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Khakhdia, D. (2013).

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“Financial Statement analysis of Rajoo engineering company ltd.”

Devendra Khakhdiaunconfirmed user (Management, Delhi University)

Published in mani.philica.com

Abstract
Researcher has selected Rajoo engineering because of its famous name in rajkot (Gujarat-India) industrial region. In this research article attempt has been made to identify financial efficiency of the company using Ratios as an accounting tool and T-test spss as a statistical tool. Ratio gives financial efficiency result while T test provides result regarding there is significance difference in data during study period or not. At the end suggestion and recommendation has been covered by researcher for the further improvement in company’s financial position.

Article body

Introduction:

Rajoo Engineers Limited was originally incorporated on 8th December, 1986 under the name and style of Rajoo Engineers Pvt. Ltd. The company is engaged in manufacturing of plastic processing machinery. These machinery are used for extrusion processing of various thermoplastic raw materials into compounding such as profiles, pipes, blown films, etc., Company is very reputed in plastic processing machinery. When company is doing business at huge level, it becomes very necessary to check financial efficiency of the company. Ultimately company who is very efficient in financial position can run its business in long run. Here researcher has tried to analysis financial position of the company. Researcher has used efficient accounting as well as statistical tool which gives best result.

 

Identification of problem and title of study:

The researcher has studied existing literature in the library and after going through long discussion with the honorable guide, researcher has selected the following topic.

This topic has been selected after considering the relevant information, tools, time available and other related aspects. The topic selected for this research as under;

"Financial Statement analysis of Rajoo engineering company ltd."

 

Period of the study:

The period of the study is of 7 years. The study period cover the period from year 2004-05 to year 2010-11

 

Objectives of the study:

  1. To Study the Profitability in Rajoo Engineering Ltd of the last five years e.g. 2006-07 to 2010-11.
  2. To know the financial structure, growth, development with financial aspects of Rajoo Engineering Ltd.
  3. To do ratio analysis of the company, its subsidiaries and also the competitors for comparative analysis and thereby give required suggestions.
  4. To study the about the liquidity position of the company with the help of various ratios and examine whether the current assets - which can be easily converted into cash, are enough to meet the current liabilities - which requires fast cash settlement.
  5. Try to know current issues of Rajoo Engineering Ltd.
  6. To suggest some view for better practices.
  7. To create platform for future research in this area.

 

Source of data:

This research study is based on primary and secondary data from 2007 to 2011. Major source is secondary data. Secondary sources like P &L, Balance sheet, magazines, journals, newspapers, reference books and websites are taken for the purpose of study.

 

Data analysis:

The Secondary data were classified and tabulated according to the need of the study and objectives. The collected data is analyzed by using appropriate and relevant financial techniques, graphs and tables on the basis of the information received through annual report for further analysis.

 

Tools and techniques for the analysis:

- Accounting Tools:

          Ratio Analysis

          Trend Analysis

- Statistical Tools

          T -  Test (SPSS)

 

 Hypotheses of the study:

Null Hypotheses

H0: There is no significant difference in the Net Profit Margin during the study period.

H0: There is no significant difference in the Gross Profit Margin during the study period.

H0: There is no significant difference in the Retained Earnings during the study period.

H0: There is no significant difference in the Sales during the study period.

H0: There is no significant difference in the Return on Capital Employed during the study period.

Alternative Hypotheses

H1: There is significant difference in the Return on Capital Employed during the study period.

H1: There is significant difference in the Net Profit Margin during the study period.  

H1: There is significant difference in the Sales during the study period.

H1: There is significant difference in the Retained Earnings during the study period

H1: There is significant difference in the Gross Profit Margin during the study period.

 

Limitations of the study:

Finance as the core area, which is a vast field, covers many aspects, which is not possible for us to cover. The knowledge, which we have, is quite limited and thus it makes it difficult for us to deal as the practical and the theoretical knowledge has a wide difference within.In spite of all sincere effort in preparing this report, there are certain limitations, which cannot be ignored.

1. Research time

My samples for analysis includes only Seven year's data i.e. from the year 2004-05 to 2010-11, so it may affect the result of the analysis.

2. Scope of study

This study was limited only to the Rajoo Engineering Ltd. As a result it has a narrow outlook of overall industry.

3. Data Collection Method

The study is based on the secondary data collected from the published annual report of the Rajoo Engineering Ltd and website like www.rajoo.com. So limitation of the secondary data will remain with the study

4. Personal Bias

Every person has its own thinking and believes so in this research work may include personal bias during the research work.

