CONTENTS

S.No. Particulars
Page No
CHAPTER-I
INTRODUCTION
1.1 Introduction of study
1.2 Financial statement
1.3 Need of study
1.4 Company profile
1 1.5 Industry profile
1.6 Review Of Literature

CHAPTER - II
RESARCH METHODOLOGY
2
CHAPTER –III
3 Data Analysis and Interpretation

CHAPTER –IV
4.1 Findings
4.2 Suggestions
4 4.3 Conclusion

BIBILIOGRAPY
5 APPENDIX

1
 Chapter I
INTRODUCTION

1.1 Introduction
A financial statement is an organized collection of data according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of some financial
aspects of a business firm. It may show a position at a moment of time as in the case of a
balance sheet, or may reveal a series of activities over a given period of time, as in the case of
an income statement.
Thus, the term financial statement generally refers to the basis statements;
 The income statement
 The balance sheet
 A statement of retained earnings
 A statement of charge in financial position in addition to the above two
statement.
1.2 Financial statement:
It is the process of identifying the financial strength and weakness of a firm from the
available accounting data and financial statement. The analysis is done by properly establishing
the relationship between the items of balance sheet and profit and loss account the first task of
financial analyst is to determine the information relevant to the decision under consideration
from the total information contained in the financial statement. The second step is to arrange
information in a way to highlight significant relationship. The final step is interpretation and
drawing of Interpretations and conclusion. Thus financial analysis is the process of selection
relating and evaluation of the accounting data/information.
This study contain following analysis:
o Comparative analysis statement
o Ratio analysis
1.2.1 Comparative financial statement:
Comparative financial statement is those statements which have been designed in a way
so as to provide time perspective to the consideration of various elements of financial position

2
embodied in such statements. In these statements, figures for two or more periods are placed
side by side to facilitate comparison.
But the income statement and balance sheet can be prepared in the form of
comparative financial statement.
a) Comparative income statement:
The income statement discloses net profit or net loss on account of operations. A
comparative income statement will show the absolute figures for two or more periods. The
absolute change from one period to another and if desired. The change in terms of percentages.
Since, the figures for two or more periods are shown side by side; the reader can quickly
ascertain whether sales have increased or decreased, whether cost of sales has increased or
decreased etc.
b) Comparative balance sheet:
Comparative balance sheet as on two or more different dates can be used for comparing
assets and liabilities and finding out any increase or decrease in those items. Thus, while in a
single balance sheet the emphasis is on present position, it is on change in the comparative
balance sheet. Such a balance sheet is very useful in studying the trends in an enterprise.
1.2.2 Common-size financial statement:
Common-size financial statement are those in which figures reported are converted into
percentages to some common base in the income statement the sales figure is assumed to be
100 and all figures are expressed as a percentage of sales. Similarly, in the balance sheet, the
total of assets or liabilities is taken as 100 and all the figures are expressed as a percentage of
this total.
1.2.3 Ratio analysis:
Ratio analysis is a widely used tool of financial analysis. The term ratio in it refers to the
relationship expressed in mathematical terms between two individual figures or group of
figures connected with each other in some logical manner and are selected from financial
statements of the concern. The ratio analysis is based on the fact that a single accounting figure
by itself may not communicate any meaningful information but when expressed as a relative to
some other figure, it may definitely provide some significant information the relationship
between two or more accounting figure/groups is called a financial ratio helps to express the

3
relationship between two accounting figures in such a way that users can draw conclusions
about the performance, strengths and weakness of a firm.

