Professional Documents
Culture Documents
CONTENTS
LIST OF TABLES
2
LIST OF CHARTS
CHAPTE PAGE NO
R TITLE
NO
3.2.1 Current Ratio
3.2.2 Liquid Ratio
3.2.3 Absolute Liquidity Ratio
3.2.4 Fixed Assets Ratio
3.2.5 Net Working Capital Ratio
3.3.6 Debt Equity Ratio
3.3.7 Proprietary Ratio
3
ABSTRACT
DEFINITION
A branch of economics concerned with resource allocation as well as
resource management, acquisition and investment. Simply, finance deals with matters
related to money and the markets. To raise money through the issuance and sale of debt
and/or equity.
term credits for the firm. As such it deals with the situation that required selection of
specific assets as well as the problem of size and growth of an enterprise.
Vendors who extend credit to a business require financial statements to assess the
creditworthiness of the business.
Media and the general public are also interested in financial statements for a variety of
reasons.
or weakness. One or even several ratios might be misleading, but when combined with
other knowledge of a company's management and economic circumstances, ratio analysis
can tell much about a corporation. Second, there is no single correct value for a ratio. The
observation that the value of a particular ratio is too high, too low, or just right depends
on the perspective of the analyst and on the company's competitive strategy. Third, a
financial ratio is meaningful only when it is compared with some standard, such as an
industry trend, ratio trend, a ratio trend for the specific company being analyzed, or a
stated management objective. Financial ratios can also give mixed signals about a
company's financial health, and can vary significantly among companies, industries, and
over time. Other factors should also be considered such as a company's products,
management, competitors, and vision for the future.
INCOME STATEMENT
The income COMPARATIVE statement discloses net profit and net loss on
account of operation. Comparative income statement will show the absolute figures for
two or more periods. The absolute change from one to another period if desired the
change terms of percentage.
the balance sheet the total of assets or liabilities is taken as 100 and all the figures are
expressed as percentage of this total.
TREND PERCENTAGES
Trend percentages are immensely helpful in making a comparative study of
the financial statement for several years. Under this method trend percentage are
calculated for each item of the financial statement taking the figure of base year as
100.The trend percentages show the relationship of each item with its preceding year’s
percentages. The trend ratio may be compared with industry ratios in order to know the
strong and weak points.
The Indian industry is one of the largest in the World with a massive and textiles
manufacturing base. Textile industry in India is the second largest employment generator
after agriculture and it accounts for more than 30% of the total export Today textile
sector accounts for nearly 14% of the total industry output. Indian fabric is in demand
with its ethnic colored and many textures. The textile sector accounts about 30% in the
total exports. India earns around 27% of the foreign exchange from exports of textiles.
SEGMENTS
In the next decade India’s textile Industry is likely to do much better. As the
domestic fiber consumption is low, there is low there is potential for increasing domestic
consumption in tandem with the projected GDP growth of 6-8 percent and this would
lead to the growth of the 6-7 percent per annum.
India can also capitalize on opportunities in the export market. The industry is
to generate 12mn new jobs in various sectors
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When the sound of knowledge of the promoters, the company could establish.
Following the de licensing of textile sector during 1998, competition among cotton yarns
spinning mills grew rapidly.
The constitution of the company in the beginning was a partnership, which was
later a limited company .The founder chairman Mr.Thangavelu and Managing Director of
the company and his two sons Mr.T.Surendran and Mr.T.Senthilnathan are the board of
the directors. They do not have any other business interested and they toiled since its
inception to bring the company to its present level of medium Enterprise from the level of
small scale Industry.
Mr.P.Thangavelu,
Chairman and Managing Director,
Thangavelu Textiles Mills Ltd,
Salem.
Mr.T.Senthilnathan
Director, Thangavelu Textiles Mills Ltd,
Salem.
Mr.T.Surendran,
Additional Managing Director,
Thangavelu Textiles Mills Ltd,
Salem.
