List of Tables: A STUDY AN Analysis of Karnataka Silk Marketing Board "

A STUDY AN Analysis of Karnataka Silk Marketing Board
in Karnataka Silk
LIST OF TABLES
TABLE Page no
Table: 1
CURRENT RATIO 44
Table: 2
LIUI! RATIO 4"
Table: #
ABSOLUTE LIUI! RATIO 4$
Table: 4
!EBT EUIT% RATIO 4&
Table: '
PROPRIETAR% or EUIT% RATIO '(
Table: "
FI)E! ASSETS to NET *ORT+ RATIO '2
Table $
FI)E! ASSETS RATIO '#
Table: &
!EBT SER,ICE OR INTEREST CO,ERA-E RATIO '4
Table: .
TOTAL ASSETS TURNO,ER RATIOS '"
Table: 1(
FI)E! ASSETS TURNO,ER RATIO '$
Table: 11
CURRENT ASSETS TURNO,ER RATIO '&
Table: 12
-ROSS PROFIT RATIO "(
Table: 1#
OPERATIN- RATIO OR OPERATIN- COST RATIO "1
Table: 14
OPERATIN- PROFIT RATIO "2
Table: 1'
NET PROFIT RATIO "#
Table: 1"
-ROSS PROFIT RATIO "'
Table: 1$
OPERATIN- PROFIT RATIO "$
Table: 1&
NET PROFIT RATIO "&
Table: 1.
RETURN ON S+ARE+OL!ERS IN,EST/ENTS ".
LIST OF C+ARTS
C+ART Page no
C0art: 1
CURRENT RATIO 4'
C0art: 2
LIUI! RATIO1 4"

C0art: #
ABSOLUTE LIUI! RATIO 4$
C0art: 4
!EBT EUIT% RATIO 4.
C0art: '
PROPRIETAR% or EUIT% RATIO '1
C0art: "
FI)E! ASSETS to NET *ORT+ RATIO '2
C0art: $
FI)E! ASSETS RATIO '#
C0art: &
!EBT SER,ICE OR INTEREST CO,ERA-E RATIO ''
C0art: .
TOTAL ASSETS TURNO,ER RATIOS '"
C0art: 1(
FI)E! ASSETS TURNO,ER RATIO '$
C0art: 11
CURRENT ASSETS TURNO,ER RATIO '&
C0art: 12
-ROSS PROFIT RATIO "(
C0art: 1#1
OPERATIN- RATIO OR OPERATIN- COST RATIO "1
C0art: 14
OPERATIN- PROFIT RATIO "2
C0art: 1'
NET PROFIT RATIO "4
C0art: 1"
-ROSS PROFIT RATIO ""
C0art: 1$
OPERATIN- PROFIT RATIO "$
C0art: 1&
NET PROFIT RATIO "&
C0art: 1.
RETURN ON S+ARE+OL!ERS IN,EST/ENTS $(
Chapter 1.
INTRO!UCTION
The dimensions of business finance have undergone a phenomenal
transformation during the last few decades. Until the recent past business
finance was considered as an economic activity, primarily concerned with the
enterprises. Procurement of funds for business purposes and the finance
manager was considered as keeper of books of accounts and provider of
capital needed by the enterprise.
owever, today the finance manager has become an integral part of the
enterprise and is involved in the problems and decisions pertaining to the
management of the assets of the enterprises. !n fact finance is considered so
indispensable today that it is rightly said that "it is the lifeblood of an
enterprise. #ithout ade$uate financial management, no enterprise can
possibly accomplish its ob%ectives.
&inance is a body of facts, principles and theories concerned with rising and
use of money by individuals, firms and companies. !t also deals with how
individuals and companies divide their income between consumption, savings
and investments.
'ne of the most widely $uoted definitions of business finance is by (uthmann
and )ougall who consider as "an activity concerned with planning, raising,
administering and controlling of funds used in the business.
!n other words, business finance or the finance function of management is the
process of rising, providing and managing of the funds or money used in the
business. Thus it deals with the ac$uisition of funds and their effective
utili*ation.
OVERVIEW OF FINANCE FUNCTION
MODERN FINANCE FUNCTION
+odern finance functions can be categori*ed into two broad groups
namely recurring finance functions and non,recurring or episodic finance
functions.
A1 Re23rring 4inan2e 43n2tion:
-ecurring finance function encompasses all such financial
activities as are carried out regularly for the efficient cont of a
firm.
1. Planning o4 4inan2e: The initial task of finance manager is to formulate
the financial plan of the company. The finance plan is the act of deciding
in advance the $uantity of funds re$uired and their duration and the make,
up of such investment to achieve the primary goals of the enterprises. The
main aim of t his e.ercise is to synchroni*e the cash inflows with cash
outflows so that the firm does not have any idle funds nor suffers from
want of funds.
/. Rai5ing o4 43n65: The procurement of the desired amount of funds is
another important responsibilities of the finance manager. The re$uired
amount can be raised by issue of securities like shares or debentures or by
borrowing fro,financial institutions like !)01, !C!C1, 2tate financial
corporations etc. !t is the responsibility of the finance manager to fulfill the
formalities re$uired for this purpose on behalf of the company.
3. Allo2ation o4 43n65 4 5nother ma%or responsibility of the finance manager
is to allocate the fund among the different assets. !n allocation of funds
consideration should be given to such factors like competing use,
immediate re$uirement, profit prospects, overall management plans and
ability to accomplish the enterprise ob%ectives, in managing cash the
finance manager must strike a goal between two conflicting goals of
profitability and li$uidity of the company. !n managing receivables he
must try to minimi*e the level of receivables without affecting the sales. !n
addition, the finance manager is also responsible for determining the
amount of investment in inventories.
6. Allo2ation o4 ann3al in2o7e 4 5llocating the annual income of the
business is the responsibility of the finance manager. !ncome may be
retained for e.pansion purpose or it may be distributed in the form of
dividends. This decision should be taken in the light of the financial
position of the company, dividend policy, present and future re$uirements
and market standing of the firm.
7. Control o4 43n65: The finance manager also has to e.ercise control over
the use of the funds ac$uired by the firm so that the cash flow is as per plan
and there are no deviations between the actual and the estimates. 1ffective
budgetary control, break,even analysis, ration analysis are some off the
tools that can be used for this purpose.
B1 Non8re23rring 43n2tion:
8on,recurring finance function refers to those financial activities that a
financial e.ecutive has to perform very infre$uently. Preparation of financial
plan at the time of promotion of the enterprise, financial read%ustment in times
of li$uidity crisis, valuation of he firm at the time of merger or reorgani*ation of
the firm and similar other activities are of episodic character. 2uccessful
handling of such problems re$uires financial skills and understanding of
principles and techni$ues of finance peculiar to non,recurring situations.
RELATION OF FINANCE WITH OTHER AREAS OF BUSINESS
&inance is omnipresent and it is associated with the plans and results of
every functional department. This is because every proposal and every decision
entails financial problems or has an influence on financial results. !t is
practically impossible to separate finance from any activity or department of an
organi*ation. &urthermore, decisions taken by the financial manager influence
the activities of other functional departments particularly production and
marketing.
&inance is intimately related with marketing. The financial manager,
while formulating credit and collection policies for the firm, must consult the
marketing manager because these policies affect magnitude of sales of the firm.
#hether to sell for credit, to what e.tend and on what terms are parts of the
sales strategy of an enterprise. 0ut they have financial implications too because
the funds which will be tied up in receivable must be made available and any
shift in policies tied up a larger or smaller amount in receivables.
Thus, thus aspect of business decisions involves both sales and finance
alongside this, the financial manager will have to draw upon the fundamentals
of marketing while deciding whether to invest funds in a given business
enterprise and in discovering how o market stocks and bonds.
&inance is also closely related with purchase and production functions.
The decisions to determine the level of fi.ed assets and the different types of
such assets for an enterprise is more a task for production engineer than a
financial manager. !n the same way the types of goods to be held in inventory
and the amounts of each are a basic part of the purchase and sales function,
which in turn are related with production function. owever, investment in
fi.ed asset as well as in inventory is of significance because of greater risk
e.posure of these assets affecting the financial position of the enterprise for a
long period of time. 2ince the financial manager is primarily responsible for
supplying funds to finance
!nventory and fi.ed assets, which must earn sufficient return to cover the
cost involved in procuring funds, he has to participate directly in the decisions
pertaining to ac$uisition of assets.
&inance is also connected with accounting. 5ccounting is a staff function,
which supplies data to top management, financial management, sales
management, production management and personnel management. The
financial manager re$uired accurate and scientifically arranged financial records
of the enterprise to guide him in managing the inflow and outflow of funds.
5s a matter of fact, sound financial management is a matter of good
accounting. Particular attention must, therefore, be given to procedures which
the accountant uses in determining the financial condition and income of the
business and to the restrictions which sound accounting imposes upon those in
charge of financial policies.
COMPANY PROFILE
KARNATAKA SILK /ARKETIN- BOAR! 9KS/B:
9arnataka silk marketing board was formed in 1:;:,<= under the
board function at the direction of sericulture. The company is nominated by the
government of state. The purpose of establishing 92+0 is the act area price,
stabili*ing agent. The board is also one of the headers participating in public
auction conducted by the sericulture department through silk e.change. The
board also facilitates dealers in buying large $uantity of goods at a time >
different types of $uality also. !n terms of market, the same in its sales outlet.
The company has no competitors. The board provides credit to their customers
depending to their securities of fi.ed deposits etc.,
The board provides credit to the customers > foremen?s for := days?.
The main important ob%ective of the board is to help the local dealers, weavers,
and twisters.
Company has been recogni*ed by the 9hadi and @illage !ndustries
Commission A9@!CB as their certified institution for the period from august /==1
to march /==/ for the purchase of mulberry silk yarn and sale to the khadi
institutions.
The $uantity information furnished above includes purchase of 3/1=
kgs amounting to -s.3C.17 lakhs Aprevious year nilB and sales of <<3 kgs
amounting to -s.1/.;; lakhs Aprevious year nilB of yarn during the year under
report. &or this activity 9@!C has not given financial assistance to the company
hence, creating Dyarn price fluctuation fundD and accounting of service charges E
6F is not considered.
The company has no in,house manufacturing activity and hence
furnishing of particulars relating to licensed capacity, installed capacity and
production does not arise. The company has not purchasedGconsumed any
imported materials or spare during the year.
52,1; 2egment -eporting, 52,1< related party disclosures, 52,//
accounting for ta.es on income4 since the company?s e$uity shares are not listed
in any recogni*ed stock e.change in !ndia and the annual turnover is not more
than -s.7= crores during the year, the above said accounting standards are not
applicable to the company for the year.
1arnings per share computed in accordance with accounting standard
/= issued by institute of chartered accountants of !ndia.
PARTICULARS 2001-02 2000-01
RS1 RS1
ProfitGloss before ta. , /C,<6,77C 3/,:=,1/:
ProfitGloss after ta. , /C,<6,77C 17,16,1/:
8o. of e$uity shares issued of
8ominal value ,-s.1, === 8 3,16,7== 3,16,===
0asic earning per share H : 7
)ilutative potential e$uity shares 8!I 8!I
)iluted earning per share : 7
Bran20e5 o4 Karnataka Silk Boar6
*it0in Karnataka:
P3r20a5e 3nit5
9annakapura 0angalore )istrict.
-amanagaram 0angalore )istrict.
+agadi 0angalore )istrict.
5nekal 0angalore )istrict.
2iddlaghatta 0angalore )istrict.
9olar )istrict.
Chickballapura 9olar )istrict.
Chamragnagar.
@i%ayapura 0angalore -ural )istrict.
Sale5 Unit5

