A

RESEARCH PROJECT REPORT

ON

“ A STUDY ON RATIO ANALYSIS OF

FLOWMORE LTD.”

SUBMITTED IN PARTIAL FULFILLMENT OF THE DEGREE

OF
MASTER OF BUSINESS ADMINISTRATION
(SESSION 2022-2024)
Submitted to : Submitted by:

Dr. Preeti Vaishali

Assistant Professor MBA 2nd year
(Department of Management Studies ) University Roll No. :

PANIPAT INSTITUTE OF ENGINEERING AND TECHNOLOGY

SAMALKHA , HARYANA (INDIA) – 132101

AFFILATED TO KURUKSHETRA UNIVERSITY , KURUKSHETRA

2
CERTIFICATE

3
 ACKNOWLEDGEMENTS

As I look back after the completion of my project, I feel it would not have been possible without
the guidance. I am very grateful to all the people who have lent their precious time and advice
for rendering this project successful. I take this opportunity to thank them all.

First of all, I would like to thank to my HOD Dr. Akhilesh Mishra Department of
Management studies of PANIPAT INSTITUTE OF ENGINEERING AND TECHNOLOGY, for
extending his support and ensuring that all necessary procedures were completed well before
time. Secondly, I am grateful to “FLOWMORE” for giving me an opportunity to undertake this
project in their organization. I would like to thank Mr. Vineet Arora and Ms. Manisha my
industry mentor.

I would like to thank my institute guide Dr. Preeti for having given me this opportunity and
for her valuable ever-patient guidance ever endeavoring support, timely help and constant
encouragement and also, I am thankful to all faculty members of my management department of
institute for their valuable guidance in completing of this project successfully. Last but not least I
am thankful to all those people who helped me directly and indirectly.

Vaishali

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 Declaration

 I Vaishali hereby declare that this project Report entitled “A STUDY ON

RATIO ANALYSIS OF FLOWMORE LTD ” has been personally done by me
under the guidance of professor Dr. Preeti in partial fulfilment of MBA program
during academic year 2022-2024 . All the data represented in this project report is
correct & true to the best of my knowledge & belief .
 I also declare that this project is my own preparation and it is not submitted to any
other Institution or University for the award of any degree , diploma /certificate or
published any time before .

Submitted to : Submitted by:

Dr. Preeti Vaishali
Assistant Professor MBA 2nd year
(Department of Management Studies ) University Roll No.

Dr. Akhilesh Mishra

Head of the Department
Department of Management Studies

5
 EXECUTIVE SUMMARY

Partial fulfillment of MBA I was required to undergo internship of 6 weeks. With respect to that
I have prepared this report on “A STUDY ON RATIO ANALYSIS OF FLOWMORE
LTD”,Gurugram.

Established in 1946, today, Flowmore is a market leader in the area of large and special
application pumps and currently has two manufacturing facilities in Ghaziabad, Uttar Pradesh,
India.Flowmore works have achieved ISO 9001, ISO 14001, ISO 45001 & ISO
50001 accreditation. Proper management of liquid assets and stock is necessary for sound
managerial control, these assets part of working capital of the balance sheet. An efficient
utilization of financial resources is necessary to avoid financial distress.

To analysis a study on ratio analysis of Flowmore ltd. The financial data for 3 years has been
measured. That is 2019-2020 to 2021-2022 . The ratio analysis is approved out by calculating
Current ratio, Solvency ratio, Debt collection period, Debt position ratio, Trends debtors, Sales
trends, fixed assets to share holder fund ratio etc.. based on financial data of the organization.

6
 INDEX

Chapter number Topic Pages

Declaration
Certificate
CHAPTER 1 INTRODUCTION
1.1 Introduction to Industry 10 - 11
1.2 Introduction to Company
12 - 23
1.3 Introduction to Topic 23 - 37

CHAPTER 2 LITERATURE REVIEW 38- 41

CHAPTER 3 RESEARCH METHODOLOGY
3.1 Objective of the Study

3.2 Hypothesis of the Study

3.3 Scope of study

3.5 Research Design

3.6 Collection of the Data

3.7 Source of Collection of Data

3.8 Research Tool

3.9 Justifictaion of the Study

3.10 Limitation of Study

CHAPTER 4 DATA ANALYSIS AND

INTERPRITATION
4.1 Data Analysis
4.2 SWOT Analysis

7
CHAPTER 5 FINDINGS , SUGGESTIONS AND
CONCLUSION
5.1 Findings
5.2 Conclusion
5.3 Suggestions
CHAPTER 6 Bibliography
CHAPTER 7 Annexure

8
TABLE NO. PARTICULAR PAGE NO.

2
3
4

9
CHAPTER - 1

INTRODUCTION

10
 1.1 INTRODUCTION TO INDUSTRY
Market research analysts at have predicted that the pumps market in India will grow steadily
during the predicted period and will post a CAGR of almost 10% by 2020. Owing to increased
consumption, the pump manufacturers have been concentrating only on the needs of the
domestic market, mainly to the agriculture and building services industries. The influence of
libearalization, privatization, and globalization of the Indian pump market have compelled
manufacturers to export their products to foreign countries where the demand for pumps in high
in industries such as oil and gas, steel, and mining. Currently, the US and Germany are the
revenue contributors to the market. Factors such as the rising demand for oil and the increased
investments in water and wastewater treatment activities will have a huge impact on pump
exports in India, which will drive the demand for the market during the predicted period.
The pumps market in India will witness the emergence of intelligent pump systems and micro
disc pump technology in the next few years. Intelligent pump systems can control and regulate
the flow or pressure of the fluid, can adjust to process changes, and also have a fault tolerant
design, which will induce several manufacturers to adopt these pumps as they reduce the total
cost of ownership without compromising performance parameters.
India today exports pumps to 100+ countries. Market Size of Pump Industries
in India

• The Indian pump market was worth over US$ 18 billion in 2019
• India has over 800 pump manufacturers
• India manufactures more than more than 1 million pumps every year
• The Indian Pump industry offers excellent growth opportunities for international
collaborations
• Indian Pumps are exported to more than 100 countries.

Indian Pumps – Market Segmentation by Pump Type

• Centrifugal Pumps ~95%

• Positive Displacement Pumps ~5%

Indian Pumps – Key Strengths: Why Make in India?

 India offers among the highest net value additions in the world (20%-plus)

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  A ready export market in 100-plus countries
 16% of India’s pump manufacturing capacity is geared for exports (and growing)
 Healthy domestic market for pumps in India – US$ 1.2 billion-plus (INR 8,500-plus Cr.)
 Technological capabilities to meet the highest quality standards – such as ISO 9000,
ANSI, API or EUNO series
 Proactive government policies to stimulate agricultural growth (and demand for pumps),
through:
 subsidized electricity
 exemptions on use of solar water pumps
Such policies have inspired farmers to install independent irrigation facilities to ensure
consistent availability of water. As a result of these schemes, the demand for water pumps has
increased significantly.
 Rapid growth of the Indian chemical market has stimulated the demand for high quality
industrial pumps
 The growing demand for lower cost of operation and zero downtime pumps gives India a
competitive advantage to offset the labour cost advantage offered by low-cost/low-
quality manufacturers in some Asian countries.