a) Liquidity ratios:
These ratios portray the capacity of the business unit to meet its short term obligation
from its short-term resources (e.g.) current ratio, quick ratio.
b) Leverage ratios:
Many financial analyses are interested in the relative use of debt and equity in the firm.
The term ‘solvency’ refers to the ability of a concern to meet its long-term obligation.
Accordingly, long-term solvency ratios indicate a firm’s ability to meet the fixed interest and
costs and repayment schedules associated with its long-term borrowings. (E.g.) debt equity
ratio, proprietary ratio, etc….
c) Turnover ratios:
These ratios evaluate the use of the total resources of the business concern along with
the use of the components of total assets. They are intended to measure the effectiveness of the
assets management the efficiency with which the assts are used would be reflected in the speed
and rapidity with which the assets are converted into sales. The greater the rate of turnover, the
more efficient the management would be (E.g.) stock turnover ratio, fixed assets turnover ratios
etc….It is also called as “Activity Ratios” or “Asset Management Ratios”
d) Profitability ratios:
The profitability ratios of a business concern can be measured by the profitability ratios.
These ratios highlight the end result of business activities by which alone the over all efficiency
of a business unit can be judged, (E.g.) gross ratios, Net profit ratio.
e) Other Ratios:
The ratios are which are not included in the above categories are called as other ratios. It is
also used to reveal the financial position of the company.
a) Liquidity ratios:
i) Current ratio:
Current ratio may be defined as the relationship between current assets and current
liabilities it is the most common ratio for measuring liquidity. It is calculated by dividing
current assets and current liabilities. Current assets are those, the amount of which can be

4
realized with in a period of one year. Current liabilities are those amounts which are payable
with in a period of one year.
Current assets
Current assets = -------------------------
Current liabilities
ii) Liquid ratio:
The term ‘liquidity’ refers to the ability of a firm to pay its short-term obligation as and
when they become due. The term quick assets or liquid assets refers current assets which can be
converted into cash immediately it comprises all current assets except stock and prepaid
expenses it is determined by dividing quick assets by quick liabilities.
Liquid assets
Liquid ratio = -------------------------
Liquid liabilities

iii) Absolute liquidity ratio:

Absolute liquid assets include cash, bank, and marketable securities. This ratio obtained by
dividing cash and bank and marketable securities by current liabilities. It is also called as Super
Quick Ratio.
Cash + bank +marketable securities
Absolute liquidity ratio = ----------------------------------------------
Current liabilities
b) Leverage ratios:
I) Debt equity ratio:
It expresses the relationship between the external equities and internal equities or the
relationship between borrowed funds and ‘owners’ capital. It is a popular measure of the long-
term financial solvency of a firm. This relationship is shown by the debt equity ratio. This ratio
indicates the relative proportion ofdebt and equity in financing the assets of a firm. This ratio is
computed by dividing the total debt of the firm by its equity (i.e.) net worth.
Outsider’s funds
Debt equity ratio = ------------------------------
Proprietor’s funds

5
ii) Proprietary ratio:
Proprietary ratio relates to the proprietors funds to total assets. It reveals the owners
contribution to the total value of assets. This ratio shows the long-time solvency of the business
it is calculated by dividing proprietor’s funds by the total tangible assets.
Proprietor’s funds
Proprietary ratio = ---------------------------
Total tangible assets
iii) Fixed Asset Ratio:
This ratio explains whether the firm has raised adequate long term funds to meet its fixed
assets requirements. It is expressed as follows:
Fixed Assets
Fixed Asset = -------------------------
Long term Funds
The ratio should not be more than 1. If it is less than 1, it shows that a part of the working
capital has been financed through long term funds. This is desirable to some extent because a
part of working capital termed as “Core Working Capital” is more or less of a fixed nature.
c) Turnover ratios:
i) Stock turnover ratio:
This ratio indicates whether investment is inventory is efficiently used or not it explains
whether investment in inventories in with in proper limits or not. It also measures the
effectiveness of the firms’ sales efforts the ratio is calculated as follows.
Cost of goods sold
Stock turnover ratio = -----------------------------
Average stock
ii) Fixed assets turnover ratio:
The ratio indicates the extent to which the investments in fixed assets contribute
towards sales. If compared with a pervious year. It indicates whether the investment infixed
assets has been judious or not the ratio is calculated as follows.
Net sales
Fixed assets turnover ratio = -------------------
Fixed assets

6
iii) Working capital turnover ratio:
Working capital turnover ratio indicates the velocity of the utilization of net working
capital. This ratio indicates the number of times the working capital is turned over in the course
of a year. It is a good measure over –trading and under-trading.
Net sales
Working capital turnover ratio = ----------------------------
Net working capital

iv) Total assets Turnover ratio =

Total assets
Total assets turnover ratio = -----------------
Net assets
v) Capital turnover ratio:
Sales
Capital turnover ratio = -----------------------
Proprietor’s fund
vi) Debtors turnover ratio:
Debtors constitute an important constituent of current assets and the quality of debtors
to a great extent determines a firm’s liquidity. Two ratios are used by financial analysts to
judge the liquidity of a firm. They are
I. Debtors Velocity
II. Debt collection period ratio