0angalore.
)ooddaballapura.
0etageri.
9ollegal +ysore )istrict.
Ot0er State5
Tamil 8adu
5ndra Pradesh
Uttar Pradesh
1.1 BACK-ROUN! TO T+E RESEARC+
TITLE OF T+E PRO;ECT
&inancial 2tatement 5nalysis of "Karnataka Silk Marketing Board.
FINANCIAL STATE/ENTS ANAL%SIS
&inancial statements are prepared primarily for decision,making. They
play a dominant role in setting the framework of managerial decision. owever,
the information provided in the financial statements is not any end in itself as no
meaningful conclusions can be drawn from these statements alone. ence these
statements need to be analy*ed and interpreted so that suitable decisions can then
be taken on the basis of the information contained in them. The term Jfinancial
analysisK also known as Janalysis and interpretation of financial statementsK refers
to the process of determining the financial strengths and weaknesses of a concern
by establishing strategic relationships between the items of the balance sheet,
profit and loss account and other operative data.
!n the words of +yers, "financial statement analysis is largely a study of
relationship among the various financial factors in a business as disclosed by a
single set of statements, and a study of the trend of these factors as shown in a
series of statements.
!n the words of +etcalf and Titard, "analy*ing financial statements is a
process of evaluating the relationship between component parts of financial
statement to obtain a better understanding of a firmKs position and performance.
The purpose of financial analysis is to diagnose the information contained
in the financial statements so as to %udge the profitability and financial soundness
of the concern. !t is thus an attempt to determine the significance and meaning of
the data contained in the financial statements so that a forecast may be made of
future earnings, debt servicing ability, repayment of debt upon maturity and
profitability of a sound dividend policy.
112 STATE/ENT OF T+E PROBLE/
The topic is selected to analy*e changes in the financial position of the
company for the past four years, which have increased its capital, turnover and
profits. The study is conducted to know the changes in the various items in the
balance sheet and income statement and to analy*e their impact on the
profitability, li$uidity and the other overall financial position of the company.
11# NEE! AN! I/PORTANCE OF T+E STU!%
in the financial statements so as to %udge the profitability and financial
soundness of 9arnataka 2ilk +arketing 0oard.
The analysis attempts to determine the significance and meaning of the
data contained in the financial statements so that a forecast may be made of
future earnings, debt servicing ability, repayment of debt upon maturity
and profitability of a sound dividend policy of 9arnataka 2ilk +arketing
0oard.
The analysis will help determine the financial strengths and weaknesses of
9arnataka 2ilk +arketing 0oard by establishing strategic relationships
between the items of the balance sheet, profit and loss account and other
operative data.
The analysis will help the process of evaluating the relationship between
component parts of financial statement to obtain a better understanding of
a firmKs position and performance.
114 OB;ECTI,ES OF T+E RESEARC+
To study all the financial statements for the past four years and to
identify the changes in the various items present in them.
To e.amine the impact of the changes in the financial statements on the
financial position and profitability of the board.
Preparation of comparative statements to know the changes in the
absolute figures as well as the percentages.
Preparation of trend analysis statement to know the trend for the past
four years.
Preparation of common si*e statements to understand the Composition
of the various assets and liabilities in the balance 2heet, the composition
of the various e.penses and the proportion of the profits Agross,
operating and netB to sales in the income statements.
Calculation of li$uidity ratios, solvency ratios, general profitability
ratios, turnover ratios and overall profitability ratios in order to
ascertain financial significance of the figures contained in the financial
statements by establishing relationships between them.
To analyses the financial risk the company is e.posed to and e.amine
the short,term li$uidity and long,term solvency position of the
company.
To e.amine the increase in the various cost items in relation to
the sales and the past years figures and analyses whether the
increase is giving %ustifiable returns or not.
C0a<ter 21 LITERATURE RE,IE*
The theoretical aspects have been adapted fromL
&inancial +anagement by 2harma and (upta
0usiness &inance by -eddy, 5ppannaihh and 2rivastava
&inancial +anagement by 9han and Main
+anagement 5ccounting by 0.2. -aman and
&inancial 5ccounting by -. 8arayanaswamy.
2.1 CONCEPT OF FINANCIAL STATEMENTS
&inancial statements Nalso known as financial reports, final accounts,
financial accountsO are the summari*ed periodical reports which disclose the
financial aspects of a business such s the operating results i.e. the profits or
losses of a business for a particular period and the financial position of the
concern as on a particular date. !n other words, they are the formal and original
statements prepared for the purpose of depicting the financial health of a
business in terms of profits, position and prospects as on a certain date or for a
certain period, as the case may be.
The financial statements are so called, because they provide a summary
of the financial position of a business enterprise. They are the outcome of the
summari*ing process of accounting.
The term "financial statements or "the package of financial statements
includes at least three basic statements, vi*.
1. The position statement or the balance sheet, prepared by a concern at
the end of every financial year.
/. The income statement o the operations statement of the profit and loss
account.
3. The statement of retained earnings, the surplus statement or the profit
and loss appropriation account. !n addition, it also includes schedules of
the various assets and liabilities as well as e.planatory footnotes
relating to the methods of inventory valuation, depreciation etc. to
supplement the data contained in the financial statements.
11POSITION STATE/ENT OR BALANCE S+EET:
The 5merican institute of certified public accountants defines balance
sheet as "a tabular statement of summary of balances Ndebits and creditsO carried
forward after an actual and constructive closing of books of accounts kept
according to principles of accounting. The purpose of the balance sheet is to
show the resources that the company has i.e. its assets and from where those
resources come from i.e. its liabilities and the investment made by the owners
and outsiders.
The balance sheet is one of the important statements depicting the
financial strength of the concern. !t shows on one hand the resources that it
utili*es and on the other hand the sources of all those resources. The balance
sheet is always prepared as on a particular date.
5ll concerns registered under the companies act, 1:7C have to adopt a
prescribed format for showing the assets and liabilities in the balance sheet and
are also re$uired to give the figures of the previous year along with the current
year figures.
21INCO/E STATE/ENT OR PROFIT = LOSS ACCOUNT:
!ncome statement is prepared to determine the operational position of the
concern. !t is a statement of revenues. !f there is an e.cess of revenues over
e.penditure the income statement will show a profit and if the e.penditures are
more than the income then there will be a loss. The income statement is
prepared for a particular period, generally a year. !t includes all revenues and
e.penditures falling due in that year, irrespective of their receipt or payment.
#1STATE/ENT OF RETAINE! EARNIN-S OR PROFIT = LOSS
APPROPRIATION ACCOUNT:
5 profit and loss appropriation account is a connecting link between
profit and loss account and balance sheet. 'nly %oint stock companies prepare it.
5 profit and loss appropriation account is a statement prepared to show
how the profits earned by a company during a year have been appropriated Ni.e.,
distributed or utili*edO as dividends on shares, transfer to general reserve,
sinking fund or any other reserve, and how much of the earnings or profits are
retained as surplus profits.
212 FINANCIAL STATE/ENTS ANAL%SIS
be taken on the basis of the information contained in them.
The term Jfinancial analysisK also known as Janalysis and interpretation of
financial statementsK refers to the process of determining the financial strengths
and weaknesses of a concern by establishing strategic relationships between the
items of the balance sheet, profit and loss account and other operative data.
!n the words of +yers, "financial statement analysis is largely a study of
relationship among the various financial factors in a business as disclosed by a
single set of statements, and a study of the trend of these factors as shown in a
series of statements.
!n the words of +etcalf and Titard, " analy*ing financial statements is a
process of evaluating the relationship between component parts of financial
statement to obtain a better understanding of a firmKs position and performance.
TYPES OF FINANCIAL ANALYSIS
&inancial analysis may be classified into different categories depending
upon
5. The materials used for the analysis or the persons interested in
the analysis and
0. The modus operandi or method of operation followed in the analysis.
A1 Cla55i4i2ation on t0e ba5i5 o4 t0e 7aterial 35e6 4or t0e anal>5i5 or t0e
<er5on5 intere5te6 in t0e anal>5i5
11 E?ternal anal>5i5:
1.ternal analysis is done by outsiders who do not have access to the
detailed internal accounting records of the business firm. These outsiders include
investors and creditors, both e.isting and potential as well as government
agencies, credit agencies and the general public. These e.ternal parties depend
almost entirely on the published financial statements. 1.ternal analysis thus
serves only limited purposes.
21 Internal anal>5i5:
The analysis conducted by persons who have access to the internal
accounting records of a business firm is known as internal analysis. 2uch an
analysis can therefore by performed by the e.ecutives and employees of the
organi*ation as well as government agencies which have statutory powers vested
in them. 0ut, generally, the personnel of the finance and accounting departments
and the e.ecutives for management purposes do internal analysis.
5s the persons who have access to the books of accounts and the infernal
records of the concern do the internal analysis, internal analysis is more detailed
than e.ternal analysis and thus serves a broader purpose.
B1Cla55i4i2ation on t0e ba5i5 o4 t0e 7o635 o<eran6i
11 ,erti2al anal>5i5 or 5tr32t3ral anal>5i5:
#hen a single set of financial statements relating to %ust one accounting
year are analy*ed, the analysis is known as vertical analysis. !n the vertical
analysis, the figures of the financial statements are analy*ed column,wise i.e. a
figure from one years financial statement is compared with a base figure selected
from the same years financial statement. &or instance, the different items of costs
of a particular year may be compared with the sales for that year.
@ertical analysis is also known as static analysis, as it depends upon the
data as on one date or for one accounting ear and measures the state of affair as
on a particular date or for a particular year. @ertical analysis is useful to compare
the performance of several companies in the same group or the various divisions
or departments in the same company.
owever vertical analysis is not very helpful for a proper analysis of the
state of affairs of a concern as it depends on the data relating to %ust one date or
one accounting year. Common,si*e statements and financial ratios are the two
main tools employed in vertical analysis.
21 +ori@ontal Anal>5i5 or Tren6 Anal>5i5:
#hen the financial statements of a number of years are analy*ed, the
analysis is called hori*ontal analysis. !n other words, hori*ontal analysis is a type
of analysis in which there is comparison of the trend of each item. !n the financial
statements over a number of years.
The figures of the current year are compared with the figures of the
standard or the base year, and the changes in each of the element or items from
the base year are shown, usually, in the form of percentage. ori*ontal analysis
is also known as dynamic analysis, as it is based on the data from year to year
and measures the changes of position or trend of the business over a period of
time.
ori*ontal analysis is more useful than vertical analysis as it provides
considerable inside into the areas of strength and weakness of an enterprise. !t
also focuses attention on those items that had changed significantly during the
period under review.
Comparative statements and trend percentages are two tools employed in
hori*ontal analysis.
STEPS IN,OL,E! IN ANAL%SIS OF FINANCIAL STATE/ENT
&rom a study of the meaning of analysis of the financial statements, it clear
that the work of analysis of financial statements involves three steps or processes.
They are4
1.5nalysis
/.Comparison
3.!nterpretation.
1. Anal>5i5: 5nalysis of financial statements means splitting up or regrouping of
the figures found in the financial statements into the desired homogeneous and
comparable component parts. !n other words, it means methodical classification
of the data given in the financial statements into homogeneous and comparable
parts. !n short, it is the re,classification and re,arrangement of the data found in
the financial statements into groups of a few principal elements according to their
resemblances and affinities and presenting them in the form most convenient fro
interpretation.
Thus, an analysis of the financial statements is the process of regrouping or
re,classifying the figures found in the financial statements into the desired
homogeneous and comparable component parts.
21Co7<ari5on: mere splitting up or regrouping of the figures found in the
financial statements into the desired components parts is not sufficient for
%udging the profitability and the financial status of an enterprise. 5fter the figures
contained in the financial statements are dissected or split into the re$uired
comparable component parts, the comparable component parts must be compared
with each other, and their relative magnitudes must be measured.
2o comparison is the process of ascertainment of the relative magnitudes
of the component parts of the study of the e.tent of relationship of the component
parts.
#1Inter<retation: 5fter the financial statements are analy*ed or dissected into
comparable parts and the relative magnitudes of the comparable parts and the
relative magnitudes of the comparable components parts is measured through
comparison, the results must be interpreted.
!nterpretation of results means the formation of rational %udgment and the
drawing of proper conclusions about the progress, financial position and future
prospects of the business through careful study of the relationship of component
parts obtained through analysis and comparison, in short, interpretation covers
even the work of presenting the findings in report form.
ObAe2tiBe5 o4 4inan2ial 5tate7ent5 anal>5i5
1.To determine the progress.
/.To measure the operational efficiency of the concern.
3.To %udge the financial position of the concern.
6.To ascertain the future prospects of the concern.
21# TEC+NIUES OR /ET+O!S OF FINANCIAL ANAL%SIS
The techni$ues or methods of financial statements analysis adopted for the
purposes of this study are as follows
I1 CO/PARITI,E FINANCIAL STATE/ENT ANAL%SIS1
II1 CO//ON SICE FINANCIAL STATE/ENTS ANAL%SIS1
III1 TREN! PERCENTA-ES OR TREN! RATIOS1
I,1 RATIO ANAL%SIS1
I1 CO/PARITI,E FINANCIAL STATE/ENT ANAL%SIS
The comparative financial statements are statements of the financial
position at different periods of time. The elements of financial position are shown
in a comparative form so as to give an idea of financial position at two or more
periods. These financial statements summari*e and present relative accounting
data for a number of years, incorporating there in the changes in individual items.
Thus they provide time perspective to the various elements contained in the
financial statements.
Comparative financial statements facilitate comparison between two or
more accounting years by presenting the relevant figures for those years side by
side. The trends in a number of accounting items relating to the performance,
efficiency and financial position of a business can be understood through the use
of comparative financial statements.
!mportant comparative financial statements are the comparative balance
sheet and the comparative income statement.
11Co7<aratiBe balan2e 50eet:
5ccording to -oy &oulke "the comparative balance sheet analysis is the study of
the same items, group of items and computed items in two or more balance sheets
of the same business enterprise on different dates.
5 comparative balance sheet is thus a balance sheet which is prepared to
facilitate the comparison of assets, liabilities and proprietorKs capital of a business
on two different dates and to find out the changes, i.e., the increases or decreases,
in the various assets, liabilities and ownerKs capital between the two dates.
5 comparative balance sheet shows the balances of assets, liabilities and
proprietorsK capital as on different dates, but also the amount of changes, i.e., the
increase or decreases in the assets, liabilities and ownersK capital between the two
dates. Thus while the emphasis in a single balance sheet is on status, the
emphasis in a comparative balance sheet is on change rather than the status.
21Co7<aratiBe in2o7e 5tate7ent:
5 comparative income statement is a statement prepared to compare
the various items of the income statement of the different periods and to ascertain
the changes, i.e., the increases or decreases, that have taken place in the items of
income statements from one period to another.
!n the comparative income statement, the figures of revenue and
costs for the current period and the previous period are given. &urther, the
changes, i.e., the increases or decreases, in the items of the revenues and costs,
are also given in terms of rupee values and in terms of percentages. 5s such, a
mere reading of the comparative income statement helps one to device
meaningful conclusion about the performance of the business from year to year.
II1 CO//ON SICE FINANCIAL STATE/ENTS ANAL%SIS
Common,si*e financial statements are those statements in which the data
or figures reported in the financial statements are converted into percentages,
taking some common base. They are the tools for vertical analysis of financial
statements.
Common,si*e financial statements are also known as component
percentage statements or 1== percent statements because each statement is
reduced to the total of 1==F and each individual item is e.pressed as a
percentage of the total of 1==. Common,si*e financial statements mainly include
N1O common,si*e income statement and N/O common,si*e balance sheet.
11Co77on85i@e in2o7e 5tate7ent:
5 common,si*e income statement is statement in which the net sales is
taken a 1==F and all the other items of the income statement are e.pressed as a
percentage of net sales.
5 significant relationship can be established between items of the income
statement and the volume of sales. This is because certain e.penses are largely
fi.ed in nature where as certain e.penses tend to vary in proportion to sales. &ro
instance, the increase in sales will be certainly increase selling e.penses and not
administrative or financial e.penses by the same e.tant however, in case the
volume of sales increases by a considerable e.tent, the administrative and
e.penses may go up. Conversely, if the sales are declining the selling e.penses
should be reduced at once. 2o a relationship is established which is helpful in
evaluating the operational activities of the enterprise.
21Co77on85i@e Balan2e S0eet
5 statement in which each asset is e.pressed as a ratio to the total assets
and each liability is e.pressed as a ratio of total of liabilities is called common,
si*e balance sheet. Thus the total assets or the total liabilities and capital is taken
as 1==F and all the items of the balance sheet Ai.e. each of the assets and each of
the liabilitiesB are e.pressed as a percentage of the total assets or the total
liabilities and capital.
The common,si*e balance sheet throws light on the structure of the balance
sheet and can be used to observe the trend of the ratio of each of the items of the
balance sheet to the total of all assets or liabilities. They can also be used to
compare companies of differing si*es.

