A study on ratio analysis at vst tillers tractors final

ANALYSIS OF FINANCIAL WEALTH V.S.T. TILLERS TRACTORS LTD

INTRODUCTION

PART A: ABOUT INDUSTRY:
1.1 Introduction about the Tractor Industry

The Indian tractor industries were as follows history of the company.
1945 to 1960:
War suppliers tractors and bulldozers were imported for land
reclamation and cultivation in mid 1940`s in 1947 central and state tractors
organizations were setup to develop and promote the supply and age of
tractors in agriculture and unto 1960 the demand met entirely through
imports. There were 8500 tractors in age in1951-20000 is 1955 and 37000
by 1960.

1961 to 1970:
Local production began in 1961 with five manufactures producing
total of880 units per day by 1965 this had increased to over 5000 unites per
pear and the total in use had rise to our 52000 by 1970 annual production
had exceeded 20000 units over 146000 units working in the country.

1971 to 1980
Six new manufactures were established during this period although
three companies (Kriloscar tractors, Harshor and Pittie tractors) did not
survive. Escorts ltd., began location manufacture of ford tractors in 1971 in
collection with Ford UK and total production climbed steadily to 33000 in
1975 reaching 71000 by1980 credit facilities for farmers continued to
improve and the tractor market expanded the half million mark by 1980.

LORVEN EDUCATIONAL CENTRE 1


1981 to 1990
A further five manufacture began to production during this period but
only one of these survived in the increasingly competition market place.
Annual production exceeded 75000 units by 1985 and reaching 14000 in
1990 when the total in use was about 1 to 2 million. The Indian net importer
up to the mid seventies become an exporter in the 80`s mainly to countries in
Africa.

1991 to 1997
Science 1992 it has not been necessary to obtain an industrial license
for tractor manufacture in India by 1997 annual production exceeded 255000
units and the national tractor park and passed the two million mark. India as
emerged as one of the world leaders wheeled tractors production.

The Industry Today

Tractors manufacture in now firmly established in India and is highly
competitive with repaid advanced being made in technical design and
quality with increasing attention to export markets of the 16 companies that
began operation before 1990 six are considering before major manufactures
(Eicher, Escorts ltd., HMT, Mahindra and Mahindra, PTC and TAFE).

Mahindra and Mahindra have emerged as a larger manufacture
producing68000 unites in 1997 followed TAFE, Escort ltd., and Punjab
tractors with 49000, 48000 and 40000 units respectively.



The average size of the tractor in the country is currently 35hp which
following trends in other parts of the world, seems likely to increase steadily
to around 45hp by 2020. By which time total tractor population may have
increased from the present two million with annual production up to
3200000.

Power Tillers
By comparison with other parts of south East Asia demand for power
tillers in India has been slow to take off. However the current population of
around 66000 units with an average size of the 10hp is expected to rise
steadily to around production reaching our 50000 units.

Tractor is a vehicle intended for drawing, towing, pushing or pulling
something which cannot propel itself and, often, powering it too. Most
commonly the word is used to describe a vehicle intended for pulling some
other vehicle or object (see traction unit).

The word comes from the Latin trahere "to pull". A conflicting
history of the name suggests that steam tractors were originally referred to as
traction engines, with the word "tractor" eventually deriving from a
contraction of 'traction' and 'motor'.



In Britain, Australia, India, Spain, and Poland the word "tractor"
usually means "farm tractor", and the use of the word "tractor" to mean other
types of vehicles is familiar to the vehicle trade but unfamiliar to much of
the general public. In Canada and the US the word is also used to refer to a
road tractor .

Farm tractor

A modern John Deere 8110 Farm Tractor plowing a field using a
chisel plow.

The most common use of the term is for the vehicles used on farms.
The farm tractor is used for pulling or pushing agricultural machinery or
trailers, for plowing, tilling, disking, harrowing, planting, and similar tasks.

History

The first powered farm implements in the early 1800s were portable
engines – steam engines on wheels that could be used to drive mechanical
farm machinery by way of a flexible belt. Around 1850, the first traction
engines were developed from these, and were widely adopted for
agricultural use. Where soil conditions permitted, such as the US, steam
tractors were used to direct-haul ploughs, but in the UK, ploughing engines
were used for cable-hauled ploughing instead. Steam-powered agricultural



engines remained in use well into the 20th century, until reliable internal
combustion engines had been developed. [2]

In 1892, John Froelich built the first practical gasoline-powered
tractor in Clayton County, Ohio. Only two were sold, and it was not until
1911, when the Twin City Traction Engine Company developed the design,
that it became successful.

In Britain, the first recorded tractor sale was the oil-burning Hornsby-
Ackroyd Patent Safety Oil Traction engine, in 1897. However, the first
commercially successful design was Dan Albone's three-wheel Ivel tractor
of 1902. In 1908, Saundersons of Bedford introduced a four-wheel design,
and went on to become the largest tractor manufacturer outside the USA.

While unpopular at first, these gasoline-powered machines began to
catch on in the 1910s as they became smaller and more affordable. Henry
Ford introduced the Fordson, the first mass-produced tractor in 1917. They
were built in the U.S., Ireland, England and Russia and by 1923, Fordson
had 77% of the U.S. market. The Fordson dispensed with a frame, using the
strength of the engine block to hold the machine together. By the 1920s,
tractors with a gasoline-powered internal combustion engine had become the
norm.

The classic farm tractor is a simple open vehicle, with two very large
driving wheels on an axle below and slightly behind a single seat (the seat
and steering wheel consequently are in the center), and the engine in front of
the driver, with two steerable wheels below the engine compartment. This
basic design has remained unchanged for a number of years, but enclosed



cabs are fitted on almost all modern models, for reasons of operator safety
and comfort.

Originally, plows and other equiptment were connected via a draw-
bar, or a proporietary connecting system; prior to Harry Ferguson patenting
the three-point hitch. Recently, Bobcat's patent on its front loader connection
has expired; and compact tractors are now being outfitted with quick-
connect attachments for their front-end loaders.

There are also lawn tractors. Cub Cadet, Husqvarna, John Deere,
Massey Ferguson and Toro are some of the better-known brands.

Tractor

 Ford 75 HP tractor
 VST Mitsubishi Shakti MT 180 D Tractor

 Swaraj 744 FE

 OX –45 Tractor (45 HP)

 OX-35 Tractor (35 HP)



Ford 75 HP tractor

Specifications:-

Powerful Engine

• 75HP (BS). 4 cylinder engines give the power required to tackle the
toughest soil conditions.
• Direct injection (DI).

• Easy start even in cold conditions

• Rated engine rpm-2500

• Bosch Rotary FI pump for high fuel efficiency

• Dry type replaceable sleeves – enables the use of standard size piston
after replacing the liners.

VST Mitsubishi Shakti MT 180 D Tractor

• More powerful and fuel efficient ‘Direct Injection’ Diesel Engine
• Micron Engine Oil Filter for long life
• Rotary changing device for ease and safety
• Adjustable tail wheel for superior field operation
• Optional wheel carrier for easy field operation

CHANNIES TRACTORS



Hubei Machinery & Equipment Import & Export Corporation was
established as a major machinery and equipment exporter. Today, we are
proud to be one of the world¡¯s foremost suppliers of industrial products
especially in the agricultural machinery and industrial equipment markets
such as tractors, ATVs, Gocarts, bulldozers, diesel/gasoline generators etc.

With our beginnings in the early 1970s, we have since established 24
subsidiaries both inside and outside of China. These include 9 subsidiaries in
the provincial cities, 5 enterprises in chinese cities such as Zhuhai,
Shengzhen, Guangzhou, Shanghai, Beijing and 4 overseas enterprises in the
USA, UKRAINE, SYRIA and Hongkong. We also have set up 6 joint
ventures and hundreds of coordinate factories all over China. We have
traded in over 100 countries in the world market providing thousands of
products. Our annual product turnover ranks among China¡¯s top 200 largest
companies. We will be glad to work with the partners’ worldside.

