Printer Friendly

Financial management analysis of profitability of selected industries in India: empirical research findings.

Abstract

The purpose of this paper is to study the profitability of the 166 non-financial companies of the BSE 200 index with particular emphasis on a pre- and post-recession analysis for the period 2001-2011 with an attempt to link the profitability with the liquidity of the sample firms. The study covers virtually all the major aspects of financial management, viz., capital budgeting, capital structure, dividend policies, working capital, corporate governance, global finance and risk management. To the best of the authors' knowledge an analysis of the impact (if any) of the recent recession on profitability for such a large sample has not been undertaken.

Key words : Recession, Profitability, return on : total assets, capital employed, shareholders'funds, liquidity management.

JEL Classification : C82; G 32; L 21; 053

Introduction

The profit test is more than a conventional test of economic efficiency, which is, whether the resources are gainfully employed and whether the business enterprise is operating competitively. It has a direct bearing on the company's ability to function as a successful business firm. Further, the company's ability to tap capital markets and/or other sources of finance (for its growth and additional requirements) would depend on its commercial profitability.

Given the significance of financial viability of business operations, the objective of this paper is to assess the financial performance of the sample companies primarily in terms of profitability with a special focus on the pre- and post-recession period. Expectedly, financial management of resources in terms of profitability constitutes, by far, the most important element of operational efficiency and hence the significance to study this aspect. Further, to the best of the authors' knowledge an analysis of the impact (if any) of the recent recession on such a large sample has not been undertaken. Analysis that follows seeks to answer such basic questions with respect to the sample companies as

* are their profits adequate,

* what rates of return do they earn, and

* are their returns to equity-owners satisfactory?

It is in this context that profitability of the sample companies has been analyzed in this paper. Analysis is based on profit margins on sales as well as rates of return earned on total assets, capital employed and shareholders' funds. To begin with, the basic components of profits, namely, gross profit and net profit are determined for the sample companies for the entire 11 year period of the study (sub-divided into 4 phases). Then three sets of rates of return (RoR) have been computed. These are:

* return on total assets (ROTA),

* return on capital employed (ROCE) and

* return on ordinary shareholders' equity (ROSE). The first two rates of return highlight how efficiently financial resources are deployed by the sample companies; the RoR on the common shareholders' equity indicates the return provided to their equity owners.

The first two types of RoRs have been determined on the basis of operating profits, i.e., earnings before interest and taxes. By precluding effect of financial structure and taxes, these rates focus directly on operational efficiency. The rationale of inclusion of interest is that the RoRs (related to total assets and capital employed) exclusively based on pre-tax profits would be an under-estimate as the interest paid to lenders is excluded from the net profits (in numerator) whereas total capital employed as well as total assets (as a part of denominator) includes borrowed funds. Therefore, a better and reliable indicator of the true/ real return on assets/capital employed is the pre-tax profits inclusive of interest.

Profitability as a Measure of Financial Performance

Fukui and Ushijima T. (1) decomposed the business-level profit rate of Japanese multi-business corporations by performing a variance components analysis on a large sample of publicly traded non-financial firms in 1998-2003. Kaymaz and Kaymaz (2) identified the firm-level determinants underlying the profitability in brokerage institutions operating in Turkey. Zeli and Mariani (3) analyzed profitability and productivity for large Italian companies (operating in industrial sectors) for the years 1998-2002.

Monea (4) presented a picture about company's profitability, its financial position and use of its assets efficiency through profitability ratios. Karacaer and Kapusuzoolu (5) made evaluations on 30 ratios listed under the title of liquidity, leverage, activity and profitability ratios on the financial positions of enterprises (profit/loss) of 61 enterprises traded on the Istanbul Stock Exchange. Jianjun, et al (6). determined that in case a company wants to increase shareholders' wealth, return on equity (ROE) must be improved on the basis of the size of shareholders' equity and shareholders' equity will grow on the premise that ROE is greater than cost of equity capital. Rajan et al. (7) examined empirically how a firm's return on investment (ROI) is impacted by two central variables: accounting conservatism and growth.

Holz (8) found that liability-asset ratio of China's industrial state-owned enterprises (SOEs) had increased dramatically in the course of the economic reform period. They, however, perceive that low profitability SOEs tend to have a high liability--asset ratio, perhaps due to government-ordained support through bank loans. Zhang, et al. (9) assessed the reform of state-owned enterprises (SOEs) by examining the effect of ownership on the profitability and productivity of Chinese industrial firms. The subsequent analysis, based on revised profitability measurements, suggested that the effects of capital structure, taxes and welfare burdens were significant in determining firm performance. Claver, et al. (10) used return on assets (ROA) as the profitability measure in their research. Nissim and Penman (11) used financial statement analysis for equity valuation. Standard profitability analysis was incorporated, extended, and was complemented with an analysis of growth:

* Current purchasing power (CPP) and

* Current cost accounting (CCA).

These inflation sensitive and adjusting accounting systems are examined in this study to post for comparison the looks of the books of the selected.

Impact of Recent Financial Crisis on the Indian Economy

Brazil, the Russian Federation, India and China (the so-called BRIC economies) are four of the top five destinations preferred by the world's largest multinational companies according to the World Investment Prospects Survey undertaken by the United Nations Conference on Trade and Development (UNCTAD) in 2009. Interestingly, all these economies are estimated to have experienced a rise in inward foreign direct investment (FDI) in 2008 over 2007. Difficulties and uncertainties in their economies have increased substantially, however, after the sudden worsening of the global financial crisis in September and October 2008. Coupled with the reduced availability of capital worldwide, this has led to a reversal of a growth cycle of inflows to these economies by the end of the year 2008 (12). According to the remarks prepared for the International Monetary Fund (IMF)--Financial Stability Forum (FSF), on the recent financial turmoil and policy responses for India, Reserve Bank of India (RBI, India's central bank) in October 2008, stated that India, had (at that time) not been seriously affected by the recent financial crisis. The reasons for the relative resilience shown by the Indian economy, the impact and likely implications have been summarized below (13).

India has been following a rather calibrated and cautious approach to the opening up of the capital account and the financial sector. Evidence suggests that the greatest gains for an economy are obtained from the opening to foreign direct investment followed by portfolio equity investment. Therefore, while encouraging foreign investment flows (in particular, direct investment flows) a cautious approach has been adopted related to debt flows. Debt flows are subject to ceilings and some end-use restrictions (modulated from time to time), taking into account evolving macroeconomic and monetary conditions. Similarly, portfolio investment in government securities and corporate bonds are also subject to macro ceilings, which are also moderated from time to time. These prudential policies have attempted to prevent excessive recourse to borrowings and dollarization of the economy. As far as capital outflows are concerned, the policy framework has been progressively liberalized to enable the corporate sector to invest abroad. As a result, investments have been predominantly financed by domestic savings in India. The Government's fiscal deficit has been high by international standards but is also largely internally financed through a vibrant and well developed government securities market, and thus, despite large fiscal deficits, macroeconomic and financial stability has been maintained.

However, with the increasing integration of the Indian economy and its financial markets with the rest of the world, there is recognition that the country does face some downside risks from these international developments. The risks arise mainly from the potential reversal of capital flows on a sustained medium-term basis. As might be expected, the main impact of the global financial turmoil in India has emanated from the significant change experienced in the capital account. Total net capital flows fell from US $17.3 billion in April-June 2007 to US $13.2 billion in April-June 2008. As per the Economic Survey of India of 2010-11, the Indian economy has emerged with remarkable rapidity from the slowdown caused by the global financial crisis of 2007-09. With the growth in 2009-10 estimated at 8 per cent by the Quick Estimates released on January, 31,2011 and 8.6 per cent in 2010-11 as per the Advance Estimates of the Central Statistics Office (CSO) released 2011 February, 7, 2011, the turnaround has been fast and strong. Much of the economic stress (if any) in 2011 can be attributed to continued food inflation and a temporary slow-down in industrial growth (14).