1.2 INTRODUCTION TO COMPANY

Flowmore is an Indian organization that operates in the sector of industrial scale pumps.
The origin of Flowmore Ltd. dates to 1946, when it began as a Propriety firm,
manufacturing self-priming pumps .The following decades saw a slow rise of the brand to
subsequently become one of the largest names in India in the market. They incorporated into a
Private Ltd. Co.in 1967, the following years saw a boom of development in India and Flowmore
grasped the opportunity to expand its market, landing big projects like the supply of the Vertical
Axial Flow Raw Water Pumps to Badarpur Thermal Power in 1969 and has become a consistent
supplier for similar and diverse products through the decades. The expansion in the following
years led the company to go public in 2008. Flowmore Ltd., today, is a market leader in the area
of large and special application pumps, having two manufacturing facilities at Ghaziabad, Uttar

12
Pradesh, India and 20 regional offices all across the country. Throughout the years, the
organization has maintained its core corporate values and business ethics.

Considerable emphasis is given to safety with Flowmore Ltd. having achieved ISO 9001, ISO
14001 and OHSAS 18001 accreditation and securing CE Marking for all its products. Flowmore
has diversified into an EPC Company and undertakes complete turnkey contracts, offering an
extensive line of standard and custom-engineered centrifugal pumps, for varied services in
Power Stations such as Cooling Water, Cooling Tower, Intake, Make-Up Water, Ash Water, Ash
Slurry applications, apart from other Services such as Sewage, Wastewater, Fire Protection,
Drainage, Flood Control, Lift Irrigation, Steel and Mines, Viscous and Volatile Liquid Handling
Pumps for Petroleum and Chemical Industries, etc., with a strong after sales service department
in all regional offices for service calls, routine maintenance, undertaking erection, testing and
commissioning of pumps at site, etc. and, registered as an approved pump vendor by all major
government owned units such as NTPC, NPCIL, BHEL, PDIL, MECON, NHPC, EIL, State
Electricity Boards, Water and Sewage Boards and many municipal corporations all across the
country with clientele consisting of Toshiba, Al stom, Nuclear Power Corporation.

NTPC, BHEL, NHPC, EIL, Reliance Industries, Reliance Energy, L and T, Jindal Steel and
Power Ltd., Birla Corporation, Hindalco Industries, Tata Group, JSW, Essar Group, Adani
Group, Hindustan Zinc, LANCO, BGR Energ, Andritz Hydro etc. with operations all over the
world in countries like USA, Canada, Australia, Oman, Saudi Arabia, Fiji,South America,
Philippines, South Africa etc.

Vision
To remain a world class technology driven pump manufacturer and service provider and always
be ahead of customer expectations.

Mission
To provide reliable and efficient pumping systems at competitive prices with innovative Eco-
Friendly technologies whilst contributing to society.

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 Values

 Safety first.
 Business ethics
 Mutual Respect
 Customer focus
 Quality at all stages.

Products

In process operation , liquids and their movement and transfer from one placed to another plays
a large part in process. Liquid can flow only under its own power from a high pressure system to
a lower pressure system .

The flow of liquid is also affected by friction , pipe size, liquid viscosity and the bends and
fittings in the piping. To overcome flow problems , and to move liquid from place to place ,
against a higher pressure to a higher elevation , energy must be added to the liquid. To add the
required energy to liquids, we use ‘PUMPS’.

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A pump therefore is defined as ‘ A machine used to add energy to a liquid ‘. Pumps come in
many types and the sizes. The type depends on the function the pump is to perform and the size (
and speed ) depends on the amount ( volume ) of the liquid to be move in a given time. Water
pumps are mechanical or electromechanical devices designed to move water through pipes or
hoses by generating a pressure differential. They are driven by electricity and other power
sources like gasoline engines. They can also be powered using solar panels in remote areas, such
as desert regions. At present, water pumps find extensive applications in the municipal,
industrial, agricultural, and residential sectors for supplying water across India.

The two basic types of pumps are:

1.Centrifugal pumps

2. Reciprocating pumps

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 1. VERTICAL TURBINE PUMP

Fig. 1.1

(Source : www.flowmorepumps.com)

 Flow: up to 70000 m³/h

 Head: up to 300 m
 Sizes: 100 to 2800 mm.

Applications & Services of Product :

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 Cooling Water
 Intake Pumps
 Water, Sewage & waste water treatment
 Dock Drainage
 Flood Control
 Fire service
 Irrigation / Lift Canal
 Water Supply
 Booster Service
 Dewatering.

2. MULTI STAGE CENTRIFUGAL PUMPS

Fig. 1.2

(Source : www.flowmorepumps.com)

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 Flow : up to 700 m³/hr
 Head: up to 400 m
 Size: 40 to 250 mm

Application of Products

 Hilly Area Water Supply

 Booster Service
 Irrigation
 Sprinkler System
 Mine dewatering
 Boiler feed service
 Fire fighting
 Condensate transfer

3. SUMP PUMPS

Fig. 1.3

(Source : www.flowmorepumps.com)

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 Range

 Flow: up to 4600 m³/h

 Head: up to 70 m
 Size: 50 to 600 mm

Applications & Services of Product :

 WTP /STP/ ETP

 Sump Dewatering
 General Fluid Transfer

4. PROPELLER PUMP

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 Fig. 1.4

(Source : www.flowmorepumps.com)

Range

 Flow: up to 60000 m³/hour

 Head: up to 30 m
 Sizes: 200 to 1800 mm

Applications & Services of Product :

 River / Raw water

 Intake Pumps
 Water, Sewage & waste water treatment
 Dock Drainage

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 Flood Control
 Fire service
 Irrigation / Lift Canal
 Water Supply
 Booster Service

5. END SUCTION PUMPS

Fig. 1.5

(Source : www.flowmorepumps.com)

Range

 Flow: up to 1350 m³/ hour

 Head: up to 170 m
 Size - 32 to 250 mm

Applications & Services of Products :

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 Circulating Water System
 Power plants
 WTP & STP
 Fire Fighting
 HVAC
 Irrigation / Sprinkler service
 General Services

6. SOLAR PEDALFLOW PUMP

Fig. 1.6

(Source : www.flowmorepumps.com)

Advantages

 No electricity or external power required.

 Potable water available almost at door steps.
 Closed system avoids water contamination.
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 Provides high level of health & hygiene.
 Contributes in eradication of water borne diseases.
 Increased availability even during cloudy or night hours.
 Drinking water available round the clock - 24x7.
 Highly Economical @ Paise 3.55 / litre.
 Eco-friendly with Zero Noise and Emissions.
 Complete independence from grid connections for water supply.
 Eliminates human effort.
 Remote location suitability.
 Pumps directly to overhead tank.
 Large quantities eliminates multiple hand pumps.

