PROJECT REPORT
Summary
Established in 1971 by a group of technocrats led by Mr. Ramesh Chandra, Unitech has
over the last three decades emerged as one of the leading business houses in India. Apart
from the flagship business of real estate development, the group has interests in varied
businesses such as Fund management, Infrastructure development and Transmission tower
manufacturing.
Unitech has long partnered with internationally acclaimed architects and design
consultants including SOM (USA), BDP (UK), Maunsell AECOM (HK), MEA Systra
(France), Callison Inc. (USA), RMJM (UK), FORREC (Canada), SWA, and HOK (USA)
for various projects. It s clientele for commercial projects includes global leaders such as
Fidelity, McKinsey, Bank of America, Ford Motors, Nike, Intercontinental Hotel Group,
EDS, Hewitt, Amdocs, Ernst & Young, United Health Group, Converges, Reebok
A ratio is a comparison of any two relevant values from balance sheet and profit & loss
a/c of an organization. J. Batty defines “accounting ratios” as a relationship expressed
between numbers reflected in profit and loss account, balance sheet or any other part of
accounts.
1
PROJECT REPORT
Chapter ~1
Company profile
2
PROJECT REPORT
Established in 1971 by a group of technocrats led by Mr. Ramesh Chandra,
Unitech has over the last three decades emerged as one of the leading business houses in
India. Apart from the flagship business of real estate development, the group has interests
in varied businesses such as Fund management, Infrastructure development and
Transmission tower manufacturing.
The Group has recently ventured into mobile telecom business. The Group’s
flagship company Unitech Limited is a leading real estate developer in India with a market
capitalization of around USD 6 billion. Unitech has been at the forefront of the rapid
transformation of Indian real estate sector in the recent years.
From being a National Capital Region (NCR) focused real estate developer,
Unitech has fast established a pan Indian presence. It is already a market leader in NCR
and Kolkata and endeavors to attain leadership in every market that it operates in.
Unitech has the most diversified product mix comprising residential, commercial/
Information Technology (IT) parks, Retail, Amusement parks, Hotels and Special
Economic Zones. It is known for the quality of its product and is the first real estate
developer to have been certified ISO 9001:2000 certificate in North India.
Unitech has long partnered with internationally acclaimed architects and design
consultants including SOM (USA), BDP (UK), Maunsell AECOM (HK), MEA Systra
(France), Callison Inc. (USA), RMJM (UK), FORREC (Canada), SWA, and HOK (USA)
for various projects. It s clientele for commercial projects includes global leaders such as
Fidelity, McKinsey, Bank of America, Ford Motors, Nike, Intercontinental Hotel Group,
EDS, Hewitt, Amdocs, Ernst & Young, United Health Group, Converges, Reebok.
3
PROJECT REPORT
Over the years, Unitech has been very efficient in utilizing capital and has grown
to become a USD 6 billion market cap company with a cumulative external equity capital
of under USD 10 million! It was the first real estate company to be part of the National
Stock Exchange s NIFTY 50 index.
Group has recently ventured into the fast growing mobile telecom business in
India. It has already secured the licenses for providing Mobile telecom services across the
country. Rollout is expected to happen by the end of this fiscal year.
BOARD OF DIRECTORS
Chairman
Mr. Ramesh Chandra
Managing Directors
Mr. Sanjay Chandra
Mr. Ajay Chandra
Whole – Time Directors
Mr. A. S. Johar
Directors
Ms. Minoti Bahri
Mr. G. R. Ambwani
Dr. P. K. Mohanty
Mr. Anil Harish
Mr. Sanjay Bahadur
Mr. Ravinder Singhania
Executive Vice President
& Company Secretary
Mr. S. Ravi Aiyar
Presidents
Mr. H. D. Sharma
Col. K. Prakash
Executive Vice Presidents
Mr. M. K. Agrawal
Mr. S. Ravi Aiyar
Mr. Sameer Bahri
Mr. S. S. Bhowmick
Mr. V. K. Chadha
Mr. R. B. Jhalani
Dr. P. K. Magu
Mr. S. K. Mahajan
Mr. R. S. Sharda
Mr. R. K. Sharma
4
PROJECT REPORT
Auditors
Goel Garg & Co.
Chartered Accountants
Bankers
Allahabad Bank
Axis Bank Limited
Bank of India
Canara Bank
Catholic Syrian Bank
Central Bank of India
HDFC Bank Limited
ICICI Bank Limited
Indian Overseas Bank
Jammu & Kashmir Bank Limited
Standard Chartered Bank
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of India
State Bank of Indore
State Bank of Mysore
State Bank of Travancore
Syndicate Bank
The Bank of Rajasthan Limited
Solicitors
Amarchand & Mangaldas
& Suresh A. Shroff & Co.
REGISTERED OFFI CE
6, Community Centre, Saket, New Delhi 110017
Tel.: +91-11-26857331 (Shares), 26857330 (FD), 26965169/41664040 (Marketing).
Fax: +91-11-26857338
CORPORATE OFFI CE
D-3, District Centre, Saket Place, New Delhi 110017
Tel.: +91-11-29562196
GURGAON OFFI CE
Unitech Signature Towers, Ground Floor, South City-1,
Gurgaon. Tel.: +91-124-4082020. Fax: +91-124-4083355
www.unitechgroup.com
5
PROJECT REPORT
CHAPTER ~ 2
BALANCE SHEET
&
PROFIT AND LOSS
A/C
6
PROJECT REPORT
BALANCE SHEET AS ON 31ST MARCH, 2007
PARTICULARS
SOURCES OF FUNDS
1) SHAREHOLDERS’
FUNDS
a) Share capital
b) Reserves and surplus
2) LOANS FUNDS
a) Secured loans
b) Unsecured loans
3) DEFERRED LIABILITY
– AGAINST LAND
4) DEFERRED TAX
LIABILITY
TOTAL
APPLICATION OF FUNDS
1) FIXED ASSETS
Gross(at cost)
Less: Depreciation
Net block
Add: Capital work in
progress.
2)INVESTMENTS
3)CURRENT ASSETS,
LOANS AND ADVANCES
a) Inventories
b) Projects in progress
c) Advances to subsidiary
co.
d) Sundry debtors
e) Cash and bank balance
f) Loans and advances
RUPEES
RUPEES
1,623,375,000
9,986,634,968
11,610,009,968
23,904,079,627
7,675,028,057
31,579,107,684
4,492,586,021
21,232,241
47,702,935,914
998,680,654
302,425,840
696,254,814
28,753,897
725,008,711
5,189,269,439
327,678,535
44,057,110,255
8,578,976,970
975,494,326
7,958,175,118
22,311,322,122
84,208,757,326
Less: CURRENT
LIABILITIES-PROVISIONS
a) Current liabilities
b) Provisions
NET CURRENT ASSETS
TOTAL
37,922,118,817
4,497,980,745
42,420,099,562
41,788,657,764
47,702,935,914
7
PROJECT REPORT
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH,2007
PARTICULARS
RUPEES
RUPEES
INCOME
Sales, receipts and incomes
25,996,461,272
Closing stock
327,678,535
26,324,139,807
EXPENDITURE
Opening stock
Less: Transfer to PIP
Job and construction exp.
Receipts of real estate
Expenses of real estate
Expenses of percentage of
completion method
Administrative expenses
Interest
Depreciation
322,631,298
10,636,399
5,283,163,000
1,292,362,629
1,587,606,710
45,369,263
12,875,815,107
13,448,324,700
PROFIT BEFORE TAX
Provision for tax
a) Current
b) Fringe Benefit tax
c) Deferred
PROFIT AFTER TAX
Balance brought forward from
previous year
Add/(less):
Capitalized for bonus shares
Taxes paid for earlier years
Foreign project reserve written
back
311,994,899
2,376,838,738
1,682,044,819
296,435,049
3,600,000,000
10,000,000
2,748,084
3,612,748,084
9,835,576,616
1,352,961,360
(806,000,610)
4,402,720
30,000,000
Profit available for appropriation
APPROPRIATIONS
10,416,940,086
405,843,750
Proposed dividend
Tax on dividend
Transfer to general reserve
Transfer to debenture redemption
reserve
Balance carried to balance sheet
68,973,145
4,000,000,000
1,600,000,000
4,342,123,191
10,416,940,086
8
PROJECT REPORT
BALANCE SHEET AS ON 31ST MARCH,2008
PARTICULARS
SOURCES OF FUNDS
1) SHAREHOLDERS’
FUNDS
a) Share capital
b) Reserves and surplus
RUPEES
RUPEES
3,246,750,000
21,438,186,289
18,191,436,289
2) LOANS FUNDS
c) Secured loans
d) Unsecured loans
3) DEFERRED LIABILITY
– AGAINST LAND
4) DEFERRED TAX
LIABILITY
TOTAL
APPLICATION OF FUNDS
1) FIXED ASSETS
Gross(at cost)
Less: Depreciation
Net block
Add: Capital work in
progress.
2)INVESTMENTS
3)CURRENT ASSETS,
LOANS AND ADVANCES
g) Inventories
h) Projects in progress
i) Advances to subsidiary
co.
j) Sundry debtors
k) Cash and bank balance
l) Loans and advances
46,031,851,611
26,130,023,138
72,161,874,749
9,032,679,332
14,548,709
102,647,289,079
1,320,469,113
359,644,801
960,824,312
46,464,617
1,007,288,929
13,979,895,154
136,587,503
70,787,615,459
21,516,110,009
7,397,448,313
3,711,808,167
54,706,215,641
158,255,785,092
Less: CURRENT
LIABILITIES-PROVISIONS
a) Current liabilities
b) Provisions
NET CURRENT ASSETS
TOTAL
63,105,381,624
7,490,298,472
70,595,680,096
87,660,104,996
102,647,289,079
9
PROJECT REPORT
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH,2008
PARTICULARS
RUPEES
RUPEES
INCOME
Sales, receipts and incomes
26,697,250,734
Closing stock
136,587,503
29,833,838,237
EXPENDITURE
Opening stock
Less: Transfer to PIP
Job and construction exp.
Receipts of real estate
Expenses of real estate
Expenses of percentage of
completion method
Administrative expenses
Interest
Depreciation
322,631,298
10,636,399
7,526,779,000
1,779,851,908
3,584,357,301
85,789,114
16,178,756,142
13,448,324,700
PROFIT BEFORE TAX
Provision for tax
d) Current
e) Fringe Benefit tax
f) Deferred
PROFIT AFTER TAX
Balance brought forward from
previous year
Add/(less):
Capitalized for bonus shares
Taxes paid for earlier years
Foreign project reserve written
back
327,678,535
1,961,351,370
569,131,681
343,817,233
3,600,000,000
10,000,000
2,748,084
3,612,748,084
9,835,576,616
1,352,961,360
(806,000,610)
4,402,720
30,000,000
Profit available for appropriation
APPROPRIATIONS
10,416,940,086
405,843,750
Proposed dividend
Tax on dividend
Transfer to general reserve
Transfer to debenture redemption
reserve
Balance carried to balance sheet
68,973,145
4,000,000,000
1,600,000,000
4,342,123,191
10,416,940,086
10
PROJECT REPORT
Chapter ~ 3
Ratio analysis
11
PROJECT REPORT
A ratio is a comparison of any two relevant values from balance sheet and profit & loss
a/c of an organization. J. Batty defines “accounting ratios” as a relationship expressed
between numbers reflected in profit and loss account, balance sheet or any other part of
accounts.
It is expressed in three ways: In the form of percentage
 In the form of proportion
 In the form of no. of times
 Classification
(a) Profitability Ratios
These ratios indicate profitability or otherwise for a company. This category includes: Gross profit ratio
 Net profit ratio
 Operating ratio
 Return on capital employed
 Return on shareholders’ funds
 Earnings per share
(b) Liquidity Ratios
These ratios indicate whether short term funds are enough to meet the short term
obligations. This category includes: Current ratio
 Liquid ratio
12
PROJECT REPORT
(c) Leverage ratios
These ratios indicate the capital of the company and its division into own funds and
borrowed funds. This category includes: Proprietory ratio
 Debt equity ratio
 Capital gearing ratio
 Long term funds to fixed assets
 Interest coverage ratio
(d) Activity ratios
These ratios include the efficiency of the investments in an organization. It includes: Fixed assets turnover ratio
 Total assets turnover ratio
 Creditors’ turnover ratio
 Debtors’ turnover ratio
 Stock turnover ratio
 Calculation and Interpretation of ratios
(a) Profitability ratios
1.
Gross profit ratio
Gross profit ratio = Gross profit X 100
Sales
It is a ratio expressing relationship between gross profits earned to net sales. It is a useful
indication of the profitability of the business.
Gross profit ratio for 07-08 = 17,325,228,510 X 100
28,022,751,557
= 61.83 %
13
PROJECT REPORT
Gross profit ratio for 06-07 = 15,081,300,673 X 100
25,039,718,678
= 60.23%
Gross ratio
Ratio of percentage
62
61.5
61
60.5
Series1
60
59.5
59
2006-07
2007-08
Year
Interpretation:Gross profit ratio for 07-08 is 61.83% which is good as compared to years 06-07.In 0708, the gross profit and sales is high than 06-07, 61.83% is beneficial for the company.
2. Net profit ratio:This ratio is useful for the purpose of ascertaining the overall profitability of the business
and shows the efficiency or otherwise of operating the business. This ratio shows
relationship between net profit and sales.
Net profit ratio = Net profit X 100
Sales
Net profit = profit after tax
Net profit ratio for 07-08 = 10,306,765,627 X 100
28,022,751,557
= 36.78%
14
PROJECT REPORT
Net profit ratio for 06-07 = 9,835,576,616 X 100
25,039,718,678
= 39.28%
Net profit ratio
Profit of percentage
39.5
39
38.5
38
37.5
Series1
37
36.5
36
35.5
2006-07
2007-08
Year
Interpretation:Net profit ratio in the year 07-08 is less as compared to 06-07. Net profit ratio is showing
a decreasing trend from 06-07 to 07-08.
3. Operating ratio:This ratio is very important for analyzing the profitability of the firm. One can the
operating efficiency with the help of this ratio.
Operating ratio
= cost of goods sold + operating expenses X 100
Sales
15
PROJECT REPORT
Calculation of cost of goods sold:
Particulars
07-08
06-07
Sales
28,022,751,557 25,039,718,678
- Gross profit
17,325,228,510 15,081,300,673
Cost of goods sold 10,697,523,047 9,958,418,005
Calculation of operating expense:
Particulars
07-08
06-07
Administrative exp 1,779,851,908 1,292,362,629
+ other expenses
9,831,947,603 7,956,436,787
Operating expense 11,611,799,511 9,248,799,416
Operating ratio for 07-08 = 10,697,523,047 + 11,611,799,511 X 100
28,022,751,557
= 22.309,322,558
28,022,751,557
= 79.61 %
Operating ratio for 06-07 = 9,958,418,005 + 9,248,799,416 X 100
25,039,718,678
= 19,207,217,421
25,039,718,678
= 76.70 %
16
PROJECT REPORT
Percentage of ratio
Operating ratio
80
79.5
79
78.5
78
77.5
77
76.5
76
75.5
75
Series1
2006-07
2007-08
Year
Interpretation:
As it is an expense ratio, lower ratio will be beneficial for the firm. In the year 07-08 the
operating ratio is very high as 79.61% .The reason for high operating ratio is high cost of
goods sold in these years. As the ratio is much high the position of the firm is very bad as
due to high expenses, profits are going to be decreased.
In year 06-07 the ratio is not very good but it is better as compared to 07-08.
4. Return on capital employed:The base of capital employed provides a test of profitability related to the
sources of long term funds. A comparison of this ratio with similar firms shows how
efficiently the long term funds of owners and lenders are being used. The higher the ratio
the more efficient is the use of capital employed.
Return on capital employed
= EBIT (earning before interest & tax) X 100
Capital employed
Calculation of EBIT
Particulars
profit after tax
+ interest
+ tax
EBIT
07-08
10,306,765,627
3,584,357,301
3,348,316,468
14,013,439,396
06-07
9,835,576,616
1,587,606,710
3,612,748,084
15,035,931,410
17
PROJECT REPORT
Calculation of capital employed
Particulars
Share capital
+ reserves
+ secured loan
+ unsecured loan
Capital employed
07-08
06-07
3,246,750,000 1,623,375,000
18,191,436,289 9,986,634,968
46,031,851,611 23,904,079,627
26,130,023,138 7,675,028,057
93,600,061,038 43,189,117,652
Return on capital employed for 07-08 = 14,013,439,396 X 100
93,600,061,038
= 14.97 %
Return on capital employed for 06-07 = 15,035,931,410 X 100
43,189,117,652
= 34.81 %
Return on capital employed
Percentage of ratio
40
35
30
25
20
Series1
15
10
5
0
2006-07
2007-08
Year
Interpretation:
It is very important for all the external parties to the firm. In the year 07-08 the ratio is
18.51% which is very low. In year 06-07 the ratio is 34.92% which is comparatively
better than 07-08. There are many wide fluctuations in this ratio for the firm.
18
PROJECT REPORT
5. Return on shareholders’ funds:In order to judge the efficiency with which the proprietors’ funds are employed in
business, this ratio is ascertained.
Return on shareholders’ fund
= PAT (profit after tax) X 100
Shareholders’ funds
Calculation of shareholders’ funds
Particulars
07-08
Share capital 3,246,750,000
+ reserves
18,191,436,289
Total
06-07
1,623,375,000
9,986,634,968
21,438,186,289 11,610,009,968
Return on shareholders’ funds for 07-08
= 10,306,765,627 X 100
21,438,186,289
= 48.08 %
Return on shareholders’ funds for 06-07 = 9,835,576,616 X 100
11,610,009,968
= 84.72 %
19
PROJECT REPORT
Percentage of ratio
Return on shareholders' funds
90
80
70
60
50
40
30
20
10
0
Series1
2006-07
2007-08
Year
Interpretation:
This ratio should be higher as it will suggest that how much dividend will be declared to
shareholders by the company. The ratio in year 06-07 is comparatively better than the
ratio in year 07-08 which is 48.08%.
Thus a fluctuating trend is observed in return on shareholders’ funds.
6. Earnings per share:
This ratio measures the profit available to equity shareholders on per share basis.
Earning per share = PAT – preference dividend
No of equity shares
Earning per share for 07-08 = 10,306,765,627 - 0
162, 33, 75,000
= 6.30
Earning per share for 06-07 = 9,835,576,616 - 0
81, 16, 87,500
= 12.11
20
PROJECT REPORT
Earnings per share
Percentage of ratio
14
12
10
8
Series1
6
4
2
0
2006-07
2007-08
Year
Interpretation:
This ratio shows the profitability of the firm. By comparing the EPS of the current
year with those of past year, the trend of profitability can be ascertained. In year 07-08,
EPS is 6.3 which is very much low then 06-07.
(b) Liquidity ratio
1. Current ratio:The current ratio of a firm measures its short term solvency that is ability to meet
the short term obligations of the firm. It is a measure of margin of safety to the creditors.
From this ratio, one can know the capability to pay current liabilities
Current ratio = Current assets
Current liabilities
Current ratio for 07-08 = 158,255,785,092
70,595,680,096
= 2.24:1
Current ratio for 06-07 = 84,208,757,326
42,420,099,562
= 1.99:1
21
PROJECT REPORT
Interpretation:
The ideal ratio is 1.33:1 to 2:1. If this ratio is between anywhere in this range then it
is beneficial for the company. In year 07-08 and 06-07 it is 2.24:1 and 1.99:1 which
means the situation has been controlled.
2. Liquid ratio:It is a better indication of liquid position of the company. It shows the amount of cash
available to meet immediate payments. It is obtained by dividing the liquid assets by
liquid liabilities. It includes all the current assets except stock and all current liabilities
except bank overdraft. The standard liquid ratio is 1:1.
Liquid ratio = liquid assets
Liquid liabilities
Calculation of liquid assets:
Particulars
07-08
06-07
Current assets 158,255,785,092 84,208,757,326
- stock
136,587,503
327,678,535
Liquid assets 158,119,197,589 83,881,078,791
Calculation of liquid liabilities:
Particulars
07-08
06-07
Current liabilities 70,595,680,096 42,420,099,562
- bank overdraft
15,492,345
33,792,926
Liquid liabilities 70,580,187,751 42,386,306,636
Liquid ratio for 07-08= 158,119,197,589
70,580,187,751
= 2.24:1
Liquid ratio for 06-07 = 83,881,078,791
42,386,306,636
= 1.98:1
22
PROJECT REPORT
Interpretation:
As the ideal ratio is 1:1 then each of the two years the ratio is unexpected. In year 07-08 it
is 2.24:1 which means investment in assets of current use is more than needed. In year
06-07 also the ratio is high so investment is current assets should be decreased. We can
observe fluctuating trend in the ratio.
c) Leverage ratios
1. Proprietory ratio:This ratio shows the proportion of proprietors’ funds to the total assets employed in the
business. It is expressed in terms of percentage. Higher ratio is beneficial.
Proprietory ratio = Proprietory funds X 100
Total assets
Proprietory ratio for 07-08 = 21,438,186,289 X 100
102,647,289,079
= 20.89 %
Proprietory ratio for 06-07 = 11,610,009,968 X 100
47,702,935,914
= 24.34 %
23
PROJECT REPORT
Proprietory ratio
Percentage of ratio
25
24
23
22
Series1
21
20
19
2006-07
2007-08
Year
Interpretation:
Here the ratio seems to be unsatisfactory in the year 07-08 and 06-07.Ratio in 06-07 is
24.34% which is low but it is better than 07-08.Ratio in 07-08 is quit unsatisfactory.
2. Debt equity ratio:The relationship between borrowed funds and owners capital is a popular measure of
long term financial solvency of a firm. This ratio reflects the relative claims of creditors
and shareholders against the assets of the firm.
Debt equity ratio = long term liability X 100
Shareholders’ funds
Long term liability = Secured loan
Debt equity ratio for 07-08 = 46,031,851,611
21,438,186,289
X 100
= 214.72%
Debt equity ratio for 06-07 = 23,904,079,627 X 100
11,610,009,968
= 205.89%
24
PROJECT REPORT
Interpretation:
In all the leading successful companies in India this ratio is between 40-60%. If this
ratio is very low then no advantage of trading on equity can be taken. If it is very high
then also it is very risky.
In year 07-08 and 06-07 the ratio is 214.72% and 205.89% which is very high than
needed. This means that in proportion to equity the debts are very high. It is very risky
for the firm.
3. Capital gearing ratio:Here the outside liabilities are related to the total capitalization of the firm and not only to
the shareholders’ equity.
Capital gearing ratio =
Fixed charge bearing capital X 100
Equity capital
Calculation of fixed charge bearing capital
Particulars
07-08
Secured loan
46,031,851,611
+ Pref. share capital
46,031,851,611
06-07
23,904,079,627
100,000,000
24,004,079,627
Capital gearing ratio for 07-08 = 46,031,851,611 X 100
3,246,750,000
= 1417.78%
Capital gearing ratio for 06-07 = 24,004,079,627 X 100
1,623,375,000
= 1478.65%
25
PROJECT REPORT
Interpretation:
When this ratio will be very low there will be no risk for the firm but no advantage of
trading on equity can be enjoyed by the firm. When it is high it will be much risky for the
firm and equity shareholders will not get any money.
In year 07-08 and 06-07 this ratio is unexpected which is 1417.78% and 1478.65%
which shows that all the equity capital is worth paying to some other party. It is very
danger situation for the life of the firm.
4. Long term funds to fixed assets
This ratio shows the relationship between fixed capital and fixed assets. The ratio must be
1.1 or more i.e. the fixed must be more than fixed assets or must at least be equal to fixed
assets.
Long term funds to fixed assets = long term funds
Fixed assets
Calculation of Long term funds
Particulars
07-08
06-07
Share capital
3,246,750,000 1,623,375,000
+ reserves
18,191,436,289 9,986,634,968
+ long-term liability 46,031,851,611 23,904,079,627
Long term funds
67,470,037,900 35,514,089,595
Long term funds to fixed assets for 07-08 = 67,470,037,900
1,007,288,929
= 66.98
Long term funds to fixed assets for 06-07 = 35,514,089,595
725,008,711
= 48.98
26
PROJECT REPORT
Long term funds to fixed assets
Percentage of ratio
80
70
60
50
40
Series1
30
20
10
0
2006-07
2007-08
Year
Interpretation:
In 07-08 and 06-07, the fixed capital is more than the fixed assets therefore it is
beneficial. Even though the ratio in 06-07 is less than 07-07, it is beneficial.
5. Interest coverage ratio
This ratio indicates as to how many times the profit covers the payment of interest on
debentures and other long term loans.
Interest coverage ratio = EBIT
Interest
Interest coverage ratio for 07-08 = 14,013,439,396
3,584,357,301
= 3.91
Interest coverage ratio for 06-07 = 15,035,931,410
1,587,606,710
= 9.47
27
PROJECT REPORT
Percentage of ratio
Interest coverage ratio
10
9
8
7
6
5
4
3
2
1
0
Series1
2006-07
2007-08
Year
Interpretation:
Higher the ratio, the more sound is the financial strength of the company, as it indicates
greater ability of the firm to handle fixed charge liabilities. If the ratio is very high, it
shows the firm is not making proper use of outside debt. But a very low ratio indicates
that the firm is using excessive debt. Here, in 07-08 the ratio is low while in 06-07, it is
high
(d) Activity ratios
1. Fixed assets turnover ratio:The higher the turnover ratio the more efficient is the management and utilization of
assets. The low ratio shows underutilization of available resources.
Fixed assets turnover ratio =
Sales
Fixed assets
Fixed assets turnover ratio for 07-08 = 28,022,751,557
1,007,288,929
= 27.81 times
Fixed assets turnover ratio for 06-07 = 25,039,718,678
725,008,711
= 34.53 times
28
PROJECT REPORT
Fixed assets turnover ratio
Percentage of ratio
40
35
30
25
20
Series1
15
10
5
0
2006-07
2007-08
Year
Interpretation:This ratio is very good when it is above 4 times and very adverse situation when it is
below 2 times. So the ratio is satisfactory as we can see all ratios for the years are more
than 4 times.
A decreasing trend is followed by this ratio from 06-07 to 07-08. But in all the years
sales are high so fixed assets will be rotating speedily.
2. Total assets turnover ratio:If this ratio is less than two times (< 2 times) then it is poor. If it is between 2 and
4 times (2 < 4) then it is average ratio. If it is more than 4 times then it is a very good
position. So, higher sales are a good position for the company.
Total assets turnover ratio = Sales
Total assets
Total assets turnover ratio for 07-08 = 28,022,751,557
102,647,289,079
= 0.27 times
Total assets turnover ratio for 06-07 = 25,039,718,678
47,702,935,914
= 0.52 times
29
PROJECT REPORT
Total assets turnover ratio
Percentage of ratio
0.6
0.5
0.4
0.3
Series1
0.2
0.1
0
2006-07
2007-08
Year
Interpretation:Here high ratio is considered to be a good situation. In year 06-07 and 07-08 the ratio is
less than 2 times. So it is a very dangerous situation. The average situation is 2<4 times.
So it is a very bad situation.
3. Debtors turnover ratio:It shows how quickly the debtors and receivables are converted into cash. It is a test of
liquidity of the debtors of a firm.
Assumptions:(i) Assume 360 days in a year
(ii) Assume 100% sales to be credit
Debtors’ ratio =
Debtors + Bills receivables X 360
Credit sales
Debtors’ ratio for 07-08 = 7,397,448,313 + 0 X 360
28,022,751,557
= 95 days
Debtors’ ratio for 06-07 = 975,494,326 + 0 X 360
25,039,718,678
= 14 days
30
PROJECT REPORT
Debtors’ turnover ratio =
360
Debtors’ ratio
Debtors’ turnover ratio for 07-08 = 360
95
= 4 times
Debtors’ turnover ratio for 06-07 = 360
14
= 26 times
Debtors' turnover ratio
Percentage of profit
30
25
20
15
Series1
10
5
0
2006-07
2007-08
Year
Interpretation:Here in year 06-07 the debtors’ ratio is 26 days which is average for the business. It
means that money outstanding from debtors will be recovered within 26 days. Ratio for
year 07-08 is 4 days. As the collection period is small it is beneficial for the firm.
31
PROJECT REPORT
4. Creditors’ turnover ratio:It shows how frequently the creditors are to be paid. It is to test the urgency of the
creditors of the firm.
Creditors’ ratio = creditors + bills payables X 360
Annual purchases
Creditors’ ratio for 07-08 = 6,942,688,308 + 0 X 360
19,887,657,039
= 126 days
Creditors’ ratio for 06-07 = 6,489,975,976+ 0 X 360
12,606,380,018
= 185 days
Creditors’ turnover ratio =
360
Creditors’ ratio
Creditors’ turnover ratio for 07-08 = 360
126
= 2.8 times
Creditors’ turnover ratio for 06-07 = 360
185
= 1.9 times
32
PROJECT REPORT
Percentage of ratio
Creditors' turnover ratio
3
2
Series1
1
0
2006-07
2007-08
Year
Interpretation:This ratio will be considered satisfactory when the duration will be higher. In year 06-07
this ratio is 1.9 times a year which means that creditors are to be paid off 1.9 times in one
year. In year 07-08 this ratio is 2.8 times a year which means that creditors are to be paid
off 2.8 times in one year.
5. Stock turnover
The number of times the average stock is turned over during the year is known as stock
turnover.
Stock turnover = cost of goods sold
Average stock
Average stock = opening stock + closing stock
2
Average stock for 07-08 = 327,678,535 + 136,587,503
2
= 232,133,019
33
PROJECT REPORT
Average stock for 06-07 = 311,994,899 + 327,678,535
2
= 319,836,717
Stock turnover for 07-08 = 10,697,523,047
232,133,019
= 46.08
Stock turnover for 06-07 = 9,958,418,005
319,836,717
= 31.13
Percentage of
ratio
Stock turnover
60
40
Series1
20
0
2006-07
2007-08
Year
Interpretation:This ratio signifies that the average stock is turned over 46 times in 07-08 and 31 times in
06-07. Higher the turnover ratio, the profitable the business would be.
34
PROJECT REPORT
Chapter ~ 4
Financial results
35
PROJECT REPORT
PARTICULAR
1) Total Income
Less: Operating expense.
2) Gross Profit before Interest
and depreciation
Less: a) Interest
b) Depreciation
3) Profit before Tax
Less: Provision for tax.
I. Currency
II. Fringe Benefit
III. Deferred
4) Profit after Tax.
Add/Less:
i. Bal of Profit as per
last b/s
ii. Capitalized for Bonus
shares.
iii. Foreign Project
Reserve Written Back
iv. Taxes Paid For earlier
years
v. Debentures
Redemption Reserve
written back
Balance available for
appropriation.
5) Appropriation
i. Proposed Dividend
ii. Tax on dividend
iii. Transfer to Debenture
Redemption Reserve
iv. Transfer to General
reserve
v. Balance carried over
to B/s
2007-08
3584.35
85.79
2006-07
29,697.25
12,372.02
25,996.46
10,915.16
17,325.23
15,081.30
3,670.14
13,655.09
3,40.00
15.00
(6.68)
1,587.61
45.31
16,32.98
13,448.32
3600.00
10.00
2.74
3,348.32
10,306.77
3,612.74
9,835.58
4,342.12
1,352.96
-
(806.00)
20.00
30.00
(3.77)
4.40
1,600.00
5,958.35
16,265.12
581.36
10,416.94
405.85
68.97
405.85
68.97
1,250.00
1,600.00
600.00
4000.00
13,940.30
4,342.12
16,265.12
10,416.94
36
PROJECT REPORT
Conclusion is on the basis of following 5 ratios
 Net profit ratio
 Return on capital employed
 Current ratio
 Share holders’ funds
 Total assets turnover ratio
 Fixed turnover ratio
The net profit ratio of the firm is showing a decreasing trend from 06-07 to 07-08
The ratio in year 06-07 is beneficial for the firm as compared to 07-08.
The ratio of return on capital employed is very important for all the parties which
are related to the firm whether directly or indirectly. Many wide fluctuations are seen in
return on capital employed of the firm for these years. . In the year 07-08 the ratio is
18.51% which is very low. In year 06-07 the ratio is 34.92% which is comparatively
better than 07-08. This means that the firm is obtaining a firm amount of return on capital
employed in the firm.
Any firm’s current availability of assets to repay the current and immediate
liabilities can be known from the current ratio. The ideal current ratio is 1.33:1 and it
should not be very high as compared to the liabilities to be paid off. In year 07-08 and 0607 it is 2.24:1 and 1.99:1 which means the situation has been controlled.
This ratio should be higher as it will suggest that how much dividend will be declared to
shareholders by the company. The ratio in year 06-07 is comparatively better than the
ratio in year 07-08 which is 48.08%.
Thus a fluctuating trend is observed in return on shareholders’ funds.
37
PROJECT REPORT
High ratio of total assets turnover is considered to be a good situation for the firm. In year
06-07 and 07-08 the ratio is less than 2 times. So it is a very dangerous situation. The
average situation is 2<4 times. So it is a very bad situation.
This ratio is very good when it is above 4 times and very adverse situation when it is
below 2 times. So the ratio is satisfactory as we can see all ratios for the years are more
than 4 times.
A decreasing trend is followed by this ratio from 06-07 to 07-08. But in all the years sales
are high so fixed assets will be rotating speedily.
38
PROJECT REPORT
BIBLIOGRAPHY
I have referred to company’s annual report for two consecutive years of “UNITECH
GROUP”.
39
PROJECT REPORT
40