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Documentos de Profesional
Documentos de Cultura
PROJECT REPORT
ON
STUDY OF RATIO ANALYSIS PERFOMED IN
KANSAI NEROLAC PAINTS .LTD, LOTE,
CJIPLUN 415605
REQUIRED FOR PARTIAL FULFILLMENT OF
M.M.S PROGRAMME
SUBMITTED BY
MOATASIM IMRAN PARKAR
UNDER THE GUIDANCE OF
PROF.RENAPURE L.N
SUBMITTED TO
RAJARAM SHINDE COLLEGE OF M.B.A
PEDHAMBE, CHIPLUN
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ACKNOWLEDGEMENT
officers who are working in the department for their valuable advice,
I am thankful Prof. Laxman Renapure Sir for helping me in making this project
I would also like to thanks MES College of MBA for the support in this project
Regards,
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INDEX
Acknowledgement 2
Declaration 4
Executive summary 5
Introduction 6
Industry progress 9
Information technology 13
Objective 17
Ratio analysis 18
Research mythology 33
Learning objective 45
Limitations 49
Conclusion 50
Finding and Suggestion 52
Bibliography 53
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DECLARATION
fulfillment of the requirement of the course curriculum for the year 2017 2019. The
data collected and the work done by me is truly authentic and is not borrowed or
copied from any report. The project contains true and complete information.
In Partial Fulfillment of the Requirement for the Award of the Degree of Masters
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EXECUTIVE SUMMARY
decisive subject to study the procedure, methods, merits and demerits of Ratio
Analysis. I referred various resources person like Mr.Vinod Kadam sir (Head of
Company having both domestic and abroad customer and company is satisfying
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INTRODUCTION
KNPL operates in India and also has operations in Nepal and Sri Lanka through
Joint Ventures with Kansai Nepal and Capital Holdings Maharaja Group
respectively. KNPL has presence in multiple market segments of the paint market
conscious brand which is synonymous with Health. The tag line of the Company,
consciousness.
KNPL is one the most preferred vendors for Industrial paints in the country. Over
the years the Company has worked tirelessly to create value for its customers and
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Through a combination of customer insights, customized R&D, quality, service,
(Haryana) and Hosur (Tamil Nadu). In addition, a new state of the art facility will
These factories provide customers with an unmatched range and flexibility to cater
Vishakhapatnam which has been announced is being planned, and work for which
cutting edge Research & Development center at Vashi will shortly commence
operations in FY 18-19.
Customer satisfaction is the central goal around which KNPL functions. The
requirements of customers are paramount and are constantly evolving. KNPL uses
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Customized solutions for its customers. KNPL has continuously focused on
introducing new technology for the customer every year. Notable introductions this
year were products such as Anti-Graffiti coatings, Rebar Coating for Concrete and
The Company continued its growth momentum in Nepal with high double digit
volume and value growth. The Company successfully completed brand migration
from ‘Nerolac’ to ‘KNP’. The company name was also changed to KNP Japan
Private Limited.
The Company entered Sri Lankan paint market by way of a joint venture with
Lanka. The Company successfully started a Greenfield plant and launched entire
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INDUSTRY PROGRESS
2017-18 was an eventful year for the domestic market. The introduction of GST
ushered in a new era in Indian business. The Paint industry successfully adopted
The industry did feel the impact of demonetization as well as GST and demand as
a whole for the industry was subdued in both the segments. The organized players
are expected to perform better than the small and medium scale players. The
industry however views GST as positive and beneficial in the long run.
The industry witnessed inflationary pressures through-out the year. Higher prices
of crude, exchange rate volatility and the larger geo-political climate added to the
pressures.
The industry has partially been able to pass on the cost increase in the market.
