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INDEX

CHAPTER PARTICULARS PAGE NO.


1 INTRODUCTION 1
1.1.Industry profile 2–6
1.2.Company profile 7 – 14
2 REVIEW OF LITERATURE 15 – 27
3 RESEARCH METHODOLOGY 28
3.1.Need for the study 29
3.2.Scope of the study 30
3.3.Objectives of the study 31
3.4.Limitations of the study 32
3.5.Research Design 33
4 DATA ANALYSIS AND INTERPRETATION 34 – 54
5 5.1.Findings 56
5.2.Suggestions 57
5.3.conclusion 58
6 6.1.ANNEXURE 60 – 66
6.2.BIBLIOGRAPHY 67 – 68
LIST OF TABLES AND CHARTS

TABLE NO. TITLE PAGE NO.


4.1 Current ratio 35
4.2 Quick ratio 36
4.3 Super quick ratio 37
4.4 Debt ratio 38
4.5 Equity ratio 39
4.6 Debt – equity ratio 40
4.7 Operating profit ratio 41
4.8 Net profit ratio 42
4.9 Return On Investment 43
4.10 Return On Equity 44
4.11 Earnings Per Share 45
4.12 Dividend Per Share 46
4.13 Dividend – Payout ratio 47
4.14 Return On Capital Employed 48
4.15 Debtors turnover ratio 49
4.16 Creditors turnover ratio 50
4.17 Working Capital turnover ratio 51
4.18 Fixed assets turnover ratio 52
4.19 Total assets turnover ratio 53
4.20 Inventory turnover ratio 54
Acknowledgment
The joy of ingenuity! This is doubtlessly what this project is about. Before getting to brass
tasks of things, I would like to add a heartfelt word for all the people who have in their own
sweet ways helped me in bringing out the creativeness of this project.

This project would just not have been complete without the valuable contributions from the
various people who I have interacted within the course of its completion.

First and foremost I wish to express my deep sincere feelings of gratitude to this esteemed
institute “EMERALD’S DEGREE COLLEGE”, for providing me an opportunity to fulfill my
long cherished desire of becoming a graduate.

Our guide Mr.K.S. RAM of ( EMERALD’S DEGREE COLLEGE ) was very helpful and
supportive through out the project and promptness with which he addressed the problem. I
would like to express my sincere gratitude for his untiring effort and dedication with which
he discharged his role.

I express my sincere thanks to Mr.B.SHANKARAIAH, GENERAL MANAGER of


“GRINDWELL NORTON LIMITED,” for having kindly accorded permission to undertake
work in the esteemed concern.

I would also like to thank Mr.P.NARENDRA of GRINDWELL NORTON LIMITED was


very co-operative and very kind to expose me to the problems a graduate student has to
content with in an organization. He also helped me in solving many problems faced during
the project. This experience will stand me in good stead throughout my career and I am
greatly obliged to him.

Last I express my sincere gratitude to our Asst. Director Shri M. Muniratnamgaru of


EMERALD’S DEGREE COLLEGE for extending the facilities, timely help and suggestions
throughout the study.

I take this opportunity to thank my parents, family and my friends for all the help they
rendered me in trying circumstances.
Ratio analysis

CHAPTER – 1

INTRODUCTION

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INDUSTRY PROFILE

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1.1. INDUSTRY PROFILE

The businesses of Saint-Gobain group in India are housed into two large entities,
Grindwell Norton Limited(GNO), a listed company and Saint-Gobain India private limited.
Listed on both Bombay and National Stock Exchanges, the GNO pioneered the
manufacturing of the grinding wheels in India in 1941.

Today , GNO’s businesses includes :

 Abrasives
 High performance refractories
 Performance plastics

ABRASIVES:
An 'Abrasive' is a material, often a mineral, that is used to shape or finish a workpiece
through rubbing which leads to part of the workpiece being worn away by friction. In short,
the ceramics which are used to cut, grind and polish other softer materials are known as
ABRASIVES.
At Norton, they offer powerful, precise and user friendly solutions that enable their
customers to shape and finish all types of material even in the most complex and challenging
applications. From simple cutting, grinding, sanding and finishing activities in the DIY
market (Do It Yourself) to highly technical, precision operations in specialist manufacturing
industries, they understand abrasive safety, quality, performance and cost is critical and can
provide a range of solutions to meet any demand.
GNO’s abrasives business in the Indian arm of Saint-Gobain abrasives. In 1941, GNO
pioneered the manufacturing of grinding wheels in India. Today, the abrasives business is a
market leader with a pan-India presence. In 2015-16, the business registered sales of Rs.840
crores and employs 1100+ people.

Types of abrasives:
 Bonded abrasives
 Coated abrasives

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Bonded abrasives:
Bonded abrasives are a mixture of abrasive grinds, fillers and bonding materials. The
bonding agent can be vitreous; resin, rubber, shellac, epoxy, magnesite and a range of
bonding materials often referred to as a ‘plastic’.
Coated abrasives:
A coated abrasive is an abrasive grain bonded to a flexible substrate using adhesives.
Common substrates are paper, cloth, vulcanized fiber and plastic films. Sandpaper and emery
cloth are coated abrasives for hand use, usually non-precision. These two terms are used by
general public in place of “coated abrasives”.

Applications of abrasives:

Metal fabrication:
 Cutting sheet metal
 Grinding and sanding all kind of metals
 De-rusting of steels
 Cleaning and finishing
Building and construction:
 Tile cutting
 Wood cutting
 Stone grinding
 Industrial sawing and grinding
Bearing:
 Center less grinding
 Bore grinding
 Profile dressing
Foundry:
 Removing cracks
 Shaping
 Cutting-off

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Steel:
 Roll grinding
 Plate grinding
 High pressure coil grinding
Medical:
 Rough grinding
 Intermediate finishing
 Needle grinding and shaping
Glass:
 Edge breaking
 Beveling
 Finishing and brightness finishing

 Silicon Carbide:

Silicon Carbide, exceedingly hard, synthetically produced crystalline compound


of Silicon and Carbon. Its chemical formula is SiC. Since the late 19th century, Silicon
Carbide has been an important material for sand papers, grinding wheels and cutting tools.

GNO’s Silicon Carbide business is a major supplier to all leading refractory,


metallurgy and abrasives manufacturers in India. The business is a part of Saint-Gobain’s
ceramic materials division. Globally, Saint-Gobain is the world’s largest manufacturer of
Silicon Carbide. All their products are manufactured in accordance with international
standards or customized fulfill specific customer demands. GNO and its subsidiary have two
fully integrated manufacturing plants ( own furnacing as well as sizing plants).

Applications of silicon carbide:

 Metallurgical applications
 Abrasion resistance applications
 Refractory applications for steel industry
 High performance refractory applications
 Abrasive applications
 Slurry wire sawing

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HIGH PERFORMANCE REFRACTORIES:


"Non-metallic materials having those chemical and physical properties that make
them applicable for structures or as components of systems, that are exposed to environments
above 1000 ° F". Refractory materials are used in furnaces, kilns, incinerators and reactors.
The high performance refractory’s business of GNO is a part of Saint-Gobain’s
ceramic materials division which offers complete solutions with expertise in design and
engineering, product manufacturing for refractory systems for high temperature applications,
ballistic applications and wear applications.

PERFORMANCE PLASTICS:
High performance plastics differ from standard plastics and engineering plastics
primarily by their temperature stability, but also by their chemical resistance and mechanical
properties, production quantity, price.
The performance plastics business develops products with high performance
properties used to produce energy and reduce consumption, provide protection, improve
comfort and sustain the environment.

Applications:
 Composites
 Fluid systems

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COMPANY PROFILE

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1.2. COMPANY PROFILE

EVOLUTION:

1941:

Two Parsi gentlemen set up Grindwell Abrasives at Mora, a small fishing village near
Mumbai, with technical assistance from two Czechs. They were soon joined by Mr. Noshir
Sidhva. This was the first Grinding Wheels factory in India.

1967:

Grindwell Abrasives enters into a technical collaboration with Norton Co., USA, and
in 1971 Norton co. becomes a partner into GNO comes into being.

1972:

GNO pioneers the manufacture of Silicon Carbide (SiC) in India at its new site in
Bangalore.

1980:

The manufacturing of SiC is moved to a new site near Tirupati.

1983:

GNO goes Public. Following an Initial Public Offering (IPO), GNO is listed on the
Bombay Stock Exchange. Since then, GNO’s market value has grown at a compounded
annual rate of 18.5%.

1990:

GNO commissions High Performance Refractories (HPR) plant at Bangalore.

1991:

GNO celebrates a major milestone in its history - its Golden Jubilee - with the theme:
‘LIFE BEGINS AT 50’.

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1993:

A state of the art Coated Abrasives plant set up to manufacture a full range of Coated
Abrasive products.

1995:

GNO sets up a new Non-woven Abrasives plant and pioneers its production in India.

1996:

GNO becomes the first majority-owned subsidiary of Saint-Gobain in India. Earlier,


in 1990, Compagnie de Saint-Gobain had acquired Norton Co., USA, and thereby became a
stakeholder in GNO. Super Abrasives plant set up for manufacturing Diamond and cBN
Grinding Wheels.

1997:

A state of the art plant set up at Nagpur for manufacture of Thin Wheels and Bonded
Abrasive products.

2008:

GNO commissions a new Abrasives plant near Baddi in Himachal Pradesh for
manufacture of Thin Wheels and Coated Abrasive products. A state of the art performance
plastics plant set up on Banglore campus.

2009:

Saint-Gobain Ceramic Materials Bhutan, a majority-owned subsidiary of GNO,


commissions a new plant for manufacturing Silicon Carbide near Phuentsholing, Bhutan.

2010:

GNO launches INDEC, a captive, global IT Development Centre in Mumbai for


providing a range of services to the Saint-Gobain Group worldwide.

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2012:

GNO commissions a new High Performance Refractories plant at Halol in Gujarat.


Enters a new business - ADFORS - with a plant at Bangalore for manufacturing mine-grids.
Upgrades Non-woven Abrasives facility with a new state of the art plant at Banglore.

2013:

GNO commissions a new Bonded Abrasives plant at Nagpur.

2015:

GNO becomes the No. 1 Abrasives company in India.

2016:

GNO celebrates its 75th Anniversary - with the theme: SoAlive@75.

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MESSAGE FROM MANAGING DIRECTOR

Born in 1941, in a 40'x40' room at Mora, a fishing village across Bombay harbour,
Grindwell pioneered the manufacture of grinding wheels in India. Promoted by two Parsi
entrepreneurs, the company has grown steadily and, over the years, has established itself as a
strong leader in Abrasives, Silicon Carbide, High-Performance Refractories and Performance
Plastics.

In 1983, GNO, which was by then a JV between Norton Company and the Indian
Promoters, was listed on the Bombay Stock Exchange. In 1996, GNO became a majority-
owned subsidiary of Compagnie de Saint-Gobain (which had acquired Norton a few years
earlier). With its headquarters in Paris, Saint-Gobain is a large, transnational Group (Sales of
€39.6 billion in 2015) with a presence in 67 countries.

I have had the privilege of leading GNO since 1991. That was the year that GNO
celebrated its Golden Jubilee. The theme for the Golden Jubilee was: "Life Begins at fifty".
And it certainly did. The last 25 years have been a period of extraordinary expansion and
growth in sales and profits.

In 1991, GNO had three manufacturing sites (Mora, near Mumbai, Bangalore and
Tirupati). Since then, besides making significant investments in the existing sites (especially,
Bangalore), GNO has built plants at four new sites: Abrasives plants in Nagpur (1997) and
Himachal Pradesh (2008), a Silicon Carbide plant near Phuentsholing in Bhutan (2009) and a
High Performance Refractories plant in Halol near Vadodara (2012).

In 2016, GNO reached another historical milestone and celebrated its 75th
Anniversary. It has been quite a journey – one that we take pride in. For, it is the people of
GNO, who have made this journey possible, who have made a difference. Reflecting the
energy, the spirit and the liveliness of the people of GNO, our theme for the 75th Anniversary
was SO ALIVE@75!

During the 33 years that I have been with GNO, I have had the privilege of working
with many talented, committed, enthusiastic people who have made GNO what it is today and

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who will lead GNO into an exciting future - a future that will be marked by sustained growth,
strong profitability and market leadership.

Product Range:

The company manufactures the below:

A) Abrasives - in 1941,grindwell made the first grinding wheel in India. It has since
been offering the best abrasives technology to Indian industry. It offers six kinds of abrasives:

 Bonded abrasives
 Coated abrasives
 Non-woven abrasives
 Super abrasives
 Construction abrasives
 Thin wheels

B) Ceramics – ceramics, the material of the future has a wide range of industrial
applications ranging from high temperature refractories, wear parts, fused cast ceramics to
filters for chemical plants and much more.

BUSINESS DIVISIONS:

 Performance plastics - The performance plastics division is a recognized authority in


advanced polymer technology. It produces and markets more than 800 standard and
custom polymer products through three businesses: Engineered Components, Fluid
Systems and Composites. Each demonstrates innovation, responsiveness to customer
needs and polymer expertise.
 Project Engineering Group – The Project Engineering Group (PEG) is a division of
Grindwell Norton. Established in the early seventies, primarily for setting up
Grindwell Norton's plants and equipment in– house, PEG has come a long way and
has several achievements to its credit. Over the years, it has set up large scale
complex projects for Grindwell Norton and for other Saint–Gobain group companies
in India and abroad.

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Awards:

 GNO had featured in Forbes Asia best under a Billion lists in October 2006. It was
one of just 23 Indian companies listed among the top 200 companies, with sales of
under a billion dollars, in the Asia–Pacific Region.
 The company got ISO 9001:2000 certifications in the year 2003.

Recent Development:

Saint–Gobain Ceramic Materials Bhutan, the joint venture between Grindwell Norton
and bhutanSingye Group for manufacturing silicon carbide, commenced commercial
production during the first week of May 2009.

General Principles of Conduct and Action:

Principles of conduct:

 Professional commitment
 Respect for others
 Integrity
 Loyalty
 Solidarity

Principles of Action:

 Respect for the law


 Caring for the environment
 Worker health and safety
 Employee rights

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Corporate Social Responsibility

Within the global framework of Corporate Social Responsibility (CSR), the Saint-
Gobain Group in India focuses on a few, specific priority actions under each of the five broad
areas. In addition, as an important element of its Corporate Social Responsibility, the Group
in India lays great emphasis in ensuring that its business practices meet the highest standards
of corporate governance and ethics.

Five broad areas:

 Limiting environmental impacts


 Inventing and promoting sustainable buildings
 Encourage employees professional growth
 Supporting community development
 Saint-Gobain India foundation

World class manufacturing

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CHAPTER – 2

REVIEW OF LITERATURE

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REVIEW OF LITERATURE

FINANCIAL ANALYSIS:

Financial analysis is an aspect of the overall business finance function that involves
examining historical data to gain information about the current and future financial health of
a company. Financial analysis can be applied in a variety of situations to give business
managers the information they need to make critical decisions. It helps in the decision
making process such as evaluating past performance, projecting future performance,
forecasting profits, forecasting cash flows, investment screening etc.

Financial analysis is the process of identifying the financial strengths and


weaknesses of the firm by properly establishing relationships between the items of the
balance sheet and profit and loss account. The future plans of the firm should be laid down in
view of the firm’s financial strengths and weaknesses. Thus, financial analysis is the starting
point for making plans, before using any sophisticated forecasting and planning procedures.

“UNDERSTANDING THE PAST IS A PRE-REQUISITE FOR ANTICIPATING


THE FUTURE.”

RATIO ANALYSIS:

A ‘RATIO’ is defined as “The indicated quotient of two mathematical expressions.”


In financial analysis, a ratio is used as a benchmark for evaluating the financial position and
performance of a firm. Ratio reflects a quantitative relationship helps to form a quantitative
judgement.

Ratio analysis is defined as “The systematic use of the ratio 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.” As compared to other tools
of financial analysis, ratio analysis provides very useful conclusion about various aspects of
working, like financial position, liquidity, stability and profitability of an enterprise.

Ratio analysis is a powerful tool of financial analysis. It involves assessing how


various transactions in a company’s financial statements relate to one another. This can be

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used to compare a company’s present performance to past performance or competitor’s


performance in their industry.

Nature of ratio analysis:

The most popular way to analyze the financial statements is computiong ratios.
Ratios, by themselves, are not an end but only one of the means of understanding the
financial health of a business entity. Ratio analysis is not capable of providing precise
answers to all the problems faced by any business unit. Ratio analysis is basically a technique
of:

 Establishing meaningful relationship between significant variables of financial


statements.
 Interpreting the relationships to form judgement regarding the financial affairs of the
unit.

Steps in ratio analysis:


Ratios enable the mass of data to be summarised and simplified. Industrial ratios may
provide valuable information only when they are studied and compared with several other
related ratios. The following are the 4 steps involved in the ratio analysis:
 Selection of relevant data from the financial statements depending upon the objective
of the analysis.
 Calculation of appropriate from the above data.
 Comparision of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from the projected financial statements or the ratios of some other
firms or the comparision with ratios of the industry to which the firm belongs.
 Interpretation of the ratios.

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Types of ratios:
The tool of ratio analysis performs in a way that it makes the process of
comprehension of financial statements simpler, at the same time, it reveals a lot about the
changes in the financial condition of a business entity. In view of the requirements of various
users i.e, short and long term creditors, owners and management, ratios are classified into
four important categories.

TYPES OF RATIOS

LIQUIDITY LEVERAGE PROFITABILITY ACTIVITY

SALES INVESTMENT

LIQUIDITY RATIOS:
Liquidity ratios measure the ability of the firm to meet its current obligations. In other
words, these ratios show the cash levels of a company and the ability to turn other assets into
cash to pay off liabilities and other current obligations. Liquidity is not only a measure of
how much cash a business has. It is also a measure of how easy it will be for the company to
raise enough cash or convert assets into cash. A firm should ensure that it does not suffer
from lack of liquidity, and also that it does not have excess liquidity. It is necessary to strike a
proper balance between high liquidity and lack of liquidity. The most common ratios, which
indicate the extent of liquidity or lack of it, are:
 Current ratio
 Quick ratio
 Super quick ratio

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Current ratio:

The current ratio is a measure of the firm’s short- term solvency. Current assets
include cash and those assets that can be converted into cash within a year, such as
marketable securities, debtors and inventories. Current liabilities include creditors, bills
payable, accrued expenses, short-term bank loan and long-term debt maturing in the current
year. Ideal ratio is 2:1.

CURRENT ASSETS
CURRENT RATIO =
CURRENT LIABILITIES

Quick ratio:

Quick ratio, also called acid- test ratio, measures how well a company can meet its
short-term financial liabilities. An asset is liquid, if it can be converted into cash immediately
or reasonably soon without a loss of value. Generally, a quick ratio of 1 to 1 is considered to
represent a satisfactory current financial condition.

CURRENT ASSETS − INVENTORIES


QUICK RATIO =
CURRENT LIABILITIES

Cash ratio:
Since cash is the most liquid asset, a financial analyst may examine cash ratio and its
equivalent to current liabilities. Trade investment or marketable securities are equivalent of
cash; therefore, they may be included in the computation of cash ratio:

CASH + MARKETABLE SECURITIES


CASH RATIO =
CURRENT LIABILITIES

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LEVERAGE RATIOS:
In fact, a firm should have a strong short as well as long-term financial position. To
judge the long-term financial position of the firm, financial leverage, or capital structure
ratios are calculated. As a general rule, there should be an appropriate mix of debt and
owner’s equity in financing the firm’s assets. Leverage ratios may be calculated from the
balance sheet items to determine the proportion of debt in total financing. These are also
computed from the profit and loss items by determining the extent to which operating profits
are sufficient to cover the fixed charges. It involves:
 Debt ratio
 Equity ratio
 Debt – equity ratio

Debt ratio:

Several debt ratios may be used to analyse the long-term solvency of a firm. Debt
ratio is a solvency ratio that measures a firm’s total liabilities as a percentage of its total
assets. In a sense, the debt ratio shows a company’s ability to pay off its liabilities with its
assets. In other words, this shows how many assets the company must sell in order to pay off
its liabilities.

TOTAL DEBT

DEBT RATIO =

TOTAL ASSETS

Equity ratio:
The equity ratio is an investment leverage or solvency ratio that measures the amount
of assets that are financed by owner’s investments by comparing the total equity in the
company to the total assets.It indicates the relative proportion of equity used to finance a
company’s assets.

TOTAL EQUITY
EQUITY RATIO =
TOTAL ASSETS

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Debt – equity ratio:

The debt – equity ratio is a financial ratio indicating the relative proportion of
shareholder’s equity and debt used to finance a company’s assets. In a basic sense,
debt/equity is a measure of all of a company’s future obligations on the balance sheet relative
to equity.

DEBT

DEBT – EQUITY RATIO =

EQUITY

PROFITABILITY RATIOS:
A company should earn profits to survive and grow over a long period of time. Profit
is the ultimate output of a company, and it will have no future if it fails to make sufficient
profits. Therefore, the financial manager should continuously evaluate the efficiency of the
company in terms of profits. The profitability ratios are calculated to measure the operating
efficiency of the company. Besides management of the company, creditors and owners are
also interested in the profitability of the firm. Generally, two major types of profitability
ratios are calculated:
 Profitability ratios based on Sales
 Profitability ratios based on Investment
Profitability ratios based on Sales:
 Operating profit ratio:
Operating profit is an accounting figure that measures the profit earned from a
firm’s normal core business operations, thus excluding deductions of interest and taxes.
This value also does not include any profit earned from the firm’s investments, such as
earnings from firms in which the company has partial interest.

OPERATING PROFIT
OPERATING PROFIT RATIO =
SALES

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 Net profit ratio:


Net profit is the overall measure of the firm’s ability to turn each rupee sales
into net profit. If the net margin is inadequate, the firm will fail to achieve satisfactory
return on shareholders funds. It indicates the firm’s capacity to withstand adverse
economic conditions.

NET PROFIT
NET PROFIT RATIO =
SALES

Profitability ratios based on Investment:


 Return on Investment:
The term investment may refer to total assets or net assets. Return on
investment is a performance measure, used to evaluate the efficiency of an investment.
ROI measures the amount of return on an investment, relative to the investment’s cost.

PROFIT AFTER TAXES


RETURN ON INVESTMENT =

INVESTMENT

 Return on Equity:
Return on equity is the amount of net income returned as a percentage of
shareholders equity. ROE measures a corporation’s profitability by revealing how much
profit a company generates with the money shareholders have invested.

PROFIT AFTER TAXES


RETURN ON EQUITY =
NET WORTH

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 Earnings per share:

The profitability of the shareholders investment can also be measured in


many other ways. One such measure is to calculate the Earnings Per Share. EPS
calculations made over the years indicate whether or not the firm’s earning power on per-
share basis has changed over that period.

PROFIT AFTER TAXES

EARNINGS PER SHARE =

NUMBER OF SHARES OUTSTANDING

 Dividend per share:


Dividend per share is the sum of declared dividends issued by a company for
every ordinary share outstanding. DPS is an important metric to investors because the
amount a firm pays out in dividends directly translates to income for the shareholder.

EARNINGS PAID TO SHAREHOLDERS


DIVIDEND PER SHARE =
NUMBER OF ORDINARY SHARES
OUTSTANDING

 Dividend – payout ratio:


The dividend-payout ratio is the amount of dividends paid to stockholders
relative to the amount of total net income of a company. The amount that is not paid out
in dividends to stockholders is held by the company for the growth. The amount that is
kept by the company is called retained earnings.

DIVIDEND TO EQUITY HOLDERS


DIVIDEND – PAYOUT RATIO =
PROFIT AFTER TAX

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 Return on capital employed:


Return on capital employed is a financial ratio that measures a company’s
profitability and the efficiency with which its capital is employed. Capital employed
is the total amount of capital that a company has utilized in order to generate profits.
This provides a better indication of financial performance.

EBIT
RETURN ON CAPITAL =
EMPLOYED TOTAL CAPITAL EMPLOYED

ACTIVITY RATIOS:
Funds of creditors and owners are invested in various assets to generate sales and
profits. Activity ratios are employed to evaluate the efficiency with which the firm managers
and utilizes its assets. These ratios are also called turnover ratios because they indicate the
spead with which assets are being converted or turned over into sales. Activity ratios, thus,
involve a relationship between sales and assets. A proper balance between sales and assets
generally reflects that assets are managed well. Several activity ratios can be calculated to
judge the effectiveness of asset utilization.

 Debtors turnover
 Creditors turnover
 Working capital turnover
 Fixed assets turnover
 Capital turnover
 Inventory turnover

Debtors turnover ratio:

Debtors turnover ratio is a technique used to measure how quickly a company is able
to collect money that is owed by its customers. The total amount of money due from
customers for credit sales is known as Debtors turnover / Account receivables ratio. The
higher the ratio becomes, the most efficient management is in collecting credit sales. A low
ratio implies poor credit and collection performance.

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CREDIT SALES

DEBTORS TURNOVER =

AVERAGE DEBTORS

Creditors turnover ratio:

The creditors turnover ratio is a short term liquidity measure used to quantify the rate
at which a company pays off its suppliers. Also known as Payables turnover ratio. The
accounts payable is listed under a company’s current liabilities on its balance sheet.

CREDIT PURCHASES

CREDITORS TURNOVER =

AVERAGE CREDITORS

Working capital turnover ratio:

The working capital turnover ratio is also referred to as net sales to working capital.
It includes a company’s effectiveness in using its working capital. It is a measurement
comparing the depletion of working capital used to fund operations and purchase inventory,
which is then converted into sales revenue for the company.

SALES

WORKING CAPITAL TURNOVER =

NET WORKING CAPITAL

Fixed assets turnover ratio:

The firm may wish to know its efficiency of utilizing fixed assets and current assets
seperately. A high ratio indicates the business has less money tied up in fixed assets for each

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Ratio analysis

unit of currency of sales revenue. A declining ratio may indicate that the business is over-
invested in plant, equipment, or other fixed assets.

SALES
FIXED ASSETS TURNOVER =
NET FIXED ASSETS

Total assets turnover ratio:

Total assets turnover ratio shows the relationship between total assets and sales. Total
assets turnover ratio indicates how well the firm’s total assets are being used to generate its
sales. This ratio is obtained by using the following formula.

SALES

TOTAL ASSETS TURNOVER =

TOTAL ASSETS

Inventory turnover ratio:

Inventory turnover measures how fast a company is selling inventory and is generally
compared against industry averages. A low turnover implies weak sales and, therefore, excess
inventory. A high ratio implies either strong sales and/or large discounts.

SALES

INVENTORY TURNOVER =

INVENTORY

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Ratio analysis

ADVANTAGES OF RATIO ANALYSIS:

o Forecasting and planning


o Measurement of operating efficiency
o Control of performance and cost
o Inter –firm comparision
o Indication of liquidity position
o Indication of overall profitability
o Aid to decision making

LIMITATIONS OF RATIO ANALYSIS:


o Historical information
o Different accounting policies
o Lack of standard of comparision
o Changes in the price levels
o Seasonal factors affect financial data
o Window –Dressing
o Quantitative analysis

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Ratio analysis

CHAPTER - 3

RESEARCH METHODOLOGY

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Ratio analysis

3.1.NEED FOR THE STUDY

 The study has great significance and provides benefits to various parties whom
directly or indirectly interact with the company.
 To know whether the company is growing or incurring losses or it is stagnant in its
performance.
 It is beneficial to management of the company by providing crystal clear picture
regarding important aspects like liquidity, leverage, activity and profitability.
 The use of ratio analysis enables conclusions to be drawn from the figures as to know
the earning capacity, operational efficiency and financial condition of a concern.
 The investors who are interested in investing in the company’s shares will also get
benefited by going through the study and can easily take a decision whether to invest
or not to invest in the company’s shares.

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Ratio analysis

3.2.SCOPE OF THE STUDY

The scope of the study is limited to collecting financial data published in the annual
reports of the GRINDWELL NORTON LTD. The analysis is done to suggest the possible
solutions. The study is carried out for 3 years ( 2014-17 ).

Using the ratio analysis, firms past, present and future performance can be analysed
and this study is an endeavor to have a comprehensive understanding of the financial
statements properly, know how the items of financial statements are interlinked, and bear an
influence on each other. The firm should generate enough profits not only to meet the
expectations of owner, but also to expansion activities.

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Ratio analysis

3.3.OBJECTIVES OF THE STUDY

 The major objectives of the recent study are to know about financial strengths and
weaknesses of Grindwell Norton through ratio analysis.
 To evaluate the part of the company by using ratios as a yardstick to measure
efficiency of the company.
 To study the ability of the company in utilizing its assets.
 To compare and interpret the ratios for future projections.
 To estimate and determine the possibilities of future growth of business.
 To suggest measures for the better performance of the organization.

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Ratio analysis

3.4.LIMITATIONS OF THE STUDY

 The study was purely based on secondary data which were taken from published
annual reports of GNO.
 The study was limited to 3 years financial data.
 Detailed analysis could not be carried for the project work because of limited time
span.
 The differences in the definition of items in the balance sheet and in the profit and
loss statement makes the interpretation of ratios difficult.

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Ratio analysis

3.5. RESEARCH DESIGN

Research methodology is the systematic, theoritical analysis of the methods applied to


a field of study. The methodology is the general research strategy that outlines the way in
which research is to be undertaken.

Methods of Data collection:

The required data for the study are basically secondary in nature and the data is
collected from the audited reports of the company.

Primary data:

Data which is gathered originally for a certain purpose.The primary data is collected
from personal interaction with P. SAINA KUMARI - EXECUTIVE FINANCE

Secondary data:

Secondary data refers to data that was collected by someone other than the user.
Secondary data is collected from the

o Company’s Annual reports.


o Websites and books.

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Ratio analysis

CHAPTER - 4

DATA ANALYSIS

&

INTERPRETATION

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Ratio analysis

Liquidity ratios:

 Current ratio:

4.1 TABLE
Years Current assets Current liabilities Current ratio
2014 -15 50470.09 24915.75 2.0256
2015 -16 55477.69 25825.24 2.1482
2016 -17 66131.45 25418.94 2.6017

4.1 CHART

Current ratio
3
2.6017
2.5
2.1482
2.0256
2

1.5
Current ratio
1

0.5

0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
From the above table, it represents that the current ratio is in increasing trend
from the last three years i.e.; 2014-17. It satisfies the rule of thumb for current ratio i.e.;
2 to 1, which indicates a highly solvent position.

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Ratio analysis

 Quick ratio:

4.2. TABLE
Years Quick assets Current liabilities Quick ratio
2014 -15 29186.32 24915.75 1.1714
2015 -16 31986.47 25825.24 1.2386
2016 -17 42587.21 25418.94 1.6754

4.2. CHART

Quick ratio
1.8 1.6754
1.6
1.4 1.2386
1.1714
1.2
1
0.8 Quick ratio
0.6
0.4
0.2
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:

A quick ratio of 1:1 is considered to represent a satisfactory current financial


condition. It is inferred from the above table that liquid assets are quite sufficient to
provide a cover to the current liabilities.

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Ratio analysis

 Super quick or cash ratio:

4.3.TABLE

Years Cash
+ Current Super quick ratio
Marketable securities
liabilities
2014 -15 11311.06 24915.75 0.4540
2015 -16 12063.38 25825.24 0.4671
2016 -17 24234.44 25418.94 0.9534

4.3 CHART

Super quick ratio


1.2

1 0.9534

0.8

0.6
0.454 0.4671 Super quick ratio
0.4

0.2

0
2014 -15 2015 -16 2016 -17

INTERPRETATION:

The above table represents the cash ratio of GNO for the years 2014-17.
During the years there was increasing trend in the cash ratio. This shows the
company is maintaining sufficient cash balance.

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Ratio analysis

Leverage ratios:
 Debt ratio:

4.4. TABLE
Years Total debt Total assets Debt ratio
2014 -15 29119.95 90822.02 0.3206
2015 -16 29702.35 96890.03 0.3066
2016 -17 30139.85 118932.04 0.2534

4.4 . CHART

Debt ratio
0.35 0.3206
0.3066
0.3
0.2534
0.25

0.2

0.15 Debt ratio

0.1

0.05

0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
This ratio gives an idea about the firm’s financial structure. The debt ratio of
0.32 means that the lendors have financed 32% of company’s net assets in the year
2014-15, 30% in 2015-16, 25% in 2016-17. It implies that owners have provided the
remaining.

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Ratio analysis

 Equity ratio:

4.5 TABLE
Years Total equity Total assets Equity ratio
2014 -15 61702.07 90822.02 0.6794
2015 -16 67187.68 96890.03 0.6934
2016 -17 88792.19 118932.04 0.7466

4.5 CHART

Equity ratio
0.76
0.7466
0.74

0.72

0.7 0.6934
Equity ratio
0.6794
0.68

0.66

0.64
2014 -15 2015 -16 2016 -17

INTERPRETATION:
This is another alternative way of expressing the basic relationship between
debt and equity. This will show how much funds are being contributed together by
lenders and owners for each rupee of owner’s contribution i.e.; 0.67 , 0.69 , 0.74 in
the years 2014-15, 2015-16, 2016-17 respectively.

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Ratio analysis

 Debt – equity ratio:

4.6. TABLE
Years Total debt Total equity Debt –equity ratio
2014 -15 29119.95 61702.07 0.4719
2015 -16 29702.35 67187.68 0.4421
2016 -17 30139.85 88792.19 0.3394

4.6 CHART

Debt –equity ratio


0.5 0.4719
0.4421
0.45
0.4
0.3394
0.35
0.3
0.25
Debt –equity ratio
0.2
0.15
0.1
0.05
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
This ratio establishes the relationships between the outsider’s fund and share-
holders fund. It is calculated to know the relative claims of outsiders and the owners
against the firms assets. It is clear that GNO’S owners have contributed more funds
that lenders i.e.; 47%, 44% and 33% in the years 2014-15, 2015-16 and 2016-17
respectively.

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Ratio analysis

Profitability ratios based on Sales:


 Operating profit ratio:

4.7 TABLE
Years Operating profit sales Operating profit
ratio
2014 -15 98118.26 119464.13 0.8213
2015 -16 102861.70 124441.20 0.8266
2016 -17 17274.48 133686.83 0.1292

4.7 CHART

Operating profit ratio


0.9 0.8213 0.8266
0.8
0.7
0.6
0.5
0.4 Operating profit ratio
0.3
0.2 0.1292
0.1
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
The above table shows the operating profit ratio. It is clear that the ratio has
increased from 82.13% to 82.66% in the years 2014-15 and 2015-16 respectively and
then decreased to 12.92% in the year 2016-17 which is not satisfactory.

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Ratio analysis

 Net profit ratio:

4.8 TABLE
Years Net profit Sales Net profit ratio
2014 -15 14923.07 119464.13 0.1249
2015 -16 15267.43 124441.20 0.1227
2016 -17 17274.48 136686.83 0.1264

4.8 CHART

Net profit ratio


0.127 0.1264
0.126
0.1249
0.125

0.124

0.123 0.1227 Net profit ratio

0.122

0.121

0.12
2014 -15 2015 -16 2016 -17

INTERPRETATION:
For GNO, net profit ratio for the last three years are approximately 12%. The
net profit ratio of the company has been good for all the periods and it represents that
they have enough control over their operating expenses.

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Ratio analysis

Profitability ratios based on Investment:


 Return on investment:

4.9 TABLE
Years PAT INVESTMENT RETURN ON
INVESTMENT
2014 -15 10102.49 2768 3.6497
2015 -16 10151.98 2768 3.6676
2016 -17 11600.98 5536 2.0956

4.9 CHART

RETURN ON INVESTMENT
4 3.6497 3.6676
3.5
3
2.5
2.0956
2 RETURN ON
INVESTMENT
1.5
1
0.5
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
From the above table, it is clear that there was a decreasing trend from the
last three years i.e.;2014-17, which is not satisfactory because the investment is
constant in the years 2014-16.

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Ratio analysis

 Return on equity:

4.10 TABLE
Years PAT Net worth Return on equity
2014 -15 10102.49 61702.07 0.1637
2015 -16 10151.98 67187.68 0.1511
2016 -17 11600.98 88792.19 0.1307

4.10 CHART

Return on equity
0.18 0.1637
0.16 0.1511
0.14 0.1307
0.12
0.1
0.08 Return on equity
0.06
0.04
0.02
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
Return on equity indicates how well the firm has used the resources of owners.
This will reveal the performance and strength of the company in attracting future
investments. Here, the GNO is decreasing their ROE, which is a favourable sign to
the investors.

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Ratio analysis

 Earnings per share:

4.11 TABLE
Years PAT No.of shares Earnings per share
outstanding
2014 -15 10102.49 553.60 18.2487
2015 -16 10151.98 553.60 18.3382
2016 -17 11600.98 1107.20 10.4778

4.11 CHART

Earnings per share


20 18.2487 18.3382
18
16
14
12 10.4778
10
Earnings per share
8
6
4
2
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
Earnings per share shows the profitability of the firm on a per- share basis; it
does not reflect how much is paid as divident and how much is retained in the
business. The EPS has been decreasing from the last 3 years which shows that the
company has little uncertainity in the market.

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Ratio analysis

 Dividend per share:

4.12 TABLE
Years Dividend No.of ordinary Dividend per share
shares outstanding
2014 -15 3598.40 553.60 6.5
2015 -16 3598.40 553.60 6.5
2016 -17 0 1107.20 0

4.12 CHART

Dividend per share


7 6.5 6.5

3 Dividend per share

1
0
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
Dividend Per Share is the sum of declared dividends issued by a company for
every ordinary share outstanding. Dividend is provided equally for the years 2014-15
and 2015-16, which increases the goodwill in the market.

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Ratio analysis

 Dividend payout ratio:

4.13 TABLE
Years Dividend PAT Dividend payout ratio
2014 -15 3598.40 10102.49 0.3562
2015 -16 3598.40 10151.98 0.3545
2016 -17 0 11600.98 0

4.13 CHART

Dividend payout ratio


0.4
0.3562 0.3545
0.35
0.3
0.25
0.2
Dividend payout ratio
0.15
0.1
0.05
0
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
It is the ratio of the total amount of dividends paid out to shareholders relative
to the net income of the company. Dividend payout ratio is in decreasind trend in the
years 2014-15, 2015-16. Lack of dividend in 2016-17, leads to uncertainity in the
market.

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Ratio analysis

 Return on capital employed:

4.14 TABLE
Years EBIT Total capital Return on capital
employed employed
2014 -15 14923.07 90822.02 0.1643
2015 -16 15267.43 96890.03 0.1576
2016 -17 17274.48 118932.04 0.1452

4.14 CHART

Return on capital employed


0.17
0.1643
0.165

0.16 0.1576

0.155
Return on capital
0.15 employed
0.1452
0.145

0.14

0.135
2014 -15 2015 -16 2016 -17

INTERPRETATION:
This measure narrows the focus to gain a better understanding of a company’s
ability to generate returns from its available database. However the company has got
good returns on their capital from the past three years.

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Ratio analysis

Activity ratios:
 Debtors turnover ratio:

4.15 TABLE
Years Credit sales Average debtors Debtors turnover
ratio
2014 -15 119464.13 10266.56 11.6363
2015 -16 124441.20 13394.43 9.2905
2016 -17 133686.83 12484.37 10.7083

4.15 CHART

Debtors turnover ratio


14
11.6363
12 10.7083
10 9.2905

6 Debtors turnover ratio

0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
The Debtors turnover ratio has decreased from 11.63 to 9.29 and increased to
10.70. Generally, the higher the value of debtors turnover, the more efficient is the
management of credit. Increasing of ratio represents that the company has a good
credit recovery policy.

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Ratio analysis

 Creditors turnover ratio:

4.16 TABLE
Years Credit purchases Average creditors Creditors turnover
ratio
2014 -15 8386.84 7896.51 1.0621
2015 -16 8617.19 8481.55 1.0159
2016 -17 9968.16 7975.06 1.2499

4.16 CHART

Creditors turnover ratio


1.4
1.2499
1.2 1.0621 1.0159
1

0.8

0.6 Creditors turnover ratio

0.4

0.2

0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
The creditors turnover ratio has decreased from 1.06 to 1.01 and then
increased to 1.24. It is clear that the higher the ratio, less liquid is the position of the
firm.

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Ratio analysis

 Working capital turnover ratio:

4.17 TABLE
Years Sales Net working Working capital
capital turnover ratio
2014 -15 119464.13 25554.34 4.6749
2015 -16 124441.20 29652.45 4.1967
2016 -17 136686.83 40712.51 3.3574

4.17 CHART

Working capital turnover ratio


5 4.6749
4.5 4.1967
4
3.3574
3.5
3
2.5 Working capital
2 turnover ratio
1.5
1
0.5
0
2014 -15 2015 -16 2016 -17

INTERPRETATION:
This ratio provides useful idea of how efficiently or actively working capital is
being used. These ratios are decreasing. However, 2016-17 indicates efficient
working capital policy of the company by not holding too much funds in the form of
working capital.

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Ratio analysis

 Fixed assets turnover ratio:

4.18 TABLE
Years Sales Net fixed assets Fixed assets turnover
ratio
2014 -15 119464.13 33343.63 3.5828
2015 -16 124441.20 32933.53 3.7786
2016 -17 133686.83 34699.11 3.8527

4.18 CHART

Fixed assets turnover ratio


3.9 3.8527
3.85
3.8 3.7786
3.75
3.7
3.65 Fixed assets turnover
3.6 3.5828 ratio
3.55
3.5
3.45
3.4
2014 -15 2015 -16 2016 -17

INTERPRETATION:
This ratio is used to highlight the utilisation of the company’s plant and
machinery. From the above, the fixed assets turnover ratio is increased from 3.58 to
3.85. The higher the ratio, the better is the utilisation of assets.

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Ratio analysis

 Total assets turnover ratio:

4.19 TABLE
Years Sales Total assets Total assets turnover
ratio
2014 -15 119464.13 908822.02 1.3154
2015 -16 124441.20 96890.03 1.2844
2016 -17 133686.83 118932.04 1.1241

4.19 CHART

Total assets turnover ratio


1.35 1.3154
1.3 1.2844

1.25

1.2
Total assets turnover
1.15 1.1241 ratio
1.1

1.05

1
2014 -15 2015 -16 2016 -17

INTERPRETATION:
The total assets turnover ratio represents how efficiently a company can use its
assets to generate sales. It is clear that the ratio is in decreasing trend from the past
three years indicates that the company isn’t using its assets efficiently.

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Ratio analysis

 Inventory turnover ratio:

4.20.TABLE
Years Sales Inventory Inventory turnover
ratio
2014 -15 119464.13 21283.77 5.6129
2015 -16 124441.20 23491.22 5.2973
2016 -17 136686.83 23544.24 5.8055

4.20.CHART

Inventory turnover ratio


5.9
5.8055
5.8
5.7 5.6129
5.6
5.5
Inventory turnover
5.4 ratio
5.2973
5.3
5.2
5.1
5
2014 -15 2015 -16 2016 -17

INTERPRETATION:
The Inventory turnover ratio is decreased from 5.61 to 5.29. This represents
the company’s efficiency in turning its inventories to sales is decreasing. But, in the
year 2016-17, the company utilizes its inventory properly.

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Ratio analysis

CHAPTER – 5

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Ratio analysis

5.1.FINDINGS

 Current ratio, quick ratio and cash ratios are increasing from 2014 -17. So, it
reveals that the company has enough funds and can easily meet their obligations if
they become due.
 Debt ratio is almost equal in 3 years, but this ratio represents that there is only
32 -35% financed by debtors remaining has fiinanced by owners.
 Equity ratio has been increasing from the past 3 years which represents the fair
contribution from both the parties.
 Operating profit has been fluctuating and the company faces drastic change in the
year 2016 -17.
 If we take overall three years, Net profit is fluctuating which represents a good
indicator of profitability.
 Return On Investment is not satisfactory from the past 3 years.
 Earning Per Share is in decreasing trend. It requires optimum utilisation of
resources to earn profits.
 Return On Equity is decreasing, this indicates the firm has to improve in using the
resources.
 Dividend Per Share is constant and there is lack of proposed dividend in the year
2016 -17. Also in the case of Dividend Payout ratio, there is no proposed
dividend.
 The company has got good returns eventhough Return On Capital Employed is in
decreasing trend.
 Debtors turnover ratio in the company represents that the company has a good
credit recovery policy.
 Creditors turnover ratio is increasing, which represents less liquidity in the firm.
 Working Capital turnover is in decreasing trend, which indicates efficient working
capital policy and shows the ideal funds are used for the most productive purpose.
 Fixed assets turnover ratio is in increasing trend, which represents better
utilisation of assets to fulfill the company’s objectives.
 Inventory turnover ratio is fluctuating from the past 3 years. GNO’s efficiency in
turning its inventory to sales is good in 2016 -17 than remaining.

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Ratio analysis

5.2. SUGGESTIONS

An endeavour has been done to carefully examine and analyze the various financial
statements of the company, spread over a period of three years. On careful assessment and
analysis, the following suggestions have been put forth:
 To improve current assets and to decrease current liabilities, optimum utilisation of
resources should be done.
 Debtors turnover ratio can be satisfactory, if the management will manage the credit
in an efficient manner.
 The company should enhance inventory turnover by using the proper inventory
control techniques.
 Should focus on Return On Equity and Earning Per Share to get better performance in
the market.
 Financial system has to take care of the fluctuations in the trend ratios of the
company. The company must essentially be cautious about the market trends to avoid
such fluctuations in the key ratios of the company.

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Ratio analysis

5.3.CONCLUSION

Finance is the life blood of every business. Without effective financial management, a
company cannot sustain in this competitive world. A Ratio gives the clear picture of financial
condition of the company.
After evaluating and analyzing the Liquidity, Leverage, Profitability and Activity
ratios of GRINDWELL NORTON LTD, it is concluded that the company’s overall
position is good from the last 3 years because the profits are increasing. This is a sign of
proper management of the company as well as its overall finances.
If the company’s resources are focused in the right area, there will be an enormous
growth for the company in the future also.

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Ratio analysis

CHAPTER – 6

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Ratio analysis

ANNEXURE

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Ratio analysis

6.1. ANNEXURE

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Ratio analysis

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Ratio analysis

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Ratio analysis

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Ratio analysis

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Ratio analysis

BIBLIOGRAPHY

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Ratio analysis

6.2. BIBLIOGRAPHY

Books:

 FINANCIAL MANAGEMENT : I.M. PANDEY [ TENTH EDITION ]


VIKAS PUBLISHING HOUSE PVT LTD.
 GRINDWELL NORTON’S ANNUAL REPORTS

Websites:

www.grindwellnorton.co.in

www.yourarticlelibrary.com

www.accountingnotes.net

www.investopedia.com

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