PLANT LOCATION
FINANCIAL INSTITUTIONS
Production Departments
Marketing Departments
Finance Departments
Software Departments
Electrical Departments
Purchase Departments
Quality Departments
PROCESSING OPERATION
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7. To study the liquidity position of the concern by considering the position of current
liabilities.
8. To study the trend percentage it’s helpful in making a comparative study of the
financial statement of several years.
1. There is a limitation related to the analysis of the result, as researcher doesn’t have
modern software available to analyze the findings so the result is based on manual work.
2. The availability of funds is the one of the limitations while doing this research as a
student it is difficult for the researcher to manage the funds.
3. The time period for the research is very short because it is difficult to conduct a full
time research for a student.
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4. The financial data cannot be estimated accurate for the future period.
5. The analysis and interpretation of the concern is based only past performance.
RESEARCH INSTRUMENT
FINANCIAL TOOLS
Ratio analysis
REVIEW OF LITERATURE:
Ratios are a valuable analytical tool when used as part of a thorough
financial analysis. They can show the standing of a particular company, within a
particular industry. However, ratios alone can sometimes be misleading. Ratios are just
one piece of the financial jigsaw puzzle that makes up a complete analysis. (Leslie
Rogers, 1997)
Financial ratios are widely used to develop insights into the financial
performance of companies’ by both the evaluators’ and researchers’. The firm involves
many interested parties, like the owners, management, personnel, customers, suppliers,
competitors, regulatory agencies, and academics, each having their views in applying
financial statement analysis in their evaluations. Evaluators’ use financial ratios, for
instance, to forecast the future success of companies, while the researchers' main interest
has been to develop models exploiting these ratios. Many distinct areas of research
involving financial ratios can be differentiated. (Barnes, 1986) Financial ratios can be
divided into several, sometimes overlapping categories. . Trend analysis works best with
three to five years of ratios. The second type of ratio analysis, cross-sectional analysis,
compares the ratios of two or more companies in similar lines of business. One of the
most popular forms of cross-sectional analysis compares a company's ratios to industry
averages. These averages are developed by statistical services and trade associations and
are updated annually. (Ezzamel, Mar-Molinero and Beecher, 1987)
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Financial ratios can also give mixed signals about a company's financial health, and can
vary significantly among companies, industries, and over time. Other factors should also
be considered such as a company's products, management, competitors, and vision for the
future. (Fieldsend, Longford and McLeay, 1987) There are many different ratios and
models used today to analyze companies. The most common is the price earnings (P/E)
ratio. It is published daily with the transactions of the New York Stock Exchange,
American Stock Exchange, and NASDAQ. These quotations show not only the most
recent price but also the highest and lowest price paid for the stock during the previous
fifty-two weeks, the annual dividend, the dividend yield, the price/earnings ratio, the
day's trading volume, high and low prices for the day, the changes from the previous
day's closing price. The price to earnings (P/E) ratio is calculated by dividing the current
market price per share by current earnings per share. It represents a multiplier applied to
current earnings to determine the value of a share of the stock in the market. The price-
earnings ratio is influenced by the earnings and sales growth of the company, the risk (or
volatility in performance), the debt equity structure of the company, the dividend policy,
the quality of management, and a number of other factors. A company's P/E ratio should
be compared to those of other companies in the same industry. (Garcia-Ayuso, 1994)
20
The data and information that was gathered was interpreted and analyzed by
using different financial tools.
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CURRENT RATIO
Current ratio is the relationship between current assets and current liabilities.
Current assets
Current ratio = -----------------------
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Current liabilities
A Current ratio of 2:1 is considered ideal. That is for every rupee of current liabilities
there must be current assets of Rs.2. If the ratio is less than two it may be difficulties for
my film to pay current liabilities. If the ratio is more than two it is an indicator of idle
funds.
CURRENT RATIO
INTERPRETATION
From the above table the current ratio was increased from the year 2005. It
shows increase in current ratio.
