Scope of the Study
SCOPE OF THE STUDY: This study aims at providing an insight into the financial position by comparing the Balance Sheet of Auto Syndicate Private Ltd. This study confined to five years data from annual reports 2006-2010, financial statements and other records of the Auto Syndicate Private Ltd. OBJECTIVES OF THE STUDY: The study is undertaken with the following objectives * To study the liquidity position of the company. * To analyze the financial performance of the company. * To predict the general financial position and profitability of the company and to offer possible suggestions. To identify the financial strength and weakness of the company. * To understand about the historical performance of the company. LIMTATIONS OF THE STUDY: * This study mainly depends upon the secondary data, that is annual reports and other records. * The financial performance of the company is analysed only for five years. The reliability of the study depends upon the accuracy of the data in the annual reports. RESEARCH METHODOLOGY FORMULATION OF THE RESEARCH PROBLEM: The selection of a topic for the research is the first in a project it is importance to define a research problem.
This problem defines the goals of the researcher. The research problem in this project is to analysis the financial performance of the company. NATURE OF THE RESEARCH PROBLEM: The research is a diagnostic study general to solve the specific problems relating to financial performance by discovery of the relevant variables that is associated with financial statement. RESEARCH DESION: The project is Descriptive of research. In this research the researcher has no control of variables. Only reports what has happened or what is happening can be controlled.
The research can discover causes but can’t control the variables, as it studied what happened. DATA COLLECTIONS: Data are mainly collected from two sources * PRIMARY DATA: The required data where collected through formal and informal discussion and exchange of views with the company profile. * SECONDARY DATA: The secondary data were collected through annual reports and financial statements provided by the company. NATURE OF THE DATA: The data being used in this analysis is a secondary data. It is taken from the following for the period of 5 years. 1. ANNUAL REPORTS 2. FINANCIAL STATEMENTS 3.
COMPANY PROFILE. DATA ANALYSIS TOOLS: The study of comparative financial analysis of AUTO SYNDICATE PRIVATE LTD can be made with the help of following techniques. * Ratio Analysis * Trend Analysis * Comparative Income Statement. * Comparative Balance Sheet. DATA PERSENTATION TOOLS: * Tables * Bar charts * Trend Analysis DATA ANALYSIS & INTERPRETATION MEANING OF FINANCIAL STATEMENT: A financial statements is an organized collection of data according logical and consistent procedures. Its purpose is to convey some financial aspects of a business firm. It may show a position at a moment of time as in the ase of balance sheet or may reveal a series of activities over a given period of time as in the case of an income statement. The primary objective is to determine the possible estimate and predictors about the future. It also aims at managements of an opinion with respect to the financial position of the enterprises relationship, to the study of that business in that economical world. The tools such as ratio analysis, comparative statements and trend analysis are used to facilitate the analysis and discussion of the study. TECHIQUES OF FINANCIAL PERFORMANCE: RATIO ANALYSIS:
The relationship between two figures expressed mathematically is called as “Ratio”. It is a numerical relationship between two numbers which are related in some manner. Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of determination and interpretation of various ratios for helping decision making. It is defined as the systematic use of ratios to interpret the financial statement, so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined.
The relationship can be expressed in percentage , fractions and proportion of numbers. The various classifications of ratios are follows. i. Current Ratio: It is the relationship between current assets and current liability. It is measure of liquidity position and is most widely used to make the analysis of a short term financial position. A current ratio of 2:1 is considered as satisfactory level. Curret Ratio = Current Assets / Current Liabilities. ii. Quick Ratio: Quick Ratio or acid test ratio establishes relationship between quick or liquid assets and current liabilities. The ratio is called as liquid ratio.
The satisfactory level of quick ratio is1:1. Quick Ratio = Quick Assets / Current Liabilities iii. Absolute Liquid Ratio: it is modified form of liquid ratio. The relationship of absolute liquid assets to liquid is called as Absolute Liquid Ratio. This is called as Super Quick Ratio. Absolute Liquid Assets means cash, bank and short term investments. Liquid Liabilities means current liabilities less bank overdraft. Absolute Liquid Ratio=Absolute Liquid Assets /Liquid Liabilities 2. PROFITABILITY RATIO i. Gross Profit Ratio: This ratio measures the relationship between gross profit and net sales.