Total Sales
Debtors Velocity = ------------------------------------
Average Accounts receivable

Month or days in a year

Debt collection period =-----------------------------------------
Debtors Turnover Ratio
d) Profitability ratios:

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i) Gross profit ratio:
This ratio expresses the relationship between Gross profit and sales. It indicated the
efficiency of production or trading operation. A high gross profit ratio is a good management as
it implies that cost of production is relatively low.
Gross profit
Gross profit ratio = ----------------------------------- x 100
Net sales
ii) Net profit ratio:
Net profit ratio establishes a relationship between net profit (after taxes) and sales. It is
determined by dividing the net income after tax to the net sales for the period and measures the
profit per rupee of sales.
Net profit
Net profit sales = ----------------- x 100
Net sales

iii) Expenses ratio:

This ratio establishes the relationship between various indirect expenses to net sales.
A) Administrative expenses ratio:
Administrative expenses
Administrative expenses ratio = ------------------------------- x 100
Sales

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1.3 OBJECTIVES OF STUDY
 To identify the financial strength or weakness of the firm.
 To analyze the financial performance by the companying past and current
growth.
 To determine the current financial position.
 To analyze and evaluate the firm liquidity position
 To observe the practical knowledge of the running business.
 To understand the function of the factory.
1.4 SCOPE OF THE STUDY
 The study for the project was confined only for FINANCIAL PERFORMANCE
 The duration for the study was only for two months where time is a limiting
factor.
 The analysis was confined to POINEER SPINNER COTTON MILLS LTD
only.
 To identify the financial strength or weakness of the firm.
 To analyze the financial performance by the comparing past and current growth.
 To determine the current financial position.
 To analyze and evaluate the firm liquidity position.
 Collection of data is a limiting factor because of the confidentiality.

1.5 LIMITATIONS OF THE STUDY

 The study is confined only to limited period financial statement.

 The analysis and the interpretation of the concern is based only on the past
performance, there are no standards established in the company, with which the
actual performance would be compared.

 The study is fully based on the information from the auditor report for revenue
and expenses.

9
  The annual reports and the accounts provide only limited number of the
information and expenses.

 The annual reports and accounts provide only limited number of information
regarding the company’s performance.

 As the balance is prepared on the particular date it does not reflect the averages
and the value of the entire amount is based on the book value.

1.8 COMPANY PROFILE

Pioneer Spinners, Kamudakudi is a unit of National Textile Corporation (Tamil Nadu
&Pondicherry) Ltd Coimbatore, owned by Government of India.
This mill was constructed and started in 1960. During 1974, when the condition of the
textile mill was worse the Government of India decided to take over the management of this
sick textile mills.
The main intention of this enactment was
 To Provide Continuous employment to the employees.
 To fulfill the basic necessities of worker at cheaper rate.
 To protect Government revenue (Tax/Duty)
The mill has established in the year 1960 as a spinning unit with 6048 spindles. Due to
continuous sickness the mill was closed and the Tamil Nadu state government took over the
mills on 27.12.1972.
Under the sick textiles rehabilitation act under the control of Tamil Nadu Textile
Corporation. The mill was nationalized subsequently nationalized with effect from 01.04.1974
under the sick textile undertaking nationalism act 1974 and vested with NTCltd.
After nationalization Modernization of the mills were carried out in a phased manner
and about rs.588.10 lacks were spent on modernization.
The spindle capacity increased from 6048 to 27912 spindles. After modernization, the
technical and financial background also improved considerably and the mill could earn profit
due to its achievements.

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QUALITY POLICY OF THE COMPANY
At Pioneer spinners Unit Customer satisfaction is always the guiding principle.