Methodology Used

The Bombay Stock Exchange BSE 200 index comprises of the top 200 companies listed with the Bombay Stock Exchange, based on their market capitalization. The scope of this study is limited to the 166 non-financial BSE 200 companies engaged in manufacturing and service rendering businesses.

The rationale behind excluding the financial sector from the sample is the probable impact of the recession on the same. According to the latest assessment by the NASSCOM (the software trade association), the current developments with respect to the US financial markets are very eventful; these developments may have a direct impact on the IT industry and are likely to create a downstream impact on other sectors of the US economy and worldwide markets. About 15-18 per cent of the business coming to Indian outsourcers includes projects from banking, insurance and the financial services sector which is now uncertain (15).

The relevant data (secondary) on the first aspect were collected from the Capitaline database, for eleven years (2001-2011). The period of the study is of particular importance because of the recession (originating due to the US financial crisis) that impacted the world economy towards the second-half of 2008. Consequently, phase 2 of the study (2007-2011) has been divided into two sub-phases to ascertain the impact of recession. The two years from 2005-2006 to 2007-2008 denote the pre-recession phase (phase 3) and the subsequent three years (2008-2009 to 2010-2011) denote the post recession phase (phase 4) for the purpose of this study. Further, the motivation behind concentrating on the manufacturing and allied sectors was the perceived hypothesis that these sectors were dependent on domestic savings and hence would by and large be unaffected by the U.S. financial crisis. The same has been affirmed by our findings.

The 't' test has been administered to assess whether profitability changed during the second phase compared to the first phase, as well as during the fourth phase as compared to the third phase, for the sample companies. To study trends and its implications, the descriptive statistical values/ positional values, i.e., mean, standard deviation, coefficient of variation, skew, kurtosis, median, quartile 1 and quartile 3 have been computed for each year. The entire set of data has been analyzed using Microsoft Excel spreadsheets and the statistics software SPSS, namely, Statistical Package for Social Sciences.

Profitability Ratios

In what follows, we examine the gross profit and the net profit of the sample companies for the entire eleven year period of the study as well as through the pre-recession and post-recession periods (phases 3 and 4). The impact of recession (if any) has been tested through the paired t-test statistic (amongst others).

Gross Profit

The sample companies recorded an increase in the gross profit percentage in a statistically significant manner in phase 2 over phase 1. It showed a dip in the post-recession period (statistically significant) even though the difference in mean was of one percentage point. This could perhaps be due to the varied nature of the constituent sectors making up the sample and the impact of recession on each one of them. This aspect is better supported by high positive skew and kurtosis in phase 4 which indicates that there were only few companies that recorded a high gross profit percentage in the post-recession period (Table 1). This aspect is further supported by the frequency distribution (Table 2) which shows a decline in the percentage of companies recording a gross profit between 10-20 percent in phase 2 over phase 1. At the same time, there is, however, an increase in the percentage of companies achieving a gross profit in the higher range of 20-30 percent in phase 4 compared to phase 3 indicating that some sectors were able to increase profitability in spite of the recession.

Standard deviation and coefficient of variation were moderately high, perhaps due to the different constituent sectors (making up the sample) and their respective profit situations.

Net Profit

Net profit percentages also mirror the trend of gross profit percentages. The sample companies recorded an increase in the net profit percentage (statistically significant) in phase 2 over phase 1. The mean net profit margin of the sample companies over the entire period of the study has been 15 per cent. The net profit recorded a dip in the post-recession period (statistically significant) albeit the difference of one and a half percentage point only (Table 3). This aspect is further supported by the frequency distribution (Table 4) which shows a decline in the percentage of companies recording a net profit between 10-20 percent in phase 2 over phase 1. At the same time, there is, however, an increase in the percentage of companies achieving a net profit in the higher interval of above 40 percent. In sum, the decrease in net profit margin, prima-facie, during post-recession period seems to be marginal.

Even though phase 4 does indicate a statistically significant decline in profitability (albeit marginal), all in all, the sample exhibits stable earnings and profits. While, there appears to be an impact of recession on the sample, it does not appear to merit concern in terms of very marginal decline in profit margins. The sample continued to record a rather robust/healthy profit throughout the entire period of the study, indicative of the sound fundamentals of the companies.

RATES OF RETURN ON TOTAL ASSETS AND TOTAL CAPITAL EMPLOYED

The objective is to measure profitability of the sample companies in terms of ROTA and ROCE.

Rate of Return on Total Assets (ROTA)

ROTA has been calculated based on (earnings after tax, EAT + interest - tax advantage on interest)/ average total assets, where total assets denote total assets less (revaluation reserves + miscellaneous expenses not written off + advance tax). Relevant data related to ROTA of the sample companies (Table 5) indicate that the mean has been 14 per cent during the aggregate period (2001-2011) and 15 and 13 percent during the pre-recession and post-recession period respectively. In general, these rates appear to be adequate, indicating satisfactory performance of the sample companies. This is in sharp contrast to the findings of an earlier study conducted by the authors on the public sector undertakings (PSUs) in India (Jain and Yadav (16)), where the average ROTA was at an unsatisfactory level of 1.96 per cent from 1991-2003. ROTA statistics are similar to the trend reported through the profitability ratios discussed in section III. The sample companies recorded an increase in the ROTA in a statistically significant manner in phase 2 over phase 1. The mean ROTA dipped in the post-recession period (statistically significant) as is evident from Table 5. This aspect is further supported by the frequency distribution (Table 6).

Further, as per trend, it has been noted that ROTA for the sample remained stable at 15 per cent from 2004-2008 reporting a dip in the post-recession period (Figure 3).

Rate of Return on Capital Employed (ROCE)

The ROCE is another variant of rate of return on investments. It is similar to ROTA except in one respect, i.e., the denominator is related to average capital employed instead of average total assets. Since the sum of capital employed (shareholders' equity + borrowings) is lower than total assets, the ROCE, perforce, would be higher than ROTA. The ROCE indicates how efficiently the long-term funds of owners and lenders are being used. The higher the ratio, the more efficient is the use of capital employed.

As expected, the analysis indicates that the ROCE is higher than the ROTA. For instance, the average ROCE is 16 per cent compared to a ROTA of 14 per cent for the entire period of the study. Similar conclusions follow in the basis of median and quartiles. The increase in ROCE in phase 2 over phase 1 (17 per cent and 16 per cent respectively) has not been statistically significant but the decline in phase 4 ROCE (16 per cent) when compared to phase 3 (18 per cent) is statistically significant as per the paired t-test. Skew and kurtosis figures are high indicating that only few companies record a very high ROCE when compared to the sample, perhaps due to their unique corporate financing practices. The varying capital structure practices followed by the sample are also supported by the high coefficient of variation (Table 7). As per trend also, increase (albeit marginal) in ROCE has been noted in 2010-11 after the dip in the beginning of phase 4 (Figure 4).

Equally important finding is that the sample companies' profitability record in terms of ROCE seems to be fairly satisfactory. In fact, one-fourth of sample companies have earned ROCE of more than 21 per cent (as shown by upper quartile). Similar conclusions follow on the basis of frequency distribution tables (Table 8). ROCE of the sample companies is also significantly higher than the average ROCE (11.68 per cent) reported by the PSUs in India (Jain and Yadav (16)).