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OPPORTUNITOES & THREATS
Opportunities
1. Favorable Economic Scenario
The Rural economy was given a boost with significant steps such as a
healthcare plan, and an increase in the Minimum Support Price for farmers
by 50% announced in the Budget for 18-19. This will increase income in the
The real estate sector was expected to make a turnaround during the past
year, however, the weakness in the market continued for most of the year
despite low interest rates. During the final quarter, demand started to pick up
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and is expected to continue this year while interest rates continue to remain
low.
The Company has embarked upon growth agenda using climate change as an
durable coating solutions have been helping its customers to enhance life of
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Threats
1. New Competitors
New Competitors are entering the Indian Paint Market. KNPL endeavors to
Crude oil prices are putting pressure on raw material prices used for Paint
effect on global supply chains for key raw materials for the paint industry.
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INFORMATION TECHNOLOGY
During the year, embedded digital, Business continuity, GST readiness and
Security were the key IT initiatives. Continuing the investment made in the in-
memory computation capabilities, in the current year, KNPL has taken steps
IOTs and Advanced Analytics. These technologies would enable KNPL to have a
deeper insight into the data. This would help enhance the service capabilities of the
To provide real time information to the customers and influencers, KNPL has
implemented the Dealer portal for the Decorative customers and enhanced the call
into the various Key Performance Indicators and enhance effectiveness. Further
KNPL aligned all its IT systems to the GST enabled Eco system.
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As part of the Business Continuity initiative, Near Disaster Recovery site was
environment and to insulate against the various security risks, KNPL has
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AWARD AND RECOGNITIONS
Forum of India” and won 2 Gold, 1 Silver and 1 Bronze awards for the
Chief Guest for the ceremony was Hon. President of India and the Guest of
4. Mr. H.M. Bharuka featured at the 31st Spot in the Business Today – PWC
list of India's top 100 CEOs from non-BFSI sectors, and also awarded Rank
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Awards by Customers
1. KNPL received an award for “Overall Excellence” for FY 16-17 by Maruti
3. KNPL has been honored with best vendor award in New Product
Chandigarh.
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OBJECTIVE
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RATIO ANALYSIS
Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a
ratios are categorized according to the financial aspect of the business which the
ratio measures.
1. between companies
2. between industries
Ratios generally hold no meaning unless they are benchmarked against something
else, like past performance or another company. Thus, the ratios of firms in
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1. Liquidity ratios
3. Leverage ratios
4. Profitability ratios
5. Valuation ratios
1. Liquidity ratios
Liquidity ratios asses the firm`s ability to meet its short- term obligations using
short-term assets. The short-term obligations are the ones recorded under current
liabilities that come due within one financial year. Short-term assets are the current
a. Current ratio
The current ratio (CR) is equal to total current assets divided by total current
liabilities. This indicates the extent to which current liabilities can be paid off
current assets
current ratio =
current liabilities
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b. Quick asset Ratio
One Key problem with the current ratio is that it assumes that all current assets can
assumption is highly untrue. Firms carry current assets, such as inventory and pre-
paid expenses which cannot be converted into cash quickly. To correct this
problem, the quick asset ratio (QAR) removes from current assets less liquid
current assets, such as inventory and pre-paid expenses, which cannot be converted
into cash quickly. The quick ratio, also called the acid test ratio, is equal to liquid
current assets, divided by current liabilities. It indicates the extent to which current
liabilities can be paid off through liquid current assets such as cash, marketable
Current asset
Quick asset ratio = − inventory
Current liabilities
c. Cash ratio
The cash ratio goes a step further and examines the ability of the firm to settle
short-term liabilities using only cash and cash equivalents such as marketable
securities. In other words, the cash ratio indicates the extent to which current
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cash
cash ratio = + mareketable securities
current liabilities
Asset management ratios also known as efficiency ratios indicate the efficiency of
the use of assets in generating sales. There are five (05) more important efficiency
ratios: average collection period, inventory turnover, cash conversion cycle, fixed
The average collection period (ACP), also known as days’ sales outstanding
(DSO), indicates the average length of time the firm must wait after making
a credit sale before it collects cash. In other words, it shows the average
calculated as follows:
receviables
average collection period =
annual credit sales⁄365
follows:
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cost of goods sold
inventory stock =
averege inventory
Lower inventory turnover ratio relative to the industry standard may indicate
The cash conversion cycle shows the average number of days the cash is tied
is tied up in inventory for a number of days before they are sold and
basis, to that extent, the firm does not tie up its own funds in building
inventory. Hence, the total number of days’ cash is tied up in inventory and
cash conversioncycle
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d. Fixed asset turnover ratio
The fixed asset turnover ratio measures the efficiency of the use of fixed
fixed assets, where the average net fixed assets is equal to the simple
average of beginning and ending balance sheet values of net fixed assets.