5. Analytical Tools

Analytical tools, which are used in the study, may have their own limitations, which may apply to this study too. Limitation of the ratio analysis is the one of the constrains of the study.

6. Area

It was very difficult to incorporate all the data in the report due to the limitation from the organization and thus certain information is not incorporated.

 

Analysis:

YEAR

NET PROFIT

GROSS PROFIT

RE

SALES

ROCE

2006-07

155.88

387.12

93.70

4045.70

1788.94

2007-08

215.36

450.99

150.66

4397.70

2146.67

2008-09

258.43

580.87

184.48

4777.51

1742.34

2009-10

430.05

781.16

333.70

7424.09

2175.27

2010-11

352.49

817.30

249.68

7786.81

3393.19

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

 

 

Ratios

 

N

Mean

Std. Deviation

Std. Error Mean

NET PROFIT

VAR00001

5

282.4420

109.30388

48.88218

GROSS PROFIT

VAR0002

5

603.4880

192.26625

85.98408

RE

VAR00002

5

202.4440

92.58634

41.40587

SALES

VAR00002

5

5686.3640

1775.52676

794.03971

ROCE

VAR00002

5

2249.2820

669.59642

299.45262

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

 

 

Test Value = 0

 

 

T

df

Sig. (2-tailed)

Mean Difference

95% Confidence Interval of the Difference

RATIOS

 

 

 

 

 

Lower

Upper

NET PROFIT

VAR00001

5.778

4

.004

282.44200

146.7233

418.1607

GROSS PROFIT

VAR00002

7.019

4

.002

603.48800

364.7579

842.2181

RE

VAR00002

4.889

4

.008

202.44400

87.4829

317.4051

SALES

VAR00002

7.161

4

.002

5686.36400

3481.7563

7890.9717

ROCE

VAR00002

7.511

4

.002

2249.28200

1417.8682

3080.6958

 

Result: Alternate hypothesis is accepted in all measurements.

H1: There is significant difference in the Return on Capital Employed during the study period.

H1: There is significant difference in the Net Profit Margin during the study period.  

H1: There is significant difference in the Sales during the study period.

H1: There is significant difference in the Retained Earnings during the study period

H1: There is significant difference in the Gross Profit Margin during the study period.

 

Findings:

1. Researcher found that there is no stability position regarding the profitability of the company during the study period.

2. Researcher found that the company quite progressively during the study period.

3. Researcher found that the company can try expand their business activities to capture the world market

4. Researcher found that the company has to face the problem of of government policy against the consumption of plastics products.

5. Researcher found that during the study period there is significance difference in the earning capacity of the company

6. Researcher found that the company can generated more debts in the capital structure of the company

7. Researcher found that company cannot done proper trading on equity by lack use of financial leverage

8. Researcher found that there is a healthy competition in the field of operation business activities

9. Researcher found that during the study period there is significance difference in the net profit margin of the company by applying t-test with the help of spss.

10. Researcher found that during the study period there is significance difference in the net profit margin of the company by applying t-test with the help of spss.

11. Researcher found that during the study period there is significance difference in the gross profit margin of the company by applying t-test with the help of spss.

12. Researcher found that during the study period there is significance difference in the retained earning of the company by applying t-test with the help of spss.

13. Researcher found that during the study period there is significance difference in the sales of the company by applying t-test with the help of spss.

14. Researcher found that during the study period there is significance difference in the return on capital employeed of the company by applying t-test with the help of spss.

 

Suggestions:        

Looking at the way workings, plans & Strategies, Formulation of Rajoo Engineering Company Ltd. And the same time having a true picture of company, I would like to give some suggestions in this company.

1. The company should introduce debt in its capital structure so that trading on equity is made possible.

2. They should open foreign region so there right now expanse they business activity. They should have more no. of register office in the whole country.

3. Maximum concentration should be given to the training of sales person and Relationship manager.

4. To increase brand awareness amongst the citizens it should give proper focus towards marketing and advertising strategies should be designed efficiently to catch the attention of target market.

5. They should put strong emphasis on designing of the plan. Most of the consumers are attracted by nature of the plan they are offered to suit their need, so unique and attractive plans should be designed.

6. Awareness about the use of various Plastics Extrusion Machines and types of various Plastics Manufacturing Machinery among the consumers.

7. Company should analysis the strategy of anther competitors.

8. Company should try to increase financial activities in future

 

Reference Books:

  1. Kennedy R. D. and Mc. Mullen S.Y. "Financial Statement from"
  2. Smith, A., The Wealth of Nations (English version), New York: Modern Library, Inc., 1937
  3. Financial Appriasal -> Beena Arya
  4. Mittal S. N. " Management Accounting and Financial Management" (New Delhi:- Shree Mahavir Book Depo., 1986)
  5. Krishnan P. G. and Sudersan M. " Material Management " New Delhi
  6. Schall and Hally "Readings and Appraisal", Introduction of Financial Management, McGraw Hill Publishing, New Delhi, 1970
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  9. Starr K. Martin and Miller W. Devid, " Inventory Control , Theoty and Practice", Englewood Cliffs, Prentice Hall, 1962
  10. Emerson O. Henk, "Introducing Accounting", Petro Celli, New York, 1974
  11. Anthony N. Robert, " Management Accounting Text and Cases" , (Homewood), Richard D. Irwin, Inc. 1964
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  13. Prasanna Chandra, "Financial Mnagemen Theory and Practice", Tata McGraw Hill Publishing Co. Ltd,1984
  14. Joy O. M., "introduction to Financial Management" (Home Wood) Richard D. Irwin, Inc., 1977,
  15. Kulkarni P. V. , "Financial Management", "A Conceptual Approach", Himalaya Publishing House, Bombay, 1981
  16. The advanced Learner's Dictionary of Current English, Oxford, 1952
  17. Claire Selltiz and others, Research Methods in Social Sciences, 1962
  18. L. V. Redman and A. V. H. Mory, The Romance of Research, 1923
  19. Webster's New Collegiate Dictionary, 8th Ed., Springfield, Mass: G & C, Merriam, 1975
  20. Foster, G., Financial Statement Analysis, Prentice-Hall, 1986
  21. Kuchhal S. C. "Financial Management" ( An analytical and conceptual approach ) Allahabad, chaitanya Publishing House, 1992
  22. A,b,c,Cramer, Duncan; Dennis Howitt (2004).The Sage Dictionary of Statistics.
  23. C. R. Kothari "Research Methodology", Methods and Techniques, second revised edition, New Age International Publishers, 2009
  24. N. K. Kulshrestha, "Management Accounting", Concept & Cases, Tata McGrow Hill Publishing Company Ltd., 1996
  25. M. N. Borse, "Research Methodology", Shri Nivas Publication, First Edition, 2005

 

Magazines & Reports

  1. India Infoline Sector Reports
  2. India Brand Equity Foundation
  3. Annual Reports of Rajoo Engineering Ltd year 2004-05 to 2010-11
  4. Business India
  5. Business today
  6. India today
  7. Indian Business Management
  8. The Capital Market

 

 Websites:

  1. www.accountingeormanagement.com
  2. www.wikipedia.org
  3. www.google.com
  4. www.rajoo.com

 

 

Information about this Article
Peer-review ratings (from 2 reviews, where a score of 100 represents the ‘average’ level):
Originality = 175.00, importance = 100.00, overall quality = 137.50
This Article was published on 22nd December, 2013 at 17:15:31 and has been viewed 3596 times.

Creative Commons License
This work is licensed under a Creative Commons Attribution 2.5 License.
The full citation for this Article is:
Khakhdia, D. (2013). “Financial Statement analysis of Rajoo engineering company ltd.”. PHILICA.COM Article number 400.


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1 Peer review [reviewer #95407unconfirmed user] added 29th January, 2014 at 05:34:01

Excellent work……

Asst.Prof Devendra Khakhdia your work is according to subject. Your research methodology is proper and as per need of research. In such financial research of company what ever measurements are adopted is according to research methodology. Such research work surely get admiration. All stake holders of company will get help from research and further research can be expanded. Your research work looking genuine and fair. Overall Quality is good.

Originality: 7, Importance: 4, Overall quality: 5


2 Peer review [reviewer #62281unconfirmed user] added 29th January, 2014 at 10:52:52

Researcher attempt is very good. All measurements and research methodology is very relevant as per study. Spss software is used for research purpose which is apprecaible.
As statestical test t-test is used which is also very relevant to study. Here there is originalityof work. Study is important to all stake holders. Findings and suggestions becomes helpful to company.

Originality: 7, Importance: 4, Overall quality: 6




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