Research thesis for BBS 4th year (TU Account Group)

"RATIO ANALYSIS OF JANAKALYAN MULTIPURPOSE CO-OPERATIVE LIMITED" SUNUWAL

1.1.         Introduction of the study

Ratio analysis is a form of financial statement analysis that is used to obtain a quick indication of firm's financial performance .It is one of such a tools in hand who wants to know something more from the financial statement in the simplified manner .It is widely used tools of financial analysis which helps to know weakness of a firm's as well as its historical performance and current financial condition of any organization so, it is necessary tools to every firm. Ratio analysis also helps in inter-firm's performance comparison of different department and finds if any planning is needed for its effectiveness.

Liquidity is defined as the ability of a company to meet its financial obligation as they come due. The liquidity ratio, then, is a computation that is used to measure a company's ability to pay its short term debts. There are two common calculations that fall under the category of liquidity ratios. The current ratio is the most liberal of the two. It is followed by the acid-test ratio. These two ratios are often grouped together by financial analysis when attempting to accurately measure the liquidity of a company.

Profitability analysis is a component of enterprise resources planning (ERP) that allows administrators to forecast the profitability of a proposal or optimize the profitability of an existing project. Profitability analysis can anticipate sales & profit potential specific to aspects of the market such as, customer age group, geographic regions or product types. It helps to identify the most and least profitable clients, products or services.

Profitability and liquidity are two important variables which gives information about the performance of any business entity. For long term survival and healthy growth both profitability and liquidity should go parallel to each other .Profitability is one of the major goals of any business, without being profitable it is not possible for business to survive and the business need short-term funds to fulfill its day to day needs in operations and other requirements . So, the liquidity tells about the business capacity to meet short term needs of funds by the business and the profitability tells about the profit generated from the operation of business.

In the modern age business has to face difficult challenges and competition. To overcome such challenges and competition, different analysis should be done among them financial analysis provides meaningful information about the financial aspects of the business. It is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between them i.e. Balance sheet & income statement.

The reason to choose this title is that many studies have been conducted in past to find the tradeoff between profitability and liquidity, and there is a huge variation in this results. The purpose of the research is know the relationship between two ratio of the financial statements i.e. profitability and liquidity .The relation is measured by current ratio, quick ratio, Net working capital, Gross profit margin ratio, Net profit margin ratio.

Saving and Credit co-operatives can be the link that will give rural business access to credit at cost for lower than interest rates currently charged by money lenders. People do not have the habit of saving as well as knowledge of financial institution. To get rid from such problems, different cooperative have been established .Among them Janakalyan Multipurpose Co-operative limited is the one established on 2057 B.S as per Directives of division cooperative limited. It is situated in Sunuwal-06,Nawalparasi. There are 1586share shareholders and the share amount is Rs. 1,31,67,100. Loan facility is given to people at 13-14% interest annually. People deposits their money at saving interest 8% annually, people deposits money on daily basis and monthly basis. Fertilizer to poor farmers is also distributed at low costs.

1.2.         Review of Literature

Review of Literature is thus, an essential part of all research studies. It is a way to discover what other research in the area of our problems has uncovered. A critical review of the literature will helps us to know or develop through understanding and insight it into previous research works that relates to our study. The literature survey will also provides the function for developing a comprehensive theoretical framework from which hypothesis can be develop for testing. The literature survey also maximize the risk of pursuing dead-ends in research. Advantages of reviewing the literature apply to the design of our project. Designing a study involves several decisions as to what variables to include and how to measure them, what techniques to use and so on.

According to Wixonkell and Bedford (1996), "a ratio is an expression of the quantitative relationship between two numbers.”

Ratio is the expression of one figures in terms of another's. It is the expression of the relationship of the mutually independent figures, it is simple mathematical expression of the relationship of one item to another. Absolute figure alone convey no meaning unless they are interrelated to exist among various accounting data.

Kehler (1999) defines ratio as "a ratio is the relationship of amount to another expressed as the ration of as a simple fraction integer, decimal fraction of percentage."

Therefore, ratio refers to the numerical or quantitative relationship between two numbers.

1.3.         Statement of the problems

Ratio is the expression of one figure in terms of another .It is the expression of the relationship between the mutually independent figures. It is simple mathematical expression of the relationship of one item to another. Absolute figure anyone convey no meaning unless they are compared with past research. According to ratios, It shows the interrelationship existed among various accounting data.

1.      What are the Liquidity positions of the firm­_­?

2.      What are the profitability positions of the firm?

3.      What is the financial position of firm from the view point of liquidity and profitability?

1.4.         Objectives of the study.

A field work report will be meaningless without having any objectives. So, the basic objectives of financial analysis is to provide meaningful financial information to these who have need of it and legitimate interest and right to have such information for decision making.The various objectives are enumerated below:

1.      To evaluate different ratios of past 5 years.

2.      To analyzed the liquidity ratio of the firm.

3.      To identify the profitability ratio of the firm.           

4.      To analyzed the financial position of the firm.

5.      To analyzed the financial position of the firm from the viewpoint of liquidity and profitability.

1.5.         Significance of the study.

Nowadays many Banks & Financial Institutions are established all over the country. In these situations institutional services are significant to develop the country by providing loans and credit facilities.

1.      This study helps to know how well the resources of financial institutions.

2.      To analyze the current situation of the financial institutions.

3.      This study helps to analyze liquidity and profitability and manage them well.

4.      This study provides bases for planning.

5.      By the help of this study, financial institutions can give quick financial decisions.

1.6.         Methodology of the study.

The research methodology is the process of arriving to the solution of the problem through and systematic dealing with the collection, analysis and interpretation of facts and figures. As this research entirely considers about, the Ratio Analysis of Janakalyan Multipurpose Co-operative Limited.Sunuwl-06.For the purpose of achieving the objective the following methodology has been proposed to follow, which included research design, collection of data, presentation and analysis technique.

1.6.1.  Research design

For preparing this report, descriptive research design is used. Data are collected from only secondary method, because this method is easily available. The following methodology is adopted for the data presentation and analysis.

1.6.2.  Data Collection Methods.

In this report writing most of the required data are secondary data.

Published Information of Organization

Under this method, the necessary accounts of the company published will be analyzed to gather necessary information. Annual Reports, Financial statements, Official Records, Published Books, Official Website etc. will be used to collect the data.

Previous Fieldwork Report Search

Previous report for the same financial institutions will be consulted and gathered necessary information.

1.6.3.  Techniques of Data Analysis.

After collecting the data, it will be analyzed; it is measured by following tools:

1.      Trend Analysis

2.      Bar Diagram

3.      Table

4.      Average

5.      Percentage

6.      Different Ratios

1.7. Limitation of the study.

2.      All data will be Secondary Nature.

3.      This report studies only few Ratios.

4.      The data will be used from F/Y 2070/71 to 2074/075.

5.      Report will be based on T.U Requirement of BBS 4^th Year.

6.      Limited tools and techniques are used for data analysis.

1.8.         Time Allotment.

The time allotment for writing this report will be as follows:

S.N.	Activities	No. of Days
1.	Topic Selection	3
2.	Proposal Writing	10
3.	Field Visit and Data Collection	12
4.	Presentation and Analysis Data	15
5.	Proof Reading	5
6.	Setting and Printing Report	5
	Total	50

 

1.9.         References.

The lists of all references as on this field work are.

·         Dangol, R.M. (2059), Accounting for financial Analysis and planning, Kathmandu; Taleju Publication

·         Joshi, P.R. (2061B.S), Corporate Finance, Kathmandu; Book Publisher and Distributers.

·         Agrawal, G.R (2003), Project Management in Nepal, Kathmandu; M.K Publisher and Distributors.

·         Hornby, A.S.(1996), Advance Learner Dictionary, Oxford University.

1.10.    Report Structure.

The present study has been organized into five chapters. They are Whole report summarized by listed below.

Chapter-I: Introduction

The first chapter includes background of the study, statement of the problems, objectives, rationale and limitation of the study.

Chapter-II: Related Literature Review

The second chapter included conceptual review, review of previous works and research gap.

Chapter-III: Research Methodology

The third chapter includes types of research, research design, nature of data, types of data, population and sample, data collection and analysis technique and report structure.

Chapter-IV: Results and Findings.

The fourth chapter includes presentation of data in tables and figure and their analysis and major findings.

Chapter-V: Discussion and Conclusion.

The fifth chapter includes discussion and conclusion.

Lastly, references and appendices are added at the end of this report.