Net fixed assets are gross fixed assets less accumulated depreciation.
sales
fixed asset turnover ratio =
averege net fixed assets
A lower fixed asset turnover relative to the industry may indicate that the
Total asset turnover ratio measures the efficiency of the use of total assets in
generating sales. Total assets are sum of current and net fixed assets. The
total asset turnover is calculated as sales divided by average total assets. The
average total assets are the simple average of total assets at the beginning
sales
total assets tunover ration =
averege total assets
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4. Leverage ratio
The leverage ratios, also called debt management ratios, measure two key
aspects of the use of debt financing by the firm. The use of debt financing a
used by the business as well as the ability of the firm to service its debt
obligations. The debt ratio, debt-equity ratio and interest cover is discussed
below.
a. Debt ratio
The debt ratio indicates the proportion of assets financed through both short-
term and long term debt. This ratio is computed as total debt, which is the
higher ration indicates higher leverage. A higher ration also means lower
debt capacity in that the ability for the firm to raise funds through more debt
total debts
debt ratio =
total assets
The debt to equity ratio (D/E) is also widely used as an indication of the
level of financial leverage. While there are several ways of computing this
ratio, the most useful version is to express long term debt as percent of total
equity. Thus it focuses only on the long-term financing, both debt and
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equity, and it is meaningful when we want to examine the long-term
leverage. Total equity includes both preferred equity and common equity. A
higher debt equity ratio indicates greater leverage and potentially higher
financial risk.
The interest converge ratio, also known as the times-interest earned (TIE),
ratio shows number of times the interest payment is covered by the firm`s
operating earnings. The larger the coverage the better their ability of the firm
EBIT
interest coverage ratio =
interest charge
5. Profitability ratio
firm`s ability to earn profits on sales, assets and equity. These are critical to
use these ratios widely. We will examine five important profitability ratios,
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namely, gross profit margin, operating profit margin, net profit margin,
The gross profit margin (GPM) shows the firm`s profit margin after
interest expenses, and taxes. This ratio is also known as gross profit ratio.
This is the first level of profitability. The GPM depends primarily on the
firm`s product pricing and cost control. The price of the product impacts
sales. Production cost such as material, labor, and overhead or the cost of
purchases affect the cost of goods sold. A firm with a better ability to price
products in line with inflation of cost of production and the ability to control
margins.
The operating profit margin (OPM) shows the firm`s profit margin after
deducting cost of goods sold and operating expenses but before interest
expenses and taxes. The operating profit is the earnings before interest and
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EBIT
operating profit ratio =
sales
calculated before deducting interest costs, which are a result from firm`s
financing decision, and taxes, which are outside the control of the firm. In
other words, regardless of the way the firm is financed, whether through
debt or equity, and regardless of the taxes imposed by the government, the
This is the bottom line profitability, which most analysts and investors pay
attention to on a regular basis. The net profit margin (NPM) shows the
firm`s profit margin after all the costs and expenses. It is the profit available
net income
net profit margin =
sales
Obviously, the lower operating profit margin is one reason for the lower
NPM. It is also possible that, since the firm is more debt-financed than an
average firm, it has more interest expenses as well. Since taxes are fixed, the
key difference between the OPM and NPM is interest costs, which are
d. Return on assets
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The return on assets (ROA) measures the return earned on total assets
total capital. Since total assets are financed through both debt and equity, is
important that the return measure used for this calculation reflects income to
both shareholders and debt holders. We define the return as the net income
debt holders. This return is divided by the average total assets, which
represents the simple average of the total assets at the beginning and ending
balance sheets.