In sum, it can safely be concluded that the sample companies are deploying their finances well and are providing adequate returns on the capital employed to the providers.

Rate of Return on Ordinary Shareholders Equity (Rose)

The real owners of the business firm are the ordinary shareholders who bear all the risk and are entitled to all residual profits after all outside claims including preference dividends are met in full. The profitability of a firm from the owners' point of view should, therefore, in the fitness of things, be assessed in terms of the return to the ordinary shareholders' equity (ROSE). This ratio under reference serves this purpose. The ROSE is calculated dividing profits after taxes and preference dividends by the average equity funds / net worth. The extreme values (having ROSE more than [+ or -] 50 per cent) are excluded. The data of the sample companies are presented in Table 9. Given the current interest rates prevailing in the capital market and social responsibilities the companies have to perform, the average rate of return (ROSE) of 17 per cent, primafacie, can be considered satisfactory. The decline in ROSE to 15 per cent in phase 4 compared to 19 per cent of phase 3 is statistically significant.

Frequency distribution data further reinforce the above contention (Table 10). The percentage of companies having negative ROSE is 4.24 per cent in 2011. This is again in contrast to the findings of an earlier study conducted by the authors on PSUs where 20 per cent of such companies had negative ROSE.

From the above, it is reasonable to conclude that the sample companies appear to be providing adequate returns to their owners adhering to the primary objective of maximizing the wealth of its shareholders.

Based on the above findings, it may be safely concluded that even though the sample companies reported a decline in returns on total assets, capital employed and shareholders' equity in phase 4, the overall returns continue to be satisfactory/ adequate, bearing witness to the growing/ expansionary Indian economy. The reason for such a contention is that the lower values (15 per cent) of post-recession phase do not seem to be indicative of unsatisfactory financial performance.

Liquidity Management

The importance of adequate liquidity to meet current/ short-term maturing obligations as and when they become due for payment needs no emphasis. In fact, maintenance of adequate liquidity without impairing profitability is the foremost requirement of sound and efficient working capital management. From this perspective, while excessive liquidity may be desired by the short-term creditors (as they are interested in the ability of sample companies to pay them in time), it may be undesirable/unwarranted to carry excessive funds on the part of business firms as such funds are either non-earning or earn very little. This apart, excessive liquidity may be indicative of slack management practices as it might signal excessive inventories for the current requirements and poor credit management in terms of over-extended accounts receivables. For a typical manufacturing firm, the current assets may account for over half of its total assets. For a distribution company, they may account for even more.

The companies should, therefore, maintain adequate liquidity in terms of satisfactory current ratio (CR) and acid-test ratio (ATR). What constitutes satisfactory level of these ratios depends on their access to sources of funds and ease with which these funds can be tapped in times of need. In general, it appears that the sizeable number of sample companies in India have arrangements of short-term needs say, in the form of bank borrowings/overdraft and cash credit limit from banks. These facilities, then, should enable finance managers of sample companies to operate on lower margins of working capital reflected in relatively lower current ratio (CR) as well as acid-test ratio (ATR). It may be worth mentioning here that conventionally current ratio 2:1 and acid-test ratio of 1:1 are considered satisfactory.

While Table 11 exhibits mean, standard deviation, coefficient of variation, skew, kurtosis, median and quartile values of CR (based on year-end relevant data) of the sample companies, the ATR measured on these parameters has been shown in Table 13. Data contained in these two tables is exclusive of extreme values (of greater than 5 for CR and of greater than 3 for ATR). The mean values of CR and ATR, year-wise, in respect of sample companies are portrayed in Figures 6 and 7 respectively. Frequency distribution data pertaining to CR and ATR of these sample companies are contained in Tables 12 and 14 respectively.

A high current ratio indicates a larger investment in current assets which, in general, means a low rate of return on investment for the firm. On the contrary, a low ratio indicates a smaller investment in current assets which, primafacie, yields a high rate of return on investment for the firm (in view of lower investments in current assets). However, a low current ratio could also entail interrupted production and sales, because of frequent stock-outs and inability to pay to creditors in time. Thus, the inverse relationship between profitability and liquidity may not always hold good; it may apply up to a certain level of liquidity only. Beyond that level, a decline in liquidity (in fact) is likely to cause a decline in profitability. A very poor liquidity position in a firm will create problems in smooth running of business, thereby obstructing the growth of business and causing a decline in profitability.

Data contained in Table 11 indicate that mean as well as median current ratio of the sample companies has been around the theoretically desired 2:1 for the entire 11 year period (2001-2011) of the study. Also, the acid-test ratio has been higher than the desired 1:1 (mean and median) for the entire period covered by the study (Table 13). Conclusions are similar on the basis of quartile values for both sets of ratios. However, the distribution has a high positive skew indicating that only few companies had very high liquidity (higher values of CR) amongst the sample companies. The findings are significant as they are indicative of better short-term liquidity position when compared to the findings of Jain and Kumar (17) on private sector enterprises for the period 1985-1995, when the mean current ratio reported was 1.47; a marginally higher mean current ratio of 1.53 was reported in the findings of Jain and Yadav on private sector enterprises for the period 1991-1998. However, a much lower liquidity (current ratio) of 1.19 was indicated by public sector undertakings for the period 1991-2003 in the study of Jain and Yadav.

From the frequency distributions (Tables 12 and 13), it is evident that more than half of the sample companies have a CR and ATR of between 1 and 3 indicating adequate liquidity. The paired samples 't' test signifies that there is no significant difference in mean CR of phase 2 (2007-2011) compared to mean values of the ratios in phase 1 (2001-2006) unlike the mean ATR changes (statistically significant). Between ATR and CR, ATR is a more rigorous measure as it excludes, apart from pre-paid expenses, all types of inventories (considered to be the least liquid in the category of CAs). The ATR median value of 1.24 for the 11 year period (in conjunction with median CR of 1.82), primafacie, leads us to infer that the sample companies would not be encountering problems in meeting/paying their short-term maturing obligations in time. This is in tune with the findings on the importance of liquidity for a firm's survival and is supported by a number of empirical studies on the subject; the select list includes Lamberson (18) and Mramor and Valentincic (20). There are many factors in today's economic conditions which may trigger the need to have more cash--growth without raising additional funds, funding acquisitions, rising costs, market developments etc. (explaining the rationale of higher set of liquidity ratios of the sample companies).

In terms of the acid-test ratio as well, the findings are indicative of better short-term liquidity position when compared to the findings of Jain and Kumar on private sector enterprises for the period 1985-1995, when the mean acid-test ratio reported was 0.89. An even lower average ratio of 0.57 was reported in the findings of Jain and Yadav (2000) on private sector enterprises for the period 1991-1998 and Jain and Yadav (2005) on public sector undertakings (0.59) for the period 1991-2003. However, the sample companies could do well to be less conservative with their working capital management as they are large and stable companies and may attempt a better trade-off between risk and profitability as has been propounded by researches on the subject by Gitman, et al. (21), Fazzari and Peterson (22), Opler, et al. (23), Deloof (24), Teruel and Solano (25) and Van Horne and Wachowicz (26).

Conclusions

The profitability of sample companies (measured through gross profit and net profit), prima-facie, appears to be stable and attractive (as an investment choice). Though the recession in phase 4 did witness some fluctuations in the profitability of certain constituent sectors, overall, the sample seems to have emerged unscathed from the impact of the recession, perhaps due to its strong financial fundamentals.