Gross Profit Ratio = Gross Profit / Sales ii. Net Profit Ratio: This ratio measures the relationship between net profit and net sales. It indicates the efficiency of the over all operation of the firm. Net Profit Ratio = Net Profit /Sales 3. ACTIVITY TURNOVER RATIO i. Fixed Assets Turnover Ratio: This show how best the fixed assets are being utilized in the business concern. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Fixed Assets Turnover Ratio = Sales / Fixed Assets ii. Net Assets Turnover Ratio:
Net assets turnover ratio shows the firm’s ability to produce a large volume of sale for given amount of net assets. It is used to measure the management efficiency in operating business successfully from the owner’s point of view. Net Assets Turnover Ratio = Sales / Net Asset iii. Capital Turnover Ratio: This shows the number of times the capital has been rotated in the process of carrying on business. Efficient utilization of capital would lead to higher profitability. The relationship between sales and capital employed is known as capital turnover ratio. Capital Turnover Ratio = Sales / Capital Employed iv. Stock Turnover Ratio:
Stock turnover ratio is otherwise called as Inventory Turnover ratio. It indicates whether stock has been efficiently used or not. It establishes a relationship between cost of good sold during a particular period and the average amount of stock in the concern. Stock Turnover Ratio = Cost of goods sold /Average stock 4. SOLVENCY RATIO i. Deft Equity Ratio Deft equity ratio helps to ascertain the soundness of the long tem financial position of the concern. It indicates the proportion between Long term debts and Shareholders Fund. This also indicates the extent to which firm depends upon outsides for its existence.
Deft Equity Ratio = Total long term debts / Shareholders Fund 4. 2 TREND ANALYSIS Trend analyses are immensely helpful in making a comparative study of the financial statement for statement for several years. One of the most important tasks for business man is to estimate for the future. A business man is interested in finding out his likely sales for long term planning. It provides great help to business people. 4. 3 Comparative Income Statement: The income statement gives the result of the operations of business. The comparative income statement gives an idea of the progress of a business over period of time.
The changes in absolute data in money value and percentage can be determined to analyze the profitability of the business. 4. 4 Comparative Balance Sheet: The comparative balance sheet analysis is the trend of the same items, group of items and computed items in two or more balance sheets of same business enterprise on different dates. The changes in periodic balance sheet reflect the conduct of a business. The changes can be observed by comparison of the balance sheet at beginning and at the period and these changes can help in forming an opinion about the progress of the enterprises. . SUGGESTIONS, FINDINGS AND CONCLUSION 5. 1 FINDINGS: * The current ratio for the period 5 years is greater than the ideal ratio 2:1. This would increase the liquidity position of the company. * The standard quick ratio is 1:1. In this company all the ratios are more than the standards. This will facilitate the short term responsibilities of the company. * Capital Turnover Ratio increases year by year. Efficient utilization of capital would lead to higher profitability. * Stock turnover ratio indicates that the stock has been effectively utilized by the company. Deft equity ratio decreases year by year. 5. 2 SUGGESTIONS & RECOMMENDATIONS * Since the current ratio for the five years is more than the ideal ratio, this would increase the short term financial solvency of the firm. Hence it is suggested that the company has strong liquidity position. * The management should take special attention to increase the cash position of the company. * The company can earn more profit by adopting new methods for services. * The company should concentrate on increasing the net profit even though there is an increase in sales. 5. CONCLUSION * The study was undertaken on financial performance of the company. Tools such as Ratio Analysis, Trend Analysis and Comparative Balance Sheet have been used to find out the company’s efficiency in performing in all its financial function. * The profitability, Solvency and Liquidity position of the company during the study appreciable. * The analysis reveals that long term solvency position is satisfactory. * Company is introducing new techniques for improving its growth. * It is concluded that the financial performance AUTO SYNDICATE PRIVATE LTD is good.