e. Return on Equity
The return on equity (ROE) measures the return earned on the capital
equity is the simple average of the common equity at the beginning and
ending balance sheets. The net income is the income available for
dividends.
net income
return on equity =
avg common equity
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6. Valuation Ratios
flows, and dividends. These are the ratios that investors tend to look at on a
daily basis. These ratios change whenever the price of the stock changes. We
will discuss the price/earnings ratios, the price/book value ratio, the
a. Price/Earnings ratio
This is the most widely used valuation ratio. It indicates the market price of
a share in terms of earnings. It is the rupee amount an investor has to pay for
each rupee of earnings made by the firm for the ordinary shareholder.
The earnings per share (EPS) is calculated as the net income available for
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝐸𝑃𝑆 =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠
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b. Price / Book Value Ratio (P/BV)
Price / Book Value are also a regularly reported and watched valuation ratio.
It indicates the market price of a share in terms of the book value of equity.
It is the rupee amount an investor has to pay for each rupee of book value.
The book value per share is calculated as the equity divided by the number
𝐸𝑄𝑈𝐼𝑇𝑌
𝐵𝑉 =
𝑁𝑂. 𝑂𝐹 𝑆𝐻𝐴𝑅𝐸𝑆
The price/cash flow indicates the price of a share in terms of the cash flow
per share. It shows the rupee amount an investor has to pay for each rupee of
Although not widely reported, this is in fact a more useful ratio than the P/E
and P/BV ratios discussed earlier. This is because the price of a share must
be related to the actual cash flows generated by the firm to its shareholders.
There are a number of different definitions of cash flow, and the one we use
here is the most basic definition of cash flow. The cash flow is the net
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income available for ordinary shareholders adjusted for non-cash income
and expenses included in the income statement. Since most common non-
income. Investor who depend on income from their investments include retired
persons and well as pension and mutual funds, which invest with the primary
objective of maximizing the income return. These investors like to see a higher
dividend yield. Typically, higher dividend yields are associated with more stable
and mature companies such as utilities. Growth -oriented companies tend to pay
dividend yields. The dividend per share (DPS) is the total dividends to ordinary
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shareholders during a specific period divided by the number of ordinary shares
outstanding.
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RESEARCH METHODOLOGY
Data collection is an important step in any project and success of any project will
be largely depend upon who much accurate you will be able to collect and how
much time, effort and money will be required to collect the necessary data.
Discussion Websites
The primary data source is a fresh & first hand data which is collected for the first
time & happened to be in original character. I have collected the information and
data through formal and informal discussion with my profession guide in the
various ratios.
The primary data source is a fresh & first hand data which is collected for the first
time & happened to be in original character. I have collected the information and
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data through formal and informal discussion with my profession guide in the
various ratios.
Secondary data
The data is the data which have already collected & stored. We can easily get
secondary data from records, journal, Annual reports, newsletter’s & books.
Annual reports –with the help of Annual report I easily calculated the ratios.
Websites-with the help of company website and other site I got lot of information
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1. Liquidity ratio
a. current ratio
current ratio
2.97 2.14
2015
2016
2017
2018
2.57
3.43
In the above diagram shown the current ratio of four years of KNPL
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b. Quick ratio
quick ratio
3
2.42
2.5
2.02
2 1.9
1.5
1.25 quick ratio
0.5
0
2015 2016 2017 2018
It is used as an assessment tool for testing the liquidity position of the firm the
standard value for this ratio is 1:1.KNPL LTD is good from 2015 to 2018. The
quick ratios are above the standard. It shows that the company is financially secure
in short term.