HMT TRACTORS

Commenced manufacturing Agricultural Tractors in 1972 with
technology acquired from ZETOR, Czech Republic and continues to
upgrade the products.

Our Tractor Plants in Pinjore, Mohali and Hyderabad with capacity of
20,000 per annum, produces wide range of Tractors from 25 HP to 75 HP to
suit various farming requirements. HMT Tractor manufacturing units have
ISO 9001 certification.

Our products are reliable, simple to operate with safety features and are
well accepted in the international market. We have exported our Tractors to



USA, Czech Republic, Croatia, Sri Lanka, Bangladesh, South Africa,
Senegal, Nigeria, Malaysia, and Liberia etc.

The Tractors have:

• Powerful, fuel efficient engines.
• Roll Over Protective Structure for safety
• Hydraulic and Mechanical Disc Brakes
• Dual Clutch for travel and PTO operations
• Low maintenance and operational cost

We also offer Primary & Secondary Tillage Implements, Land
Shaping, Planting and Harvesting Equipment.

MAHINDRA GUJARAT

Mahindra Gujarat Tractor Limited was formed in 2001 after
Mahindra and Mahindra Limited purchased sixty percent of the remaining
shares in Gujarat Tractor Corporation Limited, from the Govt. of Gujarat. It
is based in Vadodara, Gujarat, India. Their tractors, now called Shaktimaan
were originally named Hindustan and are based on the Zetor tractor under
licensing agreements.



PART-B: ABOUT SUBJECT

FINANCIAL STATEMENT

DEFINITION
In the words of John .N. Myer “The Financial statements provide a
summary of the accounts of a business enterprise, the balance reflecting
the assets, liabilities and capital as on a certain date and the income
statement showing the results of operations during a certain period”.
Financial statements are prepared primarily for decision-making. They
play a dominant role in setting the framework of managerial decisions. But
the information provided in the financial statements is not an end in itself as
no meaningful conclusions can be drawn from these statements alone.
However, the information provided in the financial statements is of immense
use in making decisions through analysis and interpretation of financial
statements

MEANING OF FINANCIAL STATEMENTS

The term Financial Statement refers to the Two Statements
1. The position statement or the Balance Sheet.



2. The Income statements or the Profit and loss account.
These statements are used to convey to management and other
interested outsiders the profitability and financial position of a Firm.

FINANCIAL ANALYSIS
Financial analysis 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.”

There are various methods or techniques used in analyzing financial
statements, such as comparative statements, trend analysis, common size
statements, schedules of changes in working capital, funds flow statement
and cash flow analysis, cost- volume-profit analysis and ratio analysis.
The purpose of financial analysis is to diagnose the information
contained in financial statements so as to judge the profitability and financial
soundness of the firm, a financial analyst analyses the financial statements
with various tools of analysis before commenting upon the financial health
or weaknesses of an enterprise.
The analysis and interpretation of financial statements is essential to
bring out the mystery behind the figures in financial statements. Financial
statement analysis is an attempt to determine the significance and meaning
of the financial statement data so that forecast may be made of the future



earnings, ability to pay interest and debt maturities (both current and long
term) and profitability of a sound dividend policy.

The Significance or Importance of Financial Analysis:
1. To know the Present and Future Profitability of their Concern

2. To know the Earning Per Share and the Dividend Per Share, which
have an impact on the market prices of their shareholdings.

3. To know the Financial Position of the Concern.

4. To know the stake or risk undertaken by firm.

5. To Analyze the Financial Statements which helps the management to
ascertain the profitability of the enterprise.

6. To ascertain the Trend of Progress of the Concern.

7. To forecast future sales, Production, Expenses, Profits etc on the basis
of the past data.

8. To ascertain the adequacy of Capital Structure of the Concern.

9. To know whether the Short-term Financial Position of the concern is
good to Pay Bonus Increased wages, etc.

10.To have correct assessment of Taxes, such as Excise duties, Sales tax,
Income tax etc.



11.To regulate the prices of goods produced by the enterprise.

12.To determine it’s Financial Policies.

TYPES OF FINANCIAL ANALYSIS

1. ON THE BASIS OF MATERIAL USED
A) Externa1 analysis
B) Internal analysis

A) EXTERNAL ANALYSIS:
Outsiders who do not have access to the detailed internal accounting
records of the business firm do this analysis. These outsiders include
investors, potential investors, creditors, potential creditors, government
agencies, credit agencies and the general public. For financial analysis these
external parties to the firms depend almost on the published financial
statements.
B) INTERNAL ANALYSIS:
The analysis conducted by persons who have access to the internal
accounting records of a business firm is known as internal analysis, such an
analysis can, therefore be performed by executives and employees of the
organization as well as government agencies which have Statutory powers
vested in them. Financial analysis for managerial purposes is the internal



type of analysis that can be affected depending upon the purpose to be
achieved.

2. ON THE BASIS OF MODUS OPERANDI
A. Horizontal analysis
B. Vertical analysis.

A) HORIZONTAL ANALYSIS
Horizontal analysis refers to the comparison of financial data of a
company for several years. The figures for this type of analysis are presented
horizontally over a number of columns. The figures of the various years are
compared with standard or base year. A base year is a year chosen as
beginning point. This type of analysis is also called ‘Dynamic analysis’ as it
is based on the data from year to year rather than on data of any one year.
Comparative statements and trend percentages are two tools employed in
horizontal analysis.

B) VERTICAL ANALYSIS.
Vertical analysis refers to the study of relationships of the various
items in the financial statements of one accounting period. In this type of
analysis the figures from financial statements of a year are compared with a
base selected from the same year’s statement. It is also known as ‘static
analyses. Common-size financial statements and financial ratio’s are the two
tools employed in vertical analysis.

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS



There are three steps involved in the analysis of financial statements.
These are
1. Selection
2. Classification and
3. Interpretation.
The first involves selection of information (data) relevant to the
purpose of analysis of financial statements.
The second step involved is the methodical classification of the data
and the third step includes drawing of intervenes and conclusions.

METHODS OR DEVICES OF FINANCIAL ANALYSIS.
The analysis and interpretation of financial statements is used to
determine the financial position and results of operations as well. A number
of methods or devices are used to study the relationship between different
statements.
The following methods of analysis are generally used
1. Comparative statements.
2. Trend analysis.
3. Common-size statements.
4. Funds flow analysis.
5. Cash flow analysis.
6. Ratio analysis.
7. Cost-volume-profit analysis.

1. COMPARATIVE STATEMENTS.



The Comparative Financial statements are statements of the financial
position at different periods of time. The elements of financial position are
shown in a comparative form so as to give an idea of financial position at
two or more periods. Two financial statements (balance sheet and income
statement) are prepared in Comparative form for financial analysis purposes.
Not only the comparison of the figures of the two periods but also the
relationship between balance sheet and income statement enables an in depth
study of financial position and operative results.
The two Comparative statements are
A. Balance sheet.
B. Income statement.
A. COMPARATIVE BALANCE SHEET.
The Comparative balance sheet analysis is the study of the trend of the
same items, group of items and computed items in two or more balance
sheets of the same business enterprise on different dates. The changes in
periodic balance sheet items reflect the conduct of a business. The changes
can be observed by comparison of the balance sheet at the beginning and at
the end of a period and these changes can help in forming an opinion about
the progress of an enterprise.
B. COMPARATIVE INCOME STATEMENT.
The income statement gives the results of the operations of a business.
The Comparative Income statement gives an idea of the progress of a
business over a period of time. The changes in absolute data in money
values and percentages can be determined to analyze the profitability of the
business.



2. TREND ANALYSIS.
The financial statements may be analyzed by computing trends of
series of information. This method determines the direction upwards or
downwards and involves the computation of the percentage relationship that
each statement item bears to the same item in base year.