7 . HORIZONTAL SPLIT CASING PUMPS

Fig. 1.7

(Source : www.flowmorepumps.com)

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 Flow: up to 18000 m³/hour
 Head: up to 250 m
 Sizes : 50 to 1200 mm

Applications & Services of Products :

 Power Generations
 Cooling Water, Circulating Water, Make up Water, Misc. & Auxiliary Services.
 Fire Fighting
 Industrial
 Steel Plants, Sugar Plants, Paper & Textile Mills, Rolling Mills etc.
 Fertilizer, Chemical, Refineries, Petrochemicals Plants
 Intake Raw Water, Cooling Water, Booster Services etc.
 Municipal Water Supply
 Clear Water, Raw Water, Waste Water and Auxiliary Services.
 Air Conditioning Plants
 Primary & Auxiliary Water
 Building Services

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 8. NON CLOG PUMPS

Fig. 1.8

(Source : www.flowmorepumps.com)

 Flow: up to 8000 m³/hr

 Head: up to 70 m
 Sizes: 50 to 1000 mm

Applications & Services of Products :

 Municipal sewage station

 Effluent treatment plant
 Slurry
 Food, Juices

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KEY MILESTONE

2011
Installed India Largest Test Bed (Flow up to 70,000M3/Hr & motor rating up to 6000 KW in
any voltage).

2012
Rourkela Steel Plant ( SAIL). Awarded EPC package for Water Supply for New Plate Mill in
collaboration with Bamag, Germany

Fig. 1.9

(Source : www.flowmorepumps.com)

2013
Awarded India Largest River Water Intake (Flow 6750 M³/Hr at 160.23 Mtr.) & Raw Water
(Flow 3800 M³/Hr at 25.322 Mtr.) Transfer Pumping System for power plant (4x600MW) at
Tamnar, CG. (JPL).

2014
Flowmore in collaboration with MWI-USA have launched a revolutionary product, Solar
Pedalflo.

2019
Secured prestigious CW System Pump set order for BPCL Kochi each 3200 M3/Hr at 66.5m.

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2020

NTPC Farakka STPP ( 2*500 MW)

2022

Flowmore Limited has bagged a contract from THDC India Limited for cooling water (CW)
system equipment package under the Khurja Super Thermal Power Project.

1.3 INTRODUCTION TO TOPIC

Finance is defined as the provision of money when it is required. Every enterprise needs finance
to start and carry out its operation. Finance is the lifeblood of an organization. So, finance
should be managed effectively.

Financial statements are prepared primarily for decision making. Financial Statement Analysis
refers to the process of determining financial strength and weakness of the firm by properly
establishing strategic relationship between the items of the balance sheet and profit and loss
account. There are various methods and techniques used in analysing financial statements, such
as comparative statements, trend analysis, common size statements, schedule of changes in
working capital, funds flow and cash flow analysis, cost volume profit analysis and ratio analysis
and other operative data. The analysis of financial statement is used for decision making by
various parties.

 First task is to analyse and select the information which is requiring taking decision.
 Second task is to arrange the information in a way to highlight significant relationship.
 Final task is the interpretation and drawing of inferences and conclusions.

MEANING AND CONCEPT OF RATIO ANALYSIS

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions” and “the relationship between two or more things”. In

27
financial analysis, a ratio is used as a benchmark for evaluating the financial position and
performance of a firm. The absolute accounting figures reported in the financial statements do
not provide a meaningful understanding of the performance and financial position of a firm. An
accounting figure conveys meaning when it is related to some other relevant information. For
example, Rs.5 core net profit may look impressive, but the firm’s performance can be said to be
good or bad only when the net profit figure is related to the firm’s Investment.

The relationship between two accounting figures expressed mathematically, is known as a

financial ratio (or simply as a ratio). Ratios help to summarize large quantities of financial data
and to make qualitative judgment about the firm’s financial performance. For example, consider
current ratio. It is calculated by dividing current assets by current liabilities; the ratio indicates a
relationship- a quantified relationship between current assets and current liabilities. This
relationship is an index or yardstick, which permits a quantitative judgment to be formed about
the firm’s liquidity and vice versa. The point to note is that a ratio reflecting a quantitative
relationship helps to form a qualitative judgment. Such is the nature of all financial ratios .

Standards of comparison

The ratio analysis involves comparison for a useful interpretation of the financial statements. A
single ratio in itself does not indicate favorable or unfavorable condition. It should be compared
with some standard.

Standards of comparison may consist of:

1. Past ratios, i.e. ratios calculated form the past financial statements of the same firm;
2. Competitors’ ratios, i.e., of some selected firms, especially the most progressive and
successful competitor, at the same pint in time;
3. Industry ratios, i.e. ratios of the industry to which the firm belong.

In this project calculating the past financial statements of the same firm does ratio analysis.

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 USE AND SIGNIFICANCE OF RATIO ANALYSIS

The ratio is one of the most powerful tools of financial analysis. It is used as a device to
analyze and interpret the financial health of enterprise. Ratio analysis stands for the process
of determining and presenting the relationship of items and groups of items in the financial
statements. It is an important technique of the financial analysis. It is the way by which
financial stability and health of the concern can be judged. Thus ratios have wide
applications and are of immense use today.

IMPORTANCE OF RATIO ANALYSIS:

1. Helps in decision making : Financial statements are prepared primarily for

decision-making. Ratio analysis helps in making decision from the information provided in
these financial Statements.

2. Helps in financial forecasting and planning:- Ratio analysis is of much help in

financial forecasting and planning. Planning is looking ahead and the ratios calculated for a
number of years work as a guide for the future. Thus, ratio analysis helps in forecasting and
planning.

3. 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. Thus, ratios
help in communication and enhance the value of the financial statements.

4. Helps in co-ordination:- Ratios even help in co-ordination, which is of at most

importance in effective business management. Better communication of efficiency and
weakness of an enterprise result in better co-ordination in the enterprise

5. Helps in control:- Ratio analysis even helps in making effective control of business.
The weaknesses are otherwise, if any, come to the knowledge of the managerial, which helps,
in effective control of the business.

b) Utility to shareholders/investors

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An investor in the company will like to assess the financial position of the concern where he
is going to invest. His first interest will be the security of his investment and then a return in
form of dividend or interest. Ratio analysis will be useful to the investor in making up his
mind whether present financial position of the concern warrants further investment or not.

C) Utility to creditors

The creditors or suppliers extent short-term credit to the concern. They are invested to
know whether financial position of the concern warrants their payments at a specified time or
not.

d) Utility to employees

The employees are also interested in the financial position of the concern especially
profitability. Their wage increases and amount of fringe benefits are related to the volume of
profits earned by the concern.

e) Utility to government

Government is interested to know overall strength of the industry. Various financial

statement published by industrial units are used to calculate ratios for determining short term,
long-term and overall financial position of the concerns.

f) Tax audit requirements

Sec44AB was inserted in the income tax act by financial act; 1984.Caluse 32 of the income
tax act requires that the following accounting ratios should be given:

1. Gross profit/turnover.

2. Net profit/turnover.

3. Stock in trade/turnover.

4. Material consumed/finished goods produced.

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 Further, it is advisable to compare the accounting ratios for the year under consideration
with the accounting ratios for earlier two years so that the auditor can make necessary
enquiries, if there is any major variation in the accounting ratios.

Classification of ratios

Several ratios, calculated from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated. Management is interested in
evaluating every aspect of the firm’s performance. They have to protect the interests of all
parties and see that the firm grows profitability. In view of the requirement of the various
users of ratios, ratios are classified into following four important categories:
 Liquidity ratios - short-term financial strength
 Leverage ratios - long-term financial strength
 Profitability ratios - long term earning power
 Activity ratios - term of investment utilization .

Liquidity ratios measure the firm’s ability to meet current obligations;

Leverage ratios show the proportions of debt and equity in financing the firm’s assets;

Activity ratios reflect the firm’s efficiency in utilizing its assets; and

Profitability ratios measure overall performance and effectiveness of the firm.

1. LIQUIDITY RATIOS :

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 It is extremely essential for a firm to be able to meet the obligations as they become due.
Liquidity ratios measure the ability of the firm to meet its current obligations (liabilities). The
liquidity ratios reflect the short-term financial strength and solvency of a firm.