CURRENT RATIO
LIQUID RATIO
Liquid ratio is also called acid test ratio because it is tee acid test of a concern’s
financial soundness. It is the relationship between liquid assets and liquid liabilities.
Liquid assets are assets which are easily converted into cash.
Liquid Assets
Liquid Ratio = -------------------------
Liquid Liabilities
LIQUID RATIO
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INTERPRETATION
The above table shows that the liquid ratio of the company. The standard
norm of the liquid ratio is 1:1. In the year 2009 was increased.
LIQUIDITY RATIO
This ratio is also called as “Cash ratio or Super Quick ratio”. This ratio is
calculated when liquidity is highly restricted in terms of cash and cash equivalents
Marketable securities
Cash ratio = Cash + ---------------------------
Current Liabilities
INTERPRETATION
The above table shows that the absolute liquidity ratio of the company. The
standard norm of the ratio is 9.51.Company was not satisfactory during the above study
period because the ratio was below the stand norms.
Fixed assets ratio is the relationship between fixed assets and capital employed.
Fixed assets
Fixed assets ratio = --------------------------
Capital employed.
INTERPRETATION
The fixed assets ratio for the year 2005 was 0.871%.It was decreased in 2006
with 0.823%.In the year 2007-2008 was increased with 0.39 to 0.961. So, the financial
manager should take action to raise the fixed assets ratio of the investment.
Net working capital shows current assets and current liabilities with capital
employed.
INTERPRETATION
The net working capital ratio for the year 2005 was 0.128. It was 0.176 in
2006, 0.191 in 2007, 0.132 in 2008 and 0.074 in 2008.
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INTERPRETATION
The above table shows that the debt equity ratio of the company. The standard
norm of the debt equity ratio is 2:1. Here the debt equity ratio of the company was not
Satisfactory.
PROPRIETARY RATIO
Total Assets = Fixed Assets + Investments + Current Assets + Loans and Advances
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PROPRIETARY RATIO
INTERPRETATION
The above table shows that the proprietary ratio of the company. From the
above table the proprietary ratio was showing a decreasing trend during the study period.
PROPERIETARY RATIO
INTERPRETATION:
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From the above table shows that the inflow of funds 2005-2006 it has been
decreased and out flow of funds also decreased.
FUND FLOW STATEMENT OF THE YEAR (2006-2007)
TABLE NO: 3.13
INTERPRETATION:
From the above table shows that the inflow of funds 2006-2007 it has been
decreased and out flow of funds increased in the year.
INTERPRETATION:
From the above table shows that the inflow of funds 2007-2008 it has been
decreased and outflow of funds increased in the year.
INTERPRETATION:
From the above table shows that the inflow of funds 2008-2009 it has been
increased and out flow of funds increased in the year.
Current Assets % % % % %
Inventory 57.48 5.91 1.80 4.03 4.95
Sundry Debtors 24.54 40.05 27.53 8.0 16.39
Cash and Bank 2.86 4.53 17.83 13.84 19.27
balance
Loans and 15.12 49.51 52.84 73.85 59.39
advance
Total Current 100 100 100 100 100
Assets
Current
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Liabilities
Current 100 100 97.49 93.82 78.02
Liabilities
Provision 0 0 2.51 6.18 21.98
Total Current 100 100 100 100 100
Liabilities
INTERPRETATION
From the above table the proprietary ratio was showing a decreasing trend
during the study period.
INTERPRETATION:
The table shows that a total Assets has been decreased by -7.57%. The total
liabilities and capital has been decreased by -26.19%.
INTERPRETATION:
The above table shows that a total asset has been increased to
3.77% and the total Liabilities and capital has been increased by 1.86%.
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INTERPRETATION:
The table shows that a total assets has been increased to 13.48 % and the
total liabilities and capital has been increased by 11.29
INTERPRETATION:
The above table a total asset has been increased to 34.93% and the total
liabilities and capital has been increased by 984.55%.
FINDINGS
From the analysis of the last five years of Thangavelu Textiles Mills Ltd., reveals that the
Followings finding:-
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1. From the above table the current ratio was increased from the year 2005. It
shows increase in current.
2. The above table shows that the liquid ratio of the company. The standard
norm of the liquid ratio is 1:1. In the year 2009 was increased.
3. The standard norm of the ratio is 9.51.Company was not satisfactory
during the above study period because the ratio was below the stand norms.
4. The fixed assets ratio for the year 2005 was 0.871%.It was decreased in
2006 with 0.823%.In the year 2007-2008 was increased with 0.39 to 0.961.
5. The net working capital ratio for the year 2005 was 0.128. It was 0.176 in
2006, 0.191in 2007, 0.132 in 2008 and 0.074 in 2008.
6. The standard norm of the debt equity ratio is 2:1. Here the debt equity
ratio of the company was not satisfactory.
7. From the above table the proprietary ratio was showing a decreasing trend
during the study period.
8. From the above table the proprietary ratio was showing a decreasing trend
during the study period.
9. The table shows that a total Assets has been decreased by -7.57%. The total
liabilities and capital has been decreased by -26.19%.
10. The above table shows that a total asset has been increased to 3.77% and
the total liabilities and capital has been increased by 1.86%.
11. The table shows that a total asset has been increased to 13.48 % and the
total liabilities and capital has been increased by 11.29.
12. The above table a total asset has been increased to 34.93% and the
total liabilities and capital has been increased by 984.55%.
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SUGGESTION
The company which maintains the ideal ratio is not good, in this company. The
ideal ratio is not maintained, from it’s we suggest that the company should either
decrease their liabilities or increase their assets.
The lower debt equity ratio, the higher degree of protections enjoyed by the
creditors so that the company has to control the both debt equity and debt assets ratio.
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The average assets cannot be reduced so that the company has to increase their
sales as like in the year 2005-2006. And the company should use their assets in the
effective manner to get more profit.
I) The Company has to maintain their debt equity as like in the last year (2008-2009).
III) The company has to use their working capital for their day today expenses.
CONCLUTION
The study undertake on the financial performance of the Working Capital and
Common Size statement of Current Assets and Current Liabilities for the year 2005-
2009. The analysis reveals that the short term solvency position is not good, but the long
term solvency position is satisfactory. So, the firm has healthy condition of finance for
long term. The study reveals that the company must maintain certain level of working
capital to increase the net profit as it is fluctuating every year.
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APPENDICES
s
Liabilities
Share Capital 01 44,38,000 44,38,000 44,38,000 44,38,000 44,38,000
Reserve and 3595,667 32,25,992 2748820 799344 5889182
Surplus
Secured Loans 02 2,36,42,61 2,13,46,00 17131581 - -
0 0
Current Liabilities 03 66,08,039 11225519 24360124 20305743 2291698
& Provision
Total Liabilities 4,24,4661 4,44,41,64 3,96,11,90 3,01,04,51 3,13,22,92 4,03,45,22
0 1 1 8 5 7
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Assets
Fixed assets 04 36840060 38278859 32084553 10934388 7960754
C.A. loans and 05 48904 304990 303268 243238 413918
advance
Sundry Debtors 06 632925 1010050 623811 2407837 321976
Loans and 07 1095234 1187543 5561355 2134850 3467646
advances
Cash and bank 08 471838 312976 2407837 1042052 4044315
balances
Profit and Loss 15446082 8290722 - - -
accounts
Total Assets 20 4,24,46610 4,44,41,64 3,96,11,90 3,01,04,51 3,13,22,92
1 1 8 5
BIBILOGRAPHY
JOURNALS
BOOKS
WEBSITES
www.indiachina.com.
www.business.mapsofindia.com.
www.fibre2fashion.com.
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