III1 TREN! PERCENTA-ES OR TREN! RATIOS1
Comparison of past data over a period of time with base year is known as
trend analysis. !t is a hori*ontal analysis of financial statements. ere financial
statements. ere financial statements of more than one year are analy*ed. !t is a
dynamic analysis depicting the changes over a period of years.
!t is a method of analysis under which the percentage relationship that each
financial statement item of each year bears to the same item in the base year is
calculated. 1ach item of the base year is taken as 1==F and on the basis of that
the trend analysis for the corresponding items in the other years are calculated.
Trend percentages are immensely helpful to the management in knowing the
present position and the direction in which the enterprise is moving. Through a
study of the trend percentages over the past few years, the managements can infer
whether the growth curve of the enterprises is moving upwards or downwards or
remaining constant.
I,1 RATIO ANAL%SIS
!n simple words, ratio is one number e.pressed in terms of another
and can be obtained by simply dividing one number by the other. -atio analysis
is the techni$ue of the calculation of a number of accounting ratios from the data
or figures found in the financial statements, the comparison of the accounting
rations with those of the previous years or with those of the accounting ratios
with those of the previous years or with those of other concerns engaged in
similar line of activities or with those of standard or ideal ratios, and the
interpretation of the comparison. !n short, it is the techni$ue of interpretation of
financial statements with the help of the accounting ratios derived from the
financial statements.
/O!ES OF E)PRESSION OF ACCOUNTIN- RATIONS
5n accounting ratio can be e.pressed in three ways, vi*.,
1. As a pure ratio or proportion between two accounting figures. 1.. The
current ratio that is the ratio of current assets to current liabilities is
e.pressed as /41.
/. As a rate that is so any ties o!er a period of tie e.. The fi.ed assets
turnover ratio is 3 times a year.
3. As a percentage. 1.. The profitability ratios such as the net profit ratio are
usually e.pressed as a percentage like say 67F. 1ach modes of e.pression as
illustrated above has its own advantages. !t is the responsibility of the analyst
to select that method of e.pression that best serves the purpose of each
particular ratio. 1.. The purpose of the debt,e$uity ratio is to show the
$uantum of the borrowed funds to the ownerKs funds. !t is hence e.pressed as
a pure ratio like 34/.
PROCE!URE FOR RATIO ANAL%SIS:
The following four steps are involved in the ratio analysis, vi*.
1. 2election of the relevant data from the financial statement depending
upon the ob%ective of the analysis.
/. Calculation of appropriate ratios from the selected data.
3. Comparison of the ratios so calculated with past ratios from the same
firm or similar firms or with pro%ected ratio or with the standards ratio.
6. !nterpretation of the ratios.
INTERPRETATION OF RATIOS
5 single ratio in itself does not serve much purpose. !n order to utili*e the
ratio so calculated as an input for decision,making, it has to be further
interpreted. This step of interpretation is the most crucial in the entire process of
ratio analysis as it is the most important determinant of the success or failure of
the entire e.ercise. The interpretation of the ratios can be made in either of the
following ways, vi*.
1. Co7<ari5on Dit0 i6eal or 5tan6ar6 ratio: (enerally speaking one cannot
draw any meaningful conclusion when a single ratio is considered in isolation.
owever, a single ratio may be studied in relation to certain rule of the thumb
or standard or ideal ratio and the interpretation be based upon this comparison.
1.., the standard for the current ratio is /41. Thus, if the actual ratio is more
than the standard the li$uidity position of the firm can be regarded as good
and conversely current ratio less than /41 signifies a week li$uidity position.
/. -ro3< o4 ratio5: -atios may be interpreted by calculating a group of related
ratios. This is because single ratio when supported by other related additional
ratios becomes more understandable and meaningful. 1.. Ii$uidity in short
term finance position of a concern is %udge by calculating three li$uidity
ratios, namely current ratio, $uick ratio and the absolute li$uid ratio.
3. +i5tori2al Co7<ari5on: istorical comparison is one of the easiest and most
popular ways of evaluating the performance of an enterprise. !t refers to the
comparison of the ratio of the current ratio of the current year with that of
previous years ratios of the same firm and is also called Comparison over
time. #hen such a comparison is made, the trend over the years can also be
discerned and thus the %udgment made about the changes of the firm over that
time period. owever, attention must be paid the accounting procedure and
policies are unchanged over the time period under study. !f any procedure or
policy changes are made, suitable ad%ustment will then need to be taken.
6. ProAe2te6 Ratio5: -atios can also be calculated for future standards based
upon the pro%ected or preformed financial statements. These future ratios may
be taken as standard for comparison with the ratios calculated on the actual
financial statements and variances, if any were thus discerned. Corrective
action may then be taken on the basis of the variances.
7. Inter84ir7 Co7<ari5on: -atios of one firm can also be compared with the
ratios of some other selected firms in the same industry for the same period.
2uch a comparison will give the idea about the performance of the firm in
relation to the industry, which it belongs. owever, this form of comparison
re$uires special attention to be paid to the accounting procedure and policies
adopted by the different firms.
214 CONCLUSIONS
be taken on the basis of the information contained in them.
C0a<ter # /ET+O!OLO-%
#11 RESEARC+ !ESI-N
"5 research design is the specification of methods and procedures for ac$uiring
the information needed. !t is the overall operational pattern or framework of the
pro%ect that stipulates what information has to be collected from which resources
and what procedures.
!t is also an arrangement of conditions for data collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in
procedure. !n fact, the research design is the conceptual structure within which
research is conductedL it constitutes the blue print for the collection, measurement
and analy*ing of data. 5s such the design includes an outline of what researchers
will do from writing the hypothesis and its operational implications to the final
analysis of data.