In fact, analysis of liquidity needs the preparation of cash budgets and cash and funds flow
statements; but liquidity ratios, by establishing a relationship between cash and other current
assets to current obligations, provide a quick measure of liquidity. A firm should ensure that it
does not suffer from lack of liquidity, and also that it does not have excess liquidity. The failure
of a company to meet its obligations due to lack of sufficient liquidity, will result in a poor credit
worthiness, loss of credit worthiness, loss of creditors’ confidence, or even in legal tangles
resulting in the closure of the company. A very high degree of liquidity is also bad; idle assets
earn nothing. The firm’s funds will be unnecessarily tied up in current assets. Therefore, it is
necessary to strike a proper balance between high liquidity and lack of liquidity.

The most common ratios which indicate the extent of liquidity are lack of it, are:

(i) Current ratio

(ii) Quick ratio.

(i) CURRENT RATIO

Current ratio is calculated by dividing current assets by current liabilities.
Current Assets
Current Ratio=
Current Liability
Current assets include cash and other assets that can be converted into cash within in a year,
such as marketable securities, debtors and inventories. Prepaid expenses are also included in the
current assets as they represent the payments that will not be made by the firm in the future. All
obligations maturing within a year are included in the current liabilities. Current liabilities
include creditors, bills payable, accrued expenses, short-term bank loan, income tax, liability
and long-term debt maturing in the current year. The current ratio is a measure of firm’s short-
term solvency. It indicates the availability of current assets in rupees for every one rupee of
current liability. A ratio of greater than one means that the firm has more current assets than
current claims against them Current liabilities.

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(ii) QUICK RATIO
Quick ratio also called Acid-test ratio, establishes a relationship between quick, or liquid,
assets and current liabilities. An asset is a liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset. Other assets that are
considered to be relatively liquid and included in quick assets are debtors and bills receivables
and marketable securities (temporary quoted investments). Inventories are considered to be less
liquid. Inventories normally require some time for realizing into cash; their value also has a
tendency to fluctuate. The quick ratio is found out by dividing quick assets by current
liabilities.

Quick Assets = Current Assets – ( Inventories + prepaid expenses).

QUICK ASSETS
QUICK RATIO=
CURRENT LIABILITY

The ideal Quick Ratio is 1: 1 and is considered to be appropriate.

 LEVERAGE RATIO:
The short-term creditors, like bankers and suppliers of raw materials, are more concerned
with the firm’s current debt-paying ability. To judge the long term financial position of
the firm, financial leverage, or capital structure ratios are calculated. These ratios indicate
mix of funds provided by owners and lenders. As a general rule there should be an
appropriate mix of debt and owners equity in financing the firm’s assets. Leverage ratios
may be calculated from the balance sheet items to determine the proportion of debt in
total financing.

TYPES OF LEVERAGE RATIO

1. Debt Ratio
2. Debt to Equity Ratio
3. Proprietary Ratio

33
 4. Interest Coverage Ratio
(i) Debt Ratio:
This ratio helps to determine the proportion of borrowing in a company’s capital. It
indicates how much assets are financed by debts.

Total Debt
Debt Ratio=
Total Assets

Significance: This ratio primarily indicates the rate of external funds in financing

the assets and the extent of coverage of their debts are covered by assets.

(ii) DEBT - EQUITY RATIO

The debt-to-equity ratio (D/E ratio) shows how much debt a company has compared to
its assets. It is found by dividing a company's total debt by total shareholder equity . A

higher D/E ratio means the company may have a harder time covering its liabilities .

Total Debt
Debt Equity Ratio=
Total Equity

(iii) Proprietary ratio

Proprietary ratio is a type of solvency ratio that is useful for determining the amount or

contribution of shareholders or proprietors towards the total assets of the business. The
main purpose of this ratio is to determine the proportion of the total assets of a business

that is funded by the proprietors.

Proprietors Funds
Proprietary Ratio=
Total Assets

(iv)Interest Coverage Ratio

34
 Debt ratios described above are static in nature, and fail to indicate the firm’s ability to
meet interest (and other fixed charges) obligations. The interest coverage ratio or the times
interest-earned is used to test the firm’s debt servicing capacity. The interest coverage ratio
is computed by dividing earnings before interest and taxes(EBIT)by interest charges.

EBIT
Interest Coverage Ratio=
Interest

 Activity Ratio
Funds of creditors and owners are interested in various assets to generate sales and profits.
The better the management of assets, the larger the amount of sales. Activity ratios are
employed to evaluate the efficiency with which the firm manages and utilizes its assets.
These ratios are also called turnover ratios because they indicate the speed with which
assets are being converted or turned over into sales. Activity ratios, thus, involves a
relationship between sales and assets.
Following ratios are included in activity ratios:

Inventory Accounts
Receivable
Turnover Turnover
Ratio Ratio

Net Assets Working

Capital
Turnover
Turnover
Ratios
Ratio

(i) Inventory Turnover Ratio:

Inventory turnover indicates the efficiency of the firm in producing and selling its product. It is
calculated by dividing the cost of goods sold by the average inventory:

Cost of goods sold

Inventory turnover Ratio=
Average inventory

Or

35
 Net Sales
Inventory
The average inventory is the average of opening and closing balances of inventory. The cost of
goods sold may not be available so we can compute inventory turnover as sales divided by
inventory. In a manufacturing company inventory of finished goods is used to calculate
inventory turnover. This inventory turnover ratio indicates whether investment in inventory is
efficiently utilized or not. A high inventory turnover is indicative of good inventory
management. A low inventory turnover implies excessive inventory levels than warranted by
production and sales activities or a slow moving or obsolete inventory.

Inventory Conversion Period:

It may also be of interest to see the average time taken for clearing the stock. This can be
possible by calculating the inventory conversion period. This period is calculated by dividing
the no. of days by inventory turnover ratio:
No. of days ∈the year
Inventory turnover ratio=
Inventory turnover ratio

(ii) Debtors (Accounts Receivable) Turnover Ratio

A firm sells goods for cash and credit. Credit is used as a marketing tool by number of
companies. When the firm extends credits to its customers, debtors (accounts receivable) are
created in the firm’s accounts. Debtors are convertible into cash over a short period and,
therefore, are included in current assets.
The liquidity position of the firm depends on the quality of debtors to a great extent. Financial
analyst applies these ratios to judge the quality or liquidity of debtors .
(a) Debtors Turnover Ratio

(b) Debtors Collection Period Debtors’ turnover is found out by dividing credit sales by
average debtors

Credit sales
Debtors turnover Ratio=
Debtors

Debtors’ turnover indicates the number of times debtors’ turnover each year generally, the
higher the value of debtors’ turnover, the more efficient is the management of credit. To

36
 outside analyst, information about credit sales and opening and closing balances of debtors
may not be available. Therefore, debtors’ turnover can be calculated by dividing Total sales
by the year-end balances of debtors:
Sales
Debtors turnover Ratio=
Debtors

Average Collection Period:

In ascertaining the firms comparative strength and advantage relative to its credit policy and
performance The average number of days for which the debtors remain outstanding is called the
Average Collection Period. The Average Collection Period measures the quality of the debtors
since it is indicated the speed of their collection.
360
Average Collection Period=
Debtors Turnover Ratio

(iii) Net Assets Turnover Ratio

Net assets turnover can be computed simply by dividing sales by net sales. The asset turnover ratio,
also known as the total asset turnover ratio, measures how efficient a company uses its assets to
generate sales. Like many other ratios, a single period’s asset turnover ratio is not very useful on
its own. However, when compared to the asset turnover ratios of comparable companies in the
same industry, it can reveal how well the company is doing relative to competitors. The ideal or
average asset turnover ratio depends on the industry of the company.