Also, the Indian economy is more domestically driven (15) and the scattered effect of recession that is evident is due to the increased exposure of the sample companies to the world market and economy. The impact appears to be more on those sectors which are either internationally exposed or those whose revenues are in dollars. Government control on capital flows is perhaps another reason for the successful handling of recession. The other aspects of profitability, viz., return on total assets (ROTA), return on capital employed (ROCE) and earnings for equity-owners (reflected in ROSE) appear to be equally satisfactory. All in all, not only are the sample companies deploying funds efficiently and providing adequate returns to the capital providers, they are working towards generating better returns for their shareholders. These findings are notable as well as they support the RBI's views on the resilience of the Indian economy.

The sample companies do not appear to face any problems in meeting their short-term maturing obligations. Hence, the importance of liquidity is not lost on the sample companies. This is in tune with the findings on the importance of liquidity for a firm's survival. However, the sample companies could do well to be less conservative with their working capital management as they are large and stable companies and may attempt a better tradeoff between risk and profitability.

It is self explanatory that both the profitability and liquidity remain robust and adequate (when compared with the average reported for the entire period), in spite of the recession. It is further encouraging to note that the figures support our earlier reported findings that the sampled companies are deploying their funds (sourced from domestic savings) well ensuring adequate returns. It appears thus that the sampled companies are not vulnerable to the external financial crisis and are paving the way for encouraging foreign direct investment and portfolio investment into the Indian economy. This is in line with the present policy of the Indian government to arrest the fast rupee depreciation and its consequent impact of inflationary pressures which have severely affected the organic development track of the economy.

REFERENCES

(1.) Fukui Y. and Ushijima T. (2011), What Drives the Profitability of Japanese Multi-Business Corporations? A Variance Components Analysis, Journal of the Japanese and International Economies, Vol. 25, pp. 1-11.

(2.) Kaymaz Onder and Kaymaz Ozgur (2010), The Firm-Level Determinants Underlying the Profitability in Brokerage Institutions: Some Evidence from Turkey, African Journal of Business Management, Vol.4, No. 2, pp. 172-190.

(3.) Zeli Alessandro and Mariani, Paolo (2009), Productivity and Profitability Analysis of Large Italian Companies: 1998-2002, International Review of Economies, Vol. 56, Issue 2, pp. 175-188.

(4.) Monea Mirela (2009), Financial Ratios-Reveal How a Business is Doing?, Annals of the University of Petrooani, Economies, Vol. 9, No. 2, pp. 137-144.

(5.) Karacaer Semra and Kapusuzoolu Ayhan (2008), An Analysis of the Effect of Financial Ratios on Financial Situation of Turkish Enterprises Resulting from their Annual Operations, International Research Journal of Finance and Economies, ISSN 1450-2887, Issue 19, pp. 139-149.

(6.) Jianjun Niu, Heng Yue and Guohua Jiang (2008), Profitability Analysis of Chinese Listed Firms: 1992-2004, Frontiers of Business Research in China, Vol. 2, No. 4, pp. 497-517, DOI 10.1007/ s11782-008-0029-0.

(7.) Rajan, Madhav V., Reichelstein Stefan and Soliman Mark T. (2006), Conservatism, Growth, and Return on Investment, Research Paper No. 1956, Research Paper Series, Stanford Graduate School of Business.

(8.) Holz, Carsten A. (2002), The Impact of the Liability-asset Ratio on Profitability in China's Industrial State-owned Enterprises, China Economic Review, Vol. 13, No. 1, pp. 1-26.

(9.) Zhang Anming, Zhang Yimin, Zhao Ronald (2002), Profitability and Productivity of Chinese Industrial Firms: Measurement and Ownership Implications, China Economic Review, Vol. 13, No. 1, pp. 65-88.

(10.) Claver Enrique, Molina Jose and Tari Juan (2002), Firm and Industry Effects on Firm Profitability: A Spanish Empirical Analysis, European Management Journal, Vol. 20, No. 3, pp. 321-328.

(11.) Nissim and Penman (2001), Analysis and Equity Valuation: From Research to Practice, Review of Accounting Studies, Vol. 6, No. 1, pp.109-154.

(12.) United Nations Conference on Trade and Development (UNCTAD) website, http://www.unctad.org/ en/docs/webdiaeia20095_en.pdf. Accessed on November 17, 2011.

(13.) (i) Reserve Bank of India's Database on Indian Economy. http://dbie.rbi.org.in/InfoViewApp/listing/ main.do?appKind=InfoView&service=%2FInfoViewApp%2Fcommon%2FappService.do. Accessed on 19/10/2011.

(ii) Securities and Exchange Board of India (SEBI) website, http://www.sebi.org/

(14.) (i) Economic Survey of India. http://indiabudget.nic.in/. Accessed on November 17, 2011.

(15.) Reserve Bank of India's website, http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/87784.pdf. Accessed on November 17, 2011.

(16.) Jain, P. K. and Yadav, Surendra S. (2005), Financial Management Practices--A Study of Public Sector Enterprises in India, Hindustan Publishing Corporation (India).

(17.) Jain, P. K. and Kumar, M. (1997), Comparative Financial Management: Practices of India and South East Asia, Hindustan Publishing Corporation, India.

(18.) Jain, P. K. and Yadav, Surendra S. (2000), Financial Management Practices in Select Private Corporate Enterprises--A Comparative Study of India, Thailand and Singapore, Hindustan Publishing Corporation, India.

(19.) Lamberson, M. (1995), Changes in Working Capital of Small Firms in Relation to Changes in Economic Activity, Journal of Business, Vol. 10, Issue 2, pp. 45-50.

(20.) Mramor, D. and Valentincic, A. (2003), Forecasting the Liquidity of Very Small Private Companies, Journal of Business Venturing, Vol. 18, pp. 745-771.

(21.) Gitman, Lawrence J., Moses, Edward A. and Thomas, I. (1979), An Assessment of Corporate Cash Management Practices, Financial Management, Vol. 8, No. 1, pp. 32-41.

(22.) Fazzari, Steven M. and Petersen, Bruce C. (1993), Working Capital and Fixed Investment: New Evidence on Financing Constraints, The RAND Journal of Economics, Vol. 24, No. 3, pp. 328-342.

(23.) Opler, Tim., Pinkowitz, Lee., Stulz, Rene H, and Williamson, Rohan (1999), Determinants and Implications of Corporate Cash Holdings, Journal of Financial Economics, Vol. 52, pp. 3-46.

(24.) Deloof (2003), Does Working Capital Management Affect Profitability of Belgian Firms?, Journal of Business Finance and Accounting, Vol. 30, No. 3 and 4, pp. 573-587.

(25.) Teruel, Pedro Juan Garcia and Solano, Pedro Martynez (2007), Effects of Working Capital Management on SME Profitability, International Journal of Managerial Finance, Vol. 3, No. 2, pp. 164-177.

(26.) Van Home, J.C. and Wachowicz, J. M. (2004), Fundamentals of Financial Management, 12th edition, Prentice Hall, New York.

SHVETA SINGH, Ph.D.

Faculty Member

shvetasingh@dms.iitd.ernet.'in

Professor P. K. JAIN, Ph.D.

Professor

pkjain@dms.iitd.ac.in

Professor SURENDRA S. YADAV, Ph.D.

Department of Management Studies

Indian Institute of Technology

New Delhi--110016. India

ssyadav@dms.iitd.ac.in

The authors are grateful to the JFMA journal for valuable comments and suggestions.

The authors own full responsibility for the contents of the paper.