THE COMPANY WORKS IN THREE SHIFTS

First Shift : 7.00 A.M. to 3.00 P.M
Second Shift : 3.00 A.M. to 11.00 P.M
Third Shift 11.00 A.M to 7.00 P.M

Each shift runs for eight hours per day. General shift is between 8.00 a.m to 4.30 p.m

WELFARE FACILITIES
The company provides the following facilities to workers.
 Canteen facility
 Hostel facility
 Pure drinking water
 Medical facility
 Transport facility
 Rest Room
 Sanitary facility
 Parking facility

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ORGANIZATION ANALYSIS
VARIOUS DEPARTMENTS IN PIONEER SPINNERS
Observation about working of the concern
1. Production department
2. Electrical department
3. Quality control department
4. Purchase department
5. Stores department
6. Personnel department
7. Finance and accounting department
8. Yarn Marketing department

12
 PRODUCTION DEPARTMENT

Process of production department process flow chart:

MIXING

BLOW ROOM

CARDING PROPARATORY

COMBER

SIMPLEX

SPINNING DEPARTMENT RING SPINNING FRAME

CONE WINDING

PACKING

POWER HOUSE

DIESEL GENERATOR

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1.MIXING
The pressed cotton / polyesters viscose stable fiber balls and opened, The Packing is
removed. The first content is loosened different varieties of cotton are blended in the decided
Proportions and they are blown well in the blow room machineries. The cottonseeds and dust
etc are extracted as wastes. The extended wastes are called droppings and filter wastes the
processed resultant cotton is folded into laps and sent to carded section is standard weigh

2.BLOWROOM
The pressed cotton / Polyester Viscose stable fibro boles are opened. The lint content is
loosed different varieties of cotton are blended in the decided Proportion and they are blown
well in the room machineries. The cotton sent through big pipes by air section. Foreign
materials trash, cottonseeds, sand dust etc are extracted wastes are called dropping and filter
waste. The Processed result not cotton is folded into laps set carding section in standard weight

3.CARDING
In the carding department, the laps are unfolded and subjected to flat stripping through
High-Speed cylindrical filter rotating over the laps. Here the laps are made of thin layers of
cotton fibro and finally filled in the card cans in the forms of silvers. Some more wastes like
flat strips cylinder fly etc are extracted. The silvers are sent to drawing section in card cans for
further processing

Number of Machines - 41
Machines make - Lakshmi Rieter
Number of workers - 39 people
4.COMBERS
Where good quality yarn is required the drawing silvers are combat here through silver lap
and ribbon leg machines. This process is carried out to remove short fibers and immature
fibers. The wastes extracted is called comber roils when the cotton is processed through the
comber machine, the yarn is called combed yarn when this process is not carried out then the
yarn is called yarn, which is less priced, combing is a quality averted extra process.

14
5.DRAWING
The silvers in the card lanes are subjected to further processing for uniformity in quality by
uniting 8 silvers in to one sliver in to one sliver and again refilled in the cards cars. The card
cans are either sent to comber on simplex section

Number of Machines - 13
Machines Make - MMC/LR
Number of Workers - 4 people

6.SIMPLEX
The purpose of the roving operation is to reduce the silver to suitable size for the spinning.
The machine, which produces a rovings and reduces them by roller drawings, twists them
slightly as needed and winds the product accurately on a bobbin for further use in the roving
frames or spinning.
Number of machines : 14
Machines make : Lakshmi Rieter.
Number of workers : 6 persons.

7.SPINNING
Drawing / Comber slivers are reduced thin slivers which are called roving ends in simplex
frames. They are twisted and wounded in the plastic bobbing and sent out spinning section. The
roving ends are further reduced to thin thread and wounded on plastic tubes, which are called
cops. This thread is called yarn
Number of machines : 72
Machines Make : Lakshmi Rieter / TM
Number of Workers : 70 persons
Spindles : 37952

8.WINDINGS
The spinning tabs are wounded on paper cones in standard net weights on either 1.26 meters
each. These cones are sent to parking section.

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 Number of machines : 11
Machines Make : Tex tool Rkh
Number of Workers : 30 persons

9.PACKING
This is the finishing process department. The yarn wounded on cones are packed in standard
net weight of 50 Kg each. Now the yarn is ready for marketing.
Number of Workers : 10 persons
Paper cone weight : 1.120
Poly waver sack weight : 0.190 Kgs

10.PURCHASE DEPARTMENT
Purchase department normally involves in the process.
 Enquiry regarding materials
 To get quotation from their parties
 Decision making
 Finalization
 Order placing and verifying the material with the order.