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c. Inventory /stock turnover ratio
Inventory turnover ratio = net sales / inventory
2015
2016
2017
2018
6.55, 26%
6.68, 26%
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d. Inventory conversion holding= no. of days in year/inventory turnover
No. of days in Inventory Ratio in days
Year
year turnover
2015 365 6.52 55.98
55.98
62.07
2015
2016
2017
2018
55.73
54.64
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e. Debtors turnover ratio
Credit sales/Debtors
ratio (times)
24.85, 8%
5.81, 2%
This ratio indicates more efficient collection of debt from debtors. The
higher the ratio better is the management of debt. We can easily
understand from above diagram that the ratio 2015 and 2016 is poor but
from 2017 the ratio is good.
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Average collection period=365/debtor’s turnover ratio
period in days
period in days
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f. Net Assets Turnover Ratio
Sales/Net Assets
3.08, 22%
3.37, 25%
2015
2016
2017
2018
3.65, 27% 3.52, 26%
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g. Profitability ratio
Gross Profit Ratio=Gross Profit/net sales*100
GP ratio
16.6, 23%
11.29, 16%
2015
2016
2017
2018
16.76, 23%
27.88, 38%
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h. Net Profit Ratio =Net Profit/Sales*100
2015
2016
2017
2018
11.17, 21%
23.33, 44%
Net profit of the company show profitability of the company. Higher the
ratio higher the profitability. It can be seen that the net profit of the
company decreasing from 2017 to 2018.
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i. Operating profit ratio=operating profit/net sales*100
2015
2016
2017
2018
16.76, 23%
27.88, 38%
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OBJECTIVES LEARNED AT KNPL LOTE
If the status is inspection pending then I have wait to till the material
is inspected.
2. Posting bill (Bill release) under the guidance of Vinod Kadam Sir
(Head of accounts department)
This is the continuation process of the above. In this process the
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that the Head Office can release the payments of the vendor at the
plant.
(purchase department)
include freight charges but or not attached with the supporting copy.
After receiving the freight supporting copy from the vendor, the
department)
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KNPL lote has highered contractors for the regular or monthly
agreement a list is prepared for all the type of jobs with its cost which
are to be done by the contractor/ vendor. After the job is done, the
with list prepared at the time of the agreement (there may be changes
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Bank reconciliation should be completed at regular intervals for all
Otherwise, it may find that cash balances are much lower than
reconciliation will also detect some types of fraud after the fact;
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LIMITATION
At the time of doing and completing my summer internship in KNPL LOTE LTD
.I had certain limitation, because of that I was not able to access deep information
My project is totally related with finance so I was only permitted to work only
Because of limited work area and limited time, it was not possible for me to
The key persons like managers and executive of every company are always
trying to maintain secrecy for their internal records as well as actual financial
records and hence they never open each and every card in front of outsider or
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CONCLUSION
a. The company has gross profit for the past four years (2014-15, 2015-16,
b. There is also satisfactory net cash flow from the operating, investing and
satisfactory.
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Finding and Suggestion
The profit Of the Company Is not in a good Position for That company
has to Take Alternative Actions such As
Increasing in Procurement
The firms have low current ratio so it should increase its current ratio
where it can meet its short term obligation smoothly.
Liquidity ratio of the firm is not better liquidity position in over the five
years. So I suggested that the firm maintain proper liquid funds like
cash and bank balance.
The firm high inventory so I suggested that the firm must reduce the
stock by increase sales.
The direct material cost of the firm is very high so it’s my advice to the
firm that to decrease the direct material cost by purchasing raw material
from the other suppliers.
The firms should have proper check on the manufacturing process of the
plant.
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BIBLIOGRAPHY
Websites:-
Nerolac.com
Theeconomictimes.com
Google.com
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