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Transcript of Roots Industries India Limited
“A STUDY ON THE FINANCIAL PERFORMANCE OF
ROOTS INDUSTRIES INDIA LIMITED
COIMBATORE
SUBMITTED BY
S.SATHEESH
(REG. NO. 11CM62202)
The Report is submitted as partial fulfillment of the requirement of MBA Program of
MANONMANIAM SUNDARANAR UNIVERSITY
Under the guidance of
MS.J. RENUKA PETERS
INDIGROW INSTITUTE OF PROFESSIONAL STUDIES
EVERONN EDUCATION LIMITED
COIMBATORE
OCTOBER - 2011
INDIGROW INSTITUTE OF PROFESSIONAL STUDIESEVERONN EDUCATION LIMITED334, Puliakulam Road, (opp) Carmel Garden School, Coimbatore-641 045
CERTIFICATE
This is to certify that the project titled “A STUDY ON THE FINANCIAL
PERFORMANCE ROOTS INDUSTRIES INDIA LIMITED” is submitted to
Manonmaniam Sundaranar University as partial fulfillment of the requirement of MBA Program,
is a record of the original work done by S.SATHEESH during the period of his study in
Indigrow Institute of Professional Studies, Puliakulam Road, Coimbatore under my supervision
and guidance and the report has not formed the basis for the award of any
Degree/Associateship/Fellowship or other similar title to any candidate in any university.
______________ __________________
Faculty Guide Campus Head
Viva voce examination held on _______________________
_________________ ____________________
Internal Examiner External Examiner
DECLARATION
I, S.SATHEESH here by declare that the project titled “A STUDY ON THE FINANCIAL PERFORMANCE OF ROOTS INDUSTRIES INDIA LIMITED” is submitted to Manonmaniam Sundaranar University as partial fulfillment of the requirement of MBA Program, is a record of the original work done by me under the supervision and the guidance of MS.J. RENUKA PETERS. Faculty Member Indigrow Institute of Professional Studies, Puliakulam Road, Coimbatore.
I further declare that this report has not been submitted to any other
Universities / Institutions / Board for the award of any Degree / Diploma before.
Date: S.SATHEESH
Place: (11CM62202)
INTRODUCTION
ABOUT THE STUDY
The project work titled “the study on financial
performance” with reference to Roots Industries India Limited. The main objective
of study is to find out the financial strength and weakness of the company using
financial analysis.
Finance is one of the major element is activity the overall growth of
economy. Finance is the life blood of economy activity a well-knit financial system
directly contributes to the growth of economy. An efficient system calls for the
effective performance of financial institutions and financial instruments and
financial market.
Meaning:
A tool used by individuals to conduct a quantitative analysis of
information in a company's financial statements. Ratios are calculated from current
year numbers and are then compared to previous years, other companies, the
industry, or even the economy to judge the performance of the company. Ratio
analysis is predominately used by proponents of fundamental analysis.
Definition:
According to Prof. Spring field, Prof. Mass & Merrium, a ratio is defined
As “The indicated quotient of two mathematical impression” and as “The
Relationship between two (or) more things”
Importance of ratio analysis
It helps in evaluating the firm’s performance:
With the help of ratio analysis conclusion can be drawn
regarding several aspects such as financial health, profitability and operational
efficiency of the undertaking. Ratio points out the operating efficiency of the firm
i.e. whether the management has utilized the firm’s assets correctly, to increase the
investor’s wealth. It ensures a fair return to its owners and secures optimum
utilization of firms assets
It helps in inter-firm comparison:
Ratio analysis helps in inter-firm comparison by providing
necessary data. An interfere comparison indicates relative position. It provides the
relevant data for the comparison of the performance of different departments. If
comparison shows a variance, the possible reasons of variations may be identified
and if results are negative, the action may be initiated immediately to bring them in
line.
It simplifies financial statement:
The information given in the basic financial statements serves no
useful Purpose unless it s interrupted and analyzed in some comparable terms. The
ratio analysis is one of the tools in the hands of those who want to know something
more from the financial statements in the simplified manner.
It helps in determining the financial position of the concern:
Ratio analysis facilitates the management to know whether the
firms financial position is improving or deteriorating or is constant over the years
by setting a trend with the help of ratios The analysis with the help of ratio analysis
can know the direction of the trend of strategic ratio may help the management in
the task of planning, forecasting and controlling.
It is helpful in budgeting and forecasting:
Accounting ratios provide a reliable data, which can be compared,
studied and analyzed. These ratios provide sound footing for future prospectus.
The ratios can also serve as a basis for preparing budgeting future line of action.
Liquidity position:
With help of ratio analysis conclusions can be drawn regarding the
Liquidity position of a firm. The liquidity position of a firm would be satisfactory
if it is able to meet its current obligation when they become due. The ability to met
short term liabilities is reflected in the liquidity ratio of a firm.
Long term solvency:
Ratio analysis is equally for assessing the long term financial ability
of the Firm. The long term solvency s measured by the leverage or capital structure
and profitability ratio which shows the earning power and operating efficiency,
Solvency ratio shows relationship between total liability and total assets.
Operating efficiency:
Yet another dimension of usefulness or ratio analysis, relevant
from the View point of management is that it throws light on the degree efficiency
in the various activity ratios measures this kind of operational efficiency.
Help in investment decisions:
It helps in investment decisions in the case of investors and
lending decisions in the case of bankers.
Advantages of Ratios Analysis
Simplifies financial statements:
It simplifies the comprehension of financial statements. Ratios tell the
whole story of changes in the financial condition of the business
Facilitates inter-firm comparison:
It provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firm. They also reveal strong
firms and weak firms, overvalued and undervalued firms.
Helps in planning:
It helps in planning and forecasting. Ratios can assist
management, in its basic functions of forecasting. Planning, co-ordination, control
and communications.
Makes inter-firm comparison possible:
Ratios analysis also makes possible comparison of the performance of
different divisions of the firm. The ratios are helpful in deciding about their
efficiency or otherwise in the past and likely performance in the future.
Help in investment decisions:
It helps in investment decisions in the case of investors and lending
decisions in the case of bankers.
Limitations of Ratios Analysis
Comparative study required:
Ratios are useful in judging the efficiency of the business only when
they are compared with past results of the business. However, such a comparison
only provide glimpse of the past performance and forecasts for future may not
prove correct since several other factors like market conditions, management
policies.
Lack of adequate standard:
No fixed standard can be laid down for ideal ratios. There are no well
accepted standards or rule of thumb for all ratios which can be accepted as norm. It
renders interpretation of the ratios difficult.
Limited use of single ratios:
A single ratio, usually, does not convey much of a sense. To make a
better interpretation, a number of ratios have to be calculated which is likely to
confuse the analyst than help him in making any good decision.
Personal bias:
Ratios are only means of financial analysis and not an end in itself. Ratios
have to interpret and different people may interpret the same ratio in different way.
Incomparable:
Not only industries differ in their nature, but also the firms of the similar
business widely differ in their size and accounting procedures etc. It makes
comparison of ratios difficult and misleading.
Problems of price level changes:
A change in price level can affect the validity of ratios calculated for
different time periods. In such a case the ratio analysis may not clearly indicate the
trend in solvency and profitability of the company. The financial statements,
therefore, be adjusted keeping in view the price level changes if a meaningful
comparison is to be made through accounting ratios.
Objectives of the study
1. To assess the profitability and operating efficiency of Roots
Industries India Limited.
2. To assess the liquidity position of Roots Industries India
Limited.
Scope of study
This study focuses on the information contained in financial statements
with a view to find out the strength and weaknesses of Roots Industries India
Limited. Roots Industries India Limited is a manufacturer of horns. They
produce, export and supply, automotive electric horns, air horns, halogen lamps,
friction products, auto electrical accessories , automotive two wheeler spare parts.
The study uses ratio analysis to dissect and establish relationship between
the elements of financial statement. The operational profitability and financial
position are analyzed with the help of liquidity ratios, profitability ratios and
activity ratios. In order to find out the earning power of the company, Du Pont
Technique is used.
Research methodology
The study uses analytical research methodology by collecting information
that has been gathered from Roots Industries India Limited and looks at what it
shows as trends.
Data collection
1. Primary data:
The study relies on primary data to interpret financial information
which is collected through questionnaire and interviews with officials from
finance department.
2. Secondary data:
The data for operational and profitability analysis is mainly taken from
annual reports. Apart from this, books, magazines, and office documents are
also used.
Tools applied
1. Ratio analysis
2. Du Pont Technique
Chapterisation
1. Introduction
2. Review of literature
3. Profile of Roots Industries India Limited
4. Data analysis
5. Finding and conclusion
Study Plan:
Sl No Study Coverage Date:
1. Title
2. Proposal
3.