* The paper is primarily based on the research monograph : Financial Management Practices--An Empirical study of Indian Corporates : the authors are greateful to the publisher, Springer according permission to publish this study for research purposes.

TABLE 1
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW, KURTOSIS,
MEDIAN AND QUARTILE VALUES RELATED TO GROSS PROFIT PERCENTAGE
OF SAMPLE COMPANIES, 2001-2011
(percent)

Year Ending *     Number   Mean    Standard    Coefficient of   Skew
                                   Deviation   Variation (%)

2001               115     21.00     19.00         87.21        1.78
2002               134     19.00     19.00         101.83       -1.74
2003               139     20.00     14.00         69.74        1.32
2004               143     23.00     16.00         67.93        1.22
2005               153     23.00     17.00         71.81        1.06
2006               153     26.00     19.00         75.23        1.45
2007               157     27.00     20.00         74.38        1.68
2008               157     29.00     20.00         68.76        1.24
2009               158     28.00     24.00         86.23        1.97
2010               158     28.00     22.00         78.43        2.06
2011               156     26.00     19.00         73.31        1.33
2001-2011          137     25.00     19.00         77.72        1.21
Phase 1
  (2000-2001
  to 2005-2006)    134     22.00     17.00         78.96        0.85
Phase 2
  (2006-2007
  to 2010-2011)    157     28.00     21.00         76.22        1.66
Phase 3
  (2006-2007
  to 2007-2008)    157     28.00     20.00         71.57        1.46
Phase 4
  (2008-2009
  to 2010-2011)    157     27.00     22.00         79.32        1.79

Year Ending *     Kurtosis   Median   Quartile   Quartile
                                         1          3

2001                4.96     15.00-     8.00      31.00
2002               16.59     15.00      9.00      26.00
2003                1.66     16.00     10.00      27.00
2004                1.43     18.00     12.00      31.00
2005                0.89     19.00     10.00      33.00
2006                2.16     20.00     13.00      32.00
2007                3.55     22.00     14.00      .35.00
2008                1.42     22.00     14.00      37.00
2009                494      20.00     12.00      34.00
2010                6.26     22.00     14.00      34.00
2011                1.88     22.00     12.00      36.00
2001-2011           4.16     19.00     12.00      32.00
Phase 1
  (2000-2001
  to 2005-2006)     4.62     17.00     10.00      30.00
Phase 2
  (2006-2007
  to 2010-2011)     3.61     22.00     13.00      35.00
Phase 3
  (2006-2007
  to 2007-2008)     2.49     22.00     14.00      36.00
Phase 4
  (2008-2009
  to 2010-2011)     4.36     21.00     13.00      35.00

Notes:(i) * The Indian financial year begins on April 1 and ends
on March 31 of the following year. The  same holds true for all
subsequent tables and notations.

(ii) Extreme values of 150% or more and negative values are
excluded.

                                       Paired Differences

                            Mean       Standard    Standard
                                       Deviation   Error
                                                   Mean

Pair 1   Phase 1--Phase 2   -0.05169   0.12971     0.01032
Pair 2   Phase 3--Phase 4   0.01812    0.09411     0.00749

         Paired Differences

         95% Confidence
         Interval of the
         Difference

                                              Significance
         Lower      Upper      t        df    (2-tailed)

Pair 1   -0.07207   -0.03130   -5.009   157   0.000
Pair 2   0.00333    0.03290    2.420    157   0.017

TABLE 2
FREQUENCY DISTRIBUTION RELATED TO GROSS PROFIT PERCENTAGE OF SAMPLE
COMPANIES: 2001-2011
(percent)

Gross profit (%)   2001    2002    2003    2004    2005    2006

Less than 10       8.73    7.04    4.14    3.38    1.30    1.91
10-20              56.35   59.86   60.00   -
54.05 51.95   48.41
20-30              11.11   11.27   16.55   17.57   19.48   21.02
30-40              6.35    10.56   9.66    11.49   9.09    11.46
40-60              13.49   8.45    7.59    10.81   14.94   7.64
Above 60           3.96    2.82    2.07    2.71    3.25    9.55
Total              100     100     100     100     100     100

Gross profit (%)   2007    2008     2009    2010    2011

Less than 10       1.23    0.61     2.45    1.23    2.45
10-20              45.68   40.49    48.47   38.27   44.79
20-30              18.52   19.63    17.79   29.63   20.25
30-40              15.43   14.11    11.04   9.26    12.27
40-60              9.88    14.11    9.20    12.35   11.66
Above 60           9.26    11.04    11.03   9.26    8.58
Total              100     100      100     100     100

Note: Total (100) may not tally due to rounding off. The same
holds true for other frequency distribution  tables.

TABLE 3
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW, KURTOSIS,
MEDIAN AND QUARTILE VALUES RELATED TO NET PROFIT PERCENTAGE
OF SAMPLE COMPANIES: 2001-2011
(percent)

Year Ending       Number   Mean    Standard    Coefficient of   Skew
                                   Deviation   Variation (%)
2001               108     14.00     15.00         105.49       3.14
2002               127     12.00     11.00         94.69        1.15
2003               137     12.00     10.00         86.54        1.56
2004               140     14.00     12.00         85.50        1.74
2005               150     14.00     11.00         77.61        1.31
2006               155     16.00     15.00         99.30        2.73
2007               155     18.00     18.00         97.37        3.33
2008               156     19.00     15.00         80.18        2.08
2009               155     18.00     16.00         88.88        1.79
2010               153     17.00     14.00         81.67        1.68
2011               155     16.00     13.00         80.85        1.21
2001-2011          132     15.00     14.00         88.92        1.98
Phase 1
  (2000-2001
  to 2005-2006)    132     14.00     12.00         91.52        1.94
Phase 2
  (2006-2007
  to 2010-2011)    155     18.00     15.00         85.79        2.02
Phase 3
  (2006-2007
  to 2007-2008)    156     18.50     16.50         88.78        2.71
Phase 4
  (2008-2009
  to 2010-2011)    154     17.00     14.00         83.80        1.56

Year Ending       Kurtosis   Median   Quartile   Quartile
                                         1          3
2001               16.34      9.00      5.00      22.00
2002                1.45      8.00      4.00      19.00
2003                3.20      9.00      4.00      17.00
2004                3.90     10.00      6.00      18.00
2005                2.10     11.00      6.00      20.00
2006               11.20     11.00      7.00      21.00
2007               15.84     14.00      8.00      23.00
2008                6.24     15.00      8.00      24.00
2009                3.54     13.00      7.00      23.00
2010                3.52     13.00      8.00      22.00
2011                1.14     13.00      6.00      23.00
2001-2011           6.22     11.00      6.00      21.00
Phase 1
  (2000-2001
  to 2005-2006)     6.36     10.00      5.00      19.00
Phase 2
  (2006-2007
  to 2010-2011)     6.05     14.00      8.00      23.00
Phase 3
  (2006-2007
  to 2007-2008)    11.04     14.50      8.00      23.50
Phase 4
  (2008-2009
  to 2010-2011)     2.73     13.00      7.00      23.00

Note: Extreme values of 150% or more and negative values are excluded

                            Paired Differences

                            Mean       Standard    Standard
                                       Deviation   Error
                                                   Mean

Pair 1   Phase 1--Phase 2   -0.03724   0.09611     0.00767
Pair 2   Phase 3--Phase 4   0.01698    0.10798     0.00851

         Paired Differences

         95% Confidence
         Interval of the
         Difference

                                              Significance
         Lower      Upper      t        df    (2-tailed)

Pair 1   -0.05239   -0.02209   -4.855   156   0.000
Pair 2   0.00017    0.03379    1.995    160   0.048

