A STUDY ON RATIO ANALYSIS OF SMALL SCALE

INDUSTRY WITH SPECIAL REFERENCE TO RSNG

HANUMANAMATTI

CHAPTER – 1
INTRODUCTION

INTRODUCTION TO THE STUDY

Ratio Analysis is needed to understand the liquidity, profitability and efficiency positions
of the company during the study period, to evaluate and analyze various facts of the financial
performance of the company. To make comparisons between the ratios during different periods.
The importance of the enables drawing of inference regarding the performance of the firm.

Hence in order to analyze and study about the liquidity, profitability and efficiency of
“RAITARA SAHAKARI NOOLINA GIRANI (NIYMITA), HANUMANAMATTI”.

Textile Industry is providing one of the most basic needs of people and the holds
importance; maintaining sustained growth for improving quality of life. It has a unique position
as a self-reliant industry, from the production of raw materials to the delivery of finished
products, with substantial value-addition at each stage of processing; it is a major contribution to
the country's economy. This paper deals with structure, growth and size of the Indian textile
industry, role of textile industry in economy, key advantages of the industry, textile industry
export and global scenario and strength, weakness, opportunities and treats of the Indian textile
industry.

The Indian textile industry is one of the largest in the world with a massive raw material
and textiles manufacturing base. Our economy is largely dependent on the textile manufacturing
and trade in addition to other major industries. About 27% of the foreign exchange earnings are
on account of export of textiles and clothing alone. The textiles and clothing sector contributes
about 14% to the industrial production and 3% to the gross domestic product of the country.
Around 8% of the total excise revenue collection is contributed by the textile industry. So much
so, the textile industry accounts for as large as 21% of the total employment generated in the
economy. Around 35 million people are directly employed in the textile manufacturing activities.
Indirect employment including the manpower engaged in agricultural based raw-material
production like cotton and related trade and handling could be stated to be around another 60
million.

A textile is the largest single industry in India (and amongst the biggest in the world),
accounting for about 20% of the total industrial production. It provides direct employment to
around 20 million people. Textile and clothing exports account for one-third of the total value of
exports from the country. There are 1,227 textile mills with a spinning capacity of about 29
million spindles. While yarn is mostly produced in the mills, fabrics are produced in the power
loom and handloom sectors as well.

Development countries with both textile and clothing are able to prosper in the new
competitive environment after the textile quota regime of quantitative import restrictions under
the Multi – Fiber Arrangement (MFA) came to an end on 1 st January, 2005 under the World
Trade Organization (WTO) Agreement on Textile and clothing. As a result, the t4extile industry
in developed countries will face intensified competition in both their export and domestic
market. However, the migration of textile capacity will be influenced by objective competitive
factor and will be hampered by the presence of distorting domestic measure and weak domestic
infrastructure in several developing and least developed countries.

The elimination of quota restriction has opened the way for the most competitive developing
countries to develop stronger cluster of textile expertise, enabling them to handle all stages of the
production chain from growing natural fibers to producing finished clothing. The OECD paper
says that while low wages can still give developing countries a competitive edge in world
market, time factor now play a far more crucial role in determining international
competitiveness.

The textile industry is undergoing a major reorientation towards non – clothing application of
textile, known as technical textile, which are growing roughly at twice rate of textile for clothing
applications and now account for more than half of total textile production. The process involved
in producing technical textile requires expensive equipments and skilled workers and are, for the
moment, concentrated in developing countries.

Technical textiles have many application including bed sheets; filtration and abrasive
materials; furniture and health care upholstery; thermal protection and blood – absorbing
materials, seatbelts ; adhesive tape, and multiple other specialized products and application in
India must take adequate measure for capturing its market by promoting r4esearcvh and
development in this sector. The mood in the Indian textile industry given the phase – out of the
quota regime of the multi fiber arrangement (MFA) is upbeat with new investment flowing in
and increased as a result of which capacities are fully booked.

As a result various initiatives taken by the government, there has been new investment of Rs
50,000 crore in textile industry in the last five years. Nine textile majors in invested Rs.2600
crore and plan to invest another Rs 6400 crore. Further, India’s cotton production increased by
57% over the last five years and 3 million spindles and 3000 shuttle – less looms installed.

Indian Textile Industry plays vital role in country’s economic development and contributes
Industrial production in the country. Textile industry contribute around 4% of GDP, 9% excise
collections, 18% of employment Industrial sector, and ahs 16 % of share country’s export. Indian
Textile Industry is valued at US $ 36 bn.
OBJECTIVES OF THE STUDY
 To study the different ratios used in the RAITARA SAHAKARI NOOLINA GIRANI
(NIYMITA), HANUMANAMATTI.

 To determine and analyze the short term financial performance and turnover of
RAITARA SAHAKARI NOOLINA GIRANI (NIYMITA), HANUMANAMATTI.

 To find out the RAITARA SAHAKARI NOOLINA GIRANI (NIYMITA),

HANUMANAMATTI’s efficiency and profitability based on the efficiency ratios and
profitability ratios.

STATEMENT OF THE PROBLEM

Project report is a systematic study of refuses associated with Ratio Analysis to resolve
the problem with application of management concepts and skills, it provides a practical
experience.
 A study on Ratio Analysis in RSNG is done because financial performance one of the
important requirement to have a smooth flow of operation.
 If the company neglects the importance of level of financial performance there is a
chance of adverse effect on liquidity on profitability.
 Problem associated application of theoretical concepts to the practical problem.
 Problem rose due to inefficiency of Ratio Analysis
SCOPE OF THE STUDY
The scope of the study is conducted only for the organization level. The focus is only on
analyzing the concept of Ratio Analysis and study of the ratios applied by “RAITARA
SAHAKARI NOOLINA GIRANI (NIYMITA), HANUMANAMATTI”. With Annual reports
for the year 2017-18, 2018-19 and 2019-20 and other recent reports and journals.

 The study made on the topic of performance appraisal reveals the performance
of the employees.
 This report is useful for the company to know where their performance appraisal
system stands and the measures they can take to improve it.
 The study is restricted to the employees working at Raitara Sahakari Noolina
Girani, Hanumanamatti unit.

LIMITATION OF THE STUDY

 The study is mainly carried out based on the secondary data provided in the financial
statements Ratios of the RAITARA SAHAKARI NOOLINA GIRANI (NIYMITA),
HANUMANAMATTI.
 This study is only based on the only 3 year’s historical data and information
providers in the annual report therefore it may not be a future indicator.
 During the study some important and confidential matters are not disclosed by the
respective authorities.
 The study was purely based on the information given by the company and employees and
there may be chances for wrong data.
 The researchers didn’t get much time for detailed study
MEHODOLOGY OF THE STUDY:
The success of any study depends upon the methodology adopted i.e. the techniques on
the way of approaching to gather information from different sources.

SOURCES OF DATA:
 Primary Data
 Secondary Data
PRIMARY DATA:
It is collection of first hand information. This data is collected through discussion. The
required primary data collected from the concerned officers of the RSNG MILL.

SECONDARY DATA:
It is reviewing which relevant information, which is already collected is and making
inferences base on the information collected. The required secondary data collected from annual
reports of the company. The present study is mainly based on the secondary data.