MAYA ADVANCED STUDY CENTRE FOR MANAGEMENT & I.T VALAPAD, THRISSUR KERALA 01743 ³A STUDY ON FINANCIAL PERFORMANCE OF KSE LTD´ BY VAISHAKH.V.R (reg.520927913) A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIRMENTS FOR DEGREE OF MASTER OF BUSINESS ADMINISTRATION Of Sikkim Manipal University INDIA Sikkim Manipal University Of Health , Medical and Technology Sciences Distance Education Wing Syndicate House Manipal- 576 104 STUDENT DECLARATION I hereby declare that the project report entitled ³A STUDY ON FINANCIAL PERFORMANCE OF KSE LTD.´ Submitted in partial fulfilment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION To Sikkim Manipal University India. Is my original work and not submitted for the award of any other degree, diploma, fellowship or any other similar title or prizes Place ; Valapad Date; Name; Vaishakh.V.R Reg. No.; 520927913 Examiners declaration The project report of Vaishakh.V.R ³ A STUDY ON FINANCIAL PERFORMANCE OF KSE LTD.´ Is approved and is acceptable in quality and form Intenal Examiner External Examiner C. for their peerless guidance .ACKNOWLEDGEMENT First of all I am dedicating this humble and sincer work or inline to God almighty for shower strength and blessing he has bestowed on me for doing this work. I take this opportunity to express my sincere thanks and sense of gratitude to my beloved principal Mr. Project guide. I acknowledge my sincere thanks to the personnel manager M. Manoj. suggestion and encouragement to me so that I could accomplish this work successfully.I. Vaishakh. finance Manager A. With great happiness I submitted this project entitled ³ A STUDY ON FINANCIAL PERFORMANCE OF KSE LTD.R . coordinator of Maya Advanced Study Center for Management & IT.Jhon and all other employees of the KSE Ltd.D.T . suggestions and guidance provided with by the staff members are highly acknowledged I am thankful to all other teaching and non-teaching staff of Maya Advance Study Centre for Management & I.A. Valapad for valuable services rendered by them.´ With due respect for invaluable suggestions made by my esteem well wishers. Avas . C.Jony. Mr.V. The advices . No. Today KSE comments the resources . Statement of the problem This project is a result of the study conducted in KSE Ltd Irinjalakuda. Hence the researcher has been assigned the duty of identifying the financial performance of the company. coconut oil cake and refined edible oil. Every actions of the industry are related with the financial areas and the performance of the overall company also is mainly related with the financial areas if any want to get more care . expertise and infrastructure to manufacture a range of feed in high volumes . . Financial areas is the most important area and it equally related with all other areas. The present study entitled a study on financial performance of the organization and to analyze the performance of various financial areas of the company. 520927913 ABSTRACT KSE LTD is a cattle feed company which emerged as a leader in solvent extraction and ready mixed cattle feed in the country.Reg. It is the very first solvent extraction plant in India. so that the company can improve their profit and competency. To understand the long term solvency position of the firm. RESEARCH Methodology Research methodology is a way to systematically solve the research problem. To find out the profitability of the firm. To promote suggestion if any on the basis of analysis and interpretation. It may be understand as a science of studying how research is done systematically it helps to analyze the performance of the company for a particular period from (2005-2010 ) RESEARCH DESIGN In this research an attempt has been made to analyze the past performance of the company research design of this study is descriptive and analytical in nature . To identify efficiently and effectively the company¶s resources are being utilized.OBJECTIVES OF THE STUDY Primary Objective To analyze the financial position of the firm. To analyze the liquidity position of the firm. . y DATA ANALYSIS AND INTERPRETATION Collected data are edited and tabulated. y TOOLS AND TECHNIQUES FOR DATA ANALYSIS RATIO ANALYSIS. magazines and journals. . TREND ANALYSIS. trend analysis and bar charts to give a better understanding of the analyzed data. activity ratio. The tabulated data is further taken for analysis by using rations and comparatives balance sheet by using liquidity ratio. websites. comparative balance sheet . COMPARITIVE BALANCE SHEET.SOURCE OF DATA y Secondary source It has been collected from the company records. CHAPTER ± 1 INTRODUCTION . It is rightly as the science of money. . Financial statement analysis seek to evaluate the performance. The analysis of financial statement is. activites and decisions of every business. Finance control the policies. Finance is essential for smooth running of the business. A number of tools are availabel in tool kit of the analyst for this purpose. The financial analysis is the process of selection. relation and evaluation. The financial statements provide a summarized view of the financial position and operation of a firm. much can be learnt about a firm from careful examination of its financial statement as invaluable documents / performance reports. Financial analysis is the analysis of financial statement of a company to assess its financial and soundness of its management. The focus of financial analysis is on key figures in the financial statement and the significant relationship that exists between them. financial strength. The analysis of financial statement is a process of evaluting relationship between component parts of financial statement to obtain a better understanding of the firm¶s position and performance.INTRODUCTION TO THE STUDY Finance is the life blood and nerves centers of a business. The secound step involed in financial analysis is to arrange the information in a way to highlight significant relationships. ability to generate enough cash and the growth outlook of the company. an important aid to financial analysis. thus. The first task of the financial analysis is to select the information relevant to the decision under consideration from the total information contained in the financial statement. Financial analysis is a process of identifying the strength and weakness of the firm by properly establishing relationships. Therefore . Cow and bullocks are regarded as the foundation of agriculture in India. India is deficient in green fodder. as it is supplying only about 5 % for cattle feed . Cattle feed supplies the motive power for almost all agriculture operations such as ploughing. is still in a very primitive stage. though quite old. They provide most of the manure used by the farmers in India and often enable them to earn some this during this spare time by carting for hire. The unawareness of farmers about the proper feeding methods of cows affects the milk productivity cows in rural areas. Due to this reason the importance of cattle feed industry has been increased in India. butter and ghee. Our human population is ever growing and more people are likely to consume more animal product as the economy and income of the people grow. and oil seeds for . INDUSTRY PROFILE Cattle play a vital role in the economy of India. lighting water from wells and the transport of produced to the market. This expands the market for animal products and therefore compound feed also.