11.ELECTRICAL DEPARTMENT
This will grid power consumption per month will record in lakh units costing more than one
lakh rupees per day on an average. Hence to monitor the distribution system, a separate
transfer, distribution board and power control appliances are installed and managed by
qualified engineer.

12.GENERATOR
In terms of power failures the factory should not suffer from production, loss. Hence with a
view to run the factory even without power huge generations, capable to generate required
power for full captive consumption are installed and managed by skilled / semiskilled
workman.

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1.9 INDUSTRY PROFILE
National Textile Corporation Ltd (NTC):
      National Textile Corporation (NTC) is the single largest textile central public sector and
enterprise under ministry of textiles managing 52 textile mill through its subsidiary companies
spread all over India. The headquarters of the holding company is at New Delhi. The annual
turnover of the company in the year 2004-05 was approximately Rs.638 crores.The strength of
the group is around 22,000employees. NTC is modernizing 22mill with the latest state of art
technology on its own. As on 30-09-2007 there are 16,818 employed in 52 textile mill (after
closure of 67mills),with 9,55lakh spindles,577 looms producing 400lakh kgs of yarn and
185lakh meters of cloth annually. So far 55,642employees have opted for voluntary retirement
under the Modified Voluntary Retirement Scheme (MVRS) and Rs.1951; 13crores have been
paid as VRS compensation to all the employees of closed unviable mill and surplus employees
of viable mill. As per the approved Modified Voluntary Retirement Scheme, the total cost of
modernization of 22mills was estimated at Rs.530crores. Out of these 22mills modernization
scheme is being implemented in 15 mills.
Background:
      NTC was incorporated in 1968 with the main objective of managing the affairs of 16 sick
textile mill taken over by the government .NTC took over such textile mills under In the year
2002 NTC was managing 125mills.According to the modified revival scheme of
March2006,BIFR/GOI approved revival of 52 mill and closure of 67 unviable mills. The textile
mills have so far been closed under the industrial Act. 2mills (one viable and unviable) located
in the state of Pondicherry have been transferred to the state government of Pondicherry. Now
NTC have 50mills and 100 showrooms. 22mills were under the revival of NTC itself.19mills
are proposed to be modernized through joint venture route and balance 9mills, were most of the
employees have opted for VRS are proposed to be closed. NTC expects to complete
modernization of its 22mills by itself up to spinning activity March 2009. purchase new
machinery and renovation of existing working machines, buildings, humidification and
electrification, ect.,
      Status of implementation of rehabilitation scheme:
 The total cost of the revised scheme is Rs.5267.56crores which is duly approved by
BIFR in the year 2006.

17
 BIFR has approved a merger of its 9 subsidiary companies with NTC holding
company with effect from 1.4.2006.
 An amount of Rs.322, 35corers has been paid to clear PF and ESI and creditors
outstanding.
 Paid attractive VRS compensation amounting to Rs2132.48corers to 59,252 to
employees.
 Old and obsolete plant/machinery of closely of closed mill and surplus machinery of
viable mill have been sold for a total amount of Rs.304.84crores.
 The materials of the old building have been sold for Rs.77crores.
 Land sold for a total amount of Rs.3652.14crores through open tender system.
 The funds amounting to Rs.8018.21crores will be arranged through various sources
and utilization of Rs.7134.12crores is on valuable heads of expenditure i.e.,
modernization redemption of bonds and payments of MVRS compensation,
payments for working capital and payment of PF and ESI and creditors due as on
1.12.2008.
 As per the 2nd modified scheme approved by the BIFR on 05.09.2008 the spindle
capacity will increased from 6lakhs to 9lakhs spindles. Accordingly, the total cost of
modernization would be Rs.1155, 000crores in the 1 st revised scheme and the total
cost of the Revised Rehabilitation Scheme would be Rs.93crores after adjusting the
cost of Bonds Redemption. 

18
 CHAPTER II
RESEARCH METHODOLOGY
The quality of the project work depends on the methodology adopted for the study
Methodology, in turn, depends on the nature of the project work. The use of proper
methodology is an essential part of any research. In order to conduct the study scientifically,
suitable methods & measures are to be followed

2.1 RESEARCH DESIGN

A research design is arrangements and analysis of data in a manner that to combine
relevance to purpose with economy in procedure.