Significance : A higher ratio is generally favourable as it indicates efficient use of assets.

Conversely, a low ratio may imply poor utilization of assets, poor collection methods, or poor
inventory management. It is calculated as follows
Net Sales
Assets Turnover Ratio=
Average Total Assets

(iv) Working Capital Turnover Ratio

Working Capital of a concern is directly related to sales. The current assets like debtors, bills
receivable, cash, and stock etc. change with the increase or decrease in sales. The Working
Capital is taken as:

37
 Working Capital = Current Assets – Current Liabilities

This Ratio indicates the velocity of the utilization of net working capital. This Ratio indicates the
number of times the working capital is turned over in the course of a year. This Ratio measures
the efficiency with which the working capital is being used by a firm. A higher ratio indicates the
efficient utilization of working capital and the low ratio indicates inefficient utilization of
working capital.

Net Sales
Working Capital Turnove r Ratio=
Net WorkingCapital

 PROFITABILITY RATIOS :
A company should earn profits to survive and grow over a long period of time . Profits are
essential, but it would be wrong to assume that every action initiated by management of a company
should be aimed at maximizing profits, irrespective of concerns for customers, employees, suppliers or
social consequences. It is unfortunate that the word profit is looked upon as a term of abuse since some
firms always want to maximize profits ate the cost of employees, customers and society.

Profit is the difference between revenues and expenses over a period of time (usually one year). Profit is
the ultimate output of a company, and it will have no future if it fails to make sufficient profits. Therefore,
the financial www.studymafia.org manager should continuously evaluate the efficiency of the company in
terms of profit. The profitability ratios are calculated to measure the operating efficiency of the company.
Besides management of the company, creditors and owners are also interested in the profitability of the
firm. Creditors want to get interest and repayment of principal regularly.

FIGURE 1.10 SOURCE: (https://www.google.com/search)

38
 1. Gross profit ratio:

It compares gross profit to sales revenue. This shows how much a business is earning, taking into
account the needed costs to produce its goods and services. A high gross profit margin ratio
reflects a higher efficiency of core operations, meaning it can still cover operating expenses,
fixed costs, dividends, and depreciation, while also providing net earnings to the business. On the
other hand, a low profit margin indicates a high cost of goods sold, which can be attributed to
adverse purchasing policies, low selling prices, low sales, stiff market competition, or wrong
sales promotion policies.
Gross profit
Gross Profit Ratio= ∗100
Net Sales

2. Net profit ratio :

It is the bottom line. It looks at a company’s net income and divides it into total revenue. It
provides the final picture of how profitable a company is after all expenses, including interest
and taxes, have been taken into account.

A reason to use the net profit margin as a measure of profitability is that it takes everything into
account. A drawback of this metric is that it includes a lot of “noise” such as one-time expenses
and gains, which makes it harder to compare a company’s performance with its competitors.
Net profit
Net Profit Ratio= ∗100
Net Sales

Net Sales = Total Sales - Sales Return

3. Return on Assets :

As the name suggests, shows the percentage of net earnings relative to the company’s total
assets. The ROA ratio specifically reveals how much after-tax profit a company generates for
every one dollar of assets it holds. It also measures the asset intensity of a business. The lower
the profit per dollar of assets, the more asset-intensive a company is considered to be. Highly
asset-intensive companies require

39
big investments to purchase machinery and equipment in order to generate income. Examples of
industries that are typically very asset-intensive include telecommunications services, car
manufacturers, and railroads. Examples of less asset-intensive companies are advertising
agencies and software companies.
It is calculated as follows :
Net Profit
Returnon Assets=
Total Assets

4. Return on Capital employed :

This ratio computes percentage return in the company on the funds invested in the business by its
owners. A high ratio represents better the company is. It is similar to the ROE ratio, but more all-
encompassing in its scope since it includes returns generated from capital supplied by
bondholders Capital Employed = Equity share capital, Reserve and Surplus, Debentures and
long-term Loans Capital Employed = Total Assets – Current Liability

It is calculated as follows :
Operating Profit
Returnon Capital employed= ∗100
Capital Employed

CHAPTER - 2
40
LITERTURE REVIEW

41
Review of Literature refers to the collection of the results of the various researches relating to
the present study. It takes into consideration the research of the previous researchers which are
related to the present research in any way. Here are the reviews of the previous researches related
with the present study:
Hidayatullah , Rizki 2023 (The Analysis of Financial Ratio in PT Telkom Indonesia Tbk
on 2020-2022 )
The purpose of this study is to examine the financial statements of PT Telkom Indonesia
(Persero) Tbk from 2020 to 2022. It takes a descriptive quantitative approach for study. The data
gathering method is documentation, and the data analysis method is financial ratio analysis for
the years 2020 to 2022, which includes liquidity ratios, solvency ratios, activity ratios, and
profitability ratios. The analysis results show that PT. Telkom Indonesia's financial ratios
performed well over the analyzed period. The liquidity ratios demonstrate the company's ability
to meet short-term obligations, whereas the profitability ratios demonstrate the company's ability
to create adequate earnings. The solvency ratios demonstrate the company's ability to meet long-
term obligations. Overall, the research shows that PT Telkom Indonesia's financial performance
for 2020-2022 is satisfactory.

Nur, Suciyanti 2023 (Financial Ratio Analysis of PT SOHO GLOBAL HEALTH Tbk's
Corporate Performance for 2019-2021)
The purpose of this research is to examine the performance of PT Soho Global Health, Tbk from
2019 to 2021. The analysis focuses on PT Soho Global Health's financial reports for 2019-2020.
This information is utilized to examine and construct a liquidity, solvency, profitability, and
activity ratio analysis. The liquidity ratio calculated using the current ratio performs reasonably
well. In a healthy circumstance, the solvency ratio utilizing the debt to asset ratio demonstrates
the company's performance. The profitability ratio calculated using the net profit margin ratio
reveals that it is in an unfavorable state. The activity ratio is calculated using the total asset
turnover ratio, and it performs admirably.

Sihombing, Maffett, etc.al 2022 ( Financial Ratio Analysis)

42
The purpose of this study is to determine the financial performance of PT. Astra Agro Lestari
Tbk (PT. AALI) for 2020-2022 utilizing financial ratios and the common size technique. The
descriptive research method with a quantitative approach was used in this study. According to
the findings of the research, PT. Astra Agro Lestari Tbk's performance in paying its current
liabilities with current assets is still fairly good.

Edunomik 2022 ( financial ratio analysis to assess performance finance of paper

manufacturers on stock exchange indonesia )
In this study with the help of ratio analysis comparison is made between two firms PT.
Surabaya Agung Industrial Pulp Tbk (SAIP) and PT. Fajar Surya Wisesa Tbk (FASW) . Tools
to measure the financial performance of companies is namely liquidity ratios, activity ratios,
solvency ratios, and profitability ratios.