Under this research the financial statement of the company are analy*ed by
the use of comparative statements, trend analysis statements, and common
si*e statements by ratio analysis.
/ET+O!S OF !ATA COLLECTION
The data for this research has been collected from primary sources. The
primary sources being the 5ccountant > Chairman of 9arnataka 2ilk +arketing
0oard. The data regarding the financial aspect has been collected from the
5ccountant of the board who has prepared the balance sheet and profit and loss
account since its inception.
The data regarding the managerial aspects and the operations of the
company has been collected from the Chairman.
The theoretical aspects have been adapted fromL
&inancial +anagement by 2harma and (upta
0usiness &inance by -eddy, 5ppannaihh and 2rivastava
&inancial +anagement by 9han and Main
+anagement 5ccounting by 0.2. -aman and
&inancial 5ccounting by -. 8arayanaswamy.
#14 RESEARC+ INSTRU/ENT
1. Common si*e balance sheet.
/. Common,si*e income statement.
3. Trend analysis.
6. -atio analysis.
a. Ii$uidity ratio.
b. 2olvency ratio.
c. (eneral profitability ratio
d. Turn over ratio.
e. 'ver all profitability ratio.
C0a<ter 41 ANAL%SIS AN! INTERPRETATION OF !ATA
411 FINANCIAL STATE/ENTS OF T+E CO/PAN%
Balan2e 50eet o4 t0e 2o7<an> 4or la5t 4o3r >ear5
Parti23lar5 A5 on #1
5t

7ar20 ('
A5 on #1
5t

7ar20 (4
A5 on #1
5t

7ar20 (#
A5 on #1
5t

7ar20 (2
. Share Capital
5uthori*ed
6.==.=== 1$uity shares of
rs.1=== each
!ssued, subscribed and paid
up
3.16.7== e$uity shares of
-s.1=== each.
21 Re5erBe an6 53r<l35
#1loan 43n65
Unsecured loans
TOTAL
4. A<<li2ation o4 43n6
4i?e6 a55et5
aB (ross block
Iess depreciation
Net block
INVESTMENT
Current assets, loans and
advances
Sto2k in tra6e
S3n6r> 6ebtor5
Ca50 an6 bank balan2e
Loan5 an6 a6Ban2e5
Iess4 current liabilities and
provision
C3rrent liabilitie5
Provisions
4E((E((E(((
31,67,==,===
:C,76,<16
63,=1,;3<
3/,<6,7C,77/
1,/1,=/,6<1
C1,<<,33:

7:,16,16/
1==
/=,C/,CC,6=:
6,73,6/,/C7
C,7/,C=,;:7
/,C/,:6,3<=
3,63,1C,<6:
1,C7,/1,73:
61,==,===
/,=C,/1,73:
3/,/7,6/,31=
4(E((E((E(((
31,67,==,===
1,/3,==,===
6=,:7,===
33,=:,36,3;=

1,1:,6=,<:7
7C,7;,C=:
C/,<3,/<C
1==
1,61,;<,==1
C,:;,17,C:=
13,77,1:,3C;
/,C/,<6,<::
36,7C,:;,:7;
1,C:,6C,:;3
61,==,===
/,1=,6C,:;3
3/,6C,7=,:<6
4(E((E((E(((
31,67,==,===
1,=7,1<,7C3
6=,:7,===
3/,:1,13,7C3
:/,:7,16/
71,67,3/<
61,6:,<16
1==
:,:C,3;,7;C
<,;C,1C,36C
13,;;,CC,;6C
1,<6,C:,/:C
36,36,<:,:C6
1,C1,;C,317
/3,7=,===
1,<7,/C,317
3/,6:,C3,C6:
4(E((E((E(((
31,67,==,===
<;,=7,C61
6=,:7,===
3/,;3,==,C61
<:,1;,<=<
6;,=6,1C:
6/,13,C3:
1==
6,C7,;:,/3<
<,//,;7,7//
1:,:7,=:,=<6
1,63,/=,13<
36,/C,<3,:</
1,67,l:;, =<=
7=,==,===
1,:7,:;,=<=
3/,3=,<C,:=/
TOTAL #2E&4E'"E''2 ##E(.E#4E#$( #2E.1E1#E'"# #2E$#E((E"41
PROFIT AN! LOSS ACCOUNT OF T+E CO/PAN%
Particulars
A5 on #1
5t

7ar20 ('
A5 on #1
5t
7ar20
(4
A5 on #1
5t
7ar20
(#
A5 on #1
5t
7ar20
(2
INCOME
Sales
'ther income
TOTAL
EXPENDITURE
Cst ! sales
A"#i$istrati%e
e&'e$ses
2elling, )istKn > 'ther
e.penses
&inance charges
)epreciation
Provision for bad debts
)onation
TOTAL
Profit before ta.
TOTAL
Profit before ta.
98: Provision for ta.
Pr!it a!ter ta&
I$c#e ta& ! earl(
(ear
TOTAL
Profit as per balance sheet
3=,;=,;3,;/C
1,:1,3:,<;=
#2E"2E1#E'."
/:,=7,1<,;:C
3,7:,<:,;=C
11,/C,==1
77/
;,1;,7/;
7,67,7;=
,,,
#2E&&E.&E1'2
A,B /C,<6,77C
##E1'E&2E$(&
A,B /C,<6,77C
,,,
A,B /C,<6,77C
,,,
98: 2"E&4E''"
1,/3,3:,3;=
31,<1,CC,77:
/,==,==,31/
##E&1E""E&$1
/:,<1,:6,1/;
3,/7,6;,71;
<,:3,=6<
11,=C7
;,=C,376
17,/6,C31
1=,==,===
##E4&E$"E$42
3/,:=,1/:
##E&1E""E&$1
3/,:=,1/:
1;,7=,===
17,6=,1/:
/,<=,C;<
1&E2(E&($
1,=7,1<,7C3
/;,77,;C,37<
/,61,1<,6/;
2.E."E.4E$&'
/C,C7,:;,7;6
3,=<,66,:C3
:,6/,/37
/<,;;/
6,61,17:
71,=1,::<
6,==,===
2.E&#E'"E$(1
13,3<,=<6
2.E."E.4E$&'
13,3<,=<6
/,==,===
11,3<,=<6
C,;6,<3<
1&E12E.22
<;,=7,C61
61,1;,</,;3:
/,;6,/;,167
4#E.2E(.E&&4
3:,=1,73,C;C
3,1<,37,7/;
C,:<,<C/
61,31,/=1
6,C<,C1/
6=,16,31;
,,,
4#E1#E(2E2(1
;:,=;,C<3
4#E.2E(.E&&4
;:,=;,C<3
1;,7=,===
C1,7;,C<3
,,,
"1E'$E"&#
/7,6;,:7<
PROFIT
TRANSFERRE! TO
BALANCE S+EET ."E'4E&14 1E2#E#.E#$( 1E('E1&E'"# &$E('E"41
S20e63le5 4or7ing <art o4 t0e balan2e 50eet 4or 4o3r >ear5
S201
No1
PARTICULARS AS AT #18(#8
2((2
RS1
AS AT #18(#8
2((#
RS1
AS AT #18(#8
2((4
RS1
AS AT #18#8
2(('
RS1
1.=1 S+ARE CAPITAL
5uthori*ed4
!ssued, subscribed > paid up
4(E((E((E(((
#1E4'E((E(((
4(E((E((E(((
#1E4'E((E(((
4(E((E((E(((
#1E4'E((E(((
4(E((E((E(((
#1E4'E((E(((
1.=/ RESER,ES = SURPLUS
5s per profit > loss 5GC
&$E('E"41 1E('E1&E'"# 1E2#E#.E#$( .&E'4E&14
1.=3
La$ !u$"s
Unsecured loans
!nterest accrued and due To
govtGP2&5
4(E.'E((( 4(E.'E((( 4(E.'E((( 4#E(1E$#&
1.=6
FIXED ASSETS
I58)
&U-8!TU-1 > &!PTU-12
P5-T!T!'8 > &!TT!8(2
PI58) > +5C!81-Q
@1C!CI1
'&&!C1 1RU!P+18T2
TOTAL
16,==,=6=
C,;=,=<6
1,3:,=1:
6,3<,63:
<,:;,/C:
C,C<,;<<
42E1#E"#.
17,:;,63=
7,<;,/=:
1,=<,/3;
6,/1,:==
;,17,/C7
;,1:,;;3
41E4.E&14
17,:;,63=
7,6;,/<6
1,<3,;1=
6,13,;1:
/=,;C,;<<
16,C6,377
"2E&#E2&"
1;,1/,::=
3,76,73=
1,71,=;=
6,:/,:=C
1<,C;,3C6
13,37,/</
'.E14E142
1.=7 IN,EST/ENT AT COST
Un$uotedGnon,trade one fully
paid up ordinary share of
rs.1==G, in 9arnataka state co,
op. ape. bank ltd.,
Bangalore
CURRENT ASSETSE
LOANS = A!,ANCES
CURRENT ASSETS 1== 1== 1== 1==
1.=C STOCK IN TRA!E
S5s valued and certified by
the mgtT
2ilk yarn
TOTAL
4E"'E$.E2#& .E."E#$E'$" 11E41E$&E((1 2(E"2E""E4(.
1.=; SUN!R% !EBTORS
)ebts outstanding for a
period e.ceeding si. months
'ther debts
Ttal
Iess4 provision for doubtful
debts
Ttal
'ut of the above
aB )ebts considered
good and in respect
of which the
company is fully
secured
1. 0y deposit of title
deedsG&)-
/. 0y bank guarantee
bB )ebts considered
good for which the
company holds no
security other than
debtorsK personal
security
cB )ebts considered
doubtful and
provided for
TOTAL
3,7=,3<,=C=
7,/;,:C,;;1
&E$&E#4E&#1
77,7:,3=:
&E22E$'E'2
6,3<,C<,;//
1,6=,=1,<:=
/,66,=6,:1=
77,7:,3=:
&E$&E#4E&#1
3,CC,3:,6=1
C,C1,3<,/7/
.E&2E$$E"'#
1,=C,C1,3=;
&E$"E1"E#4"
6,/;,=6,C==
1,=7,7/,/=<
3,63,7:,73:
1,=C,C1,3=;
.E&2E$$E"'$
3,<7,37,;:1
6,33,C7,<3;
&E1.E(1E"2&
1,/1,<7,:3<
"E.$E1'E".(
3,/7,::,<1=
::,CC,:3=
/,;1,6<,:7=
1,/1,<7,:3<
&E1.E(1E"2&
3,37,;=,;6<
/,/6,/:,<67
'E"(E((E'.#
1,=C,7<,3/<
4E'#E42E2"'
/,;<,/=,/;7
1,=C,3/,17;
C<,<:,<33
1,=C,7<,3/<
'E"(E((E'.#
1.=< Ca50 = bank balan2e
aB Cash, ))s, stamps
and hundi papers on
hand
bB Che$ues on hand
cB -emittance in transit
dB #ith scheduled banks
1.cash credit account
/.collection accounts
3.current account
6.fi.ed deposit account
eB 0alance with
dist.treasury
TOTAL
1/,;=,716

