interpretation:-
This graph shows debt to capital employed ratio of S.R. Steel Industries Pvt, ltd.
In 2015 the debt to capital employed ratio is 45 % and 2016 the debt to capital
employed ratio is 40 % will be decrease with the value of 5 % on previous year.
In 2017 the debt to capital employed ratio 15 % will be decrease with the value of
25 % on previous year.
41 | P A G E
5. PROPRIETARY RATIO
Formula:-
Proprietary ratio =
TABLE NO. 4.5

Particulars Years
2017 2016 2015
Shareholders’ Funds 2,329,860,696 2,370,182,436 2,450,155,506
Net Assets 196,691,842 67,305,761 57,871,504
Total Ratio 11.85 35.22 42.34
GRAPH NO. 4.5
Proprietary Ratio
13%
2017
47%
2016
2015
40%
Interpretation:-
This graph shows proprietary ratio of S.R. Steel Industries Pvt, Ltd. In 2015 the
proprietary ratio is 47 % and 2016 the proprietary ratio is 40% will be decrease
with the value of 7 % on previous year. In 2017 the proprietary ratio 13 % will be
decrease with the value of 27% on previous year.
42 | P A G E
6. TOTAL ASSETS TO DEBT RATIO:-
Formula:-
Total assets
Total assets to debt ratio =
Long term debts
TABLE NO. 4.6

Particulars Years
2017 2016 2015
Total Assets 4,850,407,793 5,539,053,967 5,659,642,543
Long Term Debtors 375,971,569 355,690,357 346,441,847
Total Ratio 12.90 15.57 16.34
GRAPH NO. 4.6
Total Assets To Debt Ratio
29%
36%
2017
2016
2015
35%
Interpretation:-
This graph shows total asset to debt ratio of S.R. Steel Industries Pvt, ltd. In 2015
the total asset to debt ratio is 36 % and 2016 the total asset to debt ratio is 35%
will be decrease with the value of 1 % on previous year. In 2017 the total asset to
debt ratio 29 % will be decrease with the value of 6 % on previous year.
43 | P A G E
7. INVENTORY TURNOVER RATIO
Formula:-
Cost of revenue from operations

Inventory turnover ratio =
Average inventory
TABLE NO. 4.7

Particulars Years
2017 2016 2015
Cost of Revenue From Operation 5,734,806,718 6,336,048,456 10,944,649,232
Average Inventory 400,497,644 659,223,336 411,433,969
Total Ratio 14.32 9.61 26.6
GRAPH NO. 4.7
Inventory Turnover Ratio
28%
2017
2016
53%
2015
19%
Interpretation:-
This graph shows inventory turnover ratio of S.R. Steel Industries Pvt, Ltd. In
2015 the inventory turnover ratio is 53 % and2016 the inventory turnover ratio is
19% will be decrease with the value of 34 % on previous year. In 2017 the
inventory turnover ratio 28 % will be increase with the value of 9% on previous
year.
44 | P A G E
8. TRADE RECEIVABLES TURNOVER RATIO
Formula:-
Net credit revenue from operations

Trade receivable turnover ratio =
Average trade receivable
TABLE NO. 4.8

Particulars Years
2017 2016 2015
Net Credit Revenue From
Operations 10,384,550,310 5,838,873,663 5,129,662,813
Average Trade Receivable 411,433,969 659,223,336 400,497,644
Total Ratio 25.24 8.86 12.81
GRAPH NO. 4.8
Trade Receivable Turnover Ratio
27%
2017
2016
54%
2015
19%
Interpretation:-
This graph shows trade receivable turnover ratio of S.R. Steel Industries Pvt, Ltd.
In 2015 the trade receivable turnover ratio is 27 % and 2016 the trade receivable
turnover ratio is 19% will be decrease with the value of 28 % on previous year. In
2017 the trade receivable turnover ratio is 54 % will be increase with the value of
31 % on previous year.
45 | P A G E
9. GROSS PROFIT RATIO
Formula:-
Gross profit
Gross Profit Ratio = X 100
Net revenue of operations
TABLE NO. 4.9

Particulars Years
2017 2016 2015
Gross Profit 5,734,806,718 6,336,048,456 10,944,649,232
Net Revenue of
5,129,662,813 5,838,873,663 10,384,550,310
Operation
Total Ratio 1.12 1.09 1.05
GRAPH NO. 4.9
Gross Profit Ratio
32% 34%
2017
2016
2015
34%
Interpretation:-
This graph shows gross profit ratio of S.R. Steel Industries Pvt, Ltd. In 2015 the
gross profit ratio is 32 % and 2016 the gross profit ratio is 34% will be increase
with the value of 1 % on previous year. In 2017 the gross profit ratio 34 % will be
the same value of the previous year.
46 | P A G E
10. NET PROFIT RATIO
Formula:-
Net Profit
Net Profit Ratio = X 100
TABLE NO. 4.10

Particulars Years
2017 2016 2015
Net Profit 2,120,622,400 4,039,899,500 8,005,032,500
Net Sales 5,129,662,813 5,838,873,663 10,384,550,310
Total Ratio 0.41 0.69 0.77
GRAPH NO. 4.10
Net Profit Ratio
22%
41% 2017
2016
2015
37%
Interpretation:-
This graph shows net profit ratio of S.R. Steel Industries Pvt, ltd. In 2015 the net
profit ratio is 41 % and 2016 the net profit ratio is 37% will be decrease with the
value of 7 % on previous year. In 2017 the net profit ratio 22 % will be decrease
with the value of 15% on previous year.
47 | P A G E
CHAPTER NO. V
FINDINGS AND SUGGESTIONS
5.1. FINDINGS
 Current ratio analysis of S.R. Steel Industries Pvt, Ltd. shows recurring
surplus in itself. Since 2015 it increasing continuously.
 Quick ratio provides positive signs since 2015 it is going increasing

continuously.
 Debt equity proportion of S.R. Steel Industries Pvt, Ltd. improving year by
year but it is not satisfactory.
 The proportion of debt to capital employed shows distinct losses after 2015.
 The proprietary ratio also decrease at huge proportion.
 The ratio of total asset to long term debts ratio will be decrease with huge
losses on company financial statements.
 Inventory turnover ratio will be not satisfactory for company position that’s
why company faces various losses.
 Due to sudden increment in stock turnover ratio there it also affected to debtors
turnover ratio. It also improve up to 54%.
 There is not satisfactory signs in gross profit ratio. It reducing by 1% in 2016-

17 as compared to in 2015.
 Due to decrement in gross profit it effect net profit of the company but it's no
strongly influence.
48 | P A G E
5.2 SUGGESTIONS
 Current ratio of S.R. Steel Industries Pvt, Ltd. its growing good that’s why it
is better for company poisons.
 Quick ratio of possessions is better for S.R. Steel Industries Pvt, Ltd.
 Debt equity proportion of S.R. Steel Industries Pvt, Ltd. is not satisfactory but
increases in revenue of S.R. Steel Industries Pvt, Ltd. can keep the ratio stable.
 The debt to capital employed ratio of S.R. Steel Industries Pvt, Ltd. is faces
huge losses in company position but company can also manage this ratio with
the help of proper asset management techniques
 The proprietary ratio was not favorable for company position after company
analysis.
 The ratio of total asset to long term debts growing slowly but this situation is
not superior for company growth
 Inventory turnover ratio is not superior for company growth the company will
reduce his non profitable product that time the inventory ratio create positive
signs
 Stock turnover ratio affects to debtors turnover ratio that why this ratio is an
growing position and this situation is better for company growth
 The gross profit ratio proportion of S.R. Steel Industries Pvt, Ltd. is not
satisfactory but company analyses all profit margins that time company can
keep the ratio on incremental situation.
 Gross profit ratio affects to net profit ratio that why this ratio is an unfavorable
and this situation is not good for company growth but company can remove
its unprofitable product, reduce inventories and reduce overheads that time the
net profit ratio will be superior for company growth.
49 | P A G E
CHAPTER NO. VI
CONCLUSION
6.1 CONCLUSION
The purpose our project report at an organization was to help us attain knowledge
about the working pattern in an organization. Appling theoretical knowledge into
practice helps in gaining additional knowledge. We learnt the skill of planning,
organizing and completing the assignment within the stipulated time. Ratio analysis
that company current ratio is better than the quick ratio and fixed / worth ratio. It
means company has invested more in current assets than the fixed assets and liquid
assets. The cash flow statement shows that net increase in cash generated from
operating and financing activities is much more than the previous year but cash
generated from investing activities is negative in both years. Therefore analysis of
cash flow statement shows that cash inflow is more than the cash outflow in
company. Thus ratio analysis and trend analysis and analysis of cash flow statement
show that company financial position is good. Company profitability is increasing
but not at high rate. The company liquidity position is fair but not good because
company invests more in current assets than the liquid assets. As we all know that a
SR Still Industry Pvt, Ltd. is on the first position among the entire private sector bank
of India in all areas but it should pay attention on its profitability and liquidity. The
company position is stable.
50 | P A G E
ANNEXURE
1. Bibliography
 Reference Books:-
i. Financial Account
ii. Financial Management
2. Weblography
 Source of internet
 www.google.co.in
 www.wekipedia.org
 www.scribd.com
 www.slideshaer.net
51 | P A G E

Ratio Analysis About S.R. Steel Industries

Uploaded by

Copyright:

Available Formats

Ratio Analysis About S.R. Steel Industries

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ratio Analysis About S.R. Steel Industries

Uploaded by

Copyright:

Available Formats

A STUDY OF RATIO ANALYSIS WITH REFERENCE TO S. R.

permanent information, to assist in investment and financial decision making. The

1.2 OBJECTIVE OF THE STUDY

 To analyze the profitability position of the S. R. Steel Industries Ltd.

 To determine the long term solvency position of S. R. Steel Industries Ltd.

1.3 NEED OF THE STUDY

 To diagnose the information contained in financial statement so as to judge the

1.4 SCOPE OF THE STUDY

1.5 LIMITATIONS OF RATIO ANALYSIS:

1. Limitations of Financial Statements:

3. Different Accounting Policies:

4. Lack of Standard of Comparison:

7. Changes in Price Level:

8. Causal Relationship Must:

9. Ratios Account for one Variable:

10. Seasonal Factors Affect Financial Data:

1.6 LIMITATION OF STUDY

1.7 RESEARCH METHODOLOGY

3. Research Design Objective

 To know the credit worthiness of the company.

 To offer suggestions based on research finding.

4. Data Collection Methods

 Company’s annual reports

 Books :- Financial Account

2.1 THEORETICAL BACKGROUND

This act is termed as financial statement analysis. It is regarded as an integral

2.2 FINANCIAL ANALYSIS

2.3 NATURE OF RATIO ANALYSIS

2.4 STANDARDS OF COMPARISON

2.5 TIME SERIES ANALYSIS

2.6 CROSS SECTIONAL ANALYSIS

2.7 INDUSTRY ANALYSIS

2.8 METHODS OF ANALYSIS

Parties interested in financial analysis

2.9 ADVANTAGES OF RATIO ANALYSIS

The following are the principal advantages of ratio analysis:

3. Measurement of Operating Efficiency:

5. Control of Performance and Cost:

7. Indication of Liquidity Position:

8. Indication of Long-term Solvency Position:

9. Indication of Overall Profitability:

10. Signal of Corporate Sickness:

11. Aid to Decision-making:

2.10 SIGNIFICANCE OF FINANCIAL ANALYSIS

 Helpful in measuring the solvency of the firm

 Comparison of past and present results

 Helps in measuring the profitability

 Bankruptcy and Failure

2.11 TYPES OF CLASSIFICATION OF RATIO

Statement of Profit And Loss

Balance Sheet Ratios

Debt Equity Inventory Gross Profit

Debt to Capital Trade Receivable

Trade Payable Operating Profit

Books Value Per

 There is a two way classification of ratios:

1. The Traditional Classification of Ratio:-

 Statement of Profit and Loss Ratios:

 Balance Sheet Ratios: