CHAPTER- I INTRODUCTION

CHAPTER- I INTRODUCTION
A highly developed financial system is the Key point of an economy. It is an important factor or the existence of a concern. Large scale production and high degree of specialization can function only if an effective financial system is in existence. Financial statements contain wealth of information, which, if properly analyzed and interpreted, can provide valuable insights into a firm's performance and position. As such, they play a vital role in setting a framework of managerial decisions. Analysis of the financial statement is helpful in assessing the financial position and profitability of a concern. In fact, financial statement analysis is the process of determining financial strengths and weaknesses of the company by establishing strategic relationship between the components of Balance sheet and profit and loss account and other operative data. Financial analysis may be done for a variety of purposes, which may range from a simple analysis for the Short - term liquidity position of the firm to a comprehensive assessment of the strengths and weaknesses of the firm in various areas. Financial analysis is thus an attempt to dissect the financial statements in to their components on the basis of the purpose in hand and establish relationships as between these components on one hand, and as between individual components and totals of these items on the other. The analysis of financial statement presents three major steps. The first step involves the reorganization and rearrangement of the entire financial data as contained in the financial statement. The next step is the establishment of significant relationships between the individual components of Balance Sheet and Profit and Loss Account and finally the evaluation of the results obtained by means of financial tools.

In this dissertation, the study is extended to probe in to the details of financial performance of "UNIPOWER TRASFORMERS PVT LTD". For this purpose, the annual statements of the last completed 5 years. From 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 are selected. The anal ysis and interpretation of the financial statements is based on the published accounts of the concern. It is presumed that a discussion of the published accounts of the concern can give the essential requirements of data. But the information need not completely pinpoint the efficiency or inefficiency due to their inherent limitation. 1.1 OBJECTIVES OF THE STUDY The main objective of the study is to give a true insight in to the financial position of UNIPOWER TRANFORMERS PVT LTD with the help of certain key management ratios. The relative secondary objectives of evaluating financial performance are:

a) To study the profitability of the concern b) To examine the liquidity position of the concern c) To find out the working capital position of the concern d) to probe how efficiently the concern is managing its resources. e) To analyses the financial strength and weakness.
1.2 SCOPE OF THE STUDY The study is limited to the analysis of the financial performance of UNIPOWERTRANSFORMERS for the period 2006-07 to 2010-11.

1.3 PERIOD OF THE STUDY The data pertaining to a period of five years from 2006-07 to 2010-11 have been collected and incorporated in this study.

1.4 TECHNIQUES AND STATISTICAL TOOLS There are different techniques for studying the financial condition such as ratio analysis, fund flow analysis, trend percentage analysis etc. But under this study only the RATIO ANALYSIS is resorted to compare the various data are selected from the firm to serve the

objective. The various ratio used for analysis are liquidity, solvency ratios, activity ratio and profitability ratio.

1.5 SIGNIFICANCE OF THE STUDY This study can be to light the efficiency of financial performance of the concern. This is an attempt to find out the weak areas in the performance of the concern and suggest remedial measures, so as to improve the efficiency of the concern.

1.6 LIMITATION OF THE STUDY

a) Time has been a limiting factor and has been difficult to analyze the various aspect of
finance within the prescribed time.

b) Because of the nature of the financial accounts only the numerical figures are considered for
the study and no quantitative factors are taken into consideration.

c) Financial statements are generally based on historical or original cost. d) Most of the data used in this study are secondary in nature e) Only data of five years has been taken for study.

1.8 SCHEME OF THE STUDY The study cont ai ns five chapt ers. The fi rst chapt er deals wit h introduction, objectives of the study, techniques, Period of study, Hypothesis, Scope of the study, significance and limitation of the study. The second chapter deals with the theoretical framework about finance, financial statements and financial analysis. The third chapter deals with the profile of the company. The fourth chapter deals with analysis and interpretation of data using the various ratios and the fifth chapter deals with findings and suggestions.

CHAPTER-II THEORETICAL BACKGROUND- LITERATURE REVIEW

CHAPTER- II FINANCIAL ANALYSIS A THEORETICAL FRAME WORK

During the past four and a half decades, role and responsibilities of the financial manager have undergone a marked transformation ever witnessed earlier. The success of a business enterprise depends upon the efficiency of the financial manager, who is in charge of the procurement and allocation of funds in a manner to achieve maximum benefit. The financial manager plays an integral part in shaping the fortunes of the concern. He must also have clear conception of the overall goal of the firm as he has to act in conformity with the goal.

2.1 FINANCE
Finance is regarded as the king pin of business enterprise. Finance can be treated as the activity concerned with planning, raising, controlling and administering the funds used in the business. It is the art of raising and spending money.

In other words, finance is the life blood of industrial system. It is the very basis of an industry. Without finance, neither any business can be started nor successfully run. It is said to be the circulatory system of the economic body, making possible the needed cooperation between the many units of activity.

Finance is the study of Money Management. The principles and methods of obtaining control of money f rom those who have saved it and of administering it by those who obtained are studied in finance. Finance guides and regulates investment decisions and expenditure.

2.1.1. DEFINITION OF FINANCE

The word finance has been interpreted by different authorities in different ways. R. C. Osborn says, "The finance function is the process of acquiring and utilizing funds by a business".

According to Bonneville and Dewey, "financing consists of raising, providing and managing of all the money, capital or funds of any kind to be used in connection with the business".

Howard and Upton in "Introduction to Business Finance" said, "finance may be defined as that administrative area or set of administrative functions in an organization which relates with the arrangement of cash and credit so that the organization may have the means to carry out its objectives as satisfactory as possible".

Finance means investment of money in permanent and current assets in suitable doses at the required time so that all the activities of the enterprise are conducted with least delay and dislocation. Finance is required to generate finance and its generation depends on the co-ordination of different business functions. No financial preposition would ever be successful unless it is effectively performed by the different activities of a business enterprise. Finance is, therefore, a part of the nervous system of a business. The subject of finance must be traditionally classified into "two: pub lic f inance and private f inance. Public f inance deals with the requirements, receipts and disbursements of funds in the Government institutions like State, local Government and Central Government. Private finance is concerned with processing of money for private organizations and management of money by individuals, voluntary association and corporations.
1

Dr. Srivastava R. M., Financial Management 2000, Pragati Prakashan, Meertut, Page No. 3.2.

2.1.2 IMPORTANCE OF FINANCE "In an organization composed of a myriad of separate enterprises, each working for its own end but simultaneously making a contribution to the system, as a whole, same force is necessary to bring about direction and coordination, something must direct the flow of economic activity and facilitate its smooth operation. Finance is the agent that produces this result Finance is rightly termed as the universal lubricant which keeps the enterprise dynamic. Right from the very beginning, i.e., conceiving an idea of business, finance is need to promote and establish, acquire fixed assets, make investigation such as market sur r eys etc., develop product,, keep men and machine at work, encourage management to make progress and create values. Even an existing concern needs further finance for making improvement or expansion. So, finance is required to generate finance and its importance cannot be overemphasized. Thus, the efficient finance function in an organization is proved to be an irrefutable one. 2.1.3 FUNCTIONS OF FINANCE The functions of finance in a firm may be divided into three major decisions: the firm must make the investment decision, the financing decision and the dividend decision. Investment decisions are concerned with the effective utilization of funds in one activity or the other. There are various techniques which helps the financial executives in assessing the relative profitability of alternative investments such as capital budgeting.

Financing decision involves the determination as to how the total funds required by the firm will be made available through the issue of different types of securities, i.e., shares and debentures etc...

Dividend decision refers to the problem of how much part of the earnings should be distributed among the shareholders by way of dividend and how much should be retained in the business for meeting the future needs of funds internally.

2.2 FINANCIAL MANAGEMENT Financial management is one of the important functional areas of the process of management. The major objective of any business is to make a profit for its owners by producing goods or services for sale in the market. Financial management is an excellent tool by means of which resources can be allotted to various projects, depending upon their importance and pay off capacities. Its main aim is to use business funds in such a way that the earnings are maximized. The central feature of financial management is its formulation of the firm's strategy in determining the most effective use of the funds currently at the disposal of the firm and in selecting the most favorable sources of additional funds that the firm will need in the foreseeable future.

2.2.1 DEFINITION In the words of Prof. Solomon Ezra financial, management is properly viewed as an integral part of overall management rather than as a staff specialty concerned with fund raising operations. In addition to raising funds, financial management is directly concerned with production, marketing and either functions within an enterprise whenever decisions are made about the acquisition or distribution of assets". Joseph and Mussie define financial management as "the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations ". Financial Management is an operational function clothed in a special garment. It involves the financial planning, financial forecasting and provision of finance as well as the formulation of financial policies. Hunt, William and donaldson have very rightly call,

it as the resource management".

2.2.2 IMPORTANCE OF FINANCIAL MANAGEMENT Financial Management is an integral part of overall management and not a staff function. It involves the application of general management principles to a particular financial position; it implies the designing and implementation of certain plans. Planning is an inextricable dimension of financial management. The term financial management connotes that fund flows are directed according to some plan.

Financial management is important because it has an impact on all activities of a firm. Its primary responsibility is to discharge the finance function successfully. It touches all other business functions. It is an academic discipline concerned with decision making in regard to size and composition of assets and the level and structure of financing. The main areas of financial management are: a) Decisions on capital structure b) Allocation of available funds to specific uses c) Analysis and appraisal of problems.

2.2.3 OBJECTIVES OF FINANCIAL MANAGEMENT Financial management is concerned with procurement and use of funds in such a way that the earnings are maximized. The pros and cons of alternative course of action should be evaluated and proper course should be selected for maximizing owner's economic welfare. This objective can be achieved by profit maximization and wealth maximization

a) Profit Maximization Profit earning is the main aim of every economic activity. A business being an economic institution must earn profit to cover its cost and provide fund for growth. Profit is a measure of efficiency and also serves as a protection against risk. The accumulated profit enables the firm to face risks like fall in prices,, competition from other units, adverse Government policies etc.... Besides, the main objective of the financial management is to safeguard the economic interest of the persons who are directly or indirectly connected with the company i.e. the shareholders, creditors and employees. These parties are interested to get maximum return for their contributions. Therefore, the goal of maximization of profits is said to be the best criterion fo decision making. b) Wealth maximization Wealth maximization is an appropriate objective of an enterprise. When the firm maximizes the shareholder's wealth, the individual shareholder can utilize this for his individual utility. It means that be maximizing shareholder's wealth, the firm is operating consistently towards maximizing stock-holder's utility. "Wealth

maximization goal as decisional criterion suggests that any financial action which creates wealth or which has a net present value above zero is desirable and should be accepted and that which does not satisfy this test should be rejected".

The wealth maximization goal considers-time value of money, risk factor or uncertainty and it avoids ambiguity in its computation. There is a rationale in applying wealth maximizing policy as an operating financial management policy. It serves the interests of suppliers of capital, employees, management and society as a whole. 2.3 FINANCIAL STATEMENTS Financial statements are used by the management as the basis for planning

operations, including procurement of adequate financing and as a means of exercising control over financial position of the business and efficient profitable use of asset. The basic purpose of preparing financial statements is to convey to owners, creditors and general public about financial position of the enterprise.

2.3.1 DEFINITION OF FINANCIAL STATEMENT

Financial statements are collection of data presented strictly according to logical and consistent accounting principles. They are the indicators of two factors such as profitability and financial soundness. According to the American Institute of Certified Public Accountants," financial statements reflect a combination of record facts; accounting conventions and personal judgments and conventions applied affect them materially". "Financial statements are the end products of financial accounting which contain summarized periodical reports of the financial and operative date accumulated by the firm in its books of account known as the General Ledger". They reflect the totals of the summary of the books of account. The two principal financial statements are the Balance Sheet and the Income statement otherwise known as Profit and Loss account. The Balance Sheet shows the financial status of a business at a given point of time. It represents all assets owned by the business at particular moment and the claims of the owners and outsiders against those assets at that time. The income statement is generally considered to be the most useful financial statement. Technically, the income statement is an adjunct to the Balance Sheet. It provides details relating to net income. 2.4 FINANCIAL STATEMENT ANALYSIS Analysis is the process of critically examining in detail accounting information given in the financial statements. Analyzing financial statements is a process of

evaluating relationship between component parts of firm's position and performance. The financial statement analysis was started in Western countries for the use of credit analysis; it involves the use of financial statements. It is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the Balance Sheet and the Profit and Loss account. Financial analysis can be undertaken! by management of the fit-in or by parties outside the firm viz. owners, creditors, investors and others. 2.4.1 DEFINITION OF FINANCIAL STATEMENT ANALYSIS In the words of Myer, financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a series of statements". Financial analysis is helpful in assessing the financial position and profitability of a concern. For this purpose, financial statements are classified, methodologically analyzed and compared with the figures of previous years or other similar firms. 2.4.2 TYPES OF FINANCIAL STATEMENT ANALYSIS Analysis of the financial statements can be broadly classified into two: on the basis of materials used and on the basis of modus of operandi of the analysis. In the first section, the analysis may be either external analysis is performed by investors, potential creditors, government agencies, credit agencies, and the general public. On the other hand, internal analysis is performed by executives and employees of the organization as well as government agencies who have statutory powers vested in them. Vertical analysis and Horizontal analysis are the two types of ratios under the second section. Horizontal analysis refers to the comparison of financial data of a company for several years. In other works, horizontal analysis or dynamic analysis is the analysis of changes in different components of the financial statement over different periods with the help of series of statements. Comparative statements

and trend percentages are two tools employed in horizontal analysis.

Vertical analysis refers to the study of relationship of the various items in the financial statements of one accounting period. In these types of analysis, the figures from financial statement of a year are compared with a base selected from the same year's statement. It is also known as 'static analysis.' In other words, analysis of relationship between different individual components and as between these components and their total for a given period is called vertical analysis.
2.4.3. TOOLS FOR ANALYSIS

The analysis and interpretation of financial statements is used to determine the financial position and results of operations as well. A number of tools or methods or devices are used to study the relationship between different statements. They are:
1. Comparative statements 2. Trend analysis 3. Common-size statements 4. Ratio analysis 5. Fund flow and Cash flow analysis and 6. Cost - Volume - Profit analysis.

2.4.3.1. COMPARATIVE FINANCIAL STATEMENTS Statements prepared in a form that reflect the financial position of two or more periods are called Comparative financial statements. Foulke defined comparative statements in these words," they are the statements of the financial position of a business so designed as to provide time perspective to the consideration of various elements of financial position embodied in such statements." These statements are very useful in measuring the effects of the conduct of a business enterprise over the period under consideration. Comparative statements can be prepared for income

statement as well as position statement or Balance Sheet. The comparative Profit and Loss accounts will present a review of operating activities of the business. The comparative Balance Sheet shows the effect of operations on the assets and liabilities. 2.4.3.2. TREND ANALYSIS Trend analysis is an important and useful technique of analysis and interpretation of financial statements. Under this technique of financial analysis, the ratios of different items for various periods are calculated and then a comparison is being made. These ratios can be calculated for the company over a definite period of time, say 3 to 5 years and then the financial analyst can analyze the trends highlighted by such ratios over the specified time period, it is also useful to compare such trends with similar trends in business generally and the concerned industry specially. The analysis shows the direction of progress-upward or downward. Generally, three methods are used in trend analysis, viz., trend percentages, trend ratios and graphic and diagrammatic representation.
2.4.3.3 COMMON-SIZE STATEMENTS

Comparative statements that give only the vertical percentage or ratios for financial data without giving rupee values known as 100% statements. For example, if the Balance Sheet items are expressed as the ratio of each asset total assets and the ratio of each liability to total liabilities (taking the total of Balance Sheet as 100), it will be called a Common -size Balance sheet. Thus, a common-size statement shows the relation of each component to the whole. It is useful in vertical analysis and comparison of two business enterprises at a certain date.
2.4.3.4. RATIO ANALYSIS

Ratios are means of highlighting in arithmetical terms the relationship between figures drawn from various financial statements. Ratio analysis is an attempt to develop meaningful relationship between individual items or group of items in the Balance Sheet or Profit and Loss account, It functions as a sort of health test.

2.4.3.5. FUND FLOW AND CASH FOW ANALYSIS

Fund flow statements are valuable aid to financial manager or a creditor in evaluating the uses of funds by a firm and in determining how these uses are financed. These statements, also called Statement of sources and application of funds, are defined by Foulke. R. A. as a technical device designed to analyze the changes in the financial condition of a business enterprise between two dates." Thus, a fund flow statement is a report on financial operation changes, flows or movements during the period. In fund flow statement, the term 'fund' is used in broader sense that cover all financial resources including current assets. Cash flow statement is a fund flow statement that views ' fund' as cash only. In this type of statement, only inflow and outflow of cash is taken into account. Both these statements are important tools of communication and are very helpful for financing executives in planning the intermediate and long term financing of the firm. 2.4.3.6. COST-VOLUME-PROFIT ANALYSIS Cost-volume-profit analysis otherwise called Break-Even analysis is a technique for studying the relationship between cost, volume and profit. Profit of an undertaking depends upon a large number of factors. But the most important of these factors are the cost of manufacture, volume of sales and the selling prices of the products. In the words of Herman C Heiser, "the most significant single factor in profit planning of the average business is the relationship between the volume of business, costs and profits. The CVP relationship is an important tool used for profit planning of a business.

2.5. RATIO ANALYSIS

Ratio analysis is the most powerful and easy tool available for financial analysis. In common parlance, ratio analysis is the analysis of financial statements with the help of ratio'. It is the process of determining and presenting in arithmetical terms the relationship between figures and group of figures drawn from the financial statements. It also involves the interpretation of the ratios and this will in turn help the

analyst for future projections.

2.5.1. MEANING OF RATIO A ratio is a simple arithmetic expression of the relationship of one number to another. It is the indicated quotient of two mathematical expressions. According to wixon, Kell and Bedford, "ratio is an expression of the quantitative relationship between two numbers:

A financial ratio is the relationship between two accounting figures expressed mathematically. Ratios provide clues to the financial position of a concern. These are the pointers or indicators of financial strength, soundness and position of weakness of an enterprise. The quantitative relationship of ratios may be expressed in either of the following ways: a) In proportion: In this form, the amounts of two items are being expressed in common denominations. b) In rate or times or as a coefficient: In this form, a quotient obtained by Dividing one item by another is taken as unit of expression. When ratio is expressed in this form, it is called turnover and is written in times. c) In percentage: In this form, quotient obtained by dividing one item by another is multiplied by 100 and it becomes the percentage form of expression. 2.5.2 CLASSIFICATION OF RATIOS The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. In view of various users of ratios, there are many types of ratios which can be calculated from the information given in the financial statements. The ratios can be classified broadly into four: (1) Traditional classification or statement ratios

(2) Functional classification or classification according to tests (3) Classification according to significance and (4) Classification according to nature.

Statement ratios are divided into three: a) Balance sheet ratios deal with the relationship between two Balance sheet items, e.g. current ratio. Both the items must however, pertain to the same balance sheet. b) Profit and Loss account ratios deal with the relationship between two profit and Loss account items, e.g. net profit ratio. Both the items must belong to the same Profit and Loss account. c) Mixed ratios exhibit the relation between an Income statement item and a Balance Sheet item, e.g. stock turnover ratio.

Ratios are classified into four based on the function it serves: Liquidity ratios, Profitability ratios, earning ratios and Activity ratios. Liquidity ratios are the ratios which measure the short-term as well as long-term solvency or financial position of a firm. Profitability ratios measure the results of business operations or overall performance and effectiveness of the firm, e.g. return in capital employed. Earning ratios are calculated either in relation to sales or in relation to investment and are computed to find out the earning capacity of the firm. Activity ratios are calculated to measure the efficiency, with which the resources of a firm have been employed E.g. Debtors turnover ratio. The ratios are classified into two according to their significance: Primary ratios and Secondary ratios. Primary ratio is the one which is of prime importance to a concern, thus return on capital employed is one of the primary ratios. The other ratios which support or explain the primary ratio are called secondary ratios, e.g. operating profit ratio.

Ratios can be classified into 3 types on the basis of its nature. They are financial

ratios, profitability ratios and turnover ratios. 2.5.2.1 FINANCIAL RATIOS Financial ratios are calculated to judge the financial position of the concern from long term as well as short term point of view. A company is deemed to be financially sound only if it is able to meet all its obligations and the members in its capital structure are satisfied with the concern's functioning. The financial ratios are classified into two: liquidity ratios and solvency or leverage ratios.

2.5.2.1.1 LIQUIDITY RATIOS

These ratios, constituting the ratio analysis of the firm financial position, are intended to derive a picture of the capacity of a firm to meet its short term obligations out of its short term resources. A core of liquidity ratios has emerged over the years, which, when viewed in their totality and with respect to risk, is expected to yield a rough approximation of the capacity of business to pay its current liabilities as and when they fall due for payment. The major liquidity ratios are current ratio and quick ratio.

2.5.2.1.1.1 CURRENT RATIO

Current ratio, also called working capital ratio is the most widely used of all analytical devices based on the Balance sheet. It matches the total assets of the firm to its current liabilities. Current assets include cash and those assets which can be converted into cash within a year. All obligations maturing within a year are included in current liabilities. This ratio is a measure of one firm's short term solvency. The rule of thumb of 2:1 is based on the logic that in a worst situation, even if the value of current assets becomes half, the firm will be able to meet its obligation.

A highest ratio means that the firm has more current assets than current claims against them. On the other hand, a relatively low value of current ratio is considered as an indication that the firm will find difficulty in paying its bills. Hence current ratio is a crude-and -quick measure of the firm's liquidity.
2.5.2.1.3 QUICK RATIO

The Quick or Acid test Ratio is a more refined measure of the firm's liquidity. This ratio establishes a relationship between liquid or quick assets and current liabilities. Liquid assets include cash, debtors, bills receivables and temporary investments. Inventories are excluded because it takes time to sell finished goods. Generally, a quick ratio of 1:1 is considered to represent a satisfactory financial position. The quick ratio is an important index of the firm's liquidity. It should be remembered that prepaid expenses and debtors exceeding 6 months are not include in the quick assets.

2.5.2.1.2 SOLVENCY RATIOS Solvency ratio, also called leverage ratio helps to measure the financial contribution of the owners compared with that of creditors and also measures the risk of debt financing. Solvency ratios are used to judge the long teen financial position of the firm. The ratios may be calculated from Balance sheet items to determine the proportion of debt in total financing. They are also computed from income statement items by determining the extent to which operating profits are sufficient to cover the fixed charges.

Leverage ratios are thus, calculated to measure the financial risk and the firm's ability of using debt for the benefit of shareholders. The major solvency ratios are

Debt equity ratio, proprietary ratio and interest coverage Ratio.

2.5.2.1.2.1 DEBT - EQUITY RATIO.

The debt equity ratio, also known as External-Internal equity ratio is a measure of the relative claims of creditors and owners against the firm's assets. This ratio shows the extent to which debt financing has been used in the business. A highly leveraged company or a geared concern will find it difficult to raise borrowed fund and if borrowing is made, it is only on very restrictive terms and conditions. A low debtequity ratio implies a greater claim of owners than creditors.

The purpose of Debt equity ratio is to determine an idea of the amount of capital supplied to the firm by the owners and of asset' cushion available to creditors on liquidation. On the average, debt equity ratio 1:1 is acceptable. The most appropriate debt equity combination would involve a trade-off between return and risk. 2.5.2.1.2.2 PROPRIETARY RATIO This ratio, also called equity ratio, is a variant to the debt equity ratio. Proprietary ratio is calculated by dividing the shareholder's fund by the total assets. This ratio is an important one for determining long term solvency of a firm. The higher the ratio or the share of the shareholders in the total capital of the company, the better is the long term solvency position of the company. The proprietary ratio throws light on the general financial strength of the company. It has come to be regarded as a test of soundness of the capital structure. While a high proprietary ratio indicates a relatively secure position to the creditors in the event of liquidation, a low ratio reflects the greater risk of the creditors. As such, a ratio above 0.5 is generally considered safe- for creditors

2.5.2.2 ACTIVITY RATIOS

Activity ratios are intended to measure the effectiveness of the

employment of resources, the command over which has been financed by the firm. They not only analyses the use of total resources of the firm but also the use of components of total assets. These are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. Activity ratios together with the degree of leverage employed by the firm are the key factors in determining profitability. The major activity ratios are Inventory turnover ratio, Debtors turnover ratio and Creditors turnover ratio.

2.5.2.2.1 INVENTORY TURNOVER RATIO

Inventory Turnover Ratio (ITR), also called stock Turnover Ratio establishes the relationship between sales and average inventory. It indicates whether investment in inventory is within proper limit or not. The two components are net sales and average inventory. Average inventory usually refers to the average of the inventories at the beginning and end of the accounting period. Inventory turnover is an indication of the velocity with which merchandise moves through the business. A low inventory turnover may reflect dull business, over investment in inventor; and accumulation of merchandise at the end of the period. A high inventory turnover ratio signifies high profit.

2.5.2.1.2.2 DEBTORS TURNOVER RATIO

The Debtors Turnover Ratio (DTR) or receivables Turnover Ratio (RT) as it is called, matches net credit sales of a firm to recorded trade debtors thereby indicating the rate at which cash is generated by turnover of receivable or debtors. This ratio is supplemented by Average Collection Period.

The Debtors Turnover Ratio indicates the number of times debtors turn over on an average, each year. Generally the higher the value of debtor's turnover, the more efficient is the management of assets. The shorter the average collection period, the better the quality of debtors as a short collection period implies prompt

payment by debtors.

2.5.2.2.4. FIXED ASSETS TURNOVER RATIO Fixed assets turnover ratio is used to highlight the utilization of the firms plant and equipment. A low ratio is indicative of the poor utilization of the existing plant capacity. This is calculated by dividing net sales into fixed assets

2.5.2.2.5 TOTAL ASSET TURNOVER RATIO

This ratio indicates sales generated per rupee of investment in total assets. A high ratio indicates overtrading of fixed assets while a low ratio shows excessive investments-a symptom of idle capacity. The traditional standard for the ratio is two times.

2.5.2.2.6 WORKING CAPITAL TURNOVER RATIO

The ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital turnover may be the result of favorable turnover of inventories and receivables. A low turnover of net working capital below 10 may the outcome of an excess of net working capital. 2.5.2.3. PROFITABILITY RATIOS The primary objective of a business undertaking is to earn profits. In the words of Lord Keynes, "Profit is the engine that drives the business enterprise". They are designed to highlight the end result of business activities which, in the imperfect world of ours, is the sole criterion for the overall efficiency of a business unit. Profitability ratios are, in fact a resultant of the pattern of liquidity ratios, leverage ratios and activity ratios. The important activity ratios are: Gross Profit ratio, Net profit ratio, Earnings per Share, return on investments, return on equity-Capital and Return on Capital Employed.

2.5.2.3.1GROSS PROFIT RATIO The first Profitability ratio in relation to sales is the gross profit ratio. It is calculated by dividing gross profit by sales. The gross profit ratio reflects the efficiency with which management produces each unit of product. This ratio indicates the average spread between cost of goods sold and sales revenue. A high gross profit ratio implies that the firm is able to produce goods at relatively lower cost and it is a sign of good management. A low gross profit ratio is not good as it may reflect higher cost of production due to the firm's inability in managing the production process.

2.5.2.3.2 NET PROFIT RATIO

This is the ratio of net income or profits after taxes to net sales. Net profit ratio indicates management's efficiency in manufacturing, administering and selling products. This ratio is the overall measure of the firm's ability to turn each rupee of sales into net profit. This ratio also shows the firm's capacity to withstand adverse economic conditions. A higher ratio shows that the firm's capacity to sun vive in the phase of falling sales prices and low ratio indicates an unfavorable position of the firms productivity and profitability.

2.5.2.3.3 RETURN ON SHAREHOLDR'S INVESTMENT

ROI also called Return on proprietor's fund is the ratio of net profits to proprietor's fund. This ratio is an effective measure of analyzing the profitableness of an enterprise. According to Charles. T. Horngreen, 'ROI is the most reliable quantitative measure that represents top managements objectives'. This ratio is one of the most important relationships in financial statement analysis

The return On Investment figures often provides a valid basis for inter industry comparisons. This is a measure of how well management has used all the permanent funds entrusted to the business. Briefly it is probably the best single measure of performance. 2.5.3. STAGES IN RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. But it is not an end in itself. It is only a medium for the better understanding of financial strengths and weakness of a firm. The analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objectives of analysis. The following are the four sees involved in ratio analysis. 1) Selection of relevant data from the financial statements depending upon the objective of the analysis. 2) Calculation of appropriate ratios from the above data Comparison of the calculated ratios with the past ratios of the same firm or ratios from projected financial statements or ratios of some other firms in the similar industry. 4) Interpretation of Ratios: Interpretation of ratios is only a clerical task where as interpretation needs skill, intelligence and foresightedness. A single ratio in itself does not convey much of the sense. To make ratios useful, they have to be interpreted further. The interpretation of ratios can be done in the following ways. I. Single absolute ratio: No one can draw meaningful conclusion when a single ratio is considered in isolation. But single ratios maybe studied in relation to certain rules of thumb which are based upon well proven conventions. 2. Group of ratios: Ratios may be interpreted by calculating a group of related ratios. A single ratio supported by other relational additional ratios becomes more understandable and meaningful. 3. Historical comparison: When financial ratios are compared over a period of time (called comparison over time) it gives an indication of direction of change and reflects

whether the firm's performance has improved, deteriorated or remained constant over a period of time 4. Inter firm comparison: Ratios of one firm can be compared with the ratios of some other selected forms in the same industry at the same point of time.

CHAPTER-III

INDUSTRY PROFILE

3.1 INDUSTRY PROFILE

Transformer industry covers oil cooled transformer, resin cast transformers, and compact secondary substations. This also covers turbo generators, boilers, turbines, transformers switch gears and relays. The performance of this industry is closely linked to the programs of the fast department of our country which requires new power equipment. This increases the demand of transformers. There is a strong manufacturing base for the manufacture of heavy electrical equipment in the country. The technology available in India is almost at par with in the international market

barring few areas of the high voltage lines. Technology is essential for a better living. However, items like CRGO steel and amorphous cores for low loss transformers are being imported. The present buoyancy in Indian Economy would create demand for the electrical product through industrial growth and general economic development. The power sector reforms will create large business for power sector equipment manufacturers and service providers. In the current favorable scenario, the electrical industry can certainly look forward to growth.

TRANSFORMERS
A Transformer is a device that transformers electrical energy from one circuit to another through inductively coupled conductors the transformers coils. A varying current in the first or primary winding creates a varying magnetic flux in the transformers core and thus a varying magnetic field through the secondary winding. This varying magnetic field induces a varying electromotive force (EMF) or voltage in the secondary winding. This effect is called mutual induction. If a load connected to the secondary, an electric current will flow in the secondary winding and electrical energy will be transformed from the primary circuit through the transformer to the load. In an ideal transformer, the induced voltage in the secondary winding (vs) is in proportion to the primary voltage (vp), and is given by the ratio of the number of turns in the secondary (Ns) to the number of turns in the primary (NP) as follows: VS/ VP
=

NS/NP

By appropriate selection of the ratio of turns, a transformer thus allows an alternating current (AC) voltage to be stepped up by making Ns greater than Np, or stepped down by making Ns less than Np. In the vast majority of transformers, the winding are coil would around a ferromagnetic core, air-core transformers being a notable exception. Transformers range in size from a thumbnail-sized coupling transformer hidden inside a stage microphone to huge units weighing hundreds of tons used to interconnect portions of power

grids. All operate with the some basic principles, although the range of design is wide. While new technologies have eliminated the need for transformers in some electronic circuits, transformers are still found in nearly all electronic devices designed for household (mains) voltage. Transformers are essential for high voltage power transmission, which makes long distance transmission economically practical. The global price hike in transformer raw material such as Copper, Aluminium and oil caused transformer prices to increase in India. Also, a shortage of cold - rolled grain oriented steel is further escalating the prices of this essential transformer core material. With growing demand and price both rising, Indian manufactures are findings it difficult to maintain margins in the long term there by transferring the burden of increased costs to the end users. The regulatory structure of the power sector has faced some uncertainties in India due to the reluctance and failure of certain states to put the regulations into practice. Furthermore, utilities are confronting financial problems because of high Transformation & Distribution losses, thus increasing their debt. Despite these setbacks, the power sector in India is likely to remain buoyant, according. Reforms in the sector and the enlargement of the power distribution network under Indias accelerated power Development and Reforms programmes is driving the growth and strengthen of sub transmission lines. In addition, the increase in transmission grid reliability will result in heightened demand for power transformers.

MAJOR PLAYERS IN INDIA

The transformers market in India is largely unorganized with very few organized players. The key organized players in this segment are: P s electrical PVT LTD Chennai Hindustan power products PVT LTD New Delhi C E power transformers Ernakulam Gayathri Industry Delhi

 Magnetic & Control, Coimbatore Shah Electronics, Areva T&D India Into Tech Transformers Limited

3.2 WORLD SCENARIO

This report analyses the worldwide markets for transformers (electricity) in US$ million and units by the following products segment: 500-10000 KVA Transformers, C10, 001-30000 KVA Transformers, and >100001 KVA Transformers. The report provides separate comprehensive analytics for the US, Canada, japan, Europe, Asia-pacific, Latin America, and rest of world. Annual estimates and forecasts are provided for each region for the period 2007 through 2015. A six year historic analysis is also provided for these markets. The report profiles 213 companies including many key and niche players such as Areva T&D, ASEA Boveri, Bharat Heavy Electricals Limited, Cromption Greaves Ltd., EFACEC Group, Ekarat Engineering public company Limited, Hammond Power solutions, inc., IMP power Limited, KirloskarEletric Company Limited., Kuhlman Electric Corporation, Nissin Electric Company Limited, power tech Transformers (pty) Ltd., Schneider Electric SA, siemens AG, VA Technologies AG, shillin Electric &Engineering Corporation, SmitTransformatoren NV. And Waukesha Electric systems inc. market data and analytics are derived from primary and secondary research. Company profiles are mostly extracted from URL research and reported select online source. The growing presence of global participants in the Indian power and voltage solution transformers market is a cause for concern for local manufacturers. Understanding the importance of private participation for the growth of the market, the Indian Government is actively taking steps to encourage increased private investment. This report analysis the worldwide markets for transformers (Electricity) in millions of US$ and units. The specific product segments analyzed are power Transformers, Distribution Transformers. One of the most important developments in the global economy in the past half-century is the enormous growth in world trade. The growth of the trade share of output is probably the most commonly used piece of evidence to illustrate the increasingly globalize world economy. This

growth has been dramatic, averaging 3 per cent per year for the past 50 years. In the time period first focus on, 1962-99 the merchandise (manufacturing) export share of output tripled (quadrupled). This report analyses the worldwide markets for transformers (Electricity) in millions of US$. The specific segments analyzed are power Transformers, Distribution Transformers, 500100001 KVA, 30001-100000 KVA, and 100001 KVA. The report profiles 195 companies including many key and niche players worldwide such as Areva, Areva T&D, ASEA Brown

Boveri, ABB powertech Transformers, Bharat Heavy Electrical Limited, commotion Greaves Ltd., EFACEC, Ekarat Engineering public limited, Hammond power solutions, HolecResitra, IMP Power Limited, Kirloskar Electric Ltd., kuhlman Electric, Nissin Electric company,Schneider Electric SA, Siemens, shihlin Electric & Engineering corporation. Recent past, current &future market analysis for Transformers (Electricity) by product type power Transformer and Distribution Transformers markets US recent past, current & future market analysis for transformers (Electricity) by product group/segment 500-10000 KVA transformers, 10001 -30000 KVA transformers, 30001 100000 KVA transformers, and 100001 KVA transformers markets. Japanese Recent past, current & future market analysis for transformers (Electricity) by product type power transformer and Distribution transformer markets independently analyzed with annual sales figures in US $million for years 2001 through 2010. Rest of world recent past, current & future markets analysis for transformers (Electricity) by product group/segment 50010000 KVA transformers, KVA transformers, 30001-100000 KVA Transformers, and 100001 KVA Transformers markets independently analyzed with annual sales figures in units for years 2001 through 2010. Rest of world historic market review for transformers ( Electricity) by product group/segment 500-10000 KVA transformers, 10001- 3000 KVA transformers, 3001-100000 KVA Transformers, and 100001 KVA transformers markets independently analyzed with annual sales figures in units for years 1991. The current interest in determining the condition of the power transformers in service, and in minimizing both the cost of keeping them in services and the risk involved. The resent trend for trend for many unities is to reduce capital spending, and one area that is being more closely

scrutinised is capital expenditure on power transformers most utilities desire to make efficient use of transformers without creating operating or main tense problem load growth causes increased loading on transformers or necessities the procurement of new transformers. Utilities may opt for increased transformers loading, which could reducing the life cycle cost of power transformers involve an evaluation of all presented future costs over the expected life of the transformers. Present value analysis is used to convert all future to equivalent present costs. The scenario with lowest life cycle cost is of the power transformers. The procedure and formulas used in the present value economic analysis are not given because of lack of space. The premise of the engineering economic study was to utilize the present value method examine the cost impacts ( savings or debits) that will occur by delaying the scheduled replacement date of the new transformers, by allowing the existing transformer to remain in service after it has exceed existing Manitoba hydro transformer replacement criteria.

3.3 INDIAN SCENARIO

Industrial units manufacturing large plant and machinery required for power generation, transmission, distribution and utilization are covered under the category Heavy Electrical Industry. These include electrical equipment such as motors, transformation; switching etc are used by all sectors of the Indian Economy. Some major areas where these are the multi core projects for power generation including nuclear power station, petrochemical complexes, chemical plants integrated steel plants, non-ferrous metal units etc. the industry has been upgrading the existing technology and is now capable of taking up turnkey contracts also for export markets. The existing installed capacity in the industry is of the orders of 4500 MW of thermal, 1345 MW of Hydro and about 250 MW of gas based power generation equipment per annum. These also exists capability for manufacture of equipment for nuclear power plants in the country. The share of domestic equipment is about 66% in the countrys power generation capacity. The Heavy Electrical Industry is capable of manufacturing transmission and distribution equipment industry is capable of manufacturing transmission and distribution equipment up to 400 KV AC and high voltage DC. Steps have also been taken to upgrading the technology to the next higher systems voltage level of 800 KV. Large electrical motor used in steel plants, petrochemical complexes and other such heavy industries are also being manufactured in the country. The

domestic heavy Electrical equipment manufacturers are making use of the development in the global market with respect to product design and upgrading of manufacturing & testing facilities. The domestic transformers industry is well established with ability to provide state-of-theart- equipments. The industry has the capacity to manufacture whole range of power and distribution transformers including the REC rating of 25,53, 100 KVA and also the extra High voltage range of 400 KVA, 600 MVA. Special types of transformers required for furnaces, rectifiers electric tract etc and series and shunt reactors as well as HVDC transmission up to 500 KV is also being manufactured in the country. The industry is well equipped to cope with the requirement of the countrys power sector development programmes. Distribution transformers offer a largely untapped opportunity for efficiency improvements in building. Application of energy-efficient equipment can reduce transformer losses by about 20%, substantially cutting facilities total electricity bill and offering typical paybacks less than three years. Since nearly all of the electricity powering the commercial and industrial sectors is stepped down in voltage by facility-owned distribution transformers, broad application of energyefficient equipment will lead to huge economy-wide energy and dollar savings as well as associated environmental benefits. This opportunity has led to a multi-party coordinated effort that offers a new model for national partnerships to pursue market transformation. Collaborative participants are joined by a common interest in establishing and expanding the market for a new product, service, or practice that will yield substantial energy saving. This paper summarizes the technical efficiency opportunity available in distribution transformers; discusses the market barriers to widespread adoption of energy-efficient transformers; and details an overall market transformation strategy to address the identified market barriers. The respective roles of each of the diverse players, manufacturers, government agencies, and utility and regional energy efficiency programs- are given particular attention. Each of the organizations involved brings a particular set of tools and capabilities for addressing the market barriers to more efficient transformers. The commercial and industrial distribution transformers market offers a still- developing case study in the informal collaborative model for a national market transformation initiative. After a brief discussion of the market transformation opportunity for commercial and industrial

transformers, this selection uncovers the roles played by the collaborators in this market transformation effort. Distribution transformers convert incoming electrical service to the lower voltages used to run equipment and lighting throughout buildings. While distribution utilities own and maintain transformers for residential and small commercial service, larger commercial and industrial customers typically take power at higher voltages and step down the power to plant or building voltages useful for their applications on the customer side of the electric meter. Therefore, large commercial and industrial utility customers pay the bill for distribution transformer inefficiency. Commercial and industrial distribution transformer losses total to about 79 billion KWh annually (barnese at 1996). Energy-efficient transformers could cut this total by about 20% substituting energy-efficient transformers for standard equipment in new facilities, expansions and renovations could reduce total U.S. Electricity uses by more than 3.2 billion KWh in 2010 for a savings of nearly $200 million. Because transformers generally last a very long time, the 2010 savings represent only a third of the total potential savings. Annual savings will continue to balloon as stock penetration grows for another twenty plus years. Barnes et al. estimate that full manufacturer participation and universal acceptance of equipment meeting a recently developed voluntary industry standard for energyefficient transformers would yield energy savings approaching 2.5quads over a 30 year period 1997. Despite this large economy-wide savings opportunity, relatively little attention has been paid to commercial and industrial transformer efficiency. This lack of attention can be traced to several barriers. In general, facility managers, specifies and contractors perceive transformers as already being very efficient. Because they are part of the electrical system, transformers are not generally perceived as a user of electricity, and therefore little attention is paid to their efficiency. In addition, specifies and contactors who typically decide which transformers get installed have no direct stake in keeping operating costs low. Finally, even for the most efficiency-focused facilities, energy-saving efforts typically are directed to large end-uses such as motor and lighting system. The net result is that most facilities choose transformers on the basis of lowest first cost, missing opportunities to cost-effectively trim operating costs by installing energy-efficient transformers. 2

Dollars quoted in 1997 dollars, assumes flat electricity prices. 1997 sales-weighted average of commercial and industrial rates was $0.0613/k Wh. For new facilities, expansions or renovation of existing facilities or the rare transformer failure, choices exist which can provide substantial cost-effective energy savings. By choosing energy-efficient transformers, individual commercial and industrial facilities can cut total electricity bills by 0.3% to 1.5% or more with paybacks of there to five years at national average electricity rates. For instance, a medium-sized office building with a husband 75 KVA low voltage transformers could cut its annual electric bill by transformers. Faced with a market that failed to yield even the most cost-effective energy efficiency improvements, the collaborative partners each contemplated individual efforts to improve transformers efficiency. In 1997, the collaborators formed a loose-knit group that began sharing information on how they could work together to move the market toward higher levels of energy efficiency. Currently, the collaborative involves manufactures. Electrical Manufacture Association, the U.S. Environment protection Agency federal purchasers represented by the Federal Energy Management Program, utility- and regionally-based energy efficiency programs, and energy- efficiency organizations. Each of these market actors has played or will play a critical role in addressing specific market barriers. On the supply side, the strategy emphasizes creating common definition of energy efficiency so that manufacturers and purchase have a clear performance target. On the demand side, effort star get creating enough initial demand to justify investment in new product lines and distribution of equipment meeting upon definition of energy-efficient equipment. The following sections detail the specific contributions of each partner in the informal collaborative. Manufacturers and their industry trade association have played a linchpin role in creating the basis for providing customers with the products and information they need to procure more efficient transformers. For over twenty years the industry has introduced technical and another choice bearing further investigation is the one between dry-type and liquid-immersed equipment. The savings cited in the text assume customers stay within equipment type. However, currently available liquid immersed equipment can reach higher efficiencies at lower equipment cost than 171000 KWh by selecting energy-efficient

comparable dry-type equipment. Despite the lower first costs and higher efficiencies of liquidimmersed equipment, facilities have generally specified dry-type equipment for indoors and, in some cases, outdoor equipment due to fire and safety concerns. With the availability of improved insulating materials, more users may be willing to consider liquid-immersed equipment for both outdoor and indoor applications and thus be able to reap additional efficiency gains and significant first cost and operating saving. Manufacturers of the competing equipment types argue the relative merits of their products. Manufacturing techniques that reflected utility interests in minimizing energy lose. Consequently, the capability to provide cost-effective, energy-efficient equipment has been developed by the manufacturing industry. Manufacturers desires to be responsive to the growing interest of their customers motivated their decision to develop standard defining energy efficiency. In addition, the public interest in saving energy gained the attention of the distribution transformer industry in 1989, in the industrys view; manufacturers are best positioned to assess their own customers needs. Distribution transformers offer a largely untapped opportunity for efficiency improvements in buildings. Application of energy-efficient equipment can reduce transformers losses by about 20% substantially cutting a facility is total electricity bill and offering typical paybacks less than three years. Since nearly all of all the electricity powering the commercial and industrial sectors is stepped down in voltage by facility-owned distribution transformers, broad application of energyefficient equipment will lead to huge economy-wide energy and dollar savings as well as associated environment benefits. This opportunity has led to a multi-party coordinated effort that offers a new model for national partnerships to purpose market transformation. Collaborative participants are joined by a common interest in establishing and expanding the market for a new product, service, or practice that will yield substantial energy savings. This paper summarizes the technical efficiency opportunity available in distribution transformers; discusses the market barriers to wide spread adoption of energy-efficient transformers; and details an overall market transformation strategy to address the identified market barriers. The respective roles of each diverse players manufacture, government agencies and utility and regional energy

efficiency programs- are given particular attention. Each of the organizations involved brings a particular set of tools and capabilities for addressing the market barriers to more efficient transformers.

3.4 STATE SCENARIO

Industry units manufacturing large plant and machinery required for powerful generation, transmission, distribution and utilization are covered under the category Heavy Electrical Industry. These include electrical equipments such as motors, transformers; switchgears etc. used by all sectors of the Indian Economy. Some major areas where these are used are the multi-core projects for power generation including nuclear power stations, petrochemical complexes, chemical plants integrated steel plants, non-ferrous metal units etc. the industry has been upgrading the existing technology and is now capable of taking up turn-key contracts also for export markets. The existing installed capacity in the industry is of the order of 4500 MW of

thermal, 1345 MW of Hydro and about 100 MW of gas based power generation equipment per annum. There also exists capability for manufacture of equipment for nuclear power plants in the country. The share of domestic equipment is about 66% in the countrys power generation capacity. The Heavy Electrical Industry is capable of manufacturing transmission and distribution equipment up to 400KV AC and high voltage DC. Steps have also been taken to upgrade the technology to the next higher system voltage level of 800 KV. Large electrical motor used in steel plants, petrochemical complexes and other such heavy industries are also being manufactured in the country. The domestic Heavy Electrical equipment manufacturers are making use of the development in the global market with respect to product designs and upgrading of manufacturing & testing facilities. The capacity established for manufacture of various kinds of turbines such as steam & hydro turbines including industrial turbines is more than 7000 MW per annum. Apart from BHEL, the public sector units have the largest installed capacity. There are units in the private sector also

manufacturing steam & hydro turbines for power generation and industrial use. The manufacturing range of BHEL includes steam turbines up to 500 MW units which they are planning to enhance up to 660 MW. They have capability to manufacture Gas Turbines up to 255 MW (ISO) rating. The domestic transformers industry is well established with ability to provide state-of-theart equipments. The industry has the capacity to manufacture whole range of power and distribution transformers including the REC ratings of 25,53,100 KVA and also the extra high voltage range of 400 KV, 600 MVA. Special type of transformers required for furnaces, rectifiers, electric tract etc. and series and shunt reactors as well as HVDC transmission up to 500 KV are also being manufactured in the country. Industry is well equipped to cope with the requirements of the countrys power sector development programmers during.

COMPANY PROFILE
Unipower Transformers pvt Ltd is transformer manufacturing company which provide most optimal voltage control solutions for both industrial and domestic applications. They design, engineer and manufacture, most reliable can resin transformer conforming to international technical standards. the senior engineering team of the company is highly skilled, with decades of experience in design and manufacture. Every product of the company reflects this technical savy gained through extensive exposure to modern transformer technology. The senior engineering team of the company is highly skilled, with decades of experience in design and manufacture.

The company has an on-going program of quality management, government by ISO procedure and in-house testing systems to check quality starting from raw material to final acceptance test. A modern test house is set up which can conduct all routine tests as per Indian standards and international standards. Also we can conduct type like temperature-rise test and special tests like partial discharge test. In order to double check the technical competency, we rely on successful testing of representative ratings at CENTRAL POWER RESEARCH INSTITUTE,(CPRI) which is the apex test house of India. We have successfully tested up to the rating of 1600KVA.

QUALITY POLICY OF THE COMAPNY

Unipower transformers private Ltd is committed to satisfy the customers by providing products and services of excellent quality always on time. It is committed to continually improve the performance and to be the marketing leader by achieving total excellence in all aspects with the involvement of all employees. Current unpowered production programme includes wide range transformers for various applications such as: Resin Cast Transformers up to 2000KVA & 11000 KVA Load break switch panels ( with or without metering) Unitised substations 11KV Oil- immersed transformers with on-load tap changer Oil-immersed transformers up to 2500KVA & Operating Voltage 33000V Rectifier Transformers Earthling Transformer

RESIN CAST TRANSFORMERS

Dry type transformers are made of Resin Cast substance which is fire retardant, nonpolluting and humidity resistant. This makes Resin Cast Transformers, one of the safest power distribution equipment. Epoxy resin insulation material is non-hazardous which makes the transformer windings maintenance-free, self-extinguishing, humidity-resistant, and tropicalized. Range of production Up to 2000KVA, 11000V

ENVIRONMENT TERIENDLY
Unipower Resin Cast transformer uses an epoxy insulation material which is a non-hazardous material. The transformer winding are maintenance-free, humidity-resistant, tropical zed, fireresistant and self-resistant and self-extinguishing. Efficiency Reliability Resin Cast Transformers can withstand higher impulse voltage and temperature. They are much more reliable compared to conventional oil-immersed transformers.

COMPACT SECONDARY SUBSTATIONS

Compact substations are widely used in areas where underground power reticulation is required, such as in residential, commercial and industrial developments. Compact substations fully enclose a transformer and HV and LV connections or switchgear, and are shipped to site fully assembled. A compact substation is a cost-effective and aesthetically pleasing solution. Many standard and pre-engineered compact substation arrangements are available. All styles are fully rated in their enclosures, which is inline kiosk (HV, transformer, LV) with oil containment in line(HV and LV on one side of transformers) without oil containment.

OIL COOLED TRANSFORMERS

For multi-kilowatt high power work, oil cooled transformers are usually used. These have metal pipes running through the core carrying thin oil. This oil thermosyphons its circuit heat to tubes external to the transformer core for dissipation. These are common in power stations & substations. Our oil cooled transformers are designed manufactured and tested as per IS 2026. The transformers are manufactured using genuine quality materials of core, conductors, oil etc. to meet losses as per the relevant standards. All the transformers are tested for its routine test as per IS 2026. Special tests shall be conducted on special request. Our range of manufacturing transformers from 100 KVA, 11KV 33KV, 3 phase, 50HZ, with first filling of oil per IS 335 and temperature rise as 50 Deg in oil &Deg in winding and suitable for outdoor execution and taps on HV by OFF circuit tap switch with Taps: 5% in steps of 2.5%. the painting shall be AD grey of shade 632 of IS-5. All the transformers will be provided with standard fittings as per the relevant standards. Optional fittings such as Temperature indicators, Bucholtz Relay, Magnetic oil level gauge,

Marshalling box, on load tap changer with Remote Tap Changer Cubicle with automatic Voltage Relay shall be provided as per the customers requirement.

3.2 OBJECTIVES OF THE COMPANY

Unipower Transformers provides the perfect, the most cost-effective voltage control solutions for both industrial and domestic applications. Unipower transformers are designed, developed, engineered and manufactured to conform to the most exacting standards of reliability and performance. The company is in a constant search for innovative product development, technology, process improvement, cost control and after sales problem-solving. Unipower transformers private Ltd is committed to satisfy their customers by providing products and services in excellent quality always on time. It is committed to continually improve their performance and to be the marketing leader by achieving total excellence in all aspects with the involvement of all employees.

3.5 HISTORY OF THE COMAPANY

The company was established in 2003 and Mr.pradheepan is the managing director of the company. Registered office of the company is in kottayam. The company was started with the authorized capital of 1000000. It is started for the giving complete voltage solution for industrial and domestic applications. The company has been working since seven years. The main market of the company is Kerala. Now the company has extended their marketing and sales activities to tamilnadu and Karnataka and also to extend their marketing activities to African countries. In the initial stage company had a few number of customers only. Now the company has a large customer network. 3.6 ORGANIZATIONAL STRUCTURE OFTHE COMAPNY

MANAGEING DIROCTOR

GENERAL MANAGER

PRODUCTION MANAGER M ASST.PURCHASE M MANAGER

MARKETING MANAGER MA MARKETING EXECUTIVE

PURCHASE MANAGER

FINANCE&ACCOU NT MANAGER

SERVICE MANAGER

H R MANAGER

ASST.PURCHASE MANAGER

ASST.FINANCE MANAGER

ASST.SERVICE MANAGER

WORK MANAGER

SUPERVISOR

MARKETING TRAINEES

STORE ASSISTENT

JUNIOR OFFICERS

JUNIOR ASSISTENT

JUNIOR OFFICERS

Figure 3.1: organization chart

3.5 DIFFERENT PHASES OF DEVELOPMENT OF THE COMPANY Unipower transformers private Ltd is a private sector undertaking established with the vision of providing most optimal voltage control solution for industrial and domestic application. Beginning in 2003 at block number 32 Kinfra Industrial park, Nellad Kochi, started producing resin cast transformers, oil cooled transformers and compact secondary

substations. Now it has started the manufacturing of load break switch panels. Company is started the authorised capital of 1000000 now the company has the turnover of Rs.16 core.

 The company has only one plant in Nellad. Now company the has new manufacturing plants at House, tamil Nadu. Unipower has carved for itself a name that spells excellence and reliability in the transformer manufacturing industry. In 2005 unipower got the ISO certification and now also the company has ISO 90012008 certification. In the initial stage the has the limited number of consumers. Now company has a large network of consumers like Cochin shipyard, Abad builders, Indus motors, popular motors etc. During the initial stage the company had the marketing activities only in Kerala. Now the company has extended their marketing activities to Karnataka and Tamil Nadu. A modern test house is set up which can conduct all routine test as per Indian standards and international standards.

3.6 FUTURE PLANS & PRODUCERS OF THE COMPANY

The company is started for manufacturing high quality transformers. Companys future plan is to renew the ISO certification. To complete the in house quality system. Maintain the related with CENTRAL POWER RESEARCH INSTITUTE. Start working the marketing activities to African countries. Start service unit in other cities of Kerala.

CHAPTER IV RESEARCH METHODOLOGY

4.1 RESEARCH METHODOLOGY Research methodology is required while conducting research, irrespective of the field in which the research is being conducted. However in context of research methodology in social sciences there are two important things that needs to be mentioned. The methodology need not restrict itself to the questions only but should concentrate on three aspects: i) ii) iii) Method of questioning Method of observation Method of interpretation

4.2 RESEARCH DESIGN Once the researcher is given the go-ahead, the next step is to work out the research design in detail. Research design outlines the conditions for collection and analysis of data. The what, when, where, how much and the method of data collection are detailed in the research design. For this study Descriptive Research Analysis is used which describes records, analyse and interprets the conditions exists. 4.3 SOURCES OF DATA

It describes what must be done, what data will be needed what data gathering device will be employed how the data will be analyzed and the conclusions drawn. There are mainly two sources from which the data are collected, they are; a) Primary data b) Secondary data. Primary data These are data which are collected for the first time, Primary data was collected through observation, direct interview held with various departmental heads, other officials and staffs.

Secondary data The secondary sources which are opted for the study are; a) Annual report of the company. b) Magazines. c) Website of the company and other related spheres.

4.4 RESEARCH INSTRUMENT USED

Some of the research instruments used for the study includes tables, percentage, ratios as statistical tools. 4.5 RESEARCH PERIOD 2 months starting from 1 December 2011 to 15th January 2012 was the research period for this study.

CHAPTER - V DATA ANALYSIS AND INTERPRETATION

5.1 Ratio Analysis

A ratio is simply one number expressed in terms of another number. In other words, a ratio expresses mathematical relationship between one number and another. Ratio Analysis is the best known and most widely used tool of financial analysis. In financial analysis, a ratio is used as an index or yardstick for evaluating the financial performance of a firm or company.

Profitability ratios indicate the efficiency or effectiveness with which the

operations of the business are carried on. They are employed by management in order to assess how efficiently they carry on business operations. The effectiveness of the operations of UNIPOWERTRANFORMERS is briefly discussed with the help of profitability ratios.

5.1.1 Gross Profit Ratio

Gross profit ratio is the ratio of gross profit to net sales expressed as a percentage. This ratio indicates to what extend the selling prices of goods per unit may be reduced without incurring losses on operations.

Gross profit Ratio =

Gross profit * 100 Net Sales

The higher the ratio, the greater will be the profitability and the greater will be the margin. Hence, it is also called margin ratio 20% to 30 % gross profit may be considered normal

Year 2007 2008

Gross Profit 947559825 17248826

Net sales 63170655 98564720

Ratio 15 17.5

2009 2010 2011

24373732 27156925.4 32904806.04

129647511 135784627 152337065

18.8 20 21.5

2011

2010

2009

Series1

2008

2007 0 5 10 15 20 25

Interpretation: The company has continues growth in gross profit. An increase in gross profit ratio due to an increase in the selling price without a corresponding increase in the cost of goods sold. It may also be due to low selling prices. A high gross profit ratio, on the other hand, indicates relatively lower cost and is a sign of good management. From the above figure we can interpret that the company is having continues growth trend for the gross profit. 5.1.2 Net Profit Ratio This is the ratio of net profit to net sales. This ratio is based on all inclusive concept of profit. It relates sales to net profit after operational as well as nonoperational expenses and incomes. It is a measure of net profit margin in relation to sales. Besides, revealing profitability, it is the main

variable in computation of Return on Investment. It reflect the overall efficiency of the business, assumes great significance from the point of view of investors. Formula:

Net Profit Ratio =

Net Profit Net Sales

*100

Year 2007 2008 2009 2010 2011

Net profit 4191552 7997667 12976925 14527224 19185784.77

Net sales 63170655 98564720 129647511 135784627 152337065

Ratio 6.63 8.4 10 10.69 12.59

2011

2010

2009

Series1

2008

2007 0 2 4 6 8 10 12 14

Interpretation: The net profit ratio is the overall measure of a firms ability to turn each rupee of sales into profit. It indicates the efficiency with which a business is managed. A firm with a high net profit ratio is in an advantageous position to survive in the face of rising cost of production and falling selling price. Where the net profit ratio is low, the firm will find it difficult to withstand these types of adverse conditions. Here the overall profitability of the company is fluctuating. In 2011 it indicates the highest net profit 12.59 of while compare to other previous years due to the increase of sales and other consumption activities.

5.1.3 RETURN ON CAPITAL EMPLOYED This ratio shows an indicator of the earning capacity of the capital employed in the business. It reflects the overall efficiency with which capital is employed.

Return on Capital Employed = Net profit before Tax/ Shareholders Fund*100

This ratio is also known as return on investment (ROI).The primary objective of making investment in any business is to obtain satisfactory return on capital invested. It indicates the return on capital employed in the business and it can be used to show the efficiency of the business as a whole.

Year 2007 2008 2009 2010 2011

Net profit

after

Capital employed 15576510 20563268 24868543 27254922 30820193

interest and tax 6954892 12649527 20725659 23647841 28764295

Ratio 44.64 61.5 83.34 86.76 93.32

2011

2010

2009

Series1

2008

2007 0 20 40 60 80 100

Interpretation:

Here we can see that the ratios were continuously varied. It shows the lowest ratio in the year 2007 and the highest ratio was shown in 2011. It indicates the

return on capital employed in the business and it can be used to show the efficiency of the business as a whole. The higher the ratio, more efficient use of capital employed.
5.1.4 Return on shareholder's Investment
The ratio popularly known as ROI is the relationship between net profit and proprietor's fund. ROI is generally calculated as a percentage.

Return on one of the important ratios used for measuring the overall efficiency of a This is shareholder's Investment = Net Profit * 100 proprietors fund firm. A higher ratio is an index of better utilization of funds.

Year 2007 2008 2009 2010 2011

Net profit

after

proprietors fund 15676510 19763268 26295437 29754922 33220193.69

interest and tax 6954892 12649527 20725659 23647841 28764295

Ratio 44.65 64.30 78.8 80.17 86.84

2011

2010

2009

Series1

2008

2007 0 50 100 150 200 250 300 350

Interpretation:

Return on shareholders investment shows a positive figure in each and every year. This is good as it is a sign of company's efficiency in the proper utilization of funds. It related the profit available for the shareholders to their total investment.

5.1.5 Return on Total Assets Return on total assets or Return on total resources is compared to find out the productivity of the total assets, this ratio compares the total profit with the total assets of the business.

Return on Total Assets = Net profit after interest and tax *100 Total assets

Year 2007 2008 2009 2010 2011

Net profit after interest and tax 6954892 12649527 20725659 23647841 28764295

Total assets 24204859.88 30524842.64 37602972.18 42233421.19 46623234.58

Ratio 28.73 41.44 53.1 55.99 61.69

2011

2010

2009

Series1

2008

2007 0 10 20 30 40 50 60 70

Interpretation: This ratio is measured in terms of relationship between net profit and assets employed and it measures the profitability of the firm in terms of assets employed in the firm. From the above figure we can interpret that the company is going with an increasing trend. In 2007 it is at 28.73 and in 2008 it increased to 41.44. In 2009 again increased to 53.1 and in 2011 it shows the highest rate of 61.69. This means the profitability of the firm is increasing year by year due to the result of introducing new outlets and other benefits to the customers.

5.1.6 EARNING PER SHARE

This helps to determine the market price of equity shares of the company and in estimating the companys capacity to pay dividend to its shareholders. This measures the profit available to the equity shareholders per share it is calculated by dividing the profit available to the equity shareholders by the number of share issued.

Earnings per Share = Net profit After Tax/ No. of Equity Shares

Year

Net profit

after interest

Number of equity shares 100 100 100 100 100

and tax 6954892 12649527 20725659 23647841 28764295

Ratio

2007 2008 2009 2010 2011

6954892 12649527 20725659 23647841 28764295

2011

2010

2009

Series1

2008

2007 0 50000 100000 150000 200000 250000 300000 350000

Interpretation: From the graph it is clear that the earning per share of the firm increasing year after year. It reveals that the company has a favorable capacity to pay the dividend to its equity shareholders

Liquidity Ratios
Liquidity means ability of a firm to meet its current obligations. The Liquidity Ratios, therefore, try to establish a relationship between current liabilities, which are the obligations soon becoming due and current assets, which presumably provide the source from which these obligations will be met. In other words, the liquidity ratios answer the question : Will the company probably be able to meet its obligations when they become due? 5.1.7 Current Ratio (Working Capital Ratio) This ratio is most commonly used to perform the short-term financial analysis. Also known as the working capital ratio, this ratio matches the current assets of the firm to its current liabilities. Normally a current ratio of 2:1 is considered satisfactory. A relatively high current ratio indicates that the firm is liquid and has the ability to meet its current liabilities. A relatively low current ratio indicates that the firm will find it difficult to pay its bills. Formula:

CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITY

Year 2007 2008 2009 2010 2011

Current assets 13880282 18892767 27447160 31077608.92 32031495

Current liability 2592764 5775971.68 6704133.18 10886269.18 11095810.97

Ratio 5.35 3.22 4.09 2.65 2.80

2011

2010

2009

Series1

2008

2007 0 1 2 3 4 5 6

Interpretation: Here, the ratio shows a favorable condition for the firm. Current ratio of 5.35, 3.22, 4.09, 2.65, and 2.80 shows a fluctuating ratio trend and it shows an inadequate use of working capital of the firm. Here the firms current assets are increasing due to the increase in cash and bank balances and other current assets.

5.1.7 Liquid Ratio (Acid Test Ratio or Quick Ratio) Liquid ratio is the ratio of liquid assets to liquid liabilities. It is considered to be superior to current ratio in testing the liquidity position of the firm or a company. It is a more severe test of liquidity of a company. It shows the ability of a business to meet its immediate financial commitments. Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial position

Formula:

Liquid Ratio =

Liquid Asset Quick Liability

Year 2007 2008 2009 2010 2011

Quick assets 10869105.6 15741125.0 25332643.0 4252912.18 32031495

Quick liability 2464703.35 2018521.4 4252912.18 4528455.19 42379917.19

Ratio 4.41 5.7 5.9 6.3 7.5

2011

2010

2009

Series1

2008

2007 0 2 4 6 8

Interpretation: Liquid Ratio is a more rigorous test of liquidity then current ratio. The ideal value for liquid ratio is 1:1.unipowertransformers has been having a growth fluctuating ratio base when liquid asset and current liabilities are considered. It shows a favorable condition because the capability of the firm to meet the standard. In 2007 the ratio is 0.4.41 and in 2011 it increased to 7.5.

Leverage Ratios
Leverage Ratios are used to analyze the long term solvency of any particular business concern. There are two aspects of long term solvency of a firm (i) ability to repay the principal amount when due, and (ii) regular payment of interest. 5.1.8 Debt Equity Ratio Debt Equity Ratio shows the relationship between total debts and owned capital. This ratio indicates the relative proportion of the debt and equity in financing the assets of the company. In other words, this ratio measures the relative claims of long term creditors on the one hand and owners on the other hand, on the assets of the company. The debt equity ratio of 1:1 is generally acceptable. The lower this ratio, the less the company has to worry in meeting its obligations.

Formula:

Debt Equity Ratio =

Debt Equity

Year 2007 2008 2009 2010 2011

Debt 8628349.88 10861574.85 12648922.18 12578499.19 13503041.19

Equity 15676510 19763268 26295437 29754922 33220193.69

Ratio 0.55 0.58 0.48 0.42 0.40

2011

2010

2009

Series1

2008

2007 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

Interpretation: The Debt Equity Ratio is an important tool of financial analysis to appraise the financial structure of firm. This ratio reflects the relative contribution of creditors and owners of business in its financing. The ideal value for Debt Equity Ratio is 1:1. This ratio is an indicator of leverage. A higher ratio here means for less protection for creditors. A low ratio indicates a wider safety cushion. When we compared with these five years it is clear that the ratio has been getting lower. In 2007 it shows .55 it get reduced in 2008 to .58 again there is a reduction of .42 in 2010 and in 2011 the ratio is at .40 it is clear that the company is moving in a favorable condition. 5.1.9 Proprietary Ratio This is a variant of debt equity ratio. It measures the relationship between shareholders funds and total assets. It indicates the proportion of total assets financed by shareholders. It is usually computed as a percentage. Proprietary ratio shows the extent to which shareholders own the business and thus indicate the general financial strength of the business. The higher the proprietary ratio, the greater the long term stability of the company and consequently greater protection to creditors.

Formula:

Proprietary Ratio =

Equity Total Assets

Year 2007 2008 2009 2010 2011

Shareholders fund 15676510 19763268 26295437 29754922 33220193.69

Total assets 24204859.88 30524842.64 37602972.18 42233421.19 46623234.58

Ratio 0.64 0.67 0.68 0.70 0.71

2011

2010

2009

Series1

2008

2007 0.6 0.62 0.64 0.66 0.68 0.7 0.72

Interpretation:

The ratio shows a fluctuating trend. In 2007 the ratio is at 0.64 and in 2008 and 2009 it increases to 0.67 and 0.68. In 2010 again it shows change to 0.70 and this fluctuation in the equity is caused by the fluctuation in the Reserves and Surplus of the company. 5.1.10 Fixed Asset Net worth Ratio This ratio shows the relationship between the fixed assets and net worth. It shows whether fixed assets are fully utilized or not. Formula:

Fixed Asset Net Worth =

Net Fixed Asset Net Worth

Year 2007 2008 2009 2010 2011

Fixed assets 10324577.32 11663200.43 10155812.27 11155812.72 11320022.32

Net Worth

Ratio 0.65 0.59 0.38 0.37 0.34

15676510 19763268 26295437 29754922 33220193.69

Series1

1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

Interpretation: Here the ratio shows a fluctuating nature. In 2007 ratio is at ., in 2008 it increased to .68, 2009 the ratio is at 0.76 and in 2011 it shows the highest ratio of 0.71. It shows whether fixed assets are fully utilized

TREND ANALYSIS
The term trend analysis refers to the concept of collecting information and attempting to spot a pattern, or trend, in the information. Trend percentages are immensely helpful in making a comparative study of the financial statement for several years. Trend analysis is a form of comparative analysis that is often employed to identify current and future movements of an investment or group of investments. The process may involve comparing past and current financial ratios as they related to various institutions in order to project how long the current trend will continue. This type of information is extremely helpful to investors who wish to make the most from their investments. The time series refers to the values of a variable chronologically ordered over a successive period of time. The time series is a record of observation or measurement of a variable over a period of time. A time series is a dynamic distribution which reveals good deal of variation over time

TREND PERCENTAGE = CURRENT YEAR AMOUNT / BASE YEAR AMOUNT *100

Table showing the Trend Analysis of net profit for the period 2007 to 2009
(LAKHS)

NET PROFITS YEAR 2007 2008 2009 AMOUNT TREND % 100% 190.80% 309.59%

4191552 7997667 12976925

INTERPRETATION: During 2006-07 the sales have increased by 14.37% .net profit has decreased by 12.4%.this is due to the increase in material consumption and marketing expenses. In 2007-08 the sales have increased by 33.86% but net profit has decreased by 17.19%.this is due to the increase in marketing expenses, administrative expenses and employees salary. In 2008-09 the sales have increased by 23.89% but net profit has decreased by 16.08%.this is due to the employees salary and finished goods trading.

NET PROFIT
Series1

100.37 100

98.26

2007

2008

2009

Table showing the Trend Analysis of fixed assets for the period 2007 to 2009

(LAKHS

FIXED ASSETS YEAR AMOUNT TREND %

10324577.32
2007 100

11663200.43
2008 112.96

11155812.27
2009 INTERPRETATION 108.O5

FIXED ASSETS
115 110 105 100 95 90 2007 2008 2009
Series1

Table showing the Trend Analysis of current assets for the period 2007 to 2009
(LAKHS)

CURRENT ASSETS YEAR AMOUNT TREND %

2007 2008 2009 INTERPRETATION

2371.75 1990.98 2435.43

100 83.94 102.68

CURRENT ASSETS
2371.75 1990.98 2435.43

100

83.94

102.68

YEAR

2007

2008

2009

Table showing the Trend Analysis of current liabilities for the period 2007 to 2009
(LAKHS)

CURRENT LIABILITIES YEAR AMOUNT TREND %

2007 2008 2009 INTERPRETATION

1632.04 1859.71 2853.93

100 113.95 174.86

CURRENT LIABILITIES
CURRENT LIABILITIES 2853.93

1632.04

1859.71

0 YEAR

100 2007

113.95 2008

174.86 2009

CHAPTER 6 FINDINGS OF THE STUDY AND SCOPE FOR FURTHER STUDY

6.1 FINDINGS OF THE STUDY

The current ratio of the company is satisfactory. The company makes the business only on demand basis. The increase or decrease in the proportion of current asset & current liability is moderate. The profitability of the firm is increasing year by year. The company is having a fluctuating trend for the gross profit. Total Asset of the company is increased in 2008 while compared to 2007. And in 2009 it clearly shows the increase of cash and bank balance of the company. The company is using its assets in a proper manner.

The return on capital employed in the business and it can be used to show the efficiency of the business as a whole. The company has a favourable capacity to pay the dividend to its equity shareholders

1.2 SCOPE FOR FURTHER STUDY

India is one of the world's largest consumers of transformers, as Indians producing about 25% of the world's transformers. India remains the largest international consumer of gold, but there is still excellent opportunity for the market to grow.

CHAPTER 7 SUGGESTIONS AND RECOMMENDATIONS

7.1 SUGGESTIONS AND RECOMMENDATIONS

Current Ratio shows a fluctuating ratio trend and it shows an improper balance of working capital of the firm. So the company should find the reasons behind thefactor The current ratio of the company is more while compared with the standard current i.e. 2:1. So the company should balance the proportion of current assets considerably in such a way that the funds arent idle.

The liquidity position of the company can be increased. Should take more and more marketing activities in order to attain the market.

CONCLUSION

CONCLUSION As a result of the study conducted at unipowertransformes, nelladu, I was exposed to the practical aspects of finance up to a certain extent. unipowertransformers is a company which is running on profitability for years except the last financial year. Liquidity and leverage position is also good. As there is lots of competitor in the domestic market as well as in global market, the company should strengthen its marketing activities so that it can proper in their desirable manner & could be more profitable than ever before. The joint effort of all the employees plays a major role in the development of the organisation. To conclude we can say that, to create a healthy, creative and profitable organisation, one should be able to connect all points with appropriate balance.