CHAPTER – I 1. INTRODUCTION AND DESIGN OF THE STUDY 1.1.

Introduction:
Sri Saravana Textiles (P) Ltd., with a two star Export House status and its towels division Sri Saravana Soft – X Towels, are ISO 9001 certified enterprises. They are leaders in the manufacture of a wide saravana of Textile Products, located in the cotton town, karur, Tamilnadu in the southern part of India. The company with over five decades in the Industry runs a self reliant and composite operation. Its operation spans Spinning, Weaving, Knitting, Yarn Dyeing, Width Processing and Sewing. Its products range from 100% cotton & Blended – Yarn , Bleached & Dyed – Yarn , Bleached & Dyed Terry Towels, Made – ups, Bathrobes, Beb & Table Linen, Non – Sterilized Operation Room Towels, Lap Sponges, to Blankets. It has an annual turnover of 1500 million rupees and a 3500 strong work force of skilled and dedicated employees maintaining uncompromising quality & efficiency while meeting ISO 9001 standards.

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Sri Saravana., with its highly modernized state-of-the-art equipment from Reiter and Schlafhorst produces high quality Ring Spun and Open End (Carded & Combed) Yarn in both 100% Cotton and Blends. With a Spinning Capacity of 100,000 Spindles and 384 Rotors it can produce 30 Tones/Day of Quality Yarn in counts ranging from 6’S to 100’S. Quality is monitored at various stages using modern testing equipment Like Ulster AFIS, Ulster HVI to ensure the manufacture of faultless yarn that meets International Standards. The company to meet its commitment to Quality is equipped with imported High Pressure Micro Processor Controlled Yarn Dyeing machines, RF – Dryers & Macbeth Colour Matching Systems to produce 3000 kgs/day of high quality Bleached & Dyed Yarn in both Vat & Reactive, in lot sizes ranging from 25 kgs to 200 kgs.

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COMPANY PROFILE: Board of directors: Shri R.N.Jagandeesan Shri K.Kaliraj Shri N.P.Manivannan Shri L.Kamalakkannan Shri C.T.Muthuraman Shri J.Ramanarayan Shri K.Amarnanth Shri S.S.Vanangamudi Shri R.Navaneethakrishan Bankers & Institutions: State Bank of India, Karur, The Karur Vysa Bank Ltd., Karur, UTI Bank Limited, Karur & Chennai, Canara Bank, Karur, IDBI Bank Ltd, Thirty & Chennai. Statutory Auditor: Shri S.Srinivaassaan B.sc., FCA., Chartered Accountant B – 9 IInd Floor, Seetha Apartment, 2A, Old Nathan Road, Thirty.
- Directors - Whole time Directors - Managing Director

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Cost Auditor: Shri K.Renganathan M.sc., FICWA, Saibaba colony Coimbatore – 641011. Registered Office: Sri Saravana Ginning & Oil Mills Premises, 87, Malaikodai Road, Thirty – 625 531. FACTORIES: Spinning A & B Units Soft – X Towels Spinning Yarn Dyeing Plant Bio Mass Captive Power Plant Weaving Plant Boothipuram Road, Thirty – 625 531. Wind Energy Plants Elathur Village, Tenkasi Taluk, Kallampulli, Poigai Village, Tenkasi Taluk.

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INTRODUCTION OF THE STUDY Financial statements are prepared primarily for decision-making. The statements are not ending in them with in this useful it is absence in decisionmaking context. The balance sheet may be described as financial cross section taken at certain intervals and the coming statement as a condensed history of the growth and delay between cross sections. Financial statements are very helpful in giving various indicators with the help of techniques popularly known as ratio-analysis and interpretation of financial statements. The utility of such statements is that a forecast may be made of the prospects of future earning ability to pay interest and debt maturities. (Both current & Long term) and probability of sound dividend policy. According to John N. Myer.” The financial statements provide a summary of accounts of a business enterprise. The balance sheet reflecting as Assets, Liabilities and Capital as on s certain date and the income statement showing the result of operation during a certain period.

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STATEMENT OF THE PROBLEM Finance is the view as a backbone to accelerating economic development of any country. In our present day, economic finance is the provision of money at the time when it is required. Presently a firm communicated financial information to the users through financial statements and reports. Being this present status, it quiets possible for company to improve its profitability as well as liquidity considerable without employing, further resources and just be stream lining the existing financial system and the financial information system. The basic problem faced by the financial manager of enterprises is to trade off between the conflicting but equally important goals of liquidity and profitability. Greater the liquid resources of firm lesser will be its profitability and vice versa. He has to maintain to profitability position, and liquidity position at such a level, which may ensure satisfactory earning to the enterprise without regarding its liquidity position So the main aim of the study is to analyze the financial position of the company over a period of time in terms of solvency, liquidity and profitability.

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NEED FOE THE STUDY The scope of study pertained to a financial performance of SRI SARAVANA TEXTILES [P] LTD, KARUR study is mainly making a comparison of six years of its operations and it aims to reveal the company standard in respect to Profitability, Liquidity and Effective use of it resources. The analysis and interpretation is essential to bring out the mystery behind the figures in financial statements interpretation will involve the comparison of different figures of different period.

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OBJECTIVES OF THE STUDY The study is based on the following objectives: To study the effectiveness of the financial position of the organization by means of Ratio Analysis. To evaluate the effectiveness of financial planning. To enable the management to predict the future requirements of resources. To analysis the various sources and uses of the company’s funds. To improve the financial performance of the company. To ascertain the earning capacity in future period. To measure the utilization of various assets during the period.

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RESEARCH METHODOLOGY According to Robert Ross “Research is essentially an investigation a recording and analysis of evidences”. The following methodology was adopted for the study. SOURCE OF DATA COLLECTION • Secondary Data The secondary data required for the study is collected from the balance sheet and the income statement published in the company’s annual report of the company. The analysis, the information flow, the report being generated from the manufacturing units and sales branches were utilized. • Tools used Several tools and techniques were used for the analysis and the interpretation of the financial statement of the company. They were, • Ratio Analysis, • Working Capital Analysis, • Time Serious Analysis. PERIOD OF STUDY The study period covers 5 years from 2005 to 2010 data for all these six years is collected from the annual report of the company.

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LIMITATIONS OF THE STUDY • The data used is secondary in nature. • The ratios used for the study suffers from the different opinion in the concepts this study. • The forecast of working capital suffers from the limitation period by the assumption. • The study covers the period between 2005 to 2010. The changes that took place before and after this period is not taken into consideration. • The study is based on the financial statements are also applicable to the study. • The financial statements do not reflect the changes in the purchasing power of the money. used for computation and all the limitation applicable to

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1.8. CHAPTER SCHEME:

The report of the study is presented in four chapters: CHAPTER 1 : CHAPTER 2 : CHAPTER 3 : CHAPTER 4 : Introduction and Design of the Study. Financial Management an Overview. Financial Statement Analysis and Interpretation. A Summary of Findings, Suggestions and Conclusion.