SECONDARY DATA
Secondary data means the data that are already collected and analyzed by someone else such
as annual reports, internal records, journals, magazines and newspapers. The study depends
mainly in company’s report, books and company’s profile.

RATIO ANALYSIS
 Leverage Ratios
 Liquidity Ratio
 Operational Ratios
 Profitability Ratios
 Solvency Ratio

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 CHAPTER III
DATA ANALYSIS AND INTERPRETATION

Analysis is the process of critically examining in detail information. For the purpose of
analysis, individual items are studied, their interrelationships with other related CHART
established and the data is sometimes rearranged to have better understandings of the
information with the help of different techniques or tools for the purpose.
Interpretation reefers to the task of drawing inferences form the collected facts after an
analytical or experimental study in fact it is a search for border meaning of research findings.
An interpretation is concerned with relationships within the collected data, partially
overlapping analysis.
Analysis and interpretation are closely related. Interpretation is not possible without analysis
and without interpretation analysis has no value. Interpretation is thus drawing of inference and
stating what the CHART in the data really means.

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 RATIO ANALYSIS

3.1 CURRENT RATIO

The ratio of current assets too current liabilities is called current ratio. In order to measure
the short term liquidity or solvency of the concern, comparison of current assets and current
liabilities is inevitable.
Current assets
Current ratio =
Current liabilities

TABLE NO 3.1
CURRENT RATIO

Current assets Current liabilities

Year Ratio
Rs Rs
2005 14.70 3.82 3.85
2006 160.8 6.15 2.61
2007 21.40 8.55 2.50
2008 22.34 8.80 2.54
2009 25.36 7.68 3.30
Source: Balance Sheet for various years, Pioneer Spinners

The above table shows that the current ratio of the company is higher (3.85 per cent) in 2005
and it is lower (2.50 per cent) in 2007. At the time of low current ratio implies more debt and
the high current ratio imply low debt in the concern.

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3.2 ABSOLUTE LIQUID/CASH RATIO
The ratio is also called “Absolute Liquid” or “Super quick ratio”. This is a variation of quick
ratio. The ratio is calculated when liquidity is highly restricted in terms of cash and cash
equivalent.

Absolute liquid Assets

Absolute Liquid Ratio =
Current Liabilities
(Cash ratio=Cash Bank + Short Term Securities)

TABLE NO3.2
ABSOLUTE LIQUID RATIO

Absolute liquid Current liabilities

Year Ratio

2005 1.86 3.82 0.49

2006 2.02 6.15 0.33
2007 3.01 8.55 0.35
2008 3.21 8.80 0.37
2009 3.99 7.68 0.52
Source: Same as Table No. 3.1.

The above table shows that the Absolute liquid ratio of the company is higher (0.52 per
cent) in 2009 and it is lower (0.33 per cent) in 2006. At the time of low it indicates liquid
asserts are low, and the liquidity ratio is high it imply the liquid assets is high in the content.

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 ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The
efficiency with which assets are managed directly affects the volume of sales. Better the
management of assets, the larger is the amount of sales and the profit’s. Activity ratio measures
the efficient or effectiveness with which a firm manages resources or assets. Here the
calculated activity ratios are
 Inventory turnover ratio
 Debtors Turnover ratio
 Working capital turnover ratio

INVENTORY STOCK TURNOVER RATIO

This ratio establishes the relationship between cost of goods sold total during a given period
and the average amount of inventory held during that period. This ratio reveals the number of
times finished goods turnover during a given accounting period.
Sales
Inventory/stock turnover ratio =
Avg.Inventories
TABLE NO:3.3
INVENTORY TURNOVER RATIO
Inventories
Year Sales Ratio

2005 36.03 5.97 6.03

2006 41.21 6.25 6.60
2007 40.83 7.95 5.14
2008 44.51 8.34 5.33
2009 45.97 8.94 5.14
Source:Same as Table No. 3.1.
From the above table shows that the Acid test ratio of the company is higher in 2006
(6.60 per cent) and it is lower in 2008 (5.14 per cent). The inventory turnover ratio an increase
it implies the company gas enough stock to meet sales, if it decreases it tells the company is not
having enough stock to meet sales.