3. COMMON SIZE STATEMENT.
The common size statements, balance sheet and income statement are
shown in analytical percentages. The common size statements may be
Prepared in the following way.
The Total of Assets or Liabilities is taken as 100, The individual assets are
expressed as a percentage of total assets that is 100 and different liabilities
are calculated in relation to total liabilities.

A. COMMON SIZE BALANCE SHEET.
A statement in which balance sheet items are expressed as the ratio of
each asset to total and ratio of each liability is expressed as a ratio of total
liabilities is called common size balance sheet. The common size balance
sheet can be used to compare companies of differing size. The comparison
of figures in different periods is not useful because total figures may be
affected by a number of factors. It is not possible to establish standard norms
for various assets. The trends of figures from year to year may not be studied
and even they may not give proper results.

B. COMMON SIZE INCOME STATEMENT.



The items in income statement can be shown as percentages of sales
to show the relation of each item to sales. A significant relationship can be
established between items of income statement and volume of sales. The
increase in sales will certainly increase selling expenses and not
administrative or financial expenses. In case the volume of sales increases to
a considerable extent, administrative and financial expenses may go up. In
case the sales are declining, the selling expenses should be reduced at once.
So a relationship is established between sales and other items in Income
statement and their relationship is helpful in evaluating operational activities
of the enterprise.

2. FUNDS FLOW STATEMENT
According to ‘SMITH and BROWN' Funds flow statement “Is a
method by which we study changes in the financial position of a
business enterprises between beginning and ending financial statement
dates”.
Meaning of funds “Funds are usually called as working capital for
the purpose of funds flow statement”
It is a statement showing sources and application of funds for a
period of time. The funds flow statement, which shows the movement of
funds and is a report of the financial operation of the business undertaking. It
indicates various means by which funds were obtained during a particular
period and the ways in which these funds were employed. In simple words,
it is a statement of sources and application of funds.
Advantages of Funds Flow Statement
1. It helps in providing proper guideline for of available Funds.



2. Acts as a basis for financial plan budgeting.
3. It gives early warning for the financial dangers.
4. It helps in borrowing funds from others sources.
5. CASH FLOW ANALYSIS.
Cash flow statement is a “Statement, which describes the Inflows
(sources) and Outflow (uses) of cash and cash equivalent in an
enterprise during a specified period of time”.

Advantages:
1. Cash flow statement is very useful in the evaluation of cash position
of a firm.
2. It helps in planning the repayment of loans, replacement of fixed
assets and other similar long term planning of cash.
3. Cash flow statement is more suitable for making comparisons than the
funds flow statement, as there is no standard format for the same.
4. Cash flow statement provides information of all activities classified
under operating, investing and financing activities.

6. RATIO ANALYSIS.
The ratio analysis is one of the most powerful tools of financial
analysis. It is the process of establishing and interpreting various ratios
(quantitative relationship between figures and groups of figures) it is with
the help of ratios that the financial statements can be analyzed more clearly
and decisions made from such analysis. Ratio analysis is a technique of
analysis and interpretation of financial statements.



Advantages:
1. It helps in decision-making.
2. It helps in financial forecasting and planning.
3. It helps in communicating. The financial strength and weakness of a
firm are communicated in a more easy and understandable manner by
the use of ratios.
4. It helps in co-ordination and control.
5. It use full in inter- firm comparison

TYPES OF RATIOS
I). LIQUIDITY RATIO.
These are the ratios, which measure the short-term solvency or
financial position of a firm. These ratios are calculated to comment upon the
Short term paying capacity of a concern or the firm’s ability to meet its
current obligations.
To measure the liquidity of a firm, the following ratios can be
calculated.
Liquidity Ratios
A). Current ratio.
B). Quick ratio or acid test or liquid ratio.
C). Absolute liquid ratio.

A). CURRENT RATIO
It is the ratio, which matches current assets with the firm’s current
liabilities
Current Assets
Current Ratio =
Current Liabilities



This ratio throws good light on the short-term financial position and
its policies. It is an indicator of a firm’s ability to promptly meet its short-
term liabilities.

B). QUICK RATIO OR ACID TEST OR LIQUID RATIO
This ratio more severe test of liquidity of a firm. It shows the
ability of a business to meet its immediate financial commitments.
Quick Assets
Quick Ratio =
Current Liabilities

C). ABSOLUTE LIQUID RATIO.
This also known as super quick ratio
Cash
Absolute Liquid Ratio =
Current Liabilities

II) ANALYSIS OF LONG-TERM FINANCIAL POSITION
OR TESTS OF SOLVENCY:
The term solvency refers to the ability of a concern to meet its long-
term obligations. The long-term indebtedness of a firm includes debenture
holders, financial institutions providing medium and long-term loans and
other creditors selling goods on installment basis.
Long-term solvency ratios indicate a firm’s ability to meet the fixed
interest and costs and repayment schedules associated with its long-term
borrowings.



The following ratios serve the purpose of determining the solvency of
the concern.
A) Debt-equity ratio
B) Proprietary ratio or equity ratio
C) Fixed assets to net worth or proprietor’s funds ratio

A). DEBT-EQUITY RATIO:
Debt-equity ratio also known as external-internal equity ratio. It is
calculated to measure the relative claims of outsiders and the owners (that is
share holders) against the firm’s assets. This ratio indicates the relationship
between the external equities or the outsider’s funds and the internal equities
or the shareholders funds.
Long Term Debts
Debt - Equity Ratio =
Shareholders Equity

Where outsider’s funds include all debts/Liabilities to outsiders
whether long term or short term or whether in the form of debentures, bonds,
mortgages or bills. The shareholders funds consist of equity share capital,
preference share capital, capital reserves, revenue reserves and reserves
representing accumulated profits and surplus like reserves for contingencies,
sinking funds etc
The debt- equity ratio is calculated to measure the extent to which
debt financing has been used in business. The ratio indicates the
proportionate claims of owners and the outsiders against the firm’s assets.
The purpose is to get an idea of the cushion available to outsiders on the
liquidation of the firm. Generally a low ratio (debt being low in comparison
to shareholders funds) is considered as favorable from the long-term
creditor’s point of view because a high proportion of owner’s funds provide



a larger margin of safety for them. A high debt equity ratio which indicates
that the claims of outsiders (creditors) are greater than those of owners, may
not be considered by the creditors because it gives a lesser margin of safety
for them at the time of liquidation of the firm.

B) PROPRIETORY RATIO:
A variant to the debt-equity ratio is the proprietary ratio, which is also
known as equity ratio or shareholders to total equities ratio or net worth to
total assets ratio. This ratio establishes the relationship between
shareholder’s funds to total assets of the firm.
Shareholdres Funds
Proprietory Ratio =
Total Assets

Where shareholders fund is equity share capital, undistributed profits,
reserves and surplus out of this amount, accumulated losses should be
deducted.
As equity represents the relationship of owner’s funds to total assets,
higher the ratio or the share of the shareholders in the total capital of the
company. This ratio indicates the extent to which the assets of the company
can be lost without affecting the interest of creditors of the company.

C). FIXED ASSETS TO NET WORTH RATIO OR FIXED
ASSETS TO PROPRIETOR’S FUNDS:
This ratio establishes the relationship between fixed assets and
shareholder’s funds that is share capital, reserves and surplus and retained
earnings.
Fixed Assets
Fixed Assets to Networth Raio =
Networth



III) PROFITABILITY RATIOS:
The primary objective of a business undertaking is to earn profits.
Profit earning is considered essential for the survival of the business. A
business needs profits not for its existence but also for expansion and
diversification.
Generally, profitability ratios are calculated either in relation to investment
General profitability ratios.
A. Gross profit ratio.
B. Operating ratio
C. Operating profit ratio
D. Expenses ratio
E. Net profit ratio

A) GROSS PROFIT RATIO:
Gross profit ratio measures the relationship of gross profit to net sales
and is usually represented as a percentage.
Gross Profit
Gross Profit Ratio = X100
Net Sales

The gross profit ratio indicates the extent to which selling prices of
goods per unit may decline without resulting in losses on operations of a



Firm. As the gross profit is found by deducting cost of goods sold from the
net sales, higher the gross profit better the result. A low gross profit ratio
indicates high cost of goods sold due to unfavorable purchasing policies,
lesser sales, lower selling prices, excessive competition, over- investment in
plant and machinery etc
A comparison of gross profit ratio overtime or for different firms in
the same industry is a good measure of profitability, yet the gross profit ratio
is one of the very important ratios for measuring profitability of a firm.

B). OPERATING RATIO:
Operating ratio establishes the relationship between the cost of
goods sold and other operating expenses on the one hand and the sales on
the other.
In other words, it measures the cost of operations per rupee of sales.
Operating Cost
Operating Ratio = X 100
Net Sales

C) OPERATING PROFIT RATIO
This ratio is calculated by dividing operating profit by sales
Operating Profit
Operating Profit Ratio = X 100
Net Sales

Where operating profit = Net sales –Operating profit

D) EXPENSES RATIO:
Expenses ratio indicates the relationship of various expenses to net
sales. Expenses ratio are calculated by dividing each item of expenses or



group of expenses with the net sales to analyze the cause of variation if the
operating profit.

Expenses ratio can be calculated as follows:
Cost of sales
a) Total cost to Sales = X 100
Net Sales

Administration and Office
b). expenses to Sales Ratio =
Adiminsration & Office Expenses
X 100
Net Sales
Selling and Distribution
c). Expenses to SalesRatio =
Selling and Distribution expenses
X100
Net Sales
Non Opertaing Expenses
d). Non Operating Expenses to Sales Ratio = X 100
Net Sales

E) NET PROFIT RATIO
Net profit ratio establishes a relationship between net profit (after
taxes) and sales and indicates the efficiency of the management in
manufacturing, selling, administrative and other activities of the firm. This
ratio is the overall measure of firm’s profitability and is calculated as.
Net Profit After Tax
a) Net Profit Ratio = X 100
Net Sales

IV OVERALL PROFITABILITY RATIO
Profits are the measure of overall efficiency of a business. The higher
the profit, the more efficient is the business considered. Thus, overall
profitability or efficiency of a business can be measured in terms of profits
related to investments made in the business.



A. Return on shareholder’s investment or net worth ratio.
B. Return on equity capital
C. Earning per share
D. Dividend yield ratio
E. Dividend pay-out ratio
F. Price earning (earning yield) ratio.

A) RETURN ON SHAREHOLDER’S INVESTMENT OR NET
WORTH RATIO
Return on shareholder’s investment popularly known as return on
investment or return on shareholder. Proprietor’s fund is the relationship
between net profits (after interest and tax) and the proprietor’s funds
Net Profit After Interest and Tax
Return on Investment =
Shareholders Funds

B) RETURN ON EQUITY CAPITAL:
Ordinary shareholders are the real owners of the company. They
assume the highest risk in the company. Ordinary shareholders are more
interested in the profitability of a company and the performance of a
company should be judged on the basis of return on equity capital of a
company.
Net Profit After Tax - Preference Dividend
Return on Equity Capital =
Equity Share Capital



C) EARNING PER SHARE:
Earning per share is a small variation of return on equity capital and is
calculated by dividing the net profit after taxes and preference dividend by
the total number of equity shares.
Net Profit After Tax - Prefernce Dividend
Earnings Per Share =
No Equity Shares

D) RETURN ON CAPITAL EMPLOYED:
Return on capital employed establishes the relationship between
profits and the capital employed. It is the primary ratio and is most widely
used to measure the overall profitability and efficiency of a business.
The term capital employed refers to the total of investments made in a
business and can be defined in a number of ways. The three most widely
used definition of this term is
I. Gross capital employed
II. Net capital employed
III. Proprietors net capital employed

GROSS CAPITAL EMPLOYED:
The term gross capital employed usually comprises the total assets
used in a business.
Gross capital employed = fixed assets+ current assets
NET CAPITAL EMPLOYED
The term net capital employed comprises the total used in a business
less its current liabilities
Net capital employed = Total assets- current liabilities



PROPRIETOR’S NET CAPITAL EMPLOYED:
Proprietor’s net capital employed means shareholders funds or
investment in the business.
Proprietors net capital employed = fixed assets = current assets —
outside liabilities.

D) DIVIDEND YIELD RATIO:
Shareholders are the real owners of a company and they are interested
in real sense in the earnings distributed and paid to them as dividends.
Therefore, dividend yield ratio is calculated to evaluate the relationship
between dividend per share paid and the market value of the share
Dividend Per Equity Share
Dividend Yeild Ratio =
Market Pr ice Per Equity Share

Dividend Paid to Shareholders
Dividend Per Share =
Number of Equity Shares

E) DIVIDEND PAY OUT RATIO:
Dividend pay out ratio is calculated to find the extent to which
earnings per share have been retained in the business. It is an important ratio
because Pouching back of profits enables a company to grow and pay more
dividends in future.
Dividend Per Equity Share
Dividend Pay Out Ratio =
Earnings Per Share

F) PRICE EARNING RATIO:



Price earning ratio is the ratio between market price per equity share
and earnings per share. The ratio is calculated to make an estimate of
appreciation in the value of a share of a company and is widely used by
investors to decide whether or not to buy shares in a particular company.
Market Price Per Share
Price Earning Ratio =
Earnings Per Share

G) EARNING YIELD RATIO:
This ratio is also shows a relationship between earnings per share and
market value of shares.
Earnings Per Share
Earnings Yield Ratio =
Market Price Per Share

7. COST-VOLUME-PROFIT ANALYSIS:
Cost-volume-profit analysis is a technique for studying the
relationship between cost, volume and profit. The CVP relationship is an
important tool used for the profit planning of a business. The study of cost-
volume-profit analysis is often referred to as break-even analysis. The term
break-even analysis is used in two senses, narrow sense and broad sense. In
its broad sense, break-even analysis refers to the study of relationship
between costs, volume and profit at different levels of sales or production. In
its narrow sense, it refers to a technique of determining that levels of
operations where total revenues equal total expenses that are the point of no
profit no loss.



RESEARCH METHODLOGY

TITLE OF THE STUDY:
PROJECT REPORT ON “A STUDY ON RATIO ANALYSIS OF
FINANCIAL WEALTH OF VST TILLERS TRACTORS LTD”.

STATEMENT OF THE PROBLEM
Financial statements are the reports of stewardship (that is the
performance of management). They are the basis for formulation of
economic and financial policies and guide to dividend decision. Financial
statements help to determine the legality of dividend payment. They act as
the basis for granting credit and are very informative to prospective
investors. Financial statements serve as a proper guide to value the
investments already made in an enterprise and serve as a basis for taxation
and act as a basis for price regulation by the government. They serve as an
aid to government interference and supervision of a business enterprise.
Financial statements are useful to various parties like the owners,
prospective investors, management, creditors, employees, government,
‘tenera1 public etc.

OBJECTIVES OF THE STUDY



1. To analyze the financial position of a VST tillers tractors ltd from the
financial statement using tools of management accounting.

2. To make detail analysis of each and every component of balance sheet
of VST tillers tractors ltd.

3. To Know the Operating Expenses of the VST tillers tractors ltd

4. To assess the Profitability condition of the Company through
analyzing the Balance sheet of the Company.

5. To Assess the Rate of return of the Company

SCOPE OF THE STUDY:
The study covers the financial analysis of the statement, which is
disclosed by the annual report of the Company. Overall performance of the
Company is assessed.

LIMITATIONS OF THE STUDY:
1. Study restricted to2 to 3 years financial statement of the Company.

2. The overall performance of the Company is analyzed and not branch
wise.

3. Few tools for analysis are used to analyze the financial statement.

4. In-depth study of items of profit or loss account and balance sheet are
not made.

5. They say little about the firm’s prospects in an absolute sense.
6. Their insights about relative performance require a reference point
from other time periods or similar firms.



7. One ratio holds little meaning.
8. As indicators, ratios can be logically interpreted in at least two ways.
One can partially overcome this problem by combining several related
ratios to paint a more comprehensive picture of the firm’s
performance.

METHODOLOGY OF THE STUDY:
All information for preparations of project is collected through annual
report of the Company and some information is collected through the books
maintained by Company and also through the employees of the Company
and some information from the website of the VST tillers tractors ltd.

SOURCES OF DATA
1. Primary Data-
Primary data are the original data which originally collected by direct
interview with the Company for the 1 st time, about the statistical
investigation & and used by them in statistical analysis are formed as
Primary Data.
2. Secondary Data-
These are the Data which might be published or unpublished have
already been collected and processed by same agency or person and take
over from some other agency.
Example-
Balance sheet, Profit & Loss account, Cash Flow Statement.

RESEARCH INSTURMENTS



The technique used for the Analysis is Ratio Analysis and
Comparative Balance Sheet etc. It is a most widely used and powerful tool
for Financial Statements Analysis. The ratios used for the study are
Liquidity ratio, Profitability Ratios, Solvency Ratios. Which includes Liquid
assets to total assets ratio and Liquid assets to total investments?
Profitability ratios such as Return on Assets, Return on Equity, Net Profit
Ratio etc. Long –term solvency ratios such as Proprietary Ratio etc.

COMPANY PROFILE:



History of the company

VST Tiller Tractors Ltd (VTTL) was incorporated in the year 1967 in
Bangalore India. It was promoted by the VST group, a well-known business
house in south India, in technology collaboration and joint venture with
Mitsubishi Heavy Industries and Mitsubishi; corporation Japan for the
manufacture of Tillers and diesel engines. The plant went into production in
the year 1970.

In 1970, an additional technical and financial collaboration with
Mitsubishi Agriculture of 18.5 HP, 4-wheel drive tractor was entered into.

The manufacturing plan is located in Whitefield industrial area near
Bangalore. It has 75,000 sq. meters, of land and a built up area of 15,000 sq.
meters (approx). The company has total personnel strength of about 500
employees as on date. The manufacturing capacity of the company is 12,000
power tillers, 16,000 engines and 2,500 tractors.

Now, the company has come out of collaboration and joint venture
partnership. It has in house design and development section for upgrading
and updating the level of technology in line with current requirements. The
company is certified to ISO-9001 quality management system. Since Jan
1998 our company follows ISO-9001-2000 Quality Systems requirements to
satisfy all out customer needs.



The main product of the company namely Power tillers and Tractors
are used in the agriculture sector all over the country. Power Tillers, Tractors
are component parts are exported to countries such as Srilanka, Tanzania,
Zambia Ghaha, Cryprus, Europe, Austria, USA, Japan and Thailand.

The company has set up a nation wide network of Dealers supported
by sales and service Organization. Adequate supply of spare parts, provision
of service tools and equipment, making available service information
through technical literature, instruction manuals etc, and imparting training
to dealer’s personnel as well as end users namely the farmers, are some of
the effective steps taken by the company towards customer satisfaction.

With this objective, company was formulated its quality policy
achievement of an international quality standard is not a single event but an
ongoing commitment which remains as a continuous obligation and process.

The plans set in place are designed to ensure that the continuous
commitment is a part of the operational policy of the company, with the help
of its people. The company will provide the best possible service to the
customers and strive for excellence in performance.

Way back in 1920 the VST Group made a humble start by dealing in
petroleum products. Using this strong base, the Group quickly diversified
into automotive marketing and after-sales service. From this activity grew
the network of the organization throughout the southern states of Karnataka
and Tamil Nadu.

The tradition and culture of the VST Group continues in this Company



in spite of it having adopted new management techniques to face global
challenges.

Over the years, VST Tillers Tractors Ltd. has established an extensive
and efficient countrywide sales and after-sales service network backed by
easy availability of spare parts. Periodic training programmes for Dealers
and customers are taken up to keep them constantly updated on
improvements on its products.

Type:
The company is manufacturing sectors. It is located in white field
road.
Nature:
The company is manufacturing the tractors, tillers and diesel engines.
The company has produced the goods and gives to dealers and increases the
sales.
Board of Directors:
The board comprises of a Non-Executive Chairman, two whole time
Directors and six Non-Executives Directors. The constitution of the Board is
given below. During the year 2005-06, four Meeting of Board Of Directors
were held i.e., on November 2005 and 30th January 2006.
Mr. V.P. Mahendra Managing Directors
Mr. A.T. Nahender Directors (Operations)
Mr.v.v.Vijayandra Non-executive
Mr.v.k. Surendra Non-executive
Mr.V.T.Velu Non-executive
Mr.A.Hishikawa Non-executive
Mr.M.Tanaka Non-executive
Mr. R.Subbramanian Non-executive/independent
Mr.M.V.Bannerjee Non-executive/independent



Mr.V.Ramachandran Non-executive/independent

ORGANIZATION CHART:

Directors (Operations)

Vice President

General Manager

Manager

Officer

Junior Officer

Supervisor

Workers

THE COMPANY' S VISION

VST Tillers Tractors Ltd. believes that the foundation of its business is to
provide
EXCELLENCE in its products through:



High Quality and Reliability.
Economical and Competitive Prices.
Efficient Services to the satisfaction of the customers.
In order to achieve these goals and attain market leadership,
it shall be the objective of every employee to strive to be

Future planes

a) Higher horsepower Tractor as a variant to MT180D.
b) Aesthetical improvement on power Tiller engines.
c) Emission compliance of new series of engines for varied
applications.

PRODUCT PROFILE

Consequent to its long and close association with the Mitsubishi
Group of Companies, VST Tillers Tractors Ltd. Has effectively absorbed the
latest technology and work culture. This has resulted in the company's



achievement in perfecting every product it manufactures, meeting even the
most exacting requirements of the customer.

Tillers Tractors Diesel Engines

Tillers are classified as follows:

Mitsubishi-Shakti VWH-120 Power
VST-Shakti 130 DI Power Tiller Tiller

Tractors are classified as follows:



Euro tractors –VST Mitsubishi-Shakti MT180D

180 Tractor

Features of Euro tractors:

• Compact, Light weight, Four Wheel drive multipurpose tractor.
• Fully confirms to safety regulations as specified by the Council
of European Communities (EEC) with the following features:

- EEC approved Roll Over Protection System (ROPS) for
operator’s safety. Options:
Regular ROPS - 'e' mark No. e11-0933.
Foldable ROPS - 'e' mark No. e4-VI-028.

- Independent hand operated brake system for additional
safety.

- 'e' Marked electrical signaling devices.
• Option of two & Four Wheel drives for optimum engine power
utilization.



• Overriding PTO clutch to facilitate use of high inertia
implements.
• Live hydraulic system with adjustable implements position, and
lowering speed control.
• Elegant dash board with all necessary instruments

Diesel engines are classified as follows:

130 DI AD8V

K3C VWH 120



FINANCIAL HIGHLIGHTS

The financial results are summarized below

(Rs.in lakhs)
Particulars Year Year
2005-06 2004-05
TURNOVER 1299 11086

OTHER INCOME 165 186

TOTAL INCOME 13164 11272

PROFIT BEFORE DEPRECIATION & 1563 1346
INTREST
137 171
INTRESET
271 299
DEPRECIATION
1155 876
PROFIT BEFORE TAX
414 290
INCOME TAX
741 586
PROFIT AFTER TAX
497 575
BALANCE B/F
1238 1161
SURPLUS AVAILABLE FOR
APPROPRATION TO: 173 144

DIVIDENT 24 20

TAX ON DIVIDENT 500 500

TRANSFER TO GENERAL RESERVE 541 497

BALANCE CARRIED FORWARD



Market share:

The stock exchange or the Securities Exchange Board of India (SEBI)
and / or any other statutory authority have not imposed any strictures /
penalties on the company on any matters relating to capital market during
the last three years

Market Price Data:

Month Highest Lowest Month Highest Lowest
price(Rs). Price(Rs). price(Rs) price(Rs)
Apr - 05 71.90 66.15 Oct- 05 122.60 91.85
May - 05 106.25 70.00 Nov- 05 113.05 97.75
Jun - 05 121.6 102.05 Dec- 05 114.10 98.60
Jul - 05 145.2 117.55 Jan- 06 116.60 106.25
Aug- 05 128.95 112.55 Feb- 06 110.60 101.30
Sept- 05 152.05 116.55 Mar- 06 105.30 91.75

Competitors:

1. Channies – From China
2. Campco – Kerla
3. Sun Brand
4. Hmt

Functional chart



MANAGEING DGM-
DIRECTOR MKV

DIRECTOR
GM-MK
(OPERATION)
VP (BUSINESS
DEPATMENT) MKS

FIA
VP
(CHARMAN) GM-FI
FIC

FII

DGM-SPS
SPS
DGM-MF

MFA MFM MFP

GM-EN

ENE /ENE ENP

DGM-QA
QAC QAV QAM

GM-IM DGM-IM

ISC IMC/IMD
GM-HR

HRD HRW

PGD / PDS (HR) PDT
CE

GAF

GA GAA GAS
Growths and Prospect



During the year under report, your company has been on a consistent
upward path in sales, profit and margins. The turnover increased by 17%
from Rs.111 crores in 2004-2005 to an all time high of 130 crores. The
operating profit increased by over 16% to 1563 lakhs due to higher
realization and lower interest cost. The profit after tax was higher by 26%
from 586 lakhs to 586 lakhs. Consequently, earnings per share grew from
Rs.10.17 to Rs.13.10 for 2005-2006. On the backdrop of the year with a
good financial performance your company is presently dept free. The sale of
power tillers increased to 8489 units as against the previous year sales of
7625 units. With respect to Tractors, your company sold 1249 unit as against
933 units an increase of 33%. This improvement in sales has been achieved
in line with the overall increase in demand complemented by better
government support prices for crops, opening new markets, normal
monsoons and availability of finance to farmers. The last factor plays a key
role since more then 80% of tractor sales are on credit.

The performance of precision components division located continued
to be challenging due to lack of consistency in overseas orders. Due to a
sudden order cancellation, this division suffered losses on account of
underutilization of capacity during the year. In addition, the substantial
reduction in DEPB benefits on exports and increase in the price of steel and
other input material has had an adverse impact on margins. However a
subsequent increase in orders for supply of crankshafts and connecting rods
to one of its customers during the year has shored up its revenues thereby
achieving optimal production.

About VST Group:



Way back in 1920 the VST Group made a humble start by dealing in
petroleum products. Using this strong base, the Group quickly diversified
into automotive marketing with after sales service. From this activity grew
the network of the Organization throughout the southern states of Karnataka
and Tamil Nadu.

The VST Group has over 2000 employees and has a turnover of U.S.
$500 million p.a.

QUALITY POLICY

• The Company will supply reliable products at competitive price with
improved technology to the satisfaction of customers.
• The Company shall ensure prompt and efficient after sales service
backed by quality spare parts.
• All employees in every function and level shall strive to achieve high
quality of work through continuous improvement Guided by global
quality system standards.



• Product costs shall be minimized without lowering quality and
sustained
efforts shall be made to reduce quality costs at all times

Sales and service of product:
Over the years, VST Tillers Tractors Ltd., has established an
extensive and efficient countrywide sales and after-sales service network
backed by easy availability of spare parts. Periodic training programmes for
dealers and customers are taken up to keep them constantly updated on
improvements in its products.
Keeping in line with India's liberalized economic policies and guided
by the conviction that quality products are marketable world wide, VST
Tillers Tractors Ltd., has successfully launched global marketing of its
products. It is marketing Diesel Engines, Power Tillers and Tractors to
regions of Asia, Middle East, Africa, Europe and United States of America.

SWOT ANALYSIS
STRENGTH
• During the year review, the Indian economy witnessed a GDP growth
rate of 8% with agriculture contributing around 2.4% and is estimated
to grow to 3.2%.
• The central and state governments continue to give priority to
agriculture through various subsidy schemes.
• This apart, Banks have promoted farm mechanization by providing
timely finance which has generated good demand for power tillers and
your company continues to maintain its lead in the power tiller
industry in India by delivering a superior value product.



• The performance is even more satisfying when viewed in the light of
the competitive pressure from low cost Chinese brand power tillers.
WEAKNESS
• In the domestic tractor segment, the industry as a whole grew to
262000 units during 2005-2006 from226000 units in the previous
year.
• The western and southern states of Maharashtra, Gujarat, AP,
Karanataka and Kerala primarily contributed to the above growth.
• Your company commands a niche market share in Maharashtra and
Gujarat in the smaller HP tractor and sales in this segment are
expected and sales in this segment are expected to grow in the
coming year.
• To cater to newer markets, the manufacturing capacities and
aesthetics for tractors are being upgraded that will lead to higher
revenue streams for the current year.
OPPORTUNITIES
• The growth of the power tiller and tractor industry could be direly
linked to the GDP growth of the Indian economy.
• As mentioned above, the country’s GDP grew by a robust 8%
making it one of the faster growing large economies in the world.
• Easier and cheaper credit availability to farmer and awareness of the
benefits to farmer mechanization provided opportunities for higher
sales and optimum utilization of capacities.
• The government’s policy on agriculture and the introduction of the
Bharat Nirman Programme for creating massive rural infrastructure
will directly benefit demand for your company’s product.



THREATS
• Several importers realizing the business potential for power tillers
have commenced imports to quickly capitalize on this front.
• These tillers are low cost unit and qualify under subsidy schemes
that could intensify competition thereby affecting demand in the
future various strategies have been planned including a tie up with a
Chinese tiller manufacture for marketing power tillers.
• Your company is continuing to pursue strategies such as cutting
casts, including manufacturing efficiencies, strengthening marketing
initiatives and garner greater economies of scale to stay ahead.
• During the year, importing duties have been reduced and further
reduction in line with WTO obligations may affect demand in this
price sensitive may affect demand in this price sensitive market
which could bring down price further that may affect the demand
pattern.



RATIO ANALYSIS AND INTERPRETATION
TABLE-1

Table showing the Current Ratio of the VST TILLERS TRACTORS
LTD for the Years 2003-2004 to 2005-2006

Current Assets
Current Ratio =
Current liabilities

(Rs in Lakhs)

Current
Year Current liabilities current Ratio
Assets

2003-2004 4534.88 2056.55 2.21
2004-2005 5184.93 2094.54 2.48
2005-2006 5088.99 2558.01 1.99

ANALYSIS-
The Current ratio of the VST TILLERS TRACTORS LTD for the
Year 2003-2004 was 2.21 %, for the Year 2004-2005 was 2.48%, and for the
Year 2005-2006 was 1.99%.
INFERENCE-
2:1 is considered as standard for the ratio. In all three years, it is far
above than the ideal level. The Current Assets of the VST TILLERS
TRACTORS LTD for the Year 2004-2005 was 2.48% which much higher
when compared other two-year 2003-2004, 2005-2006.



GRAPH -1
Graph Showing the Current Ratio for the years 2003-2004 to 2005-2006

Current Ratio

3
Ratios

2
1 2.21 2.48 1.99
0
2003-2004 2004-2005 2005-2006
years



TABLE-2

Table showing the Liquid Ratio of the VST TILLERS TRACTORS

Liquid Assets
Liquid Assets to current liabilities Ratio =
Current liabilities

(Rs in Lakhs)

Year Liquid Assets Current liabilities Liquid Ratio

2003-2004 2506.02 2056.55 1.22
2004-2005 3178.15 2094.54 1.52
2005-2006 2926.66 2558.01 1.14

ANALYSIS
The Liquid Assets of the VST TILLERS TRACTORS LTD for the
Year 2003-2004 was 1.22 %, for the Year 2004-2005 was 1.52%, and for the
Year 2005-2006 was 1.14%.
INFERENCE
The company has maintained its liquidity ratio above the standard level in

all the three years 2004-2005 was 1.52% more as compared to the year

2003-2004 and 2005-2006.



GRAPH -2
Graph Showing the Liquid Assets to Current Liabilities Ratio for the
years 2003-2004 to 2005-2006

Liquid Ratio

1.6
1.4
1.2
1
Ratios

0.8 1.52
0.6 1.22 1.14
0.4
0.2
0
2003-2004 2004-2005 2005-2006
years



TABLE-3

Table showing the Cash Ratio of the VST TILLERS TRACTORS LTD
for the Years 2003-2004 to 2005-2006
Cash Ratio = Cash + Marketable Securities

Current Liabilities
Cash & Bank Balances
=
Current Liabilities & Provisions
[Rupees in lakhs]

Year Cash Current liabilities Cash Ratio

2003-2004 363.18 2056.55 0.177
2004-2005 535.18 2094.54 0.255
2005-2006 647.597 2558.01 0.253

ANALYSIS:

The above table indicates that the Cash ratio in the year 2003-04 was 0.177

in the year 2004-05 it was 0..255 and in the year 2005-06 it was 0.253.

INFERENCE:

The Cash ratio of the firm shows decreasing flow in the year 2003-2004 as

compared to 2004-2005 and increasing from in the year 2004-05 as

compared to 2005-06



GRAPH -3
Graph Showing the Cash Ratio for the years 2003-2004 to 2005-2006

Cash Ratio

0.3
0.2
Ratios

0.1 0.255 0.253
0.177
0
2003-2004 2004-2005 2005-2006
years



TABLE-4

Table showing the Liquid Assets to Total Assets Ratio of the VST
TILLERS TRACTORS LTD for the Years 2003-2004 to 2005-2006

Liquid Assets
Liquid Assets to Total Assets Ratio =
Total Assets

(Rs in Lakhs)
Liquid Assets to
Year Liquid Assets Total Assets Total Assets
Ratio (%)
2003-2004 2506.02 7049.85 35.547
2004-2005 3178.15 7991.91 39.767
2005-2006 2926.66 7967.95 36.73

ANALYSIS-
The Liquid Assets to Total Assets Ratio of the VST TILLERS
TRACTORS LTD for the Year 2003-2004 was 35.54%, for the Year 2004-
2005 was 39.767%, and for the Year 2005-2006 was 36.73%.
INFERENCE-
The Liquid Assets to Total Assets Ratio of the VST TILLERS
when compared other two-year 2003-2004, 2005-2006.



GRAPH -4
Graph Showing the Liquid Assets to Total Assets Ratio for the years
2003-2004 to 2005-2006

Liquid Assets to Total Assets
42
40
38
36 39.767
34 35.547 36.73
32
2003-2004 2004-2005 2005-2006

years



TABLE-5

Table showing the Liquid Assets to Total Investments Ratio of the VST

Liquid Assets
Liquid Assets to Total investments Ratio =
Total investments

(Rs in Lakhs)

Liquid Liquid Assets to Total
Year Total investments
Assets investments
50.63
2003-2004 2506.02 49.50
62.60
2004-2005 3178.15 50.77
35.03
2005-2006 2926.66 83.54

ANALYSIS:
The Liquid Assets to Total Investments Ratio of the VST TILLERS
TRACTORS LTD for the Year 2003-2004 was 50.63%, for the Year 2004-

INFERENCE-
The Liquid Assets to Total Investments Ratio of the VST TILLERS
when compared to other two years 2003-2004, 2005-2006.



GRAPH-5
Graph Showing the Liquid Assets to Total Investments Ratio for the
years 2003-2004 to 2005-2006

Liquid Assets to Total
Investments Ratio

100
Ratios

50
50.63 62.6 35.03
0
2003-2004 2004-2005 2005-2006
years



TABLE-6

Table showing the Debt- Equity Ratio of the VST TILLERS
TRACTORS LTD for the Years 2003-2004 to 2005-2006

Long Term Debts
Debt - Equity Ratio =
Share holders Equity

(Rs in Lakhs)

Year Debt Equity Debt- Equity Ratio

2003-2004 2056.59 3780.86 53.75

2004-2005 2094.54 4193.33 49.94

2005-2006 2558.01 4758.72 53.74

ANALYSIS:
Debt Equity Ratio of VST TILLERS TRACTORS LTD for the Year 2003-
2004 was 53.75%, for the Year 2004-2005 was 49.94%, and for the Year 05-
06 was 53.74%.
INFERENCE:
When the Firm’s Debt-Equity Ratio is high it indicates that the firm
has to face difficulty in meeting its fixed obligation. Lower the Ratio it is
less difficult to meet its fixed obligation. In the Year 2004-2005 the Debt
Equity Ratio of VST TILLERS TRACTORS LTD is 49.94% which much
lower when compared to the other two year 2003-2004, 2005-2006.



GRAPH-6
Graph Showing the Debt Equity Ratio for the years 2003-2004 to
2005-2006

Debt- Equity Ratio

56
54
Ratios

52
50 54.39 53.75
48 49.94
46
2003-2004 2004-2005 2005-2006
years

TABLE-7



Table showing the Proprietary Ratio of the VST TILLERS

Shareholders Funds
Proprietory Ratio =
Total Assets

(Rs in Lakhs)
Share Holders Proprietary
Year Total Assets
Funds Ratio (%)
2003-2004 3780.86 7099.89 53.25

2004-2005 4193.33 8020.97 52.27

2005-2006 4758.72 8116.95 58.63

ANALYSIS
The Proprietary Ratio of the VST TILLERS TRACTORS LTD for the
year 2003-2004 was 53.25% the year 2004-2005 was 52.27%, and for the
year 2005-2006 was 58.63%.
INFERENCE
Higher the Proprietary Ratio, Greater the Long Term stability for the
Firm, the firms Proprietary Ratio in the year 2005-2006 is 58.63% which is
Higher when compared to the other two years 2003-2004, 2004-2005.



GRAPH-7

Graph Showing the Proprietary Ratio for the years 2003-2004 to 2005-
2006

propretory ratio

60
55
ratios

58.63
50 53.25 52.28
45
2003-2004 2004-2005 2005-2006
years

TABLE-8



Table showing the Fixed Assets to Net worth Ratio of the VST

Fixed Assets
Fixed Assets to Networth Ratio =
Networth

(Rs in Lakhs)

Fixed Assets to
Year Fixed Assets Net worth Net worth
Ratio (%)
2003-2004 2514.98 3780.86 66.52

2004-2005 5184.93 4193.33 123.64

2005-2006 5088.99 4738.72 107.39

ANALYSIS –
The Fixed Asset to Net worth Ratio of the VST TILLERS
TRACTORS LTD for the year 2003-2004 was 66.52%, for the Year 2004-

INFERENCE-
The Fixed Asset to Net worth Ratio of the VST TILLERS
TRACTORS LTD for the year 2004-2005 was 123.64%, which is higher
when compared to other two years 2003-2004, 2005-2006.



GRAPH-8
Graph Showing the Fixed Assets to Net worth Ratio for the years2003-
2004 to 2005-2006

Fixed Assets to Networth Ratio

140
120
100
80
ratios

60 123.64
107.39
40 66.52
20
0
2003-2004 2004-2005 2005-2006
Years

TABLE-9



Table showing the Liquid Asset to Net worth Ratio of the VST

Liquid Assets
Liquid Assets to Networth Ratio =
Networth

(Rs in Lakhs)

Liquid Asset to
Year Liquid Assets Net worth Net worth Ratio

2003-2004 2506.02 3780.86 .6652

2004-2005 3178.15 4193.33 1.2364

2005-2006 2926.66 4738.72 1.0739

ANALYSIS-

The Liquid Asset to Net worth Ratio of the VST TILLERS
TRACTORS LTD for the year 2003-2004 was .6652 Times, for the Year
2004-2005 was 1.2364 Times and for the Year 2005-2006 was 1.0739
Times.
INFERENCE-
The Liquid Asset to Net worth Ratio of the VST TILLERS
TRACTORS LTD for the year 2004-2005 was 1.2364 Times which is much
higher when compared to other two year 2003-2004, 2005-2006.



GRAPH-9
Graph Showing the Liquid Assets to Net worth Ratio for the years
2003-2004 to 2005-2006

Liquid Asset to Networth Ratio

1.4
1.2
1
0.8
ratios

0.6 1.2364
1.0739
0.4
0.6652
0.2
0
2003-2004 2004-2005 2005-2006
Years

TABLE-10



Table showing the Net Profit Ratio of the VST TILLERS TRACTORS
Net Profit
Net Profit = *100
Sales

(Rs In Lakhs)
Net Profit Ratio
Year Net Profit Sales
(%)
2003-2004 578.56 10313.75 5.60

2004-2005 585.84 11272.43 5.19

2005-2006 741.66 13164.67 5.633

ANALYSIS-
The Net Profit Ratio of the VST TILLERS TRACTORS LTD for the
Year 2003-2004 was 5.60%, for the year 2004-2005 was 5.19%, and for the
year 2005-2006 was 5.633%.

INFERENCE-
Net Profit ratio indicates the efficiency of the firm’s. Higher the Net Profit it
indicates the firm is Positive and in an advantageous position. The Net Profit
Ratio of the VST TILLERS TRACTORS LTD during the year 2005-2006
was 5.633% which much higher when compared to other two years 2003-
2004, 2004-2005.



GRAPH-10
Graph Showing the Net Profit Ratio for the years 2003-2004 to 2005-
2006

Net profit ratio

5.7
5.6
5.5
5.4
ratios

5.3
5.61 5.6
5.2
5.1
5.19
5
4.9
2003-2004 2004-2005 2005-2006
years

.

TABLE-11



Table showing the Inventory Ratio of the VST TILLERS TRACTORS

Inventory
Inventory Ratio = *100
Current Assets

(Rs in Lakhs)

Current Inventory
Year Inventory
Assets Ratio in %

2003-2004 2028.86 4534.88 44.74
2004-2005 2006.77 5184.93 38.7
2005-2006 2162.33 5088.99 42.49

ANALYSIS:

The above table indicates that the inventory ratio in the year 2003-04 was

44.74%, in the year 2004-05 it was 38.70% and in the year 2005-06 it was

42.49%.

INFERENCE:

The ratio shows the up and downfall trend. In the year 2003-04, it is

recorded the highest (44.74%) and lowest (38.7%) in the year 2004-05.



GRAPH-11
Graph Showing the Inventory Ratio for the years 2003-2004 to 2005-
2006

Inventory Ratio

50
Ratios

45
40 44.74 42.49
38.7
35
2003-2004 2004-2005 2005-2006
years



TABLE-12

Table showing Operating Profit Ratio of the VST TILLERS

Gross profit
Gross Profit Ratio = *100
Sales

(Rs in Lakhs)

Operating
Year Gross profit Sales Profit Ratio
(%)
2003-2004 3717.59 10403.92 35.73

2004-2005 3599.35 11272.43 31.93

2005-2006 21709.17 13164.67 164.91

ANALYSIS-

The Operating Profit Ratio the VST TILLERS TRACTORS LTD for
the year 2003-2004 was 35.73%, for the year 2004-2005 was 31.93%, and
for the year 2005-2006 was 164.91%.

INFERENCE
The Gross Profit Ratio of the VST TILLERS TRACTORS LTD
during the year 2005-2006 was 164.91% which much higher when compared
to the other two year 2003-2004, 2004-2005.



GRAPH-12
Graph Showing the Operating Profit Ratio for the years2003-2004 to
2005-2006

Gross profit ratio

200

150
Ratios

100
164.91
50
35.73 31.93
0
2003-2004 2004-2005 2005-2006
Years

TABLE-13



Table showing Return on Equity funds Ratio of the VST TILLERS

Profit After Tax
Return on Equity Funds =
Equity Shareholders fund

(Rs in Lakhs)
Return on
Year Profit After Tax Net worth Equity funds
(%)
2003-2004 578.56 3780.86 15.3

2004-2005 585.84 4193.33 13.97

2005-2006 741.66 4738.72 15.65

ANALYSIS-
The Return on Equity Ratio of the VST TILLERS TRACTORS LTD
for the Year 2003-2004 was 15.3%, for the year 2004-2005 was 13.9%, and
for the year 2005-2006 was 15.65%.

INFERENCE-
The Return on Equity Ratio shows the profit percentage of the Equity
shareholders. The investors favor higher Return on Equity Ratio. The Return
on Equity Ratio of the VST TILLERS TRACTORS LTD for the Year 2005-
2006 was 15.65%, which is higher when compared to the other two years
2003-2004, 2004-2005.



GRAPH-13
Graph Showing the Return on Equity funds Ratio for the years2003-
2004 to 2005-2006

Return on Equity funds Ratio

16
15.5
15
Ratios

14.5
15.65
15.3
14
13.5 13.97
13
2003-2004 2004-2005 2005-2006
years

.

TABLE-14



Table showing Earnings Per Share Ratio of the VST TILLERS

Net Profit After Tax
Earnings Per Share =
Number of Equity Shares

(In Rs)

Net Profit After No of Equity Earnings Per
Year tax Shares Share Ratio
(In Rs)
2003-2004 57855631 5759685 10.04
2004-2005 58583878 5759685 10.17
2005-2006 74166443 5759685 12.88

ANALYSIS
The Earnings per Share Ratio of the VST TILLERS TRACTORS
LTD for the Year 2003-2004 was 10.04 Rs, for the year 2004-2005 was
10.17 Rs, for the year 2005-2006 12.88 Rs.

INFERENCE-
This Ratio measures the Profitability in terms of the Earnings per
share. The earnings per share of the VST TILLERS TRACTORS LTD in the
year 2005-2006 was 12.88 which is higher than the other two years 2003-
2004, 2004-2005.



GRAPH-14
Graph Showing the Earnings per Share Ratio for the years2003-2004 to
2005-2006

Earnings Per Share

14
12
10
8
6 12.88
10.04 10.17
4
2
0
2003-2004 2004-2005 2005-2006

TABLE-15



Table showing Return on Assets Ratio of the VST TILLERS
Net Profit after Tax
Return on Assets =
Total Assets

(Rs in Lakhs)
Net Profit after Total Assets Return on
Year Assets Ratio
Tax
(%)
2003-2004 578.56 7099.89 8.15

2004-2005 585.84 8020.97 7.30

2005-2006 741.66 8116.95 9.14

ANALYSIS-
Return on Assets of the VST TILLERS TRACTORS LTD for the
Year 2003-2004 was 8.15%, for the Year 2004-2005 was 7.30%, and for the
year 2005-2006 was 9.14%.

INFERENCES-
The Return on Assets Ratio of the VST TILLERS TRACTORS LTD
for the year 2005-2006 was 9.14% which much higher when compared to
other two year 2003-2004, 2004-2005.



GRAPH-15
Graph Showing the Return on Assets Ratio for the years 2003-2004 to
2005-2006

Return on Assets Ratio

10

8

6
9.14
4 8.15 7.3
2

0
2003-2004 2004-2005 2005-2006
Years

SUMMARY OF FINDINGS AND CONCLUSION

FINDINGS


A study on ratio analysis at vst tillers tractors final

A study on ratio analysis at vst tillers tractors final

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