16,;C,<<:
3,:7,===
6,7/,<=,:7/
11,:C,<C7
:,:C,:/;
16,<<,;:,:;3
11,:C6
1.E.'E(.E(&4
1<,<6,/6;
16,</,/C;
:,<=,===
1,7/,<<,6==
6=,C/,C<<
C,:3,<7C
11,33,C/,61:
1/,<C:
1#E$$E""E$4"
13,17,=<3
<,76,;/C
16,6:,===
3,:6,:6,C6/
;1,1/,716
:,13,<=7
<,63,C7,:3:
13,C7<
1#E''E1.E#"$
C,:C,1:3
1=,66,;<C
1;,=6,1/7
1,=1,<;,:<7
6;,;6,1=3
/7,:C,3:=
6,6/,6/,61<
16,;:7
"E'2E"(E$.'
1.=: LOANS AN! A!,ANCES
aB !nterest accrued on
fi.ed deposit
bB 2taff advance
cB !nterest on staff
1/,7C,<<3
:,:;,7:3
:,/1,=1<
17,7=,/3/
6C,7:,/3=
1C,1/,7:/
;,;/,6:1
1<,;/,7;6
advances,vechicle,
accured but not due
dB 5dvance recoverable
in cash or in kind or for
value to be received.
AUn secured considered
goodB
1.other advances > prepaid
e.penses
/. 5dvance income ta. >
T.).2
TOTAL
:C,=//
6C,1C,677
;3,73,1<7
1E4#E2(E1#&
/,3;,6;:
7=,:=,C;;
1=,=C,C:,<:=
1E&4E".E2."
3,:C,://
71,7:,=77
1,66,7;,1==
2E"2E&4E&..
7,71,:73
6C,/<,:C6
1,<6,C<,3:<
2E"2E.4E#&(
1.1=
Current liabilities >
provisions
Current liabilities
aB 2undry creditors
bB Trade advances
cB 2ecurity deposits
dB 'ther liabilities
TOTAL
1,=;,3=/
6,1=,7<:
7,17,=:C
1,37,C6,=:3
1E4'E.$E(&(
1,=<,C:7
7,3<,73<
6,=3,3/;
1,71,/7,<67
1E"1E$"E#1'
:1,617
/,:C,:73
/,37,;3/
1,C3,//,<;3
1E".E4"E.$#
11,7<,66=
/,CC,:::
1,77,7/C
1,6:,6=,7;6
1E"'E21E'#.
1.11
PROVISIONS
Provision for income ta.
'pening balance
Iess4 ad%ustment related to
previous years,net
Total
5dd4 provision for the year
TOTAL
3/,7=,===
,,
#2E'(E(((
1;,7=,===
'(E((E(((
7=,==,===
/<,7=,===
21E'(E(((
/,==,===
2#E'(E(((
/3,7=,===
,,
2#E'(E(((
1;,7=,===
41E((E(((
61,==,===
,,
41E((E(((
,,
41E((E(((
Co7<aratiBe tren6 balan2e 50eet o4 Karnataka 5ilk 7arketing boar6 lt6
Parti23lar5 A5 at #18
(#82((2
R51
A5 at #18
(#82((#
R51
A5 at #18(#8
2((4
R51
A5 at #18(#8
2(('
R51
Tren6 <er2entage ba5e >ear
2((1
8888888888888888888888888888888888888
2((2 2((# 2((4 2(('
So3r2e5 o4 43n65
2hare capital
-eserves and surplus
La$s a$" !u$"s
Unsecured loans
3167=====
<;=7C61

6=:7===
3167=====
1=71<7C3
6=:7===
3167=====
1/33:3;=
6=:7===
3167=====
:C76<16
63=1;3<
1((
1((
1((
1==.=
1/=.<
1==.=
1==.=
161.;
1==.1
1==.=
11=.:
1=7.=
TOTAL
3/;3==C61 3/:1137C3 33=:363;= 3/<67C77/ 1(( 1==.7 1=1.1 1==.3
A<<li2ation o4 43n65
4i?e6 a55et5
(ross block Sat costT
Iess4 depreciation
<:1;<=<
6;=61C:
:/:716/
71673/<
11:6=<:7
7C7;C=:
1/1=/6<1
C1<<33:
1((
1((
1=6./3
1=:.3;
133.:
1/=./
137.;
131.7
8et block 6/133C3: 616:<16 C/<3/<C 7:1616/ 1(( :<.6< 16:.1 16=.3
I$%est#e$ts
1== 1== 1== 1== 1(( 1== 1== 1==
C3rrent a55et5E loan5
an6 a6Ban2e5
2tock in trade
2undry debtors
Cash and bank
balances
Ioans and advances
6C7;:/3<
<//;77//
1::7=:=<6
163/=13<
::C3;7;C
<;C1C36C
13;;CC;6C
1<6C:/:C
1161;<==1
C:;17C:=
13771:3C;
/C/<6<::
/=C/CC6=:
6736//C7
C7/C=;:7
/C/:63<=
1
1((
1((
1((
1((
/13.:=
1=C.:=
C:.=7
1/:.==
/67.1
<6.;3
C;.:/
1<3.7
66/.<
77.11
3/.;1
1<3.C
TOTAL
36/C<3:</ 3636<::C6 367C:;:7; 3631C3<6: 1(( 1==./3 1==.< 1==.1
Le55: 23rrent
liabilitie5 an6
<roBi5ion5
Current liabilities
Provisions
167:;=<=
7=======
1C1;C317
/37====
1C:6C:;3
61=====
1C7/173:
61=====
1((
1((
11=.<1
6;.==
11C.=
</.==
113.1
</.==
TOTAL
1:7:;=<= 1<7/C317 /1=6C:;3 /=C/173: 1(( :;.73 1=;.6 1=7./
8et current assets 3/3=<C:=/ 3/6:C3C6: 3/6C7=;<6 3//76/31= 1(( 1==.7< 1==.6 ::.<3
TOTAL 3/;3==C61 3/:1137C3 33=:363;= 3/<67C77/ 1(( 1==.77 1=1.1 1==.7

Co7<aratiBe tren6 in2o7e 5tate7ent o4 Karnataka Silk /arketing Boar6 lt61
Parti23lar5 A5 at #18(#8
2((2
R51
A5 at #18(#8
2((#
R51
A5 at #18(#8
2((4
R51
A5 at #18(#8
2(('
R51
Tren6 <er2entage ba5e >ear 2((1
8888888888888888888888888888888888888
2((2 2((# 2((4 2(('
INCO/E
2ales
'ther income
611;</;3:
/;6/;167
/;77;C37<
/611<6/;
31<1CC77:
/====31/
3=;=;3;/C
1:13:<;=
1((
1((
CC.:/
<;.:3
;;./C
;/.:/
;6.7;
C:.;<
TOTAL
63:/=:<<6 /::C:6;<7 33<1CC<;1 3/C/137:C 1(( C<./3 ;C.:: ;6./;
EXPENDITURE
Cost of sales
5dministrative e.penses
2elling and distribution,
and other e.penses
&inance charges
)epreciation
Provision for doubtful
debts
)onations
3:=173C;C
31<377/;

C:<<C/
6131/=;
6C<C1/
6=1631;
,
.
/CC7:;7;6
3=<66:C3
:6//37
/<;;/
66117:

71=1::<
6=====
/:<1:61/;
3/76;71;
<:3=6<
11=C7
;=C376

17/6C31
1======
/:7=1<;:C
37:<:;=C
11/C==1
77/
;1;7/;
7677;=
,,
1((
1((
1((
1((
1((
1((
1((
C<.33
:C.<<
136.<7
=.C:
:6.16
1/;.=:
,
;C.63
1=/./3
1/;.;<
=./C
17=.;3
3;.:;
,
;7.C1
113.=6
1C1.11
,,
173.11
13.17
,,
TOTAL
6313=//=1 /:<37C;=1 336<;C;6/ 3/<<:<17/ 1(( C:.1; ;;.C6 ;C./7
Profit/loss for the year
before tax
;:=;C<3 133<=<6 3/:=1/: ,/C<677C 1(( 1C.:/ 61.C= ,33.:6
TOTAL 63:/=:<<6 /::C:6;<7 33<1CC<;1 3317</;=< 1(( C</./3 ;C:.:6 ;7.6:
Iess provision for
ta.ation 1;7==== /====== 1;7==== ,, 1(( 11.6/ 1==.= ,,
Profit for the year after
tax
C17;C<3 113<=<6
.
176=1/: ,/C<677C 1(( 1<.6< /7.=1 ,63.7:
!ncome ta. for earlier
years , C;6<3< /<=C;< ,, 1(( , , ,,
TOTAL C17;C<3 1<1/:// 1</=<=; ,/C<677C 1(( /:.66 /:.7C ,63.7:
Profit as per balance
sheet /76;:7< <;=7C61 1=71<7C3 1/33:3;= 1(( 361.C; 61/.63 66<./<
Pro4it tran54erre6 to
balan2e 50eet <;=7C61 1=71<7C3 1/33:3;= :C76<16 1(( 1/=.</ 161.;3 11=.:=
4121 ANAL%SIS AN! INTERPRETATION OF CO/PARATI,E
TREN! BALANCE S+EET
1. The percentage of share capital is stagnant for all the four years as it is
(overnment concern firm and it is stagnant to 1==F for all the four years.
/. The -eserves and 2urplus has improved in /==3 i.e. 161.;3 when comparing
it to the years /==/ > /==6 i.e. 1/=.< > 11=.:. This increase in the year
/==3 is due to entirely on account of undistributed profit transferred to it.
3. The loan funds are decreased sharply to 1=7F in /==3,/==6 after having
stagnant from past years. These funds have been used to finance and
purchase of silk and fi.ed assets and thus will result in better trading on
e$uity.
6. The percentage of fi.ed assets is 16=.3 in /==3,/==6 in comparison to :<.6<
in /==1,/==/ and 16:.11 in /==/,/==3. This shows that the management is
purchasing aggressive goods strategy, which places the long term financial
and profitability position as good.
7. Cash in hand and the balance in the current deposit accounts has decreased
from C:.=7 in /==1,/==/ and C;.:/ in /==/,/==3 to 3/.;1 in /==3,/==6
respectively.
C. The increase in total current assets, loans and advances is greater than the
increase in the total current liabilities this has resulted in a increase in the net
working capital which has improved the short term financial position of the
company.
;. To conclude, the current financial position, the li$uidity position and along
term financial position of the company are secure.
ANAL%SIS AN! INTERPRETATION TREN! INCO/E STATE/ENT
1. The sales have increased in the year /==3,/==6 i.e. ;;./C when it is
compared to year /==/,/==3 i.e. CC.:/ and in the year /==6,/==7 i.e.
;6./C.
/. The administrative e.penses have increased in the year /==6,/==7
A1C1.11B when it is compared to the years /==/,/==3 A136.<7B and /==3,
/==6 A1/;.;<B. This reflects proper utili*ation of all the resources of the
company and improved productivity.
3. The net profit before ta. has decreased from ;C:.:6 in the year /==3,
/==6 to ;7.6: in the year /==6,/==7 this shows that ht company has been
unable to over come the inefficiency that were present in /==3,/==6 where
in the decreased in the net profit before ta. was more than the increase in
the total sales.
6. The provision for ta.ation has decreased from 1== in /==/ to nil in
/==6,/==7 this provision has not increase to the same e.tent in the last
year also. 8et profit before ta. because the company has been unable to get
the profit, it cannot pay ta..
7. The net profit after ta. has also decreased sharply from ::.66 in /==/,
/==3 and /:.7C in /==3,/==6 to U63.7: in /==6,/==7.
This shows that the company is not in a progress right now hence it should be
improved. To conclude, the e.pansion of the company is very good. 0ut unable
to get the huge profit, hence the company should encourage the staff members
and motivate them. 5nd even the managerial part of the company should be taken
care of in prompt decisions for the company.
41#1 RATIO ANAL%SIS: !ATA ANAL%SIS AN!
INTERPRETATION
The data which is seen in the below tables has been collected from the
annual reports of 9arnataka 2ilk +arketing 0oard and with the help of +r. (upta
who is the C.5., who is the auditor of the company and has prepared the balance
sheet and profit and loss account since its inception.
LIUI!IT% RATIO
11 CURRENT RATIO
The current ratio or working capital ratio gives the relationship between the
current assets and the current liabilities. !t is a measure of general li$uidity
and most widely used to make the analysis of the short,term financial position
or li$uidity of the firm.
&'-+UI54 CU--18T 5221T2
CU--18T I!50!I!T!12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' 1;.6 1<.7 1C.6 1C.C
17,
1!,"
1#,
1#,#
1"
1#
17
1!
1$
rati
2000-
2001
2001-
2002
2002-
200%
200%-
200
(ears
&'rre(t ratio
&'rre(t ratio
!8T1-P-1T5T!'84
The standard current ratio re$uired is /41 however an observation of the
above graph reveals a very high current ratio. The deeper look at the
composition reveals that it is due to e.cessive stocking and maintaining
huge Vcash and bank balances.
5n interaction with the officials revealed that purchase of silk is done at
when prices are attractive and materials in stocked, resulting in high amount
of inventory.
21 UICK or ACI! TEST or LIUI! RATIO
The $uick or acid test ratio is a measure of li$uidity taking into consideration the
composition of current assets. !t is referred to as $uick ratio as it is a measure of
the companyKs ability to convert its current assets into cash $uickly in order to
meet its current liabilities without any diminution in value. Ruick assets are all
current assets e.cluding stock and prepaid e.penses.
&'-+UI54 RU!C9 or I!RU!) 5221T2
CU--18T I5!0!I!T!12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' 17.1 13.1 11 C.C3

!8T1-P-1T5T!'84
The $uick ratio as compared to the current ratio is still high this can be attributed
to large cash and bank balances, however it can be seen that it is on a decreasing
trend however compared to the standard li$uid ratio of 141, the company li$uidity
provision is e.cessive.
#1 ABSOLUTE LIUI! RATIO:
5lthough receivables, debtors and bills receivables are generally more li$uid than
inventories, there are yet some doubts as regarding their reali*ation into cash
immediately. ence the 5bsolute Ii$uid -atio is calculated along with the
current ratio and the acid test ratio as the most rigorous measure of the company
li$uidity position. !t places the ma.imum emphasis on the cash component of the
current assets.
&'-+UI54 C52 W +5-91T50I1 21CU-!T!12W0589
CU--18T I5!0!I!T!12
Q15-2 /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' 1=.1< ;.63 C.63 3.1C
1).1
1*.1
11
+.+*
0
2
#
!
10
12
1
1#
rati
2001-02 2002-0% 200%-0 200-0"
(ears
!8T1-P-1T5T!'8
The standard or ideal ratio is =4741. owever the company has a higher ratio.
This, again is due to high cash balance it can also be observed that the company
is trying to reduce the balance.
LON- TER/ SOL,ENC% or LE,ERA-E RATIO
Ieverage ratio can be defined as financial ratios, which throw light on the long,
term solvency of the company as reflected in its ability to assure long,term
creditors with regards to4 aB Periodic payments on the interest during the currency
of the loans
bB -epayment of principle on maturity or in pre,determined installments at their
due dates.
11 !EBT EUIT% RATIO
The debt e$uity ratio gives the relation between the borrowed funds and the
ownerKs fund and is the most popular measure if the long term solvency of the
10)1!
7)%
0)%
%)1#
0
2
#
!
10
12
rati
2001-02 2002-0% 200%-0 200-0"
(ears
firm. This ratio reflects the relative claims of the creditors and the shareholders
against the assets of the firm.
&'-+UI54 I'8( T1-+ )10T2
25-1 'I)1-2 1RU!TQ
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' =.=13 =.=13 =.=13 =.=13
,.,1*
,.,1* ,.,1*
,.,1*
0
0)002
0)00
0)00#
0)00!
0)01
0)012
0)01
rati
2001-02 2002-0% 200%-0 200-0"
(ears
!8T1-P-1T5T!'84 The lender prefers debt e$uity of /41. owever it seems
that the company has a very low debt proportion in the capital structure. This is
because the government holds a ma%or stake in companiesK shareholding. This
indicates that the company has ample debt capacity.
21 PROPRIETAR% or EUIT% RATIO:
This is the variant of the debt e$uity ratio and is also known as 8et #orth to
Total 5ssets -atio as is establishes the relationship between the shareholders
fund and the total assets of the company. This ratio indicates the e.tent to
which the assets of the company can be lost without affecting the interest of
the creditors. ence the higher the ratio, the better is the long,term solvency
position of the company.
&'-+UI54 25-1'I)1-2 &U8)2 . 1==
T'T5I 5221T2
The two main components of this ratio are shareholders funds and total assets.
2hareholders funds are 1$uity 2hare Capital, Preference 2hare Capital,
undistributed profits reserves and surpluses less any accumulated losses. Total
assets denote the total resources of the company.
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' :=F :=F <=F :=F
-,. -,.
/,.
-,.
7
7#
7!
!0
!2
!
!#
!!
$0
rati
2001-02 2002-0% 200%-0 200-0"
(ears
!8T1-P-1T5T!'8
The proportion ratio, which is a high as :=F, indicates that shareholders
money has been utili*e to finance the companiesK assets.
The ideal ratio is 7=F. 5s the actual ratio e.ceeds the ideal ratio, it indicates
the strong financial position of the company. &urther, the ratios for three,year
period show a constant in the proportion of the total assets financed by the
shareholders funds with each successive year. 1.cept for the year /==/,=3 the
ratio is decreased, but again for the year /==3,=6 the companies financial
position attained its old proportion i.e. :=F. The total assets financed by the
shareholders funds have increased compared to last year /==/,=3.
#1 FI)E! ASSETS to NET *ORT+ RATIO:
The ratio establishes the relationship between the fi.ed assets and the
shareholders funds i.e. share capital plus retained earning and reserves. !t
indicates the e.tend to which the shareholders funds are invested in the fi.ed
assets. !f the ratio is less than 1==F, it implies that the ownerKs funds are more
than the fi.ed assets and shareholders provide the part of the working capital.
&'-+UI54 &!P1) 5221T2 . 1==
25-1'I)1-2 &U8)2
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' 1.3F 1.3F /.=F 1.:F
!8T1-P-1T5T!'84
The satisfactory ratio is C;F. The company is not a manufacturing concern
and is basically into trading of silk and cocoons. This attributes to such a low
fi.ed assets G net worth ratio.
41 FI)E! ASSETS RATIO
This ratio is a variant to the fi.ed assets to net worth ratio and gives the
relationship between the fi.ed assets and the total long,term funds of the
company. The ratio indicates the e.tent to which the total fi.ed assets are
financed by the long,term funds. The fi.ed assets are taken net block i.e. after
depreciation.
&'-+UI54 &!P1) 5221T2
I'8( T1-+ &U8)2
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' 1./;F 1./7F 1.<:F 1.;<F
1)%
1)%
2 1)$
*
+,-
*
+,C
*
rati
t,.,/,0 1,.,2,0 ,.,30 4.,,0
(ears
!8T-1P-1T5T!'84
(enerally, a concern should finance its fi.ed assets entirely from long,term
funds and hence this ratio should be ma.imum 1==F. 5s this ratio is less than
1==F for all the four years, it indicates that the long,term funds have been
used to finance the current assets in addition to the fi.ed assets of the
company. This reflects a conservative working capital financing policy on the
part of the company, as it is desirable that some part of the current assets,
which constitute the core working capital, should be financed from long,term
funds.
'1 !EBT SER,ICE OR INTEREST CO,ERA-E RATIO
The debt service ratio is a measure if the debt servicing capacity of a
company. !t indicates the number of times interest is covered by the profits
1)27
1)2"
1)!$ 1)7!
0
0)"
1
1)"
2
rati
2001-02 2002-0% 200%-0 200-0"
(ears
available to pay the interest charges. (enerally, higher the ratio, the more safe are
the long term creditors because ever if the earnings of the company will still be in
a position to meet its commitments of fi.ed interest charges.
&'-+UI54 81T P-'&!T2 01&'-1 !8T1-12T 58) T5P12
&!P1) !8T1-12T C5-(12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' /.<7 6;.13 3== ,</
!8T1-P-1T5T!'84
There is no standard or ideal ratio. The company has a very low debt
component in the capital structure and further the company has reduced its debt
capital which is evident from the above ratios its has a better capability to service
debts.
ACTI,IT% or PERFOR/ANCE or TURNO,ER RATIOS
The prime activity of any business enterprise is the sale of its products and the
various operations that it undertakes and the various resources it utili*es serve to
2)!"
7)1%
%00
-!2
-100
-"0
0
"0
100
1"0
200
2"0
%00
rati
2001-02 2002-0% 200%-0 200-0"
(ears
make some contribution towards its sales. ence the e.tent of the contribution
made by the various activities and the resources used needs to be known in order
to determine their significance to the organi*ation. !t is for this purpose that the
activity or performance ratios are calculated as they indicate the e.tent of
effective utili*ation of the various assets of the concern. 5s these ratios are
calculated on the basis of turnover i.e.,net sales, they are also called turnover
ratios.
11 TOTAL ASSETS TURNO,ER RATIOS
Total assets turnover ratio is the ratio between the total assets and turnover or
sales. This ratio indicates efficiency or inefficiency in the use of the total assets or
resources of the concern. !t is thus a measure of the overall performance of the
business.
&'-+UI54 81T 25I12
T'T5I 5221T2

Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' AtimesB 1.1< =.< =.: =.:
1)1!
0)!
0)$
0)$
0
0)2
0)
0)#
0)!
1
1)2
rati
2001-02 2002-0% 200%-0 200-0"
(ears
!8T1-P-1T5T!'84 The ideal total assets turnover ratio is that the sales
should be at least two,time the value of the total assets. 5s the actual
ratio is less than the standard ratio for all the four years Under study, it
indicates that the assets of the company has been under utili*e and that
the proportion of productive assets and the total assets of the company is
low.
21 FI)E! ASSETS TURNO,ER RATIO
&i.ed assets turnover ratio gives the relationship between the fi.ed assets
and the turnover. &i.ed assets here mean the net fi.ed assets i.e. the fi.ed
assets less depreciation. Turnover refers to the total sales less any returns. This
ratio indicates as to what e.tent the fi.ed assets of a concern have contributed
to sales. Thus it indicates the e.tent of effective utili*ation of the fi.ed assets
of a concern.
&'-+UI54 8et 2ales
&i.ed assets
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-atio AtimesB :;.;; CC.6= 7=.C3 71.:/
$7)77
##)
"0)#%
"1)$2
0
20
0
#0
!0
100
rati
2001-02 2002-0% 200%-0 200-0"
(ears
! 8T1-P-1T5T!'84
The standard fi.ed assets turnover ratio is 7 and according to the Jrule of
the thumbK the fi.ed of the concern can be considered as over utili*e this is
largely because the company has higher current assets, which is a characteristics
of a non,manufacturing company.
3.CURRENT ASSETS TURNO,ER RATIO
Current asset turnover ratio is the proportion of the current assets to the net
sales of a concern. 5s this ratio gives the contribution of the current assets to the
turnover, a high current asserts turnover ratio is an indication of better utili*ation
of the current assets and a low ratio is indicative of inefficient utili*ation of the
current assets.
&'-+UI54 81T 25I12
CU--18T 5221T2
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!'2 1./= =.<= =.:/ =.<:
!8T1-P-1T5T!'84
There is no standard current assets turnover ratio. This ratio has remained
largely stable over past three years e.cept to a constant changes in /===,/==1
which is $uite high. owever as the ratio is not very high it indicates that the
current assets have not been utili*e effectively. This is largely because bank
balances constitute a substantial portion of the total current assets and do not give
many yields.
-ENERAL PROFITABILIT% RATIOS
The primary ob%ective of any business enterprise is to earn profits. !n the
words of Iord 9eynes Dprofit is the engine that drives the business enterpriseD. 5
business enterprise can discharge its obligation to the ratios are hence calculated
to measure the overall efficiency of the business. They are calculated either in
relation to sales or in relation to investment.
1)2
0)!
0)$2
0)!$
0
0)2
0)
0)#
0)!
1
1)2
rati
2001-02 2002-0% 200%-0 200-0"
(ears
1.-ROSS PROFIT RATIO