´ cereals. this project is an attempt to analyze the financial performance of KSE Ltd. and 30% for poultry feed in India. Indian livestock feed industry . they again yield valuable product such as milk. The increasing allocation of arable land and other natural resources for growing food grains. The bulk of the feed is being produced by un-organized sector compressed of home and custom mixers.Based on this reasoning . This increase was influenced by the financial incentives for dairy farmers to produce as much milk as possible. initially supplying feedstuffs only for ruminants and later. which represents only 5 % of total potentials. and proteins from groundnuts. In India the most research work on animal feed is practical and focuses on the use of by products the upgrading of ingredients and the enhancing of productivity.0 million tones. as demand developed. The quality standards of Indian feeds are high are high and up to international levels. there by requiring large volume offered for their cattle. linseed . . oilseed cakes and meal. It can be seen as the compound feed production for cattle increased between 1974 and 1983. These included wheat feed. India. cottonseeds and fishmeal. barley and maize. and its employs the latest manufacturing technology. the problem of shortage of green for animal feeding is bound to increase. The feed industry has modern computerized plants and latest equipments for analytical procedure and least cost ration formulation . In the past feed mills were usually built at major ports or close to inland water ways. Feed industry come into existence in India in 1961 with establishment of feed plant in Ludhiana. left over from flour manufacture. This opens up prospects for compound livestock industry. from the manufacture of margarine and cooking oils. The animal feed industry has developed since the beginning of 20th century. The industry¶s production is about 3. and feed exports are not very high. including serials such as wheat. also for pigs and poultry.human consumption and cash crop for exports. Some home produced materials were also used generally by products of the food industry. Many of the raw materials were imported. The industrial deli censing in 1991 as part of the economic reform package in India did not impact on the expansion of feed industry.88% during the post de-licensing had on the food processing industry in general.3% rate of expansion in pre deli censing period (1976/77 ± 1990/91 ) remained much the same at 6. GROWTH OF ANIMAL FEEDS INDUSTRY The manufacturing of feed in the organized sector in India began around the mid. Currently there is no compulsion to use BIS standards.Feed manufacturing on commercial and scientific basis started around 1965 with the setting up of medium. The pace of increase was much faster in 70¶s ( compound annual growth rate 12.sized feed plants in the northern and western parts of the country. . Feed was produced mainly to cater to the need of dairy cattle. The early seventies established sixty feed factories in the country and their number increased manifold to over 400 by the late nineties. and dairy industry in particular where a large number of new factories/plants came up after 1991 -1992.sixties with the setting up of medium. India is currently self sufficient in live stock feed and dose not depend on imports.sized feed plants in northern and western India. the country exports large quantities of solvent extracted metals. which are a major source of foreign exchange earnings. The 6. but the central government has been advising states to introduce their own regulatory standards.7%) as compared to the subsequent decades. BIS has produced guideline feed standards and the industry also has its own guidelines. Instead . so high quality compound feed ( Industry Feed ) may not necessarily generate a significant improvement in productivity and this had hampered growth of a cattle feed industry.FEEDING PRACTICES AND THE USE OF COMPONENT FEED In India the term ³Compound Feed ³ refers to feed that is nutritionally balanced and has been manufactured using the facilities of an analytical laboratory and under the supervision of nutritionists. CATTL E FEED The productivity of the cattle is limited because of their poor genetic make ± up . . It is only in the case of highly productive animals that compound feed has been able to show its real potential and the importance of technology has been demonstrated. There are also a large number of small scale feed mixers who produce feed for local consumption. making up the balance with their own formulations. Such feed is termed ³ Self Mixed Feed ³ or ³ Home Mixed Feed ³. Instead they compromise by using such feed in proportion of 5 to 60 percent. The cattle population is fragmented and spread over large part of the country. The share of compound cattle feed manufactured by the industry in relation to the overall potential . is low for the following reason. Farmer¶s low level of education and strong traditional beliefs mean that there is generally little awareness of compound cattle feed. Members of the industry have their own analytical laboratories and either have their own research and development facilities or have access to the research laboratories of agricultural universities or government institutions. castor . other analyses are regularly carried out. aflaxotin. All vitamins.More than 50% of the country µs total milk production comes from a very large number of low yielding cows and buffaloes and only the remaining 25% of the total is produced by cross breed and improved cows. such as amino acids. ochratozin. As well as the normal proximate principles. insurance cover is available. The feed millers have acquired the latest technologies and modern equipment such as high pressure liquid chromatography ( HPLC ) and near. Feed raw materials and finished products are subjected to microbial counts. There is a high degree of awareness of feed microbiology among the millers of feed. . Industrially manufactured compound cattle feed has proved its value for cross breed cows and buffaloes but not for yielding cattle because of their genetic limitation. tannins and urease activity. minerals and other feed activities are regularly analyzed using modern analytical techniques.infrared ( NIR ) analyzers. layers and broilers. salmonella and Escherichia coli testing and mould count and contaminated materials are rejected and some time destroyed. The industry is fully committed to quality and their technical staffs are knowledge about the nutrition of cattle buffaloes. Home mixed feed is very frequently used for buffaloes and low yielding cattle. THE QUALITY ASSURANCE OF COMPOUND FEED The Indian feed industry employs the service of qualified nutritionists. . in layers and body weights 2.8 and 1.Regular seminars are conducted . short term course are arranged and Indian scientists are constantly working to upgrade quality of the Indian feed and make it completely safe for animal feedings. Dairy feed can be use the genetic potential of Indian at its maximum. The quality of Indian feed can be compared with that of any western feed.0 kg in less than 6 weeks . Today it is common to achieve a chicken house average of 310 eggs in 52 weeks. The quality of Indian feed is satisfactory and innovation will continue. with a feed conversion ratio of between 1.9 in boilers. New capacities are being added by global players in the feed business and by national as well as multinational integrators. they have not been revised for 30 years. Another feed standards issue that worries both the government and industry is that any changes to existing standards will be slow and difficult to arrive at because of participate conflicts and various lobbying groups. the industry¶s principal concern about compulsory standards is that they will disturb .ISSUE IN THE ANIMAL FEED INDUSTRY Standardization and regulations of animal feed manufactures. is resisting this move. The nature of animal feed industry has completely changed. The industry. with the BIS standards for poultry are obsolete. One of the major reason for oppositions is that the government wants to legislate regulation under the essential commodities act 1955 which is consideration draconian and totally inappropriate in the context. However . however. For cattle . the organized sector of the compound feed industry is facing serious problems resulting from a huge idle capacity. Currently there is no compulsion to use BIS standards. the industry has several reservation about implementing BIS standards. Further more. BIS has produced guidelines feed standards and the industry also has its own guidelines. There is a lack of flexibility in these standards and they are lagging far behind the industry¶s products. to the extent of 50 % or more. In fact. There is no shortage of compound animal feeds anywhere in the country. but the central government has been advising states to introduce their own regulatory standards. As already mentioned. This is because all innovations would have to be passed by BIS and such a process in likely to take several years to complete. but the Indian government put them into restricted category in October 1995. has made several representations to the government. LOCAL SALES TAX Another threat to the industry is posed by sales taxes. It must be noted that the feed industry is mainly commodity ± oriented and although it is value added . animal feed supplements and additives (HSN ) to which India is signatory. IMPORT AND EXPORT . The industry has made several representation to the government and some state governments have accepted its points of view refrained from levying any tax on animal feeds. In the HSN. World wide. but these have been round various government departments. it cannot support the burden of any kind of taxation. appellate tribunals.efforts to innovate and upgrade feed production in order to improve the productivity of the animals. The industry¶s represented by CLFMA . CLASSIFICATIONS OF ANIMAL FEED SUPPLEMENTS/ ADDITIVES FOR IMPORT The classification of feed activities is a major hindrance to the Indian feed industry. the high court and the supreme court without providing any useful results for the industry. all feed ingredients are listed under the free category for import . but in fact they are not getting this. Similarly the dairy industry as a whole is become non profitable to the farmers. Farmers are depending on milk associates for selling their milk. They are not getting required rates for their milk. cattle feed and cake etc. As a matter of fact ever after giving in the present rate the companies are not able to make any profit. The main reasons for this are that they have pay high prices for grass. Due to high process of the raw materials and their non availability forced many of the companies to curtail their production cost they are compelled to increase their product price. CURRENT SITUATION While analyzing the present situation industry have been facing a lot of challenges. The societies are taking milk from the farmer at a rate between Rs. the country does import certain chemicals. There is no import of animal feed as such in to India. As a result it will adversely affect to cattle farmers. 18. This may cause serious threat in future to cattle feed industry. amino acids and essentials for aquaculture feed. And they say they should get minimum Rs. Due to above reasons many of them are compelled to leave from this field. 14 & Rs. feed activities. India exports about 25000 tons of feed to the near east as general animal feed. Currently they are not getting any profit out of the business. At presently. According to farmers the prevailing rate of milk are not profitable to them.Indian feed was exported to the near east during the 1980¶s but the export demand was reduced when feed mills were set up in the near east. Small farmers are struggling for their existence.20. Under this circumstance . However. government should interfere in this trade and should take necessary steps to safe guard the interest of both farmers and industry. . In 1976 the company stated production of ready mixed feed with the production capacity of 50 metric tones per day and in 1983 the company increased the production of cattle feed to 120 mt per day which has recently been increased to 180 mt per day by the construction of a dully automated computerized plant. with production capacity of 150mts of cattle feed per day and processing capacity of 100-120mts of expeller extracted deoiled cake. Trivandram and though loans from industrial finance corporation of India. The company is engaged in the solvent extraction of ground nut cake and rice bran also. the company lased new cattle feed plant at pothannur near coimpthur with a production capacity of 80 mts per day and in 1995 company has leased a plan in mysore with the capacity of 50 mts per day. In 1988 company started a solvent extraction and cattle feed plant at Swaminathpuram near Palani. In 1972. New Delhi. The oil thus obtained is moved for industrial purpose into the market. In addition is full-fledged livestock feed division engaged in the production of ready mixed cattle feed. The company was registered in the year 1963. In 1996 the company started a new plant I Vedagiri at Kottayam in Kerala with the capacity of 240 mts per day. Kerala solvent extraction ltd come out with a premium public issue on March 1993 . in 1973 the solvent extraction plant was started with processing capacity of 60 metric tones of cake per day.COMPANY PROFILE A BRIEF HISTORY OF KSE LIMITED KSE ltd is a public limited company is a incorporated with substantial capital participation by the Kerala State Industrial Development Corporation ltd. The KSE is a public limited company having around 6000 . The oil mill owners in and around Irinjalakuda. this reflects the confidence of investing in the company. Today KSE commands the resources. It is matter of pride that KSE is household name today. The solvent extraction plant went on the stream in 1972 and in 1976 a new plant was setup to manufacture ready mixed cattle feed. Lokhanathan committee. The traditional coconut oil industry in state was facing a decline then. through the stock markets are showing a low trend. The Dr.10. was no looking back. Kerala the infrastructure to exploit the potential of its abundant produce. recommended the establishment of 3 solvent extraction plants. Since the early.140 per share whose face value is Rs. set up to feasibility of starting new industries in Kerala. as much as 80% of it. KSE had endeavoured to supply its products to customers through extensive network of dealers and retailers which from a dedicated force behind the success of KSE. coconut oil from coconut cake and refined edible oil. who were thinking in similar lines saw the opportunity and look the initiative to establish a solvent extraction unit. And one of them.which was over subscribed. Though the largest producer of copra in the country. It was in 1963 that Kerala Solvent Extraction limited now known as KSE ltd entered the solvent extraction industry setting up the very first solvent extraction plant in Kerala. which was a pioneering step. now Kerala Solvent¶s share is still quoted at Rs. While the oil industry in other parts of the country were thriving. Since then there. in Thrissur district. The last 3 decades have seen KSE emerging as a leader in solvent extraction and ready mixed cattle feed in the county and though these years of consolidation and diversification KSE has crate a niche for itself. expertise and infrastructure to manufacture a range of live stock feed in high volumes. OBJECTIVES 1.extract. To produce. purchase refine. The company has one Executive Director and one Whole Time Director. export.shareholders. Finance Manager. General Manager. manufacture . Nutrionist . The board of directors consisting 10 directors in the executive committee responsible for the management the article of association of the company empowers the board of directors of directors to appoint one as the Chief Managing Director. Initially started as a solvent extraction plant. ESTABLISHMENT Kerala Solvent Extractions Limited now known as KSE limited was established in 1963. by a handful of coconut millers in and around Irinjalakuda with a vision to over come the crisis of the coconut oil industry. These executives are professionals with vast experience in their areas of specialization. Whole time Director. the company now produces 750-800 MTS of coconut cake a day with 4 cattle feed production units and 2 solvent extraction plants. Marketing Manager. Executive Director and Whole time Director are the smooth running of day to day affairs of the company. It has obtained ISO recognition for its commitment to quality and professionalism. Plant Manager and Purchase Manager. sell and generally to deal in oil from seeds and other oil bearing materials to carry on the business of refining the hydrogenation of oil and . The Chief Managing Director. The company has diversified into the area of dairying by establishing 2 dairy plants for the production of pasteurized milk and milk products. Strategic decision of the company are taken by an executive body consisting of the Managing Director. Executive Director. prepare import . 2. Workforce . Oil expellers denigrators . VISION We shall endeavour to maintain leadership through quality products.000. hair oils and timed products.000 equity shares of Rs 10 each and redeemable cumulative preference share of Rs 100 each. filter press . construct. To acquire erect.toilet soaps . 4. The company at par value allows redemption of preference shares after 12 years but before 15 years from the date of allotment. washing .contribute to social development and rural enlistment. and workshops. and maintain oil mills .40. dealers and customers . . filtration and hydrogen plants . create a stronger bond between the management.5 % per year. punch machines and other machines .the manufacturing of by products there from and of trades connected there with.40. SHARE CAPITAL To authorized share capital of the company is 99. To purchase for the purpose of business of the company. explore new avenues in product development and marketing. manufacture . which is divided into 99. dyeing bleaching . washing soaps . oil neutralizing . establish operate. treat purchase sell or otherwise deal in oil cakes . 3. To purchase .extraction plants. The preference shareholders have a right of preferential divided at the rate of 13. and constantly strive for excellence in all spheres of our activities. New Delhi in category of animal feed Processing industry continuously for ten years beginning with 1996-1997.In 1994. and Cochin Now the company has 6000 share holders.50000 in each month for it. This award is being received by the company for the past 19 years consecutively since the inception of the award. And also they are spending Rs. It contributed 5 lakh each for Kargil and Tsunami Fund . AWARDS AND RECOGINATIONS The company has won the sea award constituted by Solvent Extractors Association of India for highest Processor of coconut oil cake for the year 20082009. SOCIAL SERVICE AND RESPONSIBILITY The company gave so many contribution to the country at the time of uncertainties. Your company has also won the Best Productivity Performance Awards instituted by the National Productivity Council . As a part of social responsibility the company introduced µ KS PARK µ for the enjoyment and fun children. . Madras. company made a public issue of shares and listed the shares in stock exchange Bombay. And also they were conducting some competitions for children occasionally. The chief Nutritionist and Assistant manager quality controls are also based here. . It was first solvent extraction plant in Kerala. Only the cattle feed production is running in irinjalakuda plant with a production capacity of 210 tones per day. today the Irinjalakuda plant enjoys a flagship status and commands an edge on infrastructural strength. Taking great in technological development. The embodied the spirit of enterprise of group of committed people. Research and development plays an important role in the activities of KSE. The company is giving 400 direct employments for people in Irnijalakadhu.THE COMPANY ±TODAY The pioneering plant of KSE at Irinjalakuda in many ways. The central R & D unit is located here. The plant houses a modern laboratory. The quality control cell here leads and guides other units and formulates stringent standards. KSE Limited an ISO 9001-2000 certified company is having an annual sales turnover Rs. A proud symbol of growth. Irinjalakuda branch is the head office of the company. who wanted to user in an era of modernity into a traditional society and change the industrial landscape of the state. It was here set up its first cattle feed plant. the Irinjalakuda unit is an inspiring force for the entire KSE family. Naturally. It was first manor factory in the locality. The production is running the three shifts and each shifts they were producing 70 tones. the process of computerization in plant and office was initiated way back in 1987. 371 crores . spread over 15 acres. 1990 Introduction of KS supreme pellets. 1991 Open its palaghat branch. 1988 A new mixed cattle feed plant starts operation at swaminathpuram . 1976 Mixed cattle feed production begins.GROWTH CHRONICLE 1972 Solvent plant commences operation. by pass protein cattle feed in the market. tamil nadu with a daily product ion capacity of 180 tones. 1987 Cattle feed production reaches 180 tons Introduction of computers in the factory and office. 1992 Cattle feed manufacturing beings in third party units. 1989 A solvent unit with a capacity of 120 tones per day commences operation at the Tamil Nadu plant. . 1997 Company renamed as KSE Ltd.1933 Enter exports market. Kerala. 1999 A modern childern¶s park and information centre has been completed at Irinjalakuda for the benefit of the public. 1995 Vegetable oil refining plant commissioned KS supreme ± Sunflower Refined oil Launched Calicut Branch opens. 1994 Introduction of feed supplements KS Forte public issue and listing of shares. 1998 Fourth feed production unit at Palaghat Launches Dairy Project. 1996 240 TPD cattle feed commences at Vedagiri. Company starts production and distribution of milk and milk products Konnikkara and Thalaysthu dairy units. 2002 . Kottayam Dist. 2007 Decided to install 500TPD cattled feed plant at Irinjalakuda unit . 100TPD physical refining plant at Koratty commissioned Solvent plant at Irinjalakuda dismantled on stablilizing solvent plant at Koratty. kalamassery . Cattle feed production capacity at the Irinjalakuda unit increased to 195MTS per day. Ice cream Vesta Launched. 2006 The 200 TPD solvent extraction plant at Koratty commissioned. Cattle feed production at the Swaminathapuram unit increased to 195 MTS per day. Company acquires its 5th cattle feed manufacturing unit at Mysore ISO 9001:2000 accreditation For Vedagiri and Swaminathapuram units. 2005 Cattle feed production capacity at Irinjalakuda unit increased to 210MTS per day started producing cattle feed in a leased unit at Erode.Cattle feed production capacity at the Irinjalakuda Unit increased to 210MTs per day. 2003 Started producing cattle in plant at edayar . Decided to install Fractionation plant at Koratty Unit. . ORGANIZATIONAL STRUCTURE OF KSE LTD . S.S.Ordinary 3.PRODUCT PROFILE PRODUCT OF KSE Ltd In the beginning stage of KSE limited had only solvent units. At present it is marketed in Kerala.Cattle feed in two 1.S. pellets form In Mash form contains 1. Mash form 2. K. K. K. K.S. K.Special In Pellets form contains 1.S. Deluxe plus pellets 3.S. K. Supreme pellets . Tamil nadu and Gujarat. After some time the company started to produce Jersey copra cakes and compound cattle feed jersey copra cakes which comes out of the solvent extraction process are made pure by desolventising and are named as µJersey brand copra¶. Deluxe Pellets 2. K.S. Super 2. Financial area is the most important area and it equally related with all other areas.S. Ghee 3.S. Also includes two supplementary products 1.S. K.S. Various milk products are 1. Every action of the industry are related with the financial areas and the .S.K. The study is mainly focused to analyze the effectiveness of the financial performance of the organization and to analyze the performance of various financial areas of the company. Vesta Ice Cream STATEMENT OF THE PROBLEM This project is a result of the study conducted in KSE Ltd Irinjalakuda. Paal 2. Forte 2. Butter milk 5. K. K. Mineral Mixer K.S.S. also started producing milk products. Curd 4. K. The present study entitled a study on financial performance analysis of KSE Ltd is an over all view of the performance of the financial figure in KSE Ltd. K. To identify effectively and efficiently the company¶s resources are being utilized. . Secondary Objective To analyze the liquidity position of the firm.performance of the overall company also is mainly related with financial performance of the industry. So the present study is to identify the financial areas if any want to get more care . OBJECTIVES OF THE STUDY Primary Objective To evaluate the financial performance of KSE Ltd Irnajalakuda. so that the company can improved their profit and competency. To find out the profitability position of the firm. Hence the researcher has been assigned the duty of identifying the financial performance of the company. To understand the long term solvency position of the firm. To promote suggestion if any on the basis of analysis and interpretation. RESEARCH METHODOLGY Research Methodology is a way to systematically solve the research problem. The study helps to determine the profitability. The study may helps to find out the profitability of the firm in comparison with industry. One can also define research as a scientific and systematic search for pertinent information on a specific topic. The design of the study is descriptive as well as analytical in nature. an attempt has been made to analyze the past financial statement of KSE Ltd. liquidity and activity position of the company. The study was conducted in order to analyze the financial statement so that an in depth knowledge about the situation in the company can be known. RESEARCH DESIGN In this research . . The study shows a clear picture to the investors and shareholders about the overall performance of the concern. which may be useful to the long term and short term lenders and creditors of the firm. It may be understood as a science of studying our research is done scientifically.SCOPE OF STUDY The main scopes of the study are : The study aims to evaluate the financial performance of KSE Ltd. The study aims to measure the growth of KSE Ltd. Books . journals and magazines. PERIOD OF STUDY The study was undertaken for a period of 3 months from 10th Jan 2011 to 10th April 2011. It includes: Materials provided by the firm such as balance sheet and profit and loss account. Websites. . The study cover the five year performance of the company for the period 2005 to 2010. TOOLS FOR DATA ANALYSIS Ratios.SOURCES OF DATA COLLECTION The study is based on the secondary data from the company. Trend analysis. LIMITATION OF THE STUDY. Financial statement are essential interim reports. 1. . 4. Accounting information may not be realistic. Influence of personal judgment. It discloses only monitory facts. 3. 2. 5. Analysis and interpretation was made from published data. The time period allotted for completing the project was limited. On the basis of this data analysis we can achieve only an outline of a firm. CHAPTER .2 REVIEW OF LITERATURE . It refers to the process of determining the financial strengths and weaknesses of a firm by establishing strategic relationship between the items of the balance sheet . ability to generate enough cash and growth outlook of a company.summarizing. The financial statements are based on certain accounting concepts and conventions which cannot be a full proof. The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. The financial statement relate to the third process viz . profit and loss account and other operative area. Financial statements analysis seeks to evaluate the performance . financial strength . classifying and summarizing business transactions in a systematic way. The accounting process involves recording . The term financial analysis is also known as analysis and interpretation of financial statements. . The objectives of analyzing them are to evaluate the adequacy of the profit earned by the company or its financial strength and its ability to generate enough cash and to evaluate the future growth outlook of the company.FINANCIAL STATEMENT ANALYSIS Meaning and concept of financial analysis Financial statements are the result of the accounting process which begins with recording of transactions. The objectives of analysis of financial statements have their genesis in the objectives of financial statements. ³ financial statement analysis is largely a study of relationship among the various financial factors disclosed by a single set of statements. Source : Management Accounting E. and a study of trend of these factors as shown in a series of statements¶¶.DEFINITION According to Mefcalf and A Titard . . Gordon. ³ it is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firm¶s position and performance´. In other words of MYERS. It may be defined as the indicated quotient or two mathematical expression. MEANING OF RATIO A ratio nothing but a simple arithmetical expression of the relationship of one number to another. The relationship can be expressed as : a. Ratio analysis is a widely ± used tool of financial analysis.RATIO ANALYSIS INTRODUCATION The ratio analysis is one of the most powerful tools of financial analysis. Percentages b. The term ratio refers to the numerical or quantitative relationship between two items/variables. It is with the help of ratios that the financial statements can be analyzed more clearly and decisions made from such analysis. . Proportion of numbers. In simple language ratios is one number expressed in terms of another and can be worked out by dividing one number into the other. It is the process of establishing and interpreting various ratios. Fraction and c. It is defined as the systematic use of ratios to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. TYPES OF RATIOS 1) Liquidity ratios. CURRENT RATIO . But liquidity implies. Acid test / quick ratio c. 1) LIQUIDITY RATIOS The importance of adequate liquidity in the sense of the ability of a firm to meet current short ± term obligations when they become due for payment can hardly be overstressed. In fact . 4) Turnover / Activity ratios. The liquidity ratios measure the ability of a firm to meet its short ± term obligations and reflect the short term financial strength / solvency of a firm. Current ratio b.term solvency or liquidity of a firm. which funds are idle or they earn very little. The short ± term creditors of the firm are interested in the shot. The ratio which indicate the liquidity of a firm are : a.2) Capital structure / Leverage ratios. Super quick ratio a. 3) Profitability ratios. liquidity is a perquisite for the very survival of a firm. from the view point of utilization of the funds of the firm . A proper balance between the two contradictory requirements that is liquidity and profitability is required for efficient financial management. the larger is the amount of rupees available per rupees of current liability . The super ± quick assets are cash and marketable securities. Thus .The currents ratio is the ratio of total current assets to total current liabilities. ACID TEST / QUICK RATIO Quick ratio is a measurement of a firm µs ability to convert its current assets quickly into cash in order to meet its current liabilities. c. it is a measure of quick or acid liquidity. and the greater is the safety of funds of short. SUPER QUICK RATIO This ratio is calculated by dividing the super quick assets by the current liabilities of the firm. The acid test ratio is the ratio between quick current assets and current liabilities. the more is the firm µs ability to meet current obligations . The higher is the current ratio. The current ratio of the firm measures its short ± term obligations. The size of the current assets should be sufficiently larger than current liabilities so that the firm would be assured of being able to pay its current maturing debt as and when it becomes due. CAPITAL STRUCTURE / LEVERAGE RATIOS . b. This ratio is the most rigorous and conservative test of a firms liquidity position.term creditors. 2. Thus the current ratio measures the size of short ± term liquidity ³ buffer ´. The leverage or capital structure ratios may be defined as financial ratios which throw light on the long term solvency of the firm as reflected in its ability to assure the long term creditors with regard to : 1. Debt to total capital ratio 3. two aspects of the long term solvency of a firm : 1. Ability to repay the principal when due and 2. Repayment of principal on maturity or in pre ± determined installments at due dates. The relationship between outsiders capital and outsiders claims can be shown different ways and accordingly . DEBT EQUITY RATIO The relationship between borrowed funds and owner µs capital is a popular measure of the long term financial solvency of the firm. This ratio reflects the relative claims of creditors and share holders against the assets of the firm. Periodic payment of interest during the period of the loan 2. there are many variants of the debt ± . The various types of leverage ratio are 1. Debt ± equity ratios 2. Regular payment of the interest. There are thus . Proprietary ratio a. This relationship is shown by the debt ± equity ratio. The D/E ratio is thus . PROFITABILITY RATIO . b. it is the ratio of the amount invested by outsiders to the amount invested by owners of business. this type of capital structure ratio is variant of the D/E ratio. It is an important ratio for determining long ± term solvency of firm. c. Proprietary ratio Proprietary ratio also known as equity ratio. It can be calculated in different ways. The debt considered here is exclusive of current liabilities. DEBT TO TOTAL CAPITAL RATIO Here the outside liabilities are related to the total capitalization of the firm and not merely to the shareholders equity.equity ratio ( D/E ). Higher the ratio better is the long term solvency position of the company. In other words . the ratio of total outside liabilities to owner µs total funds. One approaches to relate the long term debt to the permanent capital of the firm. One approach is to express the D/E ratios in terms or the relative proportion of long term debt and shareholder µs equity. The ratio indicates the proportion of total assets financed by owners. Included in the permanent capital is shareholders equity as well as long ± term debt. 3. Essentially . Another approach to the calculation of debt ± equity ratio is to relate the total debt to the shareholders equity. the profitability ratios are designed to provide answers such as : y Is the profit earned by the firm adequate ? y What rate of return does it represent ? y What is the rate of profit for various divisions and segments of the firm ? y What is the earning per share ? y What is the rate of return to equity holders ? and so on . The profitability of a firm can be measured by its profitability ratio. b) Net profit ratio. Profitability in relation to investments is measured by : a) Return on investment ratio. sales volume and costs. GROSS PROFIT RATIO Gross profit is the result of the relationship between prices . A change in the gross margin can be brought about by changes in any of these factors. The profitability ratios in relation to sales are : a) Gross profit ratio. Profitability ratios can be determined on the basis of either sales or investments.The operation efficiency of a firm and its ability to ensure adequate return to its shareholders depends ultimately on the profit earned by it. The gross . In other words . It is calculated by dividing gross profit by sales. b) Return on shareholder µs fund c) Return on total assets ratio 1. spoilage . A relatively low gross margin is definitely a danger signal. Further . the gross profit ratio / margin can also be made use of in determining extent of loss caused by theft . A high net profit ratio would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declining. warranting a careful and detailed analysis of the factors responsible for it. the expenses of operating the business and the cost of borrowed funds but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. the cost of merchandise or services. which follow the policy fixed gross profit margin in pricing their products. cost of production is rising and demand for the product is falling. It may also be indicative of a higher sales price without a corresponding increase in the cost of goods sold. . A high ratio gross profit to sales is a sign of good management as it implies that the cost of production of the firm is relatively low. damage and so on in the case of those firms . The ratio of net profit to sale essentially expresses the cost price effectiveness of the operation. NET PROFIT RATIO This measures the relationship between net profits and sales of a firm. It is also likely that cost of sales might have declined without a corresponding decline in sales price. The net profit margin indicative of management¶s ability to operate the business with sufficient success not only to recover from revenues of the period. 2.margin represents the limit beyond which fall in sales prices are outside the tolerance limit. PROFITABILITY RATIOS RELATED TO INVESTMENTS. RETURN ON INVESTMENTS (ROI ): The profitability ratio can also be computed by relating the profits of a firm to its investments. However a firm with a low profit margin can earn high rate of return on investment if it has higher inventory turnover.A low net profit ratio has the opposite implications. The ratio of net profit to owner µs equity reflects the extent to which the objective has been accomplished. RETURN ON TOTAL ASSET RATIO : Here the profitability ratio is measured in terms of relationship between net profit and assets. It is used to measure the overall profitability and efficiency of the business. 3. It measures the business success and managerial efficiency. 2. Such ratios are popularly termed as return on investments ( ROI ). 1. RETURN ON SHARE HOLDERS FUND : This ratio measures the profitability of capital investment in business by equity share holders. The ROA may also be called profit to asset ratio. The return is compared with the ratios of similar companies to reveal the relative performance and strength. Return on investments establishes the relationship between profit and the capital employed. There . therefore . other things being equal. The efficiency with which assets are used would be reflected in the speed and rapidity with which assets are converted into sales. Turnover is the primary mode for measuring the extent of efficient employment of assets by relating the assets to sales. For this reason . there are various types of activity ratios as follows : Total capital turnover ratio Working capital turnover ratio Inventory turnover ratio Fixed assets turnover ratio Debtor µs turnover ratio . be defined as a test of the relationship between sales and the various assets of a firm. Depending upon the various types of assets . An activity ratio may . such ratios are also designated as turnover ratios. 4.are various approaches possible to define net profits and assets . the more efficient is the utilization / management . ACTIVITY RATIOS : Activity ratios are concerned with measuring the efficiency in asset management. according to the purpose and intent of the calculation of the ratio. These ratios are also called efficiency ratios or asset utilization ratios. The greater is the rate of turnover or conversion . WORKING CAPITAL TURNOVER RATIO : Working capital of a concern is directly related to sales. This is also the text of managerial efficiency and business performance higher total capital turnover ratio is the interest of the company. It is also likely that the firm may be following a policy of replenishing its stock in too many small sizes. . It measures the relationship between the cost of goods sold and the inventory level. In general . A very low level of inventory has serious implications. A high ratio implies good inventory management. INVENTORY TURNOVER RATIO : This indicates the number of times inventory is replaced during the year. TOTAL CAPITAL TURNOVER RATIO : This ratio ensures whether the capital employed has been effectively used or not. It is a test of efficient inventory management. This ratio indicates the number of time the working capital is turned over in the course of year. It will adversely affect the ability to meet customer demand. 3. To judge wheather the ratio of a firm is satisfactory or not it should be compared over a period of time on the basis of trend analysis. 2. a high inventory turnover ratio is better than a low ratio. This ratio measures how quickly inventory is sold.1. This ratio measures the efficiency with which the working capital is being used by a firm. 4. This ratio indicates the efficiency with which debts are collected. The assets turnover ratio measures the efficiency of a firm in managing and utilizing its assets. DEBTORS TURNOVER RATIO : This ratio shows how quickly receivables or debtors are converted into cash. The effective utilization of fixed assets will result in increased production and reduced cost. . It is a test of liquidity of debtors of a firm. FIXED ASSETS TURNOVER RATIO: Fixed assets are used in the business for producing goods to be sold. It is also known as receivable turnover ratio. It establishes relationship between credit sales and average debtors. 5. The changes in the balance sheet items are the result of acquisition or sales of assets . . Comparative balance sheet indicates whether the business is moving in a favourable or un favourable direction. A comparative balance sheet has two columns is used show increase or decrease in figures. while the comparative balance sheet focuses on the changes that have taken place in one accounting period. The single balance sheet focuses on the financial status of the firm as on a particular date . changes in current assets and current liabilities . liabilities and owner µs equity of a business enterprise at the beginning and at the end of the accounting period with increase or decrease in the absolute data in terms of rupees and percentage.COMPARATIVE BALANCE SHEET A comparative balance sheet shows the assets . issue of shares . A fourth column may be added for giving percentages of increase or decreases. profits or loss etc. Time series or trend analysis of ratio indicates the direction of changes.TREND ANALYSIS Trend analysis is very helpful in making a comparative study of the financial statements of several years. Under this technique . information for a number of year is taken up and one year . the percentage of other years is calculated. In financial analysis the direction of changes over a period of years is of crucial importance. the rate of fixed expansion or secular trend in the growth of the business and the general price level. This procedure may be called as trend percentage method. It is advisable that trends of sales and net income may be studied in the light of two factors . . usually the first year is taken as the base year. This kind of analysis is particularly applicable to the items of profit and loss account. It might be found in practice that a number of firms would show a persistent growth over a period of years. Each of the base year is taken as 100 and on that basis . The trend ratio is computed by dividing each amount in the other statement with the same item in the base statement. the trend percentage would be more than 100 % and if the amount is less than the base amount the trend percentage would be less than 100 %. If amount of the same item in the other statement is more than that in the base statement .COMPUTATION OF THE TREND PERCENTAGE The following steps are involved in the computation of trend ratio : The statement probably relating to the earliest year may be taken as the base with reference to which all other financial statements are compared and analyzed. Each item in the base year is taken as base year. . CHAPTER ± 3 DATA ANALYSIS & INTERPRETATION INTRODUCTION The term financial analysis also known as analysis and interpretation of financial statement. Data analysis and interpretation is the core factor of any project. The study is done with the aid of financial statements from the annual reports published by the company. The purpose of financial analysis is to diagnose the information contained in financial statement s so as to judge the profitability and financial soundness of the firm. The object of analysis and the interpretation of financial statements are to judge their meaning and their significance. Financial statement analysis is called financial analysis. Various tools or devices are used to study the relationship between different statements. The tool which are used for data analysis and interpretation are: Ratio analysis Comparative balance sheet Trend analysis DATA ANALYSIS 1. LIQUIDITY RATIO a. CURRENT RATIO The current ratio is the ratio of total current assets to total current liabilities. The current ratio of a firm measures its short ±term solvency , that is , its ability to meet short term obligations. Current Ratio = Current assets Current liabilities. Table : 1 TABLE SHOWING CURRENT RATIO Years Current assets ( Rs . in lakhs ) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 4590.77 3063.73 2870.68 3270.91 3277.43 Current liabilities ( Rs. In lakhs ) 1082 753 854 937 863 4.63 4.06 3.36 3.49 3.79 Current ratio But if the actual ratio is more than the standard ratio.CURRENT RATIO 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 current asset current liablities INTERPRETATION The above table indicates the current ratio. As compared to the standard ratio 2:1 the current ratio of company is good in 5 years. it shows the in accuracy working capital. It is the sign of satisfied short term solvency position. . If the actual current ratio is less than the standard one . QUICK RATIO This ratio is also known as acid test ratio ( ATR ).13 1.38 .2 TABLE SHOWING QUICK RATIO Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Quick assets 1244 846 941 801 1194 Liabilities 1082 753 854 937 863 Ratio 1.15 1. It is measurement of firms ability to convert its current assets quickly into cash in order to meet its current liabilities.10 1 1.b. Quick Ratio = Liquid assets Current liabilities Table . If the actual ratio is more than the standards the conclusion can be that the concern is not liquid. . The actual quick ratio is compared with the standard ratio . which is 1:1 if actual ratio is 1:1 or more than the standard ratio if can means it¶s a short term obligation quickly and easily. In the year 2009-2010 quick ratio is 1.QUICK RATIO 1400 1200 1000 800 Quick asset 600 400 200 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Liablities INTERPRETATION The above table indicate the quick ratio.38 . 13 4312.98 2803.45 1.12 3611.14 2669. DEBT EQUITY RATIO It is also known as external internal equity ratio. In Lakhs ) 2670. This ratio indicates the relationship between the external equities or the outsiders fund and the internal equities or the shareholders funds.88 1.17 1.36 Ratio . In lakh ) 5042.53 1.equity Ratio = Total Assets Share holder fund Table :3 TABLE SHOWING DEBT EQUITY RATIO Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Debt ( Rs.68 Equity ( Rs.33 3257. Debt.87 3142.49 4421.42 1. LEVERAGE RATIOS a.67 2532.2 . This ratio indicates the proportionate line of owner and the outsider against the firm assets. .A. The ideal equity ratio is I.EQUITY RATIO 6000 5000 4000 3000 Debt Equity 2000 1000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 INTERPRETATION The above chart shows the debt equity ratio. high ratio shows the claim of creditors is greater than the owners. It is clear that the debt equity ratio is varying year by year. 11 7115.14 2669.39 .82 7679.01 5812. It indicates long term financial solvency of the firm.42 Ratio 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 . Proprietary ratio = shareholder fund Total assets Table : 4 TABLE SHOWING PROPRITORY RATIO Year Shareholder fund ( Rs in lakh ) 2670.98 2803.41 .79 6144.33 3257. It is also known as net worth to total asset ratio.67 2532. This ratio determines the extent of trading on equity. PROPRIETORY RATIO This ratio shows the relationship between shareholders funds and total assets.35 .13 .b.46 .45 Total assets (Rs in lakh) 7712. But for the financial year 2008-2009 it comes down . It indicates stronger financial position of the firm.42. The proprietary ratio is varying from year to year. . If the ratio is high.PROPRITEORY RATIO 9000 8000 7000 6000 5000 Shareholder fund 4000 3000 2000 1000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Total assets INTERPRETATION The above table shows proprietary ratio. but now in 2009-2010 it has been increased 0. From 2006-2007 financial year there is an increase in the ratio. On the other hand a lower ratio shows the weaker position of the enterprise. 75 5973.21 3. Total capital turnover Ratio = Net sales Capital employed Table :5 TABLE SHOWING CAPITAL TURNOVER RATIO Year Sales ( Rs.2.84 27503.59 28947. Higher total capital turnover ratio is the interest of the company. In lakhs ) Ratio 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 24030.86 .19 6080. TOTAL CAPITAL TURNOVER RATIO This ratio ensures whether the capital employed has been effectively used or not.87 37094.19 6.04 5. In lakh ) Capital employed ( Rs.23 5303.95 5. TURN OVER RATIOS a.52 4795.50 35007. This is also the test of management efficiency and business performance. TOTAL CAPITAL TURNOVER RATIO 40000 35000 30000 25000 20000 15000 10000 5000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Sales Capital employed INTERPRETATION The above table shows the total capital turnover ratio. . It is clear from the graph that the capital turnover ratio shows an increasing trend from 2006 but in 20082009 it slightly declines. 50 35007. WORKING CAPITAL TURNOVER RATIO Working capital of a concern is directly related to sales.87 37094.59 28947.36 15.84 27303.91 14.01 15. In lakh) 3508 2310 2016 2333 2414 6. This ratio indicates the number of times the working capital is turnover is the course of a year. In lakh ) 24030.b.19 Working capital (Rs. Working Capital turnover ratio = Sales Net Working capital Table : 6 TABLE SHOWING CAPITAL TURNOVER RATIO Year Sales ( Rs.37 Ratio 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 .94 11. WORKING CAPITAL TURNOVER RATIO 40000 35000 30000 25000 20000 15000 10000 5000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Sales Working Capital INTERPRETATION The above table shows the working capital turnover ratio. It is clear from the graph that the working capital ratio is showing an increasing trend. . That mean the working capital is efficiently being used in the firm. This ratio measures the relationship between working capital and sales. this .c. INVENTORY TURNOVER RATIO This ratio shows the number of the stock is turnover during a year.