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CHAPTER – II FINANCIAL MANAGEMENT AN OVERVIEW INTRODUCTION: Finance is the study of money management, the acquiring of funds (cash) and the directing of these funds to meet particular objectives. A function comprised of activities involving planning and control by which an organization administers financial resources in order to market share, increase its profitability, and avoid insolvency in a manner consistent with statutory requirement and designed to maximize the organization’s rate of return on equity. Good financial management helps business to maximize returns while simultaneously minimizing risks. The primary goal of financial management is the maximization of stockholder wealth. Other goals should include maximization of sales, market share, growth rate of sales and market price of the firm’s stock. As important objective of this topic is to help you develop insights into the methods by which financial managers and researchers can find value for their efforts and/or constituents. This section provides some introductory material on the many facets of financial management. Institutional environments, financial planning, risk and return, capital budgeting and capital structure (including cost of capital) are just some of the topics discussed in the listed links.

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NATURE OF FINANCIAL MANAGEMENT: Sources, uses, cost, and control of funds in business enterprises. Internal management of working capital and income sources and cost of long-term funds; capital budgeting; financing of the growth and expansion of business enterprises; government regulation of the financial process. Role of banks and non-bank financial institutions in the financial system; asset choices of banks and non-bank financial institutions; problems in the management of financial institutions with emphasis on commercial banks. Analysis of financial problems facing businesses engaged in international activities. Financing foreign investment, financial control of foreign operations, and working capital management including foreign exchange positions using cases and readings. Key issues in financial management using both analytical and case study illustrations. Valuation of public and private companies; cost of capital estimation; investment complications, such as taxes, inflation, risk, project interdependencies, and financing-investment interactions; leasing; mergers; spin-offs and carve-outs. Modern tools for managing financial risk. Fixed income securities and interest rate risk, credit risk, foreign currency risk, and insurance. Emphasis on use of futures, forwards swaps, and option contracts.

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Analysis of problems in the financial management of commercial banks and other financial institutions. Loan and investment policies, liability management, capital policies, and other selected issues are discussed. OBJECTIVES OF FINANCIAL MANAGEMENT: It is useful to define the objectives of financial management before venturing to identify its functions. What are the goals that a financial manager should seek? A quick impulse will indicate that profit maximization is the first goal. Business enterprise aims at earning profit and hence it may be argued that profit maximization is the directing goal of the enterprise, which in turn is the responsibility of financial management. The finance manager makes available need-based funds at a competitive cost, and oversees its effective deployment. The commercial firm is thereby enabled a smooth and unhindered operations yielding optimum business results. Profit earning is the purpose of the business. Earning profit sustains its continued existence. The destination of financial management canters therefore towards the goal of earning profit or earning maximum profit. Profit maximization may benefit the shareholders, but the business thrives successfully only when different stakeholders are made happy with its policies and functions. They are the employees, the customers, and the credit institutions. Others to be taken care of are rating agencies, the stock exchanges, the Government etc.

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The business enterprise has also specific social obligations to the society at large. Profit maximization at the cost of social and ethical standards is s short sighted policy. The objective of profit maximization cannot be achieved if any one of the other stakeholders withdraws or even reduces the level of support. Similarly certain steps like periodical shutdown of the plant for maintenance are required in the interest of their better upkeep. Impetuous pursuit of profit maximization may turn a blind eye to the plant-upkeep consideration and overuse these facilities leading to their quicker decay and mal-functioning. Similarly a firm should not minimize expenditure on such items like product advertisement and publicity; vendor development; customer-care; employee training and development. Good public relations with influential stakeholders like bankers, suppliers, government officials; etc, are equally important to promote the all round progress of the firm. A better objective is to accept “wealth maximization” of the business enterprise as the goal of financial management, which is reflected in the earnings per share of the firm and the market price of its shares. If the shares of the firm are traded in stock exchange, a good performance of the firm results in the price at which the shares are traded.

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When the firm’s shares attract a good price, the owners or shareholders are better of, because the market value of their investment appreciates. According van Horne “Value of a firm is represented by the market price of the company’s stock…The market price of a price represents the focal judgment of all market participants, as to what the value of the particular firm is. It takes into account the present and prospective future earnings per share, the timing and risk of these earnings, the dividend policy of the firm and many other factors that bear on the market price of the stock. The market price serves as a performance index or report card of the firm’s progress. It indicates how well management is doing on behalf of the stakeholders. The modern thinking on management goes further and considers wealth as consisting not only physical or tangible assets, but also intangible assets, like human capital, knowledge capital and relations capital.

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SCOPE OF FINANCIAL MANAGEMENT: The modern approach views the term financials management in broad sense and provides a conceptual and analytical framework for financial decision-making. According to the finance function covers both acquisitions of funds as well as the efficient and wise allocation of funds to various uses. It is an integral part of overall management. The important tasks of financial management, as related to the central concerns noted above, may be catalogued as follows: Financial Analysis, planning and Control:  Analysis of financial condition and performance – That is, assessing the financial performance of the company.  Profit Planning – Forecasting and planning the future of the firm.  Financial forecasting the future needs of the firm.  Financial Control – Instituting appropriate systems of control to ensure that the actions of managers are congruent with the goals of the firm. Investing a. Management of current assets b. Capital budgeting c. Management of mergers, reorganizations, and divestments Financing
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d. Identification of sources of finance and determination of financing mix e. Cultivating sources of funds and raising funds f. Disposition of profits between dividends and retained earnings. CHAPTER – III FINANCIAL STATEMENT ANALYSIS AND INTERPRETATION

The tools used to make an analysis on the financial statements are,  Ratio Analysis.  Working capital Analysis. For these, analysis various necessary tabular columns, charts, trend line are created. Interpretations are also shown to know about the fluctuations for every year. RATIO ANALYSIS Financial statements are prepared primarily for legal requirements. It is also used for decision – making. They play a dominant role in setting the framework of managerial decision. But the information provided in the financial statements is not an end itself as no meaningful conclusion can be drawn from these statements alone. However the information provided in the financial statement is of immense use in making decisions through analysis and interpretation of financial statements.

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Financial analysis is “the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and profit and loss accounts. There are various methods or techniques used in analyzing financial statements, such as comprehensive statements, schedule of changes in working capital, common size percentage, funds analysis, the ratio analysis is the most powerful tool of financial statement analysis. In the chapter the various types of ratios, which are directly connected, with solvency position of the firm are discussed. LIMITATIONS OF RATIO ANALYSIS Ratios should be used with extreme care and considered judgement because they suffer from certain serious drawbacks. Some of them are listed below:  A single ratio usually does not convey much sense to make a better interpretation. A number of ratios have to be calculated for making a meaningful conclusion.  There are no well-accepted standards or rules of thumb for all ratios, which can be accepted as norms. It renders interpretation of the ratio difficult.  Changes in accounting procedure by fir often make ratio analysis misleading.

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 Ratios are only means of financial and not an end in itself. Ratios have to be interpreted property, since different people may interpret the same ratio in different ways.  The ratio analysis is primarily a quantitative analysis and not a qualitative analysis.  While making ratio analysis, no consideration is made to the changes in price level and this makes the interpretation of ratios invalid.

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3.2. ANALYSIS OF LIQUIDITY RATIOS LIQUIDITY RATIOS: These are the ratios which measure the short-term solvency or financial position of a firm. These ratios are calculated to comment upon the short-term paying capacity of a concern or the firm’s ability to meet its current obligations. The various liquidity ratios are;

1. Current Ratio 2. Quick Ratio 3. Absolute Liquid Ratio

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3.2.1. CURRENT RATIO Current ratio may be defined as the relationship between current assets and current liabilities. The ratio, also known as working capital ratio, is a measure of general liquidity and is most widely used to make the analysis of short-term financial position or liquidity of a firm. In any operation concern, the current ratio should 2:1.

It is calculates as

Current ratio

=

Current assets Current liabilities

Current assets include cash, marketable securities, debtors, inventories (stock), loans and advances and prepaid expenses etc. Current liabilities include loans, creditors, outstanding expanses and provisions.

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TABLE NO: 3.2.1 CURRENT RATIO CURRENT ASSETS:
Year Rs. (in.Lakhs)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 5465.1 6596 7322.1 7922.3 9761.6 Average = 7413.42

Increase / Decrease
-----1130.9 726.1 600.2 1839.3 Maximum = 9761.6

Increase / Decrease (%)
-----20.69 11.01 8.20 23.22 Minimum = 5465.1

Index

100 120.69 131.7 139.9 163.12

CURRENT LIABILITIES:
Year Rs. (in.Lakhs) Increase / Decrease Increase / Decrease (%)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 5261.91 6020.28 6531.51 6232.94 7840.35 Average = 2620.45 --------758.37 14.41 511.23 8.49 -298.6 -4.57 1607.4 25.79 Maximum = 7840.35 100 114.41 122.90 118.33 144.12 Minimum = 5261.91 1.04 1.10 1.12 1.27 1.25

Index

Ratio

(SOURCE: ANNUAL REPOR

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INTERPRETATION The table (3.2.1.) shows that the current assets minimum value is Rs.5465.1 in 2051-2006 and it reaches the maximum of Rs.9761.6 in 2009- 2010. The Current Liabilities minimum value is Rs.5261.91 in 2005-2006and maximum value is Rs.7840.35 in 2009-2010. The calculated ratio shows that in 2005, the company had 1.04 worth of current assets for every liability. This increased to 1.25 in 2010 indicating increasing trend on liquidity, Hence from the observation, the company is able to support its short-term debt from its current assets.

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3.2.2 Quick ratio (or) Liquid ratio Quick ratio may be defined as the relationship between liquid assets and current liabilities .an asset is liquid if it can be converted into cash immediately or reasonably soon without loss a value. Cash is the most liquid assets. Inventories require more time for converting it into cash. Their value also has a tendency to fluctuate. That is why inventories are excluded from quick assets. The quick ratio is found out by dividing the total of the quick assets by total current liabilities .in any operation concern, the quick ratio should 0.5:1.

Quick ratio

=

Quick Assets Current liabilities

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TABLE NO: 3.2.2 QUICK RATIO CURRENT ASSETS:
Year Rs. (in.Lakhs)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 3374.8 3245.8 3529.3 4083.1 5659.2 Average = 1806.8

Increase / Decrease
------ 129 283.5 553.8 1576.1 Maximum = 5659.2

Increase / Decrease (%)
------ 3.82 8.73 15.69 38.60 Minimum = 3245.8

Index

100 96.18 104.91 120.60 159.20

CURRENT LIABILITIES:
Year Rs. (in.Lakhs) Increase / Decrease Increase / Decrease (%)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 5261.91 6020.28 6531.51 6232.94 7840.35 Average = 2620.45 --------758.37 14.41 511.23 8.49 -298.6 -4.57 1607.4 25.79 Maximum = 7840.35 100 114.41 122.90 118.33 144.12 Minimum = 5261.91 0.04 0.54 0.54 0.66 0.72

Index

Ratio

(SOURCE: ANNUAL REPORTS)

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INTERPRETATION The table (3.2.2) shows that the liquid assets are varied from Rs.3378.8 in 2005-2006 to Rs.5659.2 in 2009-2010. The liquid liabilities minimum value is Rs.5261.91 in 2005-2006and maximum value is Rs.7840.35 in 2009-2010. The index is calculated to find out the fluctuations between the liquid assets and liquid liabilities for the year 2005-2006 which is taken as the base year. It has reached the highest level 144.12 % in the year 2009-2010 with the Ratio 0.72 . In general, the ruler of thumb is 0.5:1 that is, for each Quick Asset there should be one Quick Liability. The company also has the required level of Quick Ratio. So it is in satisfactory level.

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3.2.3. ABSOLUTE LIQUID RATIO:

It is a variation of quick ratio. When liquidity is highly restricted in terms of cash and near cash items on the one hand and immediately maturing obligations on the other. The inventory and the debtors’ and exclude from current assets.

Absolute liquid Ratio

=

Cash in hand & bank Current liability

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TABLE NO: 3.2.3 TABLE SHOWING ABSOLUTE LIQUID RATIO CURRENT ASSETS:
Year Rs. (in.Lakhs)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 446.99 337.49 391.47 847.38 698.28 Average = 229.054

Increase / Decrease
------ 109.5 53.98 455.91 - 149.1 Maximum = 847.38

Increase / Decrease (%)
------ 24.50 15.99 116.46 - 17.60 Minimum = 337.49

Index

100 75.50 91.50 207.96 190.36

CURRENT LIABILITIES:
Year Rs. (in.Lakhs) Increase / Decrease Increase / Decrease (%)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 5261.91 6020.28 6531.51 6232.94 7840.35 Average = 2620.45 --------758.37 14.41 511.23 8.49 - 298.6 - 4.57 1607.4 25.79 Maximum = 7840.35 100 114.41 122.90 118.33 144.12 Minimum = 5261.91 0.08 0.06 0.06 0.14 0.09

Index

Ratio

(SOURCE: ANNUAL REPORTS)

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INTERPRETATION The table (3.2.3) shows that the relationship between two variables. The variables are Current Assets and current liability, its ratios, and its index numbers. The Current Asset is varied from Rs.446.99 in 2005-2006 to Rs.698.28 in 2009-2010. The Liquid Liabilities minimum value Rs. 5261.91 in 2005-2006 and maximum value is Rs.7840.35 in 2009-2010. The table indicates there is a no respectively change in the cash and Bank balance of the concern during the period of 2006 and 20010. On the other hand the alternate of four years ie.2007-2008 was highly decreased. The ratio was 0.09 in the year 2010.Hence from the observation; it indicates there is no high improvement In the cash and bank balance of the concern during the study period.

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3.3 ANALYSIS OF LONG –TERM FINANCIAL POSITION (OR)

CAPITIAL STURUCTURE

SOLVENCY RATIO

This ratio is also known as Debt ratio. It is found to between total assets and external liabilities of the company. External liability means all long period and short period liabilities (i.e.)total debt.

 Debt –Equity Ratio  Proprietary Ratio  Solvency Ratio  Fixed Assets to Current Assets Ratio

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3.3.1 Debt –Equity Ratio: This ratio is calculated to measure the relative proportions of Long-term debt and shareholder funds invested in the company. This ratio is determining to ascertain the soundness of long term financial policies of that company and is also known as External-Internal Equity Ratio. It is calculated as follows:-

Debt –Equity Ratio

=

Outsider’s Fund Shareholders Fund

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TABLE NO: 3.3.1 DEPT - EQUITY RATIO OUTSIDERS FUND: Year Rs. (In. Laksh) 7153.48 6919.86 7600.83 7122.71 10956.76 Increase/Decrease Increase/Decrease (%) ---- 3.27 9.84 - 6.29 53.83 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---- 233.62 680.97 - 478.1 3834.1 Maximum = 10956.76

100 96.73 106.57 100.28 154.11

Average = 3622.048

Minimum = 6919.86

SHAREHOLDERS FUND: Year Rs. (In. Laksh) Increase/ Decrease Increase/Decrease (%) Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Average = 1724.088

3754.68 4124.45 4658.70 5170.03 4865.76

---369.77 534.25 511.33 - 304.27 Maximum = 5170.03

---9.85 12.95 10.98 - 5.89

100 109.85 122.80 133.78 127.89 Minimum = 3754.68

1.91 1.68 1.63 1.38 2.25

(SOURCE: ANNUAL REPORTS)

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INTERPRETATION The outsider’s fund is varied from Rs. 7153.48 in 2005-2006 to Rs.10956.76 in 2009-2010 and shareholder fund is varied from Rs.3754.68 In 2005-2006 to Rs.4865.76 in 2009-10 the debt to equity ratio shows the ratio of shareholders funds in 2006 there were 1.91 of debt. This is compared to 2.25 in 2010. This ratio indicates that the claims of outsider are lower than those of owners, may be considered by the creditors because it gives a lesser margin of safety for them at the time of liquidation of the firm.

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3.3.2. Proprietory Ratio:

This ratio is also known as equity ratio or shareholders to total equity ratio or net worth to total assets ratio. This ratio establishes the relationship between shareholder’s funds to total assets of the firm. The ratio can be calculated as under.

Proprietory Ratio =

Shareholders funds Total Assets

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TABLE NO: 3.3.2 PROPRIETORY RATIO SHAREHOLDERS FUND: Year Rs. (In. Laksh) 3754.68 4124.25 4658.70 5170.03 4865.76 Increase/Decrease Increase/Decrease (%) ---9.85 12.95 10.98 - 5.89 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---369.77 534.25 511.33 - 304.27 Maximum = 5170.03

100 109.85 122.80 133.78 127.89

Average = 1724.088

Minimum = 3754.68

TOTAL ASSETS: Year Rs. (In. Laksh) 10908.16 11044.31 12174.24 12292.74 15822.55 Increase/ Decrease ---136.15 1129.93 118.5 3529.81 Increase/Decrease (%) ---1.25 10.23 0.97 28.71 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 101.25 111.48 112.45 141.17

0.34 0.37 0.38 0.42 0.31

Average = 5346.142
(SOURCE: ANNUAL REPORTS)

Maximum = 15822.55

Minimum = 10908.16

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INTERPRETATION:

The table (3.3.2) shows that the position of shareholders funded total assets ratio between these two variables and index numbers. The shareholders fund is varied from Rs. 3754.68 in 2005-2006 toRs. 4865.76 in 2009-2010. The total assets is varied from Rs. 10908.16in 2005-2006 and Rs.15222.55 in 2009-2010. The index is calculated to find out the fluctuations among the Shareholders fund and total assets for the year 2005-2006 is taken as base and the index is allotted as 100. In all the years the calculated index of shareholders fund is more than the base year. The ratio was 0.34 in 2005-2006 and 0.31 was in 2009-2010. So the concern is not satisfied in this ratio.

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3.3.3. Solvency Ratio: This ratio is also known as Debt ratio. It is found to between total assets and external liabilities of the company. External liability means all long period and short period liabilities (i.e.) total debt.

Solvency Ratio

=

Total Debt Total Asset

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TABLE NO: 3.3.3 SOLVENCY RATIO TOTAL DEBT: Year Rs. (In. Laksh) 7153.48 6919.86 7600.83 7122.71 10956.76 Increase/Decrease Increase/Decrease (%) ---- 3.27 9.84 - 6.29 53.83 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---- 233.62 680.97 - 478.1 3834.1 Maximum = 10956.76

100 96.73 106.57 100.28 154.11

Average = 3622.048

Minimum = 6919.86

TOTAL ASSETS: Year Rs. (In. Laksh) 10908.16 11044.31 12174.24 12292.74 15822.55 Increase/ Decrease ---136.15 1129.93 118.5 3529.81 Maximum = 15822.55 Increase/Decrease (%) ---1.25 10.23 0.97 28.71 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Average = 5346.142

100 101.25 111.48 112.45 141.17 Minimum = 10908.16

0.66 0.63 0.62 0.58 0.69

(SOURCE: ANNUAL REPORT)

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INTERPRETATION:

The table (3.3.3)show that the total debt has the Maximum value of Rs.7153.48 in 2005 – 2006 and Minimum value of Rs.10956.76 in 2009 – 2010. The average amount of total assets is Rs.5346.142, the Maximum amount is Rs.15822.55 in 2009 – 2010 and Minimum amount is Rs.10908.16 in 2005 – 2006.Likewise the average amount of total debt is Rs.3622.048 lakhs. The ratio attains the highest position of 0.69 in 2009 – 2010. it shows that the company has not used debt funds to its total assets.

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3.3.4. Fixed assets to current assets Ratio: The ratio measures the efficiency of the assets used. It shows how well the fixed assets are being used in the business. It is calculated as follows:

Fixed Assets to Current Assets Ratio =

Fixed Assets Current Assets

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TABLE NO: 3.3.4 FIXED ASSETS TO CURRENT ASSETS RATIO FIXED ASSETS: Year Rs. (In. Laksh) 5238.62 4834.84 5540.16 5696.93 7823.28 Increase/Decrease Increase/Decrease (%) ---- 7.71 14.59 2.83 37.32 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---- 403.78 705.32 156.77 7823.28 Maximum = 7823.28

100 92.29 106.88 109.71 147.03

Average = 2612.38

Minimum = 4834.84

CURRENT ASSETS: Year Rs. (In. Laksh) 5465.1 6596 7322.1 7922.3 9761.6 Increase/ Decrease ---1130.9 726.1 600.2 1839.3 Maximum = 9761.6 Increase/Decrease (%) ---20.69 11.01 8.20 23.22 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Average = 7413.42

100 120.69 131.7 139.9 163.12 Minimum = 5465.1

0.96 0.73 0.76 0.72 0.80

(SOURCE: ANNUAL REPORT)

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INTERPRETATION: The table shows that the position of fixed assets and current assets ratio between these two variables and index numbers. The fixed asset is varied from Rs. 5238.62 in 2005-2006 to Rs. 7823.28 in 2009-2010 the current asset is also varied from Rs. 5465.1 in 2005-2006 and Rs. 9761.6 in 2009-2010. The index is calculated to find out the fluctuations among the current assets and fixed assets for the year 2005-2010 is taken as base and the index is allotted as 100. It has reached the highest level of 163.12%. The ratio was decreased from 0.96 to 0.80. So this ratio is not satisfied by the concern.

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3.4 ANALYSIS OF CURRENT ASSETS MOVEMENTS

ACTIVITY RATIO Activity ratios are concerned with measuring the efficiency in asset management. Activity ratio also called efficiency ratio are asset utilization ratios. The efficiency with which the assets are used would be reflected in the speed and rapidity with which assets are converted into sales. The greater the rate of turnover or conversion, the more efficient utilization or management. Depending upon the various type of assets, there are various types of activity ratios. They are • Debtors turnover ratio • Average Collection Period • Creditors Turnover Ratio • Average payment period • Inventory Turnover Ratio • Average Payment Period • Total Asset Turnover ratio • Fixed Asset Turnover Ratio

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3.4.1 Debtor’s turnover ratio: Debtor’s turnover ratio indicates the velocity of debt collection of the firm. That is, it indicates the numbers of times average debtors are turned over a year. This can be calculated as under.

Debtor’s Turnover Ratio =

Net credit annual sales Average trade debtors

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TABLE NO: 3.4.1 DEBTORS TURNOVER RATIO NET CREDIT ANNUAL SALES: Year Rs. (In. Laksh) 9754.43 10673.13 11103.72 11827.02 12566.92 Increase/Decrease Increase/Decrease (%) ---9.42 4.06 6.49 6.26 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---918.7 433.59 720.3 739.9 Maximum = 12566.92

100 109.42 113.48 119.97 126.22

Average = 4464.27

Minimum = 9754.43

AVERAGE TRADE DEBTORS: Year Rs. (In. Laksh) 2302.49 2176.57 2197.56 2319.50 2948.79 Increase/ Decrease ---- 125.92 20.99 121.94 629.29 Maximum = 2948.79 Increase/Decrease (%) ---- 5.47 0.96 5.55 27.13 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 94.53 95.50 101.04 128.17 Minimum = 2176.57

4.24 4.90 5.05 5.10 4.26

Average = 1050.256
(SOURCE: ANNUAL REPORT)

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INTERPRETATION: The table (3.4.1) shows that the position of net credit sales and total Debtors between these two variables and index numbers. The ratio shows a relatively decrease in debtors turnover, which would Seem to suggest that the business is in good position to maintain the Customers. The ratio moves from 4.24 to 4.26 during the study period. This shows that the company was in good condition in retaining the Debtors

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3.4.2.Average collection period: The average collection period represents the average numbers of days for which a firm has to wait before its receivables are converted into cash. It shows the quality of debtors since it ventilates the speed at which Debtors are collected. It is calculated as under.

Average Collection period

=

No of days in a year Debtor’s turnover ratio

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TABLE NO: 3.4.2 AVERAGE COLLECTION PREIOD Year No. of days in a year 2005 – 2006 2006 – 2007 2007 – 2008 2008 – 2009 2009 - 2010 365 365 365 365 365 Debtors Turnover Ratio 4.24 4.90 5.05 5.10 4.26 Average Collection Period(Days) 86.08 74.49 72.28 71.57 85.68

INTERPRETATION: The table indicates that the average collection period differs from year to year. In the initial year 2005 – 2006 the average collection period is 86.08 days. In the year 2009 – 2010, it shows the decreased position of 85.68 days.

3.4.3 Creditors Turnover ratio: Creditors/ payable turnover ratio gives the average credit period enjoyed from creditors. It helps to find out how much time the firm is likely to take in repaying its trade creditors. It is calculated as:-

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Creditor’s Turnover Ratio

=

Net credit annual purchase Average trade Creditors

TABLE NO: 3.4.3 CREDITORS TURNOVER RATIO NET CREDIT ANNUAL PURCHASE: Year Rs. (In. Laksh) 4483.78 Increase/Decrease Increase/Decrease (%) ---Index

2005-2006

----

100

50

2006-2007 2007-2008 2008-2009 2009-2010

5006.21 5317.52 5878.29 5871.40

522.43 311.31 560.77 - 6.89 Maximum = 5878.29

11.65 6.22 10.55 - 0.12

111.65 117.87 128.42 128.30

Average = 2071.036

Minimum = 4483.78

AVERAGE CREDITORS: Year Rs. (In. Laksh) 457.48 721.87 1303.13 216.84 198.62 Increase/ Decrease ---264.39 581.26 - 1086.29 - 18.22 Maximum = 1303.13 Increase/Decrease (%) ---57.79 80.52 - 83.36 - 8.40 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Average = 131.22

100 157.79 238.31 154.95 146.55 Minimum = 198.62

9.80 6.94 4.08 27.11 29.56

(SOURCE: ANNUAL REPORT)

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INTERPRETATION: The table (3.4.3) shows that the position of net credit purchase and Total creditors between these two variables and index numbers. The ratio shows a relatively decrease in creditors turnover which would seem to suggest that the business is in good position to Maintain the creditors. The ratio moves from 9.80 to 29.56 during the study period. This shows that the company was in difficulty condition in handling the creditors.

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3.4.4. Average Payment Period The average payment period represents the average numbers of days Taken by the firm to pay its creditors. It indicates the speed with which The payments for credit purchase are made to the creditors. It is Calculated as follows:-

Average Payment Period

=

Months in a tear Creditor’s Turnover Ratio

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TABLE NO: 3.4.4 AVERAGE PAYMENT PREIOD Year No. of months in a year 2005 – 2006 2006 – 2007 2007 – 2008 2008 – 2009 2009 - 2010 12 12 12 12 12 Creditors Turnover Ratio 9.80 6.94 4.08 27.11 29.56 Average payment Period(Months) 1.22 1.73 2.94 0.44 0.41

INTERPRETATION: The table shows that the average payment period taken by the firm to pay its suppliers. The company takes maximum and minimum of 2.94 in 2007 – 2008 and 0.41 months to pay its suppliers. In the tear 2009 – 2010 it shows the decreased position when compared to the initial stage.

3.4.5. Inventory Turnover Ratio: This ratio is also known as stock velocity that denotes the speed at which the inventory will be converted into sales. This would indicate heather inventory has been efficiently used or not. It is calculated as Follows:-

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Inventory Turnover Ratio

=

Cost of goods sold(or)sales Average inventory at cost

TABLE NO: 3.4.5 INVENTORY TURNOVER RATIO SALES:

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Year

Rs. (In. Laksh) 9754.43 10673.13 11106.72 11827.02 12566.92

Increase/Decrease

Increase/Decrease (%) ---9.42 4.06 6.49 6.26

Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---918.7 433.59 720.3 739.9 Maximum = 12566.92

100 109.42 113.48 119.97 126.22

Average = 4464.27

Minimum = 9754.43

AVERAGE INVENTORY AT COST: Year Rs. (In. Laksh) 3041.2 3481.73 4397.02 4683.28 5120.35 Increase/ Decrease ---440.53 915.29 286.26 437.07 Maximum = 5120.35 Increase/Decrease (%) ---14.49 26.29 6.51 9.33 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 114.49 140.77 147.28 156.62 Minimum = 3041.2

3.21 3.07 2.53 2.53 2.45

Average = 1632.31
(SOURCE: ANNUAL REPORT)

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INTERPRETATION: The table (3.4.5.) shows that the position of sales and average Inventory cost between these two variables and index numbers

. The ratio shows a relatively low stock turnover, which would seem to that the business deals in slow moving consumer goods. The ratio moves from 3.21to 2.45 during the study period

The high stock turnover ratio would also tend to indicate that there was no chance of the firm holding damaged or obsolete stock.

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3.4.6.Average conversion period: The average conversion period represents the average number of days for which a firm as to wait before its receivables is converted into cash it shows the quality of debtors since it ventilates the speed at which debtors are collected. It is calculated as under.

Average Conversion Period

=

No of days in a year Inventory turnover ratio

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TABLE NO: 3.4.6 AVERAGE CONVERSION PREIOD Year No. of days in a year 2005 – 2006 2006 – 2007 2007 – 2008 2008 – 2009 2009 - 2010 365 365 365 365 365 Creditors Turnover Ratio 3.21 3.07 2.53 2.53 2.45 Average payment Period(Days) 113.71 118.89 144.27 144.27 148.98

INTERPRETATION: The table indicates that the average conversion period differs from tear to year. In the initial year 2005 – 2006 the average conversion period 113.71 days. In the year 2009 – 2010, it shows the increased position of 148.98 days when compared to all the five years.

3.4.7. Total Assets Turnover Ratio: Total assets turnover ratio shows the firm’s ability in generating sales from all financial resources committed to total assets. Total assets include Set fixed assets and current assets. This ratio is also known as the Investment turnover ratio.

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It is based on the relationship between sales and assets of the firm. The traditional standard for this ratio is two times.

Total Assets Turnover Ratio

=

sales Total Assets

TABLE NO: 3.4.7 TOTAL ASSETS TURNOVER RATIO SALES: Year Rs. (In. Laksh) Increase/Decrease Increase/Decrease (%) Index

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2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

9754.43 10673.13 11106.72 11827.02 12566.92

---918.7 433.59 720.3 739.9 Maximum = 12566.92

---9.42 4.06 6.49 6.26

100 109.42 113.48 119.97 126.22

Average = 4464.27

Minimum = 9754.43

TOTAL ASSETS: Year Rs. (In. Laksh) 10908.16 11044.31 12174.24 12292.74 15822.55 Increase/ Decrease ---136.15 1129.93 118.5 3529.81 Maximum = 15822.55 Increase/Decrease (%) ---1.25 10.23 0.97 28.71 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 101.25 111.48 112.45 141.17

0.89 0.97 0.91 0.96 0.79

Average = 5346.142
(SOURCE: ANNUAL REPORTS)

Minimum = 10908.16

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INTERPRETATION: The table (3.4.7.) shows that the position of net sales and total assets between these two variables and index numbers. Total assets for this purpose do not include fictitious assets like Debit balance in profit and loss account and deferred expenditure. A higher ratio would mean a better utilization of total assets to Generate maximum sales and vice versa. The ratio was 0.89 in 2006 and 0.79 was 2006. It indicates that the Company is not properly using its total assets to generate more sales.

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3.4.8. Fixed Assets Turnovers Ratio The ratio measures the efficiency of the assets used. It shows how well the fixed assets are being used in the business. It is calculated as Follows:

Fixed Turnover Ratio

=

Net Sales Net Fixed Assets

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TABLE NO: 3.4.8 FIXED ASSETS TURNOVER RATIO NET SALES: Year Rs. (In. Laksh) 9754.43 10673.13 11106.72 11827.02 12566.92 Increase/Decrease Increase/Decrease (%) ---9.42 4.06 6.49 6.26 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---918.7 433.59 720.3 739.9 Maximum = 12566.92

100 109.42 113.48 119.97 126.22

Average = 4464.27

Minimum = 9754.43

NET FIXED ASSETS: Year Rs. (In. Laksh) 5238.62 4834.84 5540.16 5696.93 7823.28 Increase/ Decrease ---- 403.78 705.32 156.77 2126.35 Maximum = 7823.28 Increase/Decrease (%) ---- 7.71 14.59 2.83 37.32 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 92.29 106.88 109.71 147.03 Minimum = 4834.84

1.86 2.21 2.00 2.08 1.61

Average = 2612.38
(SOURCE: ANNUAL REPORTS)

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INTERPRETATION: The table (3.4.8.) shows that the position of net credit sales and total debtors between these two variables and index numbers. Generally, a high fixed assets turn over ratio indicates on efficient Utilization of fixed assets in generating sales. While, a low ratio reflects in efficient utilization and management of fixed assets. The Ratio was 1.86 in 2005 and 1.61 was in the year 2010. So the firm was not satisfied by this ratio.

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3.5. PROFITABILITY RATIO
Profitability is a measure of efficiency and the search for its provides an incentive to achieve efficiency profitability also indicates public acceptance of the product and shows that the firm can produce competitively. Profitability ratio can be determined on the basis of either sales or investment. The various profitability rations are discussed below:  Cash profit Ratios  Net Profit Ratios  Return on Shareholder Equity Ratio

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3.5.1 Cash Profit Ratio: The net profit of a firm is affected by the amount/method of depreciation changes. Further, depreciation being non – cash expense, it is better to calculate cash profit ratio. This ratio measures the relation between cash generated from operations and the net sales, thus,

Cash Profit Ratio =

Cash Profit *100 Net Sales

Cash profit =

Net profit + Depreciation

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TABLE NO: 3.5.1 CASH PROFIT RATIO CASH PROFIT: Year Rs. (In. Laksh) 682.58 706.26 1413.68 1640.93 1597.15 Increase/Decrease Increase/Decrease (%) ---3.47 100.16 16.08 - 2.67 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---23.68 707.42 227.25 - 43.78 Maximum = 1640.93

100 103.47 203.63 219.71 217.04

Average = 455.946

Minimum = 682.58

NET SALES: Year Rs. (In. Laksh) 9754.43 10673.13 11106.72 11827.02 12566.92 Increase/ Decrease ---918.7 433.59 720.3 739.9 Maximum = 12566.92 Increase/Decrease (%) ---9.42 4.06 6.49 6.26 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 109.42 113.48 119.97 126.22 Minimum = 9754.43

7.00 6.62 12.73 13.87 12.71

Average = 4464.27
(SOURCE: ANNUAL REPORTS)

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INTERPRETATION: The table (3.5.1) shows that the position of cash profit and net sales between these two variables and index numbers. The cash margin ratio shows that the margin is fairly stable over time with increment to 7% in 2005 and 12.71% in 2010. However, to know how well the firm is performing one has to compare this ratio with industry average or a firm dealing in a similar business.

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3.5.2 Net Profit Ratio: Net profit ratio establishes a relationship between net profit (after taxes) and sales, and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of the firm’s profitability and is calculated as:

Net Profit Ratio

=

Net Profit after tax Net Sales

*100

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TABLE NO: 3.5.2 NET PROFIT RATIO NET PROFIT AFTER TAX: Year Rs. (In. Laksh) 137.84 517.92 467.72 378.70 478.93 Increase/Decrease Increase/Decrease (%) ---275.74 - 9.69 - 19.03 26.47 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---380.08 - 50.2 - 89.02 100.23 Maximum = 517.92

100 375.74 366.05 347.01 373.48

Average = 123.354

Minimum = 137.84

NET SALES: Year Rs. (In. Laksh) 2525608 3033358 3757554 4489682 4816882 Increase/ Decrease ---507750 7241916 732128 327200 Maximum = 4816882 Increase/Decrease (%) ---20.10 23.87 19.48 7.29 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 120.10 143.97 163.45 170.74 Minimum = 2525608

1.41 4.85 4.21 3.20 3.81

Average = 4464.27
(SOURCE: ANNUAL REPORTS)

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INTERPETATION:

The net margin ratio shows that the margin is fairly over a time with a high improvement of 3.81% in 2010.The net margin in the year 2005 was 1.41%.However , to know how well the firm is performing one has to compare this ratio with the industry average or a firm dealing in a similar business. Thus the computer was in the good profitability position when analysis is made in the net profit margin.

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3.5.3. Return on Shareholder Equity Ratio: The ratio is a measure of the percentage of net profit to equity shareholders fund. The ratio is expressed as follows:

Return on shareholders Equity Ratio

=

Net Profit Shareholders Fund

TABLE NO: 3.5.3

73

RETURN ON SHAREHOLDERS EQUITY RATIO NET PROFIT: Year Rs. (In. Laksh) 137.84 517.92 467.72 378.70 478.93 Increase/Decrease Increase/Decrease (%) ---275.74 - 9.69 - 19.03 26.47 Index

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

---380.08 - 50.2 - 89.02 100.23 Maximum = 517.92

100 375.74 366.05 347.01 373.48

Average = 123.354

Minimum = 137.84

SHAREHOLDERS FUND: Year Rs. (In. Laksh) 3754.68 4124.45 4658.70 5170.03 4865.76 Increase/ Decrease ---369.77 534.25 511.33 - 304.27 Maximum = 5170.03 Increase/Decrease (%) ---9.85 12.95 10.98 - 5.89 Index Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

100 109.85 122.80 133.78 127.89 Minimum = 3754.68

3.67 12.56 10.04 7.32 9.84

Average = 1724.088
(SOURCE: ANNUAL REPORTS)

INTERPRETATION:

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The Return on Investment is determined with the help of Net profit after tax and shareholders fund. As the primary objective of the business is to maximize the earnings, this ratio indicates the extent to which this primary objective is being achieved. The ratio changes from 3.67% to 9.84%

3.6. WORKING CAPITAL

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Working capital means the excess of current assets over current liabilities. A statement of changes in working capital is prepared to show the changes in the working between the two balance sheet items. This statement is prepared with the help of current assets and current liabilities derived from the two balance sheets. Working Capital = Current Assets – Current Liabilities 1. An increase in current assets increase in working capital. 2. A decrease in current assets decrease in working capital. 3. An increase in current liability decrease in working capital. 4. A decrease in current liability increase in working capital. The changes in the amount of any current assets of current liability in the current balance sheet as compared to that of the previous balance sheet either assets in increase or decrease in any working capital. The difference is recorded for each individual current asset and current liability. In case of current asset in the current period is more than in the previous year, the effect is an increase in working capital and recorded effect is decrease in working capital when current liability shows increasing amount.

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The total increase and total decrease are compared and the difference shows the net increase or net decrease is working capital. It is worth nothing that schedules of change is working capital is prepared only from current assets and current liabilities and the other information is not of any use for preparing this statement.

77

TABLE NO: 3.6.1
Working capital for the year ended 2005-2006
(Rs. in Lakhs)

Particulars Current Assets, Loan and Advance Inventories Sundry debtors Cash and Bank Balance Loans & Advances Total Current Liabilities Liabilities provisions Total Net Working Capital Net Decrease in Working Capital

2005

2006

Increase

Decrease

3223.83 2445.37 205.18 616.24 6490.62 496.85 514.48 1011.33 5479.29 ---5479.29

2858.6 2159.5 446.99 768.27 6233.3 1276.2 399.8 1676 4557.4 921.93 5479.3

------241.81 152.03 393.84 ---114.68 114.68 508.52 921.93 1430.45

365.26 285.87 ------651.13 779.32 ---779.32 1430.45 ---1430.45

INTERPRETATION: From the table no (3.6.1), it is indicated that in current assets, Cash and bank balance have been increased by value when compared to previous year 2005. But the Sundry Debtors and Inventories have been decreased from Rs.2445.37 to 2159.50 and Rs.3223.83 to Rs.2858.57 Lakhs in 2006.

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The current liabilities have been increased from Rs.496.85 decreasing during 2005 to Rs.1276.17 Lakhs during 2006. So, there is finally a decrease in working capital of Rs.921.93 Lakhs during 2006 as compared to 2005

TABLE NO: 3.6.2
Working capital for the year ended 2006-2007
(Rs. in Lakhs)

Particulars

2006

2007

Increase

Decrease

79

Current Assets, Loan and Advance 4104.8 Inventories Sundry debtors Cash and Bank Balance Loans & Advances Total Current Liabilities Liabilities provisions Total Net Working Capital Net Increase in Working Capital 2858.57 2159.50 446.99 768.27 6233.33 1276.17 399.8 1675.97 4557.36 1462.92 6020.28 8 2153.6 6 337.49 754.69 7350.7 2 819.68 510.76 1330.4 4 6020.2 8 ---6020.2 8 1246.31 ---------1246.31 456.49 ---456.49 1702.8 ---1702.8 ---5.84 109.5 13.58 128.92 ---110.96 110.96 239.88 1462.92 1702.8

INTERPRETATION:

From the table no (3.6.2), it is indicated that in Current Assets, Cash and Bank balance, and Sundry Debtors have been increased by value when

80

compared to previous year 2006. But the Inventories have increased from Rs.2858.57 to Rs.4104.88 in 2007. The Current liabilities have been increased from Rs.1276.17 to Rs.819.68 during 2006 – 2007.So, there is finally a decrease in working capital of Rs.1462.92 Lakhs during 2007 as compared to 2006.

TABLE NO: 3.6.3
Working capital for the year ended 2007-2008
(Rs. in Lakhs)

Particulars

2007

2008

Increase

Decrease

81

Current Assets, Loan and Advance 4689.1 Inventories Sundry debtors Cash and Bank Balance Loans & Advances Total Current Liabilities Liabilities provisions Total Net Working Capital Net Increase in Working Capital 4104.88 2153.66 337.49 754.69 7350.72 6 2241.4 5 391.47 896.34 8218.4 2 1412.0 819.68 510.76 1330.44 6020.28 425.94 6446.22 6 360.14 1772.2 6446.2 2 ---6446.2 2 ---150.62 150.62 1018.32 ---1018.32 592.38 ---592.38 592.38 425.94 1018.32 584.28 87.79 53.98 141.65 867.7 ----------------

INTERPRETATION:

82

From the table no (3.6.3), it is indicated that in current assets, Inventories, Cash and Bank balance, and Sundry Debtors have been increased by value when compared to previous year 2007. The current liabilities have been decreased by Rs.592.38 Lakhs during the study period of 2008. So, there is finally an increase in working capital of Rs.425.94 Lakhs during 2008 as compared to 2007.

TABLE NO: 3.6.4
Working capital for the year ended 2008-2009
83

(Rs. in Lakhs)

Particulars Current Assets, Loan and Advance

2008

2009

Increase

Decrease

4677.4 Inventories Sundry debtors Cash and Bank Balance Loans & Advances Total Current Liabilities Liabilities provisions Total Net Working Capital Net Increase in Working Capital 4689.16 2241.45 391.47 896.34 8218.42 0 2397.5 4 847.38 838.15 8760.4 7 2262.2 1412.06 360.14 1772.2 6446.22 ---6446.22 6 265.27 2527.5 3 6232.9 4 213.28 6446.2 2 ---94.87 94.87 706.87 213.28 920.15 850.2 ---850.2 920.15 ---920.15 ---156.09 455.91 ---612 11.76 ------58.19 69.95

INTERPRETATION:

84

From the table no (3.6.4), it is indicated that in Current assets, Cash and Bank balance, and Sundry debtors have been increased by value when compared to previous year 2007. But the Inventories and loan and advances have been decreased by 11.76 and 58.19 Lakhs. The current liabilities have been decreased by Rs.850.2 Lakhs during the period of 2009. So, there is finally a decrease in working capital of Rs.213.28 Lakhs during 2009 as compared to 2008

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TABLE NO: 3.6.5
Working capital for the year ended 2009-2010
(Rs. in Lakhs)

Particulars Current Assets, Loan and Advance Inventories Sundry debtors Cash and Bank Balance Loans & Advances Total Current Liabilities Liabilities provisions Total Net Working Capital Net Increase in Working Capital

2009

2010

Increase

Decrease

4677.40 2397.54 847.38 838.15 8760.47 2262.26 265.27 2527.53 6232.94 1607.41 7840.35

5563.30 3500.03 698.28 1460.87 11222.4 8 3135.08 247.05 3382.13 7840.35 ---7840.35

885.9 1102.49 ---622.72 2611.11 ---18.22 18.22 2629.33 ---2629.33

------149.1 ---149.1 872.82 ---872.82 1021.92 1607.41 2629.33

INTERPRETATION:

From the table no (3.6.5), it is indicated that in current assets, Inventories, Sundry Debtors and Loan and advances have increased by value when compared to previous year 2009. But the cash and bank balances have been decreased by Rs.149.1 Lakhs in 2010.

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The current liabilities have been decreased by Rs.872.82 Lakhs during the study period of 2010. So, there is finally an increase in working capital of Rs.1607.41 Lakhs during 2010 as compared to 2009.

CHAPTER IV A SUMMARY OF FINDINGS, SUGGSTIONS AND CONCLUSION
The financial statements are mirror which related to financial position as well as the operating result be it favourable or unfavourable of the company. The purposes of evaluation of financial statement differ among various groups

87

interested in the results of the company. Thus it is responsible for the overall performance of the company, maintaining its solvency at the same time ensuring an adequate rate of return.

4.1 FINDINGS:

1. The current ratio of the company was above the standard norm of 2:1.it indicates the company was in better position to meet its short term obligation. But excess liquidity necessarily blocked the capital in current assets. 2. The quick ratio of the company was above the statement norm of 0.2:1 during the study period. 3. The cash ratio has been decreased year to year. 4. The debt equity ratio indicates that the claims of outsiders are lower than those of owners may be considered by the creditors 5. The Proprietory ratio is below the standard norm in all the five years. 6. The solvency ratio has been decreased year to year. 7. The fixed asset to current asset ratio has been slightly decreased by year to year. 8. The debtor’s turnover ratio has been increased in all four years. But in the year 2010 it has been decreased. 9. The Fixed asset turnover ratio is not in a satisfaction position.

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10. The average collection period was decreased when compared to initial years. The minimum average collection period is 71.57 days which shows that the company adopts credit policy in satisfaction manner. 11. The creditor’s turnover ratio has been increased year to year. 12. The average payment period was decreased when compared to initial tears 13. The inventory turnover ratio is goes on decreasing position. 14. The average conversion period is increased, when compared to initial years. 15. The profitability are computed to analysis the operating efficiency of the company. The cash profit ratio is good enough to cover operating expenses without risk. 16. The net profit ratio has been increased year to year. 18. From working capital analysis, it could be found that in the years 2006 – 2007, 2007 – 2008 and 2009 – 2010 there have been some increase in the net working capital, but in the year 2005 – 2006 and 2008 – 2009 it shows decreasing.

4.2.SUGGECTIONS: 1. The cash flows must be improved to meet the expenses of the company without any struggle

89

2.

The firm should take necessary steps to improve the Proprietory fund ratio which will help to improve the long term solvency of the firm.

3. 4. 5. 6.

The company should try to reduce the average collection period which in turn will help to improve the cash turnover The inventory turnover ratio is in decreasing position. So it should be improved. The fixed assets turnover ratio should be improved. It will help in better utilization of fixed assets. From the working capital analysis it is suggested that optimum utilization of current is needed.

4.3. CONCLUSION:

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The study has been undertaken with the objective of evaluating the financial performance of SRI SARAVANA TEXTILES LINITED KARUR. From the study it is concluded that the textiles overall operating efficiency is satisfactory. The researcher has found that the company suffers from certain weakness and has given some suggestions to overcome it. If the suggestions are implemented the company can increase its profitability and overall performance.

BIBLIOGRAPHY
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 Dr.S.N.Maheshwari Principles of management Accounting, New Delhi, Sultan Chand & Sons,10th Edition 2007.  M.Y.khan and P.K.Jain, Financial Management, New Delhi, Tata Mc Graw, Hill Publishing Company Limited,2nd Edition 2005.  P.V.Kulkarni and B.G.sayaprasad Financial Management ,New Delhi, Himalaya Publishing houes,11th Edition,2009

Website www.srisarvan.co.on

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