(ross profit ratio measures the relationship of gross profit to net sales and is
usually represented as a percentage. There s no standard norm for the gross profit
ratio and it may vary from business to business. owever the ratio should be
ade$uate to cover the pertaining e.penses like office, administration selling etc.
also to provide or fi.ed charges, dividends and accumulation of reserves.
The two basis components of this ratio are sales and cost of goods sold since
gross profit is simply the e.cess of net sales over cost of goods sold. 8et sales
refer to the total sales less any returns.
&'-+UI54 25I12,C'2T '& ('')2 2'I)
81T 25I12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' AFB 7./7F 7.63F C./;F 7.3:F
")2"
")% #)27
")%$
)#
)!
"
")2
")
")#
")!
#
#)2
#)
rati
2001-02 2002-0% 200%-0 200-0"
(ears
!8T1-P-1T5T!'84
This ratio has been mostly stable for all the four years under study thereby
impaling that the portion of stock to sales as remained mostly unchanged for the
period. &urther, this ratio is very high as the company is in the trading industry
where in the cost of manufacturing e.penses are nil in proportion to the total cost.
ence the operating profit ratio will give a better picture of the profitability
position os a company.
/.OPERATIN- RATIO OR OPERATIN- COST RATIO
'perating ratio establishes the relationship between operating cost and the
net sales. The ratio is calculated by dividing the operating costs with the net sales
and is usually represented as a percentage. 'perating cost refers to all the
e.penses incurred in operating or running of the business. They comprise the
cost of goods sold plus operating e.penses such as office, administration, selling
and distribution. Thus this ratio measures the cost of operations per rupee of
sales.
&'-+UI54 'P1-5T!8( C'2T
81T 25I12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' AFB =.:7 =.:7 =.:6 =.:7
!8T1-P-1T5T!'84
'perating ratio is very high as the company is not a manufacturing
industry and as such operating cost constitute a greater proportion of its total cost.
#1 OPERATIN- PROFIT RATIO:
'perating profit ratio establishes the relationship between the operating
profit and the net sales. The two basic elements of this ratio are operating
profit and sales. 'perating profit is the net profit from the business for which
the concern was started i.e. the main line of operations of the concern. !t is the
e.cess of net sales over the operating costs. 5lternatively, it is the net profit
plus all non,operation e.penses and minus all non,operating incomes.
&'-+UI54 'P1-5T!8( P-'&!T
81T 25I12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' /.:/ =.6: =.1= ,=.=1
0)$"
0)$"
0)$
0)$"
0)$%
0)$%#
0)$%!
0)$
0)$2
0)$
0)$#
0)$!
0)$"
rati
2001-02 2002-0% 200%-0 200-0"
(ears
!8T1-P-1T5T!'84
The operating profit ratio is on a decreasing trend, having declined
considerably in /==3,/==6. This reflects a need for an improvement in the
operating efficiency of the concern. !t also shows that the management has
been unable to control the operating inefficiencies. &urther, the decrease in
this ratio implies that the company has not sufficient funds available to meet
non,operating e.penses.
41 NET PROFIT RATIO
8et profit ratio gives the relationship between the net profits after ta.es
and the net sales. This ratio indicates the efficiency of the management in all the
activities of the concern and is thus a measure of the overall profitability of the
concern. This ratio also indicates the capacity of the concern to face adverse
economic condition such as increase competition, low demand, etc. higher the
ratio, the better is the profitability of the concern and greater its ability to achieve
a satisfactory return on its investment.
20$2
0)$
0)1
-0)01
-"00
0
"00
1000
1"00
2000
2"00
rati
2001-02 2002-0% 200%-0 200-0"
(ears
&'-+UI54 81T P-'&!T Aafter ta.B
81T 25I12
Qear /==1,=/ /==/,=3 /==3,=6 /==6,=7
-atioAFB 1.7 =.6 =.6 =.<
!8T1-P-1T5T!'84
The net profit ratio has increased in /==1,/==/ and has e.ceeded the drop
incurred in further two years, this is caused due to the increase in the operating
e.penses this shows the current and the future profitability position of the
concern is average.
1)"
0)
0)
0)!
0
0)2
0)
0)#
0)!
1
1)2
1)
1)#
rati
2001-02 2002-0% 200%-0 200-0"
(ears
-ENERAL PROFITABILIT% RATIOS
The primary ob%ective of any business enterprise is to earn profits. !n the
words of Iord 9eynes Dprofit is the engine that drives the business enterpriseD. 5
business enterprise can discharge its obligation to the ratios are hence calculated
to measure the overall efficiency of the business. They are calculated either in
relation to sales or in relation to investment.
11-ROSS PROFIT RATIO
(ross profit ratio measures the relationship of gross profit to net sales and is
usually represented as a percentage. There s no standard norm for the gross profit
ratio and it may vary from business to business. owever the ratio should be
ade$uate to cover the pertaining e.penses like office, administration selling etc.
also to provide or fi.ed charges, dividends and accumulation of reserves.
The two basis components of this ratio are sales and cost of goods sold since
gross profit is simply the e.cess of net sales over cost of goods sold. 8et sales
refer to the total sales less any returns.
&'-+UI54 25I12,C'2T '& ('')2 2'I)
81T 25I12
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!'AFB 7./7F 7.63F C./;F 7.3:F
!8T1-P-1T5T!'84
impaling that the portion of stock to sales as remained mostly unchanged for the
period. &urther, this ratio is very high as the company is in the trading industry
where in the cost of manufacturing e.penses is nil in proportion to the totals
cost. ence the operating profit ratio will give a better picture of the profitability
position of a company.
'1 OPERATIN- PROFIT RATIO:
'perating profit ratio establishes the relationship between the operating
profit and the net sales. The two basic elements of this ratio are operating profit
and sales. 'perating profit is the net profit from the business for which the
concern was started i.e. the main line of operations of the concern. !t is the e.cess
of net sales over the operating costs. 5lternatively, it is the net profit plus all non,
operation e.penses and minus all non,operating incomes.
")2"
")% #)27
")%$
)#
)!
"
")2
")
")#
")!
#
#)2
#)
rati
2001-02 2002-0% 200%-0 200-0"
(ears
&'-+UI54 'P1-5T!8( P-'&!T
81T 25I12
!8T1-P-1T5T!'84
this ratio implies that the company has not sufficient funds available to meet
non,operating e.penses.
"1 NET PROFIT RATIO
8et profit ratio gives the relationship between the net profits after ta.es
and the net sales. This ratio indicates the efficiency of the management in all the
activities of the concern and is thus a measure of the overall profitability of the
concern. This ratio also indicates the capacity of the concern to face adverse
Q15- /==1,=/ /==/,=3 /==3,=6 /==6,=7
-5T!' /.:/ =.6: =.1= ,=.=1
20$2
0)$
0)1
-0)01
-"00
0
"00
1000
1"00
2000
2"00
rati
2001-02 2002-0% 200%-0 200-0"
(ears
economic condition such as increase competition, low demand, etc. higher the
ratio, the better is the profitability of the concern and greater its ability to achieve
a satisfactory return on its investment.
&'-+UI54 81T P-'&!T Aafter ta.B
81T 25I12
!8T1-P-1T5T!'84
The net profit ratio has increased in /==1,/==/ and has e.ceeded the drop
incurred in further two years, this is caused due to the increase in the operating
e.penses this shows the current and the future profitability position of the
concern is average.
O,ERALL PROFITABILIT% RATIOS
The general profitability ratios as calculated previously provide an analysis of
the profitability of the enterprise in relation to its revenues or sales. owever, for
a complete picture of the profit position of the enterprise, the profits also need to
Qear /==1,=/ /==/,=3 /==3,=6 /==6,=7
-atioAFB 1.7 =.16 =.7 ,<;.6=
1)" 0) 0)"
-!7)
-$0
-!0
-70
-#0
-"0
-0
-%0
-20
-10
0
10
Rati
2001-02 2002-0% 200%-0 200-0"
0ears
be considered in light of the capital invested. ence the overall profitability or
efficiency of the business by considering the profits in relation to the investments
made in the business.
11 RETURN ON S+ARE+OL!ERS IN,EST/ENTS
This ratio, popularly known as return on investment A-'!B or 81T #'-T -5T!'
shows the relationship between the net profits after ta.es and the shareholders fund. The
ratio reveals how profitably the company has utili*ed the owner funds. 8et profits are
visuali*ed from the viewpoint of the ownerKs i.e. shareholders. Thus the net profits are
arrived at after deducting interest on long,term borrowing and income ta.. The
shareholders funds include e$uity share capital W preference share capital W reserve and
surplus , any accumulated losses.
&'-+UI54 net profit Aafter interest > ta.esB
2hareholders funds
Qear /==1,=/ /==/,=3 /==3,=6 /==6,=7
-atioAFB 1.;; =.3/ =.66 =.63
1)77
0)%2
0) 0)%
0
0)2
0)
0)#
0)!
1
1)2
1)
1)#
1)!
Rati
2001-02 2002-0% 200%-0 200-0"
0ears
!8T1-P-1T5T!'84
The company earnings are very low as compared to the total assets that it
holds. 1.cept for the /==1,/==/ the return on investment is less than 1F but
for the year /==3,/==6 it is stable, which needs to be worked on.
4141 CONCLUSIONS FRO/ T+E ANAL%SIS
FINANCIAL STATE/ENTS ANAL%SIS OF KARNATAKA SILK
/ARKETIN- BOAR!
The data collected was analy*ed using financial ratios and has been
presented in the form of graphs and tables and interpreted accordingly.
The $uick ratio as compared to the current ratio is still high this can be
attributed to large cash and bank balances, however it can be seen that it is
on a decreasing trend however compared to the standard li$uid ratio of 141,
the company li$uidity provision is e.cessive.
The standard or ideal ratio is =4741. owever the company has a higher
ratio. This, again is due to high cash balance it can also be observed that
the company is trying to reduce the balance.
The lender prefers debt e$uity of /41. owever itKs seemed that the
company has a very low debt proportion in the capital structure. This is
because the government holds a ma%or stake in companiesK shareholding.
This indicates that the company has ample debt capacity.
funds and hence this ratio should be ma.imum 1==F. 5s this ratio is less
than 1==F for all the four years, it indicates that the long,term funds have
been used to finance the current assets in addition to the fi.ed assets of the
company. This reflects a conservative working capital financing policy on
the part of the company, as it is desirable that some part of the current
assets, which constitute the core working capital, should be financed from
long,term funds.
C0a<ter '1 CONCLUSIONS = RECO//EN!ATIONS
'111SU//AR% OF FIN!IN-S
FINANCIAL STATE/ENTS ANAL%SIS OF KARNATAKA SILK
/ARKETIN- BOAR!
The data collected was analy*ed using financial ratios and has been
presented in the form of graphs and tables and interpreted accordingly.
The summary of findings have been given below based on the
interpretations4
The $uick ratio as compared to the current ratio is still high this can be
attributed to large cash and bank balances, however it can be seen that it is
on a decreasing trend however compared to the standard li$uid ratio of 141,
the company li$uidity provision is e.cessive.
The standard or ideal ratio is =4741. owever the company has a higher
ratio. This, again is due to high cash balance it can also be observed that
the company is trying to reduce the balance.
The lender prefers debt e$uity of /41. owever itKs seemed that the
company has a very low debt proportion in the capital structure. This is
because the government holds a ma%or stake in companiesK shareholding.
This indicates that the company has ample debt capacity.
funds and hence this ratio should be ma.imum 1==F. 5s this ratio is less
than 1==F for all the four years, it indicates that the long,term funds have
been used to finance the current assets in addition to the fi.ed assets of the
company. This reflects a conservative working capital financing policy on
the part of the company, as it is desirable that some part of the current
assets, which constitute the core working capital, should be financed from
long,term funds.
The ideal total assets turnover ratio is that the sales should be at least two,
time the value of the total assets. 5s the actual ratio is less than the
standard ratio for all the four years Under study, it indicates that the assets
of the company has been under utili*e and that the proportion of productive
assets and the total assets of the company is low.
There is no standard current assets turnover ratio. This ratio has remained
largely stable over past three years e.cept to a constant changes in /==1,
/==/ which is $uite high. owever as the ratio is not very high it indicates
that the current assets have not been utili*e effectively. This is largely
because bank balances constitute a substantial portion of the total current
assets and do not give many yields.
impaling that the portion of stock to sales as remained mostly unchanged
for the period. &urther, this ratio is very high as the company is in the
trading industry where in the cost of manufacturing e.penses are nil in
proportion to the total cost. ence the operating profit ratio will give a
better picture of the profitability position of a company.
'perating ratio is very high as the company is not a manufacturing
industry and as such operating cost constitute a greater proportion of its
total cost.
this ratio implies that the company has not sufficient funds available to
meet non,operating e.penses.
The net profit ratio has increased in /==/,/==3 and has e.ceeded the drop
incurred in further two years, this is caused due to the increase in the
operating e.penses this shows the current and the future profitability
position of the concern is average.
impaling that the portion of stock to sales as remained mostly unchanged
for the period. &urther, this ratio is very high as the company is in the
trading industry where in the cost of manufacturing e.penses is nil in
proportion to the totals cost. ence the operating profit ratio will give a
better picture of the profitability position of a company.
this ratio implies that the company has not sufficient funds available to
meet non,operating e.penses.
The net profit ratio has increased in /==/,/==3 and has e.ceeded the drop
incurred in further two years, this is caused due to the increase in the
operating e.penses this shows the current and the future profitability
position of the concern is average.
The company earnings are very low as compared to the total assets that it
holds. 1.cept for the /==/,/==3 the return on investment is less than 1F
but for the year /==/,/==3 it is stable, which needs to be worked on.
'121 RECO//EN!ATIONS
'ver stocking to drive benefits of purchasing at lower prices should be
more carefully evaluated keeping into consideration the cost of holding
inventory and locked up capital.
@endorKs relations need to be strengthened to avoid overstocking.
The reducing cash ratio indicates that the company has reali*ed that
e.cessive cash balances are not actually recovered this should be
encouraged further.
The return for the government stake in the company can be increased if
the debt capital is introduce to a larger e.tent to derive the benefit of
leverage.
The return on total assets as well as total capital employed in e.ternally
!2 low which the company has to look into.
The company can encourage arrival of silk at silk e.change.
The company can try to arrival of silk from foreign countries.
The company can start its own manufacturing unit, which will result in
good profit and employment opportunities.
The company can try to enter international market, which results good
rate of revenue.
The e.cessive li$uidity can be reduced.
The turnover ratio indicates a very low turnover of the current assets. The
company being a trading concern should more so have a higher turnover.
1fficient inventory management combined with better purchasing and
marketing policies would unable achieving a higher activity level.
BIBLIO-RAP+%
Book Title: 0usiness -esearch +ethods
A3t0or: )onald.2.Cooper > Pamela.2.
Book Title: &inancial +anagement
A3t0or: 2harma and (upta.
Book Title: 0usiness &inance
A3t0or: -eddy, 5ppannaihh and 2rivastava
Book Title: &inancial +anagement
A3t0or: 9han and Main
Book Title: &inancial 5ccounting
A3t0or: -. 8arayanaswamy.
Book Title: +anagement 5ccounting
A3t0or: 0.2. -aman

List of Tables: A STUDY AN Analysis of Karnataka Silk Marketing Board "

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

List of Tables: A STUDY AN Analysis of Karnataka Silk Marketing Board "

Uploaded by

Copyright:

Available Formats

A STUDY AN Analysis of Karnataka Silk Marketing Board

You might also like