Anggraini 2022 (Analysis of Financial Statements Based on Financial Ratio and Vertical-
Horizontal Method in PT Unilever, Tbk, 2016-2017 Period)
The purpose of this research is to determine the financial performance of PT Unilever, Tbk
horizontally and vertically, namely by watching the development of assets and financial
statements through the calculation of financial ratios. According to the findings of the study, the
ratios of liquidity, profitability, and leverage tend to change. The liquidity ratio has increased,
whereas the profitability ratios in GPM and NPM have declined. Because the Leverage Ratio has
reduced, PT Unilever, Tbk's financial performance has not been totally ideal. Based on the
horizontal analysis, PT Unilever, Tbk's balance sheet and income statement are optimal.

Uddin , Alam, etc .al (2022). Financial performance evaluation through ratio analysis: a
study on rural power company ltd
This research attempts to assess Rural Power Company Ltd.'s financial performance from 2018
to 2020. The study mainly relies on secondary data collected from the sample unit, and the
findings are presented in tabular form and as a bar chart in MS Excel. The outcomes demonstrate
how well the company is handled in terms of production, administration, and sales. It shows that
the firm's economic situation is favorable. The Current Ratio, Liquid Ratio, Debt Equity Ratio,

43
Gross Profit Ratio, Net Profit Ratio, and EPS Ratio, on the other hand, are all appropriate.
However, the Return on Equity (ROE) Ratio is unsatisfactory and requires further improvement.

HARALAYYA 2022 ( Impact Of Ratio Analysis on Financial Performance in Royal

Enfield (Bhavani Motors) Bidar )
The study was conducted for the "Impact of Ratio Analysis on Financial Performance in Royal
Enfield," and the methods utilized for the study such as ratio analysis, comparison
statement. Ratio analysis were used to determine the company's efficiency and effectiveness.
Financial analysis and interpretation are crucial tools for evaluating a company's success. It
highlights the firm's strengths and weaknesses. The venture's working capital should be used to
improve the efficiency and effectiveness of the business enterprise venture that can be divided.
The corporation maintains unnecessary liquidity in order to generate income.

Chang, , Kochiyama, 2021 ( Management Forecasting Ability and Predictive Ability of

Dividend Changes for Future Earnings )
In this study the concept that dividend changes affect future earnings is predicated on managers'
ability to effectively forecast future earnings possibilities. In this regard, we believe that dividend
prediction capacity varies with managers' forecasting abilities. We find that dividend changes,
particularly dividend increases, are positively associated with gains in future earnings when we
analyze a large sample of Japanese dividend-paying enterprises.

Rashid 2021 (The efficiency of financial ratios analysis to evaluate company’s

profitability)
This study mainly focus on evaluating company’s profitability with the help of ratios . The
main purpose of business is to make money. It should be noted that net income alone is not very
helpful in measuring the efficiency and performance of a business unless it is linked to other data
such as sales, cost of products sold, operational expenses, investment capital, and so on. As a
result, assessing the profit rate can motivate the ultimate outcome and company comparison.
This is the only criterion for the organization to consider total efficiency.

Mheiri , Hosani 2021 ( Ratio Analysis of Apple )

44
Apple Inc. is a technological corporation that has long been recognized as a market leader in the
technology industry. Following the completion of several financial ratios, it is clear that the
company has achieved success by effectively employing its assets and equity. Financial ratios
were analyzed using data collected from Yahoo Finance. All financial measures were calculated
during a four-year period, from 2016 to 2020. This report determined that the company is
financially healthy and has the ability to satisfy its short-term obligations with ease using
liquidity ratio analysis. By having a good and growing return, the company has also succeeded
in creating value for its owners.

Yasodha, Haripriya 2021 (Ratio Analysis of Indian oil Corporation Limited )

The objective of this research is to examine the company's financial status over a five-year
period (2015-2016 to 2019-2020). The study relies on secondary data. For examination, various
ratios such as the current ratio, quick ratio, absolute liquid ratio, basic earnings per share, net
profit ratio, return on equity, debt ratio, proprietary ratio, and debt-equity ratio were used. To
reach greater heights, the company's expenses must be reduced. During the research period,
Indian Oil Corporation Limited performed rather well financially. The epidemic has an
impact on overall work performance. The corporation may improve its performance even more
by increasing sales and exercising better control over its spending. Borrowings should be
lowered in order to lessen obligation
.
Limbong , Simanjorang 2021 ( Financial Ratio Analysis at PT. Adaro Energy Tbk. Based
on The 2017–2020 Financial Statements )
In this research profitability and liquidity ratios are the financial ratios that are employed. The
results of these financial ratios will reflect the firm's health state and are used to analyze
management's performance in a period whether it has accomplished the targets set and assesses
management's capacity to properly empower corporate resources.

Milojević , Spiler etc .al 2021 (Analysis Of Financial Performance Of Hotel Companies
Using Ratio Analysis)

45
The study gives a financial analysis and diagnostics of the hotel company's financial situation.
The examination of financial indicators is significant in the accounting and financial literature,
and it is frequently given through case studies, as is the case here. The paper uses financial ratio
analysis to give financial analysis and diagnostics of the company's financial condition. The
financial performance of the hotel company "Palisad Zlatibor" is measured using 20 financial
ratios in this study. Based on the findings, a financial diagnosis was made, and recommendations
for enhancing the observed company's performance were made.

Kustiningsih, Kalbuana 2020 ( Study Ratio Financial Of Bank Performance )

This study includes a bank health evaluation based on the Bank Indonesia version of the
elements of Capital, Assets Quality, Management, Earnings, Liquidity, and Sensitivity. This
research use financial measures commonly used to assess bank financial efficiency. This
research provides a bank health assessment based on the Bank Indonesia version of the capital,
asset quality, management, earnings, liquidity, and sensitivity factors. This study uses financial
measures that are commonly utilized to analyze bank financial efficiency.

Shah , 2020 (Financial Statement Analysis Through Ratio Analysis Of Selected

Pharmaceutical Companies)
In this research through ratio analysis, the financial performance of the PHARMACEUTICAL
INDUSTRY, specifically CADILA HEALTH CARE and SUN PHARMACEUTICAL
companies, are compared. The results show that Cadila is doing far better in terms of EPS;
nevertheless, one FDA warning put both companies on nearly the same track. Despite Cadila's
higher ratios and financials, Sun Pharma's working capital management is almost steady or
rising, unlike Cadila, which has witnessed some fluctuations.

Keerthi and Eswari 2020 ( A Study On Financial Performance Using Ratio Analysis Of
Kumbakonam Central Co-Operative Bank )
The goal of this paper is to use ratio analysis to examine the bank's overall financial status. It
demonstrates whether the firm has improved or deteriorated in recent years. The secondary data,

46
which includes the last five years of KCCB annual reports, is used throughout the study. Ratio
analysis can be used to make intra-firm and inter-firm comparisons. Pictorial representations are
employed to aid comprehension. Ratios are a useful tool for a variety of stakeholders, including
management, financiers, shareholders, and creditors, among others. This study examines many
sorts of ratios such as liquidity ratios, profitability ratios, and solvency ratios. This paper not only
informs the reader about financial performance but also identifying problems and providing
solutions.

Agustina, Suprayitno 2020 ( Analysis Of Financial Statements Using Liquidity Ratio To

Measure Financial Performance In 2017-2019 )
The goal of this study is to assess PT. Mayora Indah Tbk Company's financial performance using
the liquidity ratio calculation method, which tries to assess the company's ability to pay or repay
corporate debt in the short term. Within three years, it would be feasible to conclude that the
firm's financial state has improved, as evidenced by the figure of its liquidity ratio; the company
is able to balance its current assets and debts. It is also possible to say that the corporation is able
to pay its debts.

Tariq , Dhaheri 2020 ( Ratio Analysis of Emaar )

The current ratio for Emaar shows that in 2018 it had has a better ability to meet short term
obligations. In both following years the Emaar has an optimum level of meeting short obligations
by quick assets solvency. Emaar cash ratio has upgraded & amplified in 2018 (0.28 times)
associating with 2019 (0.213 times). Overall the liquidity ratios were better for the year 2019.
The purpose of this project is to assess Emaar Properties PJSC's performance in 2018 and 2019.
The research demonstrates numerous computations and explanations to assess Emaar Properties
PJSC's performance. This research concludes that investors should invest in Emaar Properties
PJSC after analyzing Liquidity Ratios, Asset Management Ratios or Turnover or Efficiency
Ratios, Profitability Ratios, and Solvency Ratios.

Hasanaj, Kuqi 2019 ( Analysis Of Financial Statement )

47
The primary goal of this research is to identify, forecast, and evaluate the best economic
conditions and firm performance in the future. Another goal of this research is to analyze
financial statements and provide information to financial managers to help them make company
decisions. The financial statement employs tools, analytical methodologies, and business
analysis procedures. It serves as a diagnostic tool for analyzing funding, investment, and
operational operations, as well as an assessment tool for management and other business
decisions. Managers, shareholders, investors, and all other parties interested in the state of the
company employ financial statement analysis, or financial report analysis. Financial reports are
used by managers to assess the situation.

CHAPTER - 3

RESEARCH
METHODOLOGY

48
RESEARCH :
Research is nothing but systematic investigation and study of sources and materials. It establish
facts and it reach conclusions.

METHODOLOGY:
 Selection of data from the financial statements of the firm for last three years
Financial Statements for the year 2020-2021.
Financial Statements for the year 2021-2022.
Financial Statements for the year 2022-2023.

Period: The study covers a period of three years data from 2020-2021, 2021-2022,
2022-2023. An accounting year of the company consists of 365 days.

Measurement Technique / Statistical Tools

 Accounting Ratios.
 Financial Statements of the Company.

3.1 OBJECTIVE OF THE STUDY :

The objective of study is to analyze financial position, liquidity, profitability, risk,
solvency, efficiency, operations effectiveness.

 To Study the financial performance of the Flowmore Ltd. For the period of (2020-23)
 To study the operational efficiency of the Flowmore Ltd. By comparing the balance
sheet& profit & loss A\c.
 To study the ratios and analyses about the Flowmore Ltd.

49
.3.2 SCOPE OF THE STUDY

The scope of the study is limited to financial data published in annual report of the company.
The study is carried out for three years ( 2020 – 2023) . The analysis is done to suggest
possible solutions.

The firm is answerable to the owners, the creditors and employees. The firm can reach a number
of parties. On the other hand, parties interested in the business can compute ratios based on the
financial statements of the firm. The analysis is not restricted to any one aspect but takes into
account all aspects such as earning capacity of the firm, financial obligation, liquidity and
solvency aspects, liquidity and profitability concepts.

3.3 COLLECTION OF THE DATA

Data collection is a process of gathering information from all the relevant sources to find a
solution to the research problem. It helps to evaluate the outcome of the problem. The data

collection methods allow a person to conclude an answer to the relevant question.

Secondary Data Collection Methods

Secondary data is data collected by someone other than the actual user. It means that the
information is already available, and someone analyses it. The secondary data includes
magazines, newspapers, books, journals, etc. It may be either published data or unpublished data.

3.5 SOURCE OF COLLECTION OF DATA

The study is based on secondary data. Secondary data collected from annual reports2021-22) and
also existing manuals and like company records balance sheet and necessary record.

3.6 LIMITATION OF THE STUDY

 Limitations of accounting records

50
 Lack of proper standards

 Changes in accounting procedures

 Qualitative factors are ignored.

 Limited use of single ratio

 Personal bias

 The study is based on only secondary data

 The period of study was 2020-2022 financial years only.

51
 CHAPTER - 4
DATA ANALYSIS And
INTERPRETATION

4.1 DATA ANALYSIS

LIQUIDITY RATIO
1. CURRENT RATIO

52
 Table : 1 (Amount in Rs.)

Current Ratio

Year Current Assets Current Liabilities Ratio

2019 4,723,394,603 3,316,217,905

1.42
2020 5,244,474,158 3,786,221,597 1.38
2021 5,407,022,480 3,777,316,263
1.43
2022 5,389,514,000 3,510,154,000
1.53

Interpretation

As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position
of the firm. In above table shown current ratio of the company is increasing in
the year 2021 from 1.43 to 1.53 in 2022 . This means that company can payoff its
current liability on time.

53
 Current Ratio
1.55 1.53

1.5

1.45 1.43
1.42
1.4 1.38

1.35

1.3
2019 2020 2021 2022
YEAR

Graph : 1

2. QUICK RATIO
Table : 2 (Amount in Lakhs)

Quick Ratio

Yea Quick Assets Current Liabilities Ratio

r

2019 37507.406 33,162 1.13

2020 42350.59 37,862 1.11
2021 43269.3 37,732 0.11
2022 43098.07 35,102 1.22

54
INFERANCE: The Ideal Ratio is 1:1. High Quick Ratio indicates that the firm has the ability
to meet its current liabilities. In year 2020-2021 firm has quick ratio less than ideal ratio
it means that firm is not able to pay its liability quickly. But in year 2021-2022 ratio
changes from 0.11 to 1.22. It confirms that the liquidity position of this FLOWMORE Ltd. in
terms of quick ratio was more than the standard.

GRAPHICAL REPRESENTATION

Quick Ratio
1.4
1.23
1.2 1.13 1.12

0.8
Ratio

0.6

0.4

0.2 0.11
0
2019 2020 2021 2022
Year

Graph : 2

SOLVENCY RATIO

1. DEBT EQUITY RATIO

Table : 3

DEBT EQUITY Ratio

Year DEBT EQUITY Ratio

15,444.57 0.06
2019 863.85
1243.2 15578.9 0.08
2020

55
 1941.9 16622.03 0.12
2021
139.48 17928.9 0.01
2022

INFERENCE:
The standard norm for the ratio is 2:1. This means that at no given point of time
should the debt be more than twice the equity. The actual debt equity ratio in the
above table in year 2019-2020 increased from 0.06 to 0.08. Again ratio raises
from 0.08 to 0.12 . But in year 2021-2022 firm tries to reduce the debt and
reducing financial risk.

GRAPHICAL INFERENCE:

0.14
DEBT EQUITY RATIO
0.12
0.12

0.10
0.08
0.08
RATIO

0.06 0.06

0.04

0.02
0.01
0.00
2019 2020 2021 2022
Year

Graph : 3

56
 LEVERAGE RATIOS

PROPRIETORY RATIO
(Amount in Lakhs)

Table - 4
Proprietory Ratio

Year Share Holders Funds Total Assets Ratio

15,444.57
2019 49470.6 0.31
15578.9
2020 54684.43 0.28
16622.03
2021 56337.1 0.30
17928.9
2022 56502.49 0.32

INFERENCE :
The proprietary ratio establishes the relationship between shareholders funds to total assets.
Proprietary ratio give a sense of the percentage of assets shareholders would receive if
the firm were to liquidate.
A high proprietary ratio signifies the company’s strong financial position , as a large
portion of its assets are financed by equity . This means that company relys less on debt
financing method and has a healthier balance sheet.

57
 In the table data shows that company rely more on debt financing .This means that

company is in significant debt , and its profitability may be affected . A proprietary ratio
of 0.32 indicates that 32% of a company's total assets are financed by shareholders' equity,
implying moderate financial stability and a reliance on both equity and external sources for
funding.

Proprietary Ratio
0.33

0.32 0.32
0.31
0.31

0.30 0.30
Ratio

0.29 0.28
0.28

0.27

0.26
2019 2020 2021 2022
Year

Graph - 4

58
 INVENTORY TURNOVER RATIO

(Amount in Lakhs)

Table - 5
INVENTORY TURNOVER RATIO

COST OF GOODS
Year SOLD

2019
48841

2020 43347.42

2021 48844.49

INFERENCE:

This ratio measures how fast the company replaces a current batch of inventories and
transforms them into sales. A high ratio indicates that the company ‘s product is in high
demand and sells quickly. A low inventory turnover ratio is a sign of weak sales or excessive
inventory, also known as overstocking.

59
An inventory turnover ratio of 3.67 signifies that a company efficiently sells and replaces its inventory
3.67 times annually. This suggests effective management, quicker cash conversion, and potentially lower
carrying costs, improving overall operational efficiency and liquidity.

4.50 INVENTOERY TURNOVER RATIO

4.10
4.00 3.67
3.47
3.50
3.00
2.50
RATIO

2.00
1.50
1.00
0.50
0.00
0.00
2019 2020 2021
YEAR

Graph-5

PROFITABILITY RATIOS

NET PROFIT RATIO

Table -6 (Amount in Lakhs.)

Net Profit Ratio

Year Net Profit After Tax Sales Ratio

2019 1198.16 50213.52 2.39

2020 206.21 4373.42 4.72
2021 1214.15 50207.83 2.42
2022 1306.9 49894.02 2.62

60
INFERENCE :
The net profit ratio is the overall measure of the firm’s ability to turn each rupee of income from
services in net profit. If the net margin is inadequate the firm will fail to achieve return on
shareholder’s funds. High net profit ratio will help the firm service in the fall of income from
services, rise in cost of production or declining demand.

Net profit ratio

5.00 4.72
4.50
4.00
3.50
3.00
2.62
2.39 2.42
Ratio

2.50
2.00
1.50
1.00
0.50
0.00
2019 2020 2021 2022
Year

Graph - 6

RETURN ON TOTAL ASSETS RATIO

61
 (Amount in Lakhs.)
Return on Total Assets Ratio

Year Net Profit After Tax Total Assets Ratio

2019 1198.16 49470.6 0.02

2020 206.21 54684.43 0.00

2021 1214.15 56337.1 0.02

2022 1306.9 56502.49 0.02

TABLE -7

INFERENCE: A Return on Assets (ROA) ratio of 0.02 indicates that for every
dollar in assets, the company generates 2 cents in net profit. This suggests
relatively low profitability and efficiency in utilizing its assets. Investors may view
it as a sign of limited profitability and operational effectiveness.

ROA RATIO
0.03
0.02
0.02
0.02
0.02
RATIO

0.01

0.00

0.00
2019 2020 2021 2022
YEAR

Graph - 7

62
 4.2 SWOT ANALYSIS

SWOT ANALYSIS is like a formula for identifying Strengths, Weakness, Opportunity,

Threats . The main objective of this analysis is to help investors, and the company to make
business decision wisely.

STRENGTH:-

 Flowmore ltd. having achieved ISO 9001 , ISO 14001, and OHSAS 18001
accrediation.

 Securing CE marking for all its products.

 Strong after sales services.

 Registered as an approved pump vendor by all major government owned units such as
NTPC, NPCIL,BHEL, PDIL , MECON ,NHPC , EIL etc.

 Flowmore has diversified into EPC company and undertake complete turnkey contracts.

 Flowmore follows a standard process to develop the necessary competence and to

meet the specific quality requirement like NDT testing , Quality inspection ,
Destructive testing facilities.

WEAKNESS:

 Company rely more on debt financing.

 High Competition.

 Profitabiity is also affected due to debt financing.

 Highly fragmented maket .

63
  More investment is needed in New Technologies.

OPPORTUNITIES:

Economic recovery:
Economic recovery and rising consumer spending after years of recession and
slow industrial growth are opportunities for flowmore ltd. to attract new
customers and increase market share.

 Open new market through Government agreements.

 New customer in abroad through online channels .

THREATS:
 Increased Government regulations & procedures.

 Inadequate subsidy budget of the Government.

 Operates globally: Because the company deals with many countries , it is

exposed to currency fluctuations , political environment in many markets around
the world.

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 CHAPTER - 5

F INDINGS, S UMARRY & C ONCLUSION

5.1 FINDINGS
65
 1. The current ratio has shown a fluctuating trend . The current ratio increased from 2019
(1.42) to 2021 (1.43), indicating a slight improvement in liquidity during this period. The current
ratio significantly increased in 2022 to 1.53, which indicates improved liquidity and the
company's ability to cover its short-term liabilities with short-term assets which indicates a
continous increase in both current assets and current liability.

2. The quick ratio is also in a fluctuating trend through out the period 1.13( 2019) , 1.12
(2020) , 0.11(2021) and 1.23(2022) . The company’s present liquidity position is
considered as satisfactory.

3. The proprietory ratio is increased as compared with the last year. So, the long term
solvency of the firm is increased.

4. The actual debt equity ratio in the above table in year 2019-2020 increased from 0.06 to
0.08. Again ratio raises from 0.08 to 0.12 . But in year 2021-2022 firm tries to reduce the
debt and reducing financial risk.

5. Inventory turnover ratio is constantly decreasing from 4.10 ( 2019-2020) to 3.67 (2021-
2022) . A low inventory turnover ratio is a sign of weak sales or excessive inventory,
also known as overstocking. The epidemic has an impact on overall work performance.

6. The net profit ratio increased from 2.39(2019) to 4.72( 2020), indicating improved
profitability, but slightly declined in 2.42 (2021) due to covid.

CONCLUSION

After analysing the Financial statements of FLOWMORE LTD. , some important conclusions
are drawn about the working of this firm.

66
 The short-term financial position of the firm is satisfactory. The
liquidity position of the company is otherwise satisfactory.

 Company has more owned capital than borrowed capital . Company is healthy and
has a strong balance sheet.

 Flowmore return on total assets ratio is declining . Company might have over invested
in assets that have failed to produce revenue growth.

 From inventory turnover ratio it is concluded that company’s products is in high

demand and sells quickly.

 Net profit ratio has shown a fluctuating trend .

67
BIBLIOGRAPHY

68
  www.google.com
 https://www.investopedia.com/terms/r/
ratioanalysis.asp
 https://byjus.com/maths/data-collection-methods/
 https://www.wallstreetmojo.com/types-of-financial-
ratios/
 https://www.flowmorepumps.com/data.php?id=60
 www.wikipedia.com

ANNUAL REPORTS

 FLOWMORE Annual Report (2019-2020)

 FLOWMORE Annual Report (2020-2021)
 FLOWMORE Annual Report (2021-2022)

REFFERED BOOKS
 FINANCIAL MANAGEMENT - I. M. PANDEY

69
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Annexure

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