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DEBTORS TURNOVER RATIO
Debtor’s turnover ratio is called “Receivable TURNOVER RATIO” or “Debtors Velocity”.
Goods are sold on credit based on credit policy adopted by the firm. Those customers who
purchase a credit are called traded debtors or book debtors. Bills are termed as bills receivables.
The debtor’s turnover ratio can be calculated as follows:
Net credit Sales
Debtors turnover ratio =
Debtors

TABLE NO:3.4
DEBTORS TURNOVER RATIO

Debtors
Year Total Sales Ratio

2005 36.03 5.97 13.65

2006 41.21 6.25 13.55
2007 40.83 7.95 9.10
2008 44.51 8.34 9.41
2009 45.97 8.94 9.15
Source: Same as Table No. 3.1.

The above table shows that the debtors turnover ratio is higher in 2005 (13.65 per cent)
and the ratio is lower in 2007(9.10 per cent). The debtor turnover ratio increased the company
has less outstanding, if it is decreased the company has more outstanding.

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PROFITABILTY RATIO
The primary objective of a business undertaking is to earn profits. Profit earning is
considered essential for survival of the business. A business needs profits not only for its
existence but also for expansion and diversification. A business enterprise can enterprise can
discharge its obligations to the various ratios are calculated either in relation to sales or in
relation to investment

GENEREAL PROFITABILITY RATIOS

 Gross profit ratio
 Net profit ratio
1. If the amount of current liability of current year is less than is amount of previous
area, the deficit is recorded in debit column.
2. Find out the total of all debit amounts.
3. The above total is compared in the end and the difference shows decreases or
increases in the working capital.

GROSS PROFIT RATIO

Gross profit ratio measures the relationship between the gross profits to net sales and usually
represented as a percentage. Gross margin reflects the efficiency with which management
produces each unit of a product. A high gross profit margin is a sign of good management. A
low ratio indicates unfavorable trend in the form of reduction in selling price not accompanies
by proportionate decrease in cost of goods or increase in cost of production.

Gross Profit
Gross profit ratio = X 100
Net Sales

25
 TABLE NO:3.5
GROSS PROFIT RATIO
Gross profit Sales
Year Ratio

2005 16.60 36.03 46.6

2006 18.16 41.21 44.06
2007 20.39 40.83 49.93
2008 21.66 44.51 48.65
2009 22.20 45.97 48.36
Source: Same as Table No. 3.1

The above table shows that the Gross profit ratio is higher in 2007 (49.93 per cent) and the
ratio is lower in 2006 (44.06 per cent). The high gross profit percentage implies good
management. The low gross profit percentage implies bad management.

26
 NET PROFIT RATIO
The ratio indicates net margin earned on income this ratio, helps to determine the efficiency
with which the affairs of business are being managed. A higher ratio indicates better position.
Net profit
Net profit ratio = X 100
Net Sales

TABLE NO:3.6
NET PROFIT RATIO

Net profit Net Sales

Year Ratio %

2005 13.56 36.03 37.64

2006 14.92 41.21 36.20
2007 16.86 40.83 41.29
2008 17.96 44.51 40.36
2009 18.44 45.97 40.11
Source: Same as Table No. 3.1.

The above table shows that the net profit ratio is higher in 2007 (41.29 per cent) and the
ratio is lower in 2006 (36.20 per cent). The high net profit percentage increase company’s
better position and the low net profit implies bad position of the company.

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 TABLE NO :3.7
CASH PROFIT RATIO

Cash profit Net Sales

Year Ratio

2005 15.92 36.03 44.18

2006 17.69 41.21 42.94
2007 18.46 40.83 45.23
2008 19.33 44.51 43.42
2009 19.60 45.97 42.64
Source: Same as Table No. 3.1.
The above table shows that the Cash profit ratio is higher in 2007 (45.23 per cent) and the
ratio is lower in 2009 (42.64 per cent). Cash profit ratios are instable overall financial
performance quite satisfactory.

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 INTERSET COVERAGE RATIO (ICR)
It is also known as time interest earned ratio. This ratio measures the debit servicing
capacity of a firm in so far as fixed interest on long term loan is considered. It is determined by
dividing the operating profits or earnings before interest and taxes by the fixed interest changes
on loan.

Earnings before interest and taxes

ICR =
Interest
TABLE NO :3.8
INTERSET COVERAGE RATIO
EBIT Interest
Year Ratio

2005 