TABLE 4
FREQUENCY DISTRIBUTION RELATED TO NET PROFIT PERCENTAGE OF
SAMPLE COMPANIES: 2001-2011

(percent)

Net Profit (%)   2001    2002    2003    2004    2005    2006

Less than 0      14.29   11.27   6.21    5.41    3.23    2.55
10-20            62.70   68.31   76.55   72.97   72.26   71.97
20-30            15.87   11.97   10.34   13.51   16.13   15.29
30-10            4.76    7.04    4.14    4.73    5.16    4.46
Above 40         2.38    1.41    2.76    3.38    3.23    5.73
Total            100     100     100     100     100     100

Net Profit (%)   2007    2008    2009    2010    2011

Less than 0      3.70    3.07    4.32    4.32    4.27
10-20            65.43   61.96   66.67   65.43   66.46
20-30            17.90   20.25   13.58   14.81   14.63
30-10            5.56    6.13    7.41    6.17    4.88
Above 40         7.41    8.59    8.03    9.25    9.76
Total            100     100     100     1100    1100

TABLE 5
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW, KURTOSIS,
MEDIAN AND QUARTILE VALUES RELATED TO RETURN ON TOTAL ASSETS (ROTA) OF
SAMPLE COMPANIES: 2001-2011

Year Ending       Number   Mean    Standard    Coefficient of   Skew
                                   Deviation   Variation (%)

2001               139     10.00     11.00         104.70       0.67
2002               145     12.00     11.00         97.75        -0.02
2003               147     12.00     11.00         88.52        0.14
2004               147     15.00     12.00          7730        1.57
2005               154     15.00     12.00         78.27        0.11
2006               152     15.00     12.00         76.78        0.77
2007               152     15.00     11.00         72.14        0.67
2008               158     15.00     11.00         69.34        0.93
2009               159     13.00     10.00         73.98        0.78
2010               155     13.00     11.00          8231         21
2011               159     12.00     10.00         84.49        0.84
2001-2011          149     14.00     11.00          8233        0.61
Ph..se 1
  (2000-2001 to
  2005-2006)       147     13.00     11.00          8722        0.54
Phase 2
  (2006-2007 to
  2010-2011)       156     14.00     10.00         76.45        0.69
Phase 3
  (2006-2007 to
  2007-2008)       155     15.00     11.00         70.74        0.80
Phase 4
  (2008-2009 to
  2010-2011)       157     13.00     10.00         80.26        0.61

Year Ending       Kurtosis.   Median   Quartile   Quartile
                                          1          3

2001                1.65       9.00      4.00      15.00
2002                3.43      10.00      6.00      15.00
2003                4.64      11.00      7.00      18.00
2004                6.56      14.00      8.00      22.00
2005                2.43      13.00      7.00      20.00
2006                1.14      12.00      7.00      22.00
2007                0.00      12.00      8.00      22.00
2008                0.63      13.00      7.00      22.00
2009                0.58      11.00      7.00      19.00
2010                 336      10.00      6.00      19.00
2011                1.72       9.00      6.00      18.00
2001-2011           2.38      11.00      7.00      19.00
Phase 1
  (2000-2001 to
  2005-2006)        3.31      11.00      6.00      19.00
Phase 2
  (2006-2007 to
  2010-2011)         126      11.00      7.00      20.00
Phase 3
  (2006-2007 to
  2007-2008)        0.32      13.00      8.00      22.00
Phase 4
  (2008-2009 to
  2010-2011)        1.89      10.00      6.00      18.00

Note: Extreme values of f 50 percent are excluded

                            Paired Differences

                            Mean       Standard    Standard
                                       Deviation   Error
                                                   Mean

Pair 1   Phase 1--Phase 2   -0.01775   0.08951     0.00710
Pair 2   Phase 3--Phase 4   0.02613    0.06931     0.00551

         Paired Differences

         95% Confidence
         Interval of the
         Difference

                                              Significance
         Lower      Upper      t        df    (2-tailed)

Pair 1   -0.03177   -0.00373   -2.501   158   0.013
Pair 2   0.015231   0.037021   4.738    157   0.000

TABLE 6
FREQUENCY DISTRIBUTION RELATED TO RETURN ON TOTAL ASSETS (ROTA) OF
SAMPLE COMPANIES: 2001-2011

(percent)

ROTA %        2001    2002    2003    2004    2005    2006

Less than 0   9.09    6.71    5.19    6.45    2.50    3.11
0-5           19.58   12.08   12.34   9.03    12.50   7.45
5-10          22.38   29.53   27.92   20.00   20.63   27.95
10-15         23.08   23.49   22.08   18.71   18.75   21.12
15-50         23.08   25.50   28.57   42.58   42.50   35.40
Above 50      2.80    2.68    3.90    3.23    3.13    4.97

Total         100     100     100     100     100     100

ROTA %        2007    2008    2009    2010    2011

Less than 0   4.29    3.01    3.01    3.07    3.03
0-5           9.20    10.84   11.45   12.27   16.36
5-10          21.47   21.69   27.11   31.29   32.73
10-15         21.47   20.48   22.89   15.34   13.94
15-50         37.42   39.16   31.33   33.13   30.30
Above 50      6.13    4.82    4.22    4.91    3.64

Total         100     100     100     100     100

TABLE 7
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW, KURTOSIS,
MEDIAN AND QUARTILE VALUES RELATED TO RETURN ON CAPITAL EMPLOYED
(ROCE) OF SAMPLE COMPANIES: 2001-2011

Year Ending       Number   Mean    Standard    Coefficient of   Skew
                                   Deviation   Variation (%)

2001               143     13.00     17.00         131.82       3.19
2002               149     14.00     17.00         124.11       3.71
2003               154     16.00     24.00         148.83       5.90
2004               153     17.00     15.00         89.08        2.33
2005               160     17.00     18.00         105.94       3.84
2006               161     19.00     21.00         111.46       3.66
2007               163     18.00     15.00         83.65        1.53
2008               166     18.00     18.00         99.27        3.52
2009               166     16.00     18.00         108.57       3.70
2010               164     16.00     18.00         111.69       3.37
2011               165     17.00     17.00         100.11       2.11
2001-2011          155     16.00     18.00         110.41       3.35
Phase 1
  (2000-2001 to
  2005-2006)       152     16.00     19.00         118.54       3.77
Phase 2
  (2006-2007 to
  2010-2011)       165     17.00     17.00         100.66       2.85
Phase 3
  (2006-2007 to
  2007-2008)       165     18.00     17.00         91.46        2.53
Phase 4
  (2008-2009 to
  2010-2011        165     16.00     17.00         106.79       3.07

Year Ending       Kurtosis  Median  Quartile   Quartile
                                       1          3

2001               16.50    11.00     4.00      16.00
2002               27.26    10.00     6.00      17.00
2003               48.55    11.00     7.00      20.00
2004               10.23    14.00     8.00      23.00
2005               28.36    14.00     8.00      21.00
2006               19.28    13.00     8.00      23.00
2007               3.17     14.00     8.00      26.00
2008               17.79    14.00     8.00      24.00
2009               19.04    12.00     7.00      21.00
2010               16.81    12.00     7.00      19.00
2011               8.31     14.00     7.00      23.00
2001-2011          19.57    13.0)     7.00      21.00
Phase 1
  (2000-2001 to
  2005-2006)       25.03    12.00     7.00      20.00
Phase 2
  (2006-2007 to
  2010-2011)       13.02    13.00     7.00      22.00
Phase 3
  (2006-2007 to
  2007-2008)       10.48    14.00     8.00      25.00
Phase 4
  (2008-2009 to
  2010-2011        14.72    13.00     7.00      21.00

Note: Extreme values of f 50 percent are excluded

                            Paired Differences

                            Mean       Standard         Standard
                                       Deviation        Error
                                                        Mean

Pair 1   Phase 1--Phase 2   -0.01417   0.14459          0.01136
Pair 2   Phase 3--Phase 4   0.01803    0.09009          0.00699

         Paired Differences

         95% Confidence
         Intervalofthe
         Difference

                                             Significance
         Lower      Upper     t        df    (2-tailed)

Pair 1   -0.03660   0.00827   -1.247   161   0.214
Pair 2   0.00422    0.03184   2.578    165   0.011

TABLE 8
FREQUENCY DISTRIBUTION RELATED TO RETURN ON CAPITAL EMPLOYED
(ROLE) OF SAMPLE COMPANIES: 2001-2011

(Figures are is percentages)

ROCE (%)      2001    2002    2003    2004    2005    2006    2007

Less than 0   9.09    6.71    4.55    5.51    1.88    2.48    3.68
0-10          39.86   42.28   38.96   26.45   32.50   36.65   30.06
10-20         34.27   30.20   31.82   36.71   37.50   29.19   31.90
20-30         839     12.75   15.58   20.65   16.25   14.91   19.02
Above 30      8.39    8.06    9.09    10.33   11.88   16.71   15.34

Total         100     100     100     100     100     100     100

ROCE (%)      2008    2009    2010     2011

Less than 0   2.41    3.01    3.07     3.64
0-10          31.93   38.55   42.94    35.15
10-20         33.13   31.93   31.29    29.70
20-30         18.67   13.25   13.50.   16.36
Above 30      13.86   13.25   9.20     15.15

Total         100     100     100      1100

TABLE 9
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW,
KURTOSIS,  MEDIANAND QUARTILE VALUES RELATED TO RETURN ON
SHAREHOLDERS'  EQUITY (ROSE) OF SAMPLE COMPANIES: 2001-2011

Year Ending       Number   Mean    Standard    Coefficient of   Skew
                                   Deviation   Variation (%)

2001               136     10.00     16.00         151.57       -1.00
2002               136     12.00     13.00         105.58       -0.81
2003               146     14.00     14.00         98.16        -0.57
2004               144     18.00     17.00         94.63        2.95
2005               151     26.00     98.00         377.53       11.99
2006               150     19.00     12.00         61.70        0.55
2007               150     19.00     12.00         61.43        0.12
2008               157     19.00     12.00         61.51        0.24
2009               160     16.00     11.00         69.97        -0.15
2010               154     15.00     10.00         69.17        -0.29
2011               160     14.00     12.00         84.25        -0.02
2001-2011          1.49    17.00     21.00         112.32       1.18
Phase 1
  (2000-2001 to
  2005-2006)       143     17.00     28.00         148.20       2.18
Phase 2
  (2006-2007 to
  2010-2011)       155     17.00     11.00         69.27        -0.02
Phase 3
  (2006-2007 to
  2007-2008)       154     19.00     12.00         61.47        0.18
Phase 4
  (2008-2009 to
  2010-2011)       157     15.00     11.00         74.47        -0.15

Year Ending       Kurtosis   Median   Quartile   Quartile
                                         1          3

2001                3.25     12.00      2.00      19.00
2002                3.73     12.00      6.00      19.00
2003                3.02     13.00      6.00      22.00
2004               27.32     17.00      9.00      25.00
2005               146.10    17.00     10.00      26.00
2006               -0.13     18.00     10.00      26.00
2007               -0.50     20.00     10.00      27.00
2008               -0.47     19.00     10.00      25.00
2009                1.49     15.00      9.00      24.00
2010                1.28     16.00      7.00      22.00
2011                4.03     13.00      6.00      22.00
2001-2011          17.19     16.00      8.00      23.00
Phase 1
  (2000-2001 to
  2005-2006)       30.55     15.00      7.00      23.00
Phase 2
  (2006-2007 to
  2010-2011)        1.17     16.00      9.00      24.00
Phase 3
  (2006-2007 to
  2007-2008)       -0.49     20.00     10.00      26.00
Phase 4
  (2008-2009 to
  2010-2011)        227      15.00      8.00      22.00

                             Paired Differences

                             Mean       Standard    Standard
                                        Deviation   Error
                                                    Mean

Pair 1    Phase 1--Phase 2   -0.00055   0.24166     0.01917
Pair 2    Phase 3 -Phase 4   0.04515    0.08644     0.00688

          Paired Differences

          95% Confidence
          Interval of the
          Difference

                                              Significance
          Lower      Upper     t        df    (2-tailed)

Pair 1    -0.03841   0.03730   -0.029   158   0.977
Pair 2    0.03157    0.05874   6.566    157   0.000

TABLE 10
FREQUENCY DISTRIBUTION RELATED TO RETURN ON SHAREHOLDERS' EQUITY
(ROSE) OF SAMPLE COMPANIES: 2001-2011

(percent)

ROSE(%)       2001    2002    2003    2004    2005    2006    2007

Less than 0   10.49   10.74   5.84    5.81    6.10    1.86    3.68
0-5           17.48   12.08   12.34   5.81    9.15    8.70    7.98
5-10          15.38   17.45   18.18   14.84   10.98   12.42   10.43
10-15         18.18   20.13   17.53   10.97   10.98   13.04   9.82
15-25         20.98   19.46   2532    31.61   33.54   31.68   31.90
25-50         12.59   14.77   16.23   24.52   23.78   26.09   28.22
Above 50      4.90    5.37    4.55    6.45    5.49    6.21    7.98

Total         100     100     100     100     100     100     100

ROSE(%)       2008    2009    2010    2011

Less than 0   3.01    3.61    3.07    4.24
0-5           9.64    10.24   14.11   15.76
5-10          11.45   15.06   14.11   20.00
10-15         13.25   19.28   14.72   15.15
15-25         30.72   27.11   32.52   29.09
25-50         26.51   21.69   15.95   12.12
Above 50      5.42    3.01    5.52    3.64

Total         100     100     100     1100

TABLE 11
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW,
KURTOSIS, MEDIAN AND QUARTILE VALUES OF CURRENT RATIO OF SAMPLE
COMPANIES: 2001-2011

Year Ending          Number   Mean   Standard    Coefficient of   Skew
                                     Deviation   Variation (%)

2001                  130     2.16     0.94          43.47        0.66
2002                  139     2.16     1.05          48.45        0.85
2003                  141     1.97     0.95          48.72        0.56
2004                  143     1.82     0.90          49.36        0.80
2005                  147     1.90     0.89          46.93        0.79
2006                  151     1.93     0.98          50.48        0.85
2007                  148     1.99     0.98          49.48        0.96
2008                  151     2.05     1.01          49.71        0.72
2009                  145     2.00     0.96           4826        0.78
2010                  145     2.00     0.96           4826        0.78
2011                  143     2.00     0.98          49.10        0.72
2001-2011             144     2.00     0.96          48.38        0.77
Phase 1(2000-2001
  to 2005-2006)       142     1.99     0.95          47.90        0.75
Phase 2 (2006-2007
  to 2010-2011)       146     2.01     0.98          48.96        0.79
Phase 3 (2006-2007
  to 2007-2008)       150     2.02     1.00          49.60        0.84
Phase 4 (2008-2009
  to 2010-2011)       144     2.00     0.97          48.54        0.76

Year Ending          Kurtosis   Median   Quartile   Quartile
                                            1          3

2001                   0.03      2.02      1.55       2.61
2002                   0.95      2.01      1.36       2.75
2003                   0.38      1.84      1.33       2.56
2004                   0.81      1.65      1.23       2.27
2005                   0.56      1.76      1.26       2.35
2006                   0.58      1.71      1.31       2.34
2007                   0.49      1.73      1.35       2.36
2008                   -20       1.78      1.32       2.69
2009                  -0.06      1.80      133        2.55
2010                  -0.06      1.80      1.33       2.55
2011                   0.04      1.86      127        2.56
2001-2011              0.32      1.82      1.33       2.51
Phase 1(2000-2001
  to 2005-2006)        0.55      1.83      1.34       2.48
Phase 2 (2006-2007
  to 2010-2011)        0.04      1.79      1.32       2.54
Phase 3 (2006-2007
  to 2007-2008)        0.14      1.76      1.34       2.52
Phase 4 (2008-2009
  to 2010-2011)       -0.03      1.82      1.31       2.55

Note: Extreme values of CR above 5 have been excluded

                            Paired Differences

                            Mean       Standard    Standard
                                       Deviation   Error
                                                   Mean

Pair 1   Phase 1--Phase 2   -0.11195   0.78435     0.06280
Pair 2   Phase 3--Phase 4   -0.02992   0.73037     0.06024

         Paired Differences

         95% Confidence
         Interval of the
         Difference

                                             Significance
         Lower       Upper    t        df    (2-tailed)

Pair 1   -0.23600    .01210   -1.783   155   0.077
Pair 2   -0.14898    .08913   -0.497   146   0.620

TABLE 12
FREQUENCY DISTRIBUTION OF CURRENT RATIO OF SAMPLE COMPANIES:
2001-2011

(percent)

Current ratio   2001    2002    2003    2004    2005    2006

0.0-1.0         5.63    8.73    13.82   14.93   10.26   12.42
1.0-1.5         14.79   20.13   20.40   22.73   26.93   26.70
1.5-2.0         23.24   18.12   17.76   19.48   21.15   15.53
2.0-3.0         28.17   29.53   27.63   25.32   24.36   2422
3.0-5.0         18.31   16.78   13.15   10.39   11.53   14.91
Above 5.0       9.86    6.71    724     7.14    5.77    621

Total(%)        100     100     100     100     100     100

Current ratio   2007    2008    2009    2010    2011

0.0-1.0         9.81    12.65   9.03    10.42   10.91
1.0-1.5         21.47   19.88   19.88   26.38   22.43
1.5-2.0         25.15   18.67   2229    11.04   13.33
2.0-3.0         2025    20.48   21.69   28.22   24.85
3.0-5.0         14.11   18.68   14.46   12.88   15.15
Above 5.0       920     9.04    12.65   11.04   1333

Total(%)        100     100     100     100     100

TABLE 13
MEAN, STANDARD DEVIATION, COEFFICIENT OF VARIATION, SKEW,
KURTOSIS, MEDIAN  AND QUARTILE VALUES OF ACID-TEST RATIO OF
SAMPLE COMPANIES: 2001-2011

Year Ending          Number   Mean   Standard    Coefficient of  Skew
                                     Deviation   Variation (%)

2001                  111     1.41     0.79          61.17       0.97
2002                  116     1.39     0.75          57.67       0.29
2003                  122     1.38     0.74          57.46       0.34
2004                  123     1.20     0.65          56.81       0.53
2005                  127     1.27     0.70          59.64       0.58
2006                  125     1.24     0.64          53.78       0.34
2007                  124     1.34     0.72          57.46       0.62
2008                  121     131      0.70          58.97       0.48
2009                  121     137      0.65          49.74       0.39
2010                  122     1.43     0.78          61.71       0.76
2011                  133     1.36     0.68          55.74       0.32
2001-2011             122     1.34     0.71          57.29       0.51
Phase 1 (2000-2001
  to 2005-2006)       121     1.32     0.71          57.76       0.51
Phase 2 (2006-2007
  to 2010-2011)       124     1.36     0.71          56.72       0.52
Phase 3 (2006-2007
  to 2007-2008)       123     1.33     0.71          58.22       0.55
Phase 4 (2008-2009
  to 2010-2011)       125     1.39     0.70          5571         49

Year Ending          Kurtosis   Median   Quartile   Quartile
                                            1          3

2001                   2.68      1.29      0.83       1.94
2002                  -0.78      1.29      0.84       1.92
2003                  -0.62      1.29      0.83       1.90
2004                  -0.18      1.15      0.68       1.60
2005                  -0.27      1.18      0.72       1.66
2006                  -0.49      1.19      0.72       1.71
2007                  -0.20      1.25      0.81       1.75
2008                  -0.57      1.18      0.70       1.78
2009                  -0.73      1.31      0.88       1.84
2010                   0.62      1.27      0.84       1.97
2011                  -0.84      1.23      0.83       1.92
2001-2011             -0.13      1.24      0.79       1.82
Phase 1 (2000-2001
  to 2005-2006)        0.06      1.23      0.77       1.79
Phase 2 (2006-2007
  to 2010-2011)       -0.34      1.25      0.81       1.85
Phase 3 (2006-2007
  to 2007-2008)       -0.38      1.21      0.75       1.77
Phase 4 (2008-2009
  to 2010-2011)       -0.32      1.27      0.85       1.91

Note: Extreme values of ATR above 3 have been excluded

                            Paired Differences

                            Mean       Standard         Standard
                                       Deviation        Error
                                                        Mean

Pair 1   Phase 1--Phase 2   -.12889    0.80075          0.06411
Pair 2   Phase 3--Phase 4   .00701     0.82133          0.06706

         Paired Differences

         95% Confidence
         Interval of the
         Difference

                                              Significance
         Lower      Upper      t        df    (2-tailed)

Pair 1   -0.25553   -.00224    -2.010   155   0.046
Pair 2   -0.12550   .13953     .105     149   0.917

TABLE 14
FREQUENCY DISTRIBUTION RELATED OF ACID-TEST RATIO
OF SAMPLE COMPANIES: 2001-2011
(Figures are in percentages)

Acid-test ratio   2001    2002    2003    2004    2005    2006

0.0-1.0           28.03   28.67   29.93   36.18   34.96   33.11
1.0-2.0           37.88   36.03   38.69   39.72   39.86   38.51
2.0-3.0           18.18   20.59   20.44   11.35   13.99   12.84
Above 3.0         15.91   14.71   10.95   12.77   11.19   15.54

Total             100     100     100     100     100     100

Acid-test ratio   2007    2008    2009    2010    2011

0.0-1.0           28.00   28.76   25.97   25.32   27.27
1.0-2.0           41.33   36.60   38.31   37.33   36.36
2.0-3.0           13.33   13.73   14.29   18.67   16.97
Above 3.0         17.33   20.92   21.43   18.67   19.39

Total             100     100     100     100     100
COPYRIGHT 2013 Reprinted with permission from JFMA. Copyright reserved with JFMA.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2013 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Singh, Shveta; Jain, P.K.; Yadav, Surendra S.
Publication:Journal of Financial Management & Analysis
Geographic Code:9INDI
Date:Jan 1, 2013
Words:10207
Previous Article:Empirical study of market conditions and IPOs public offerings: U.S. economy in perspective.
Next Article:Analytical study of journal market behaviour vis-a-vis invention/innovation under periodical monopolistic competitive conditions: appraisal of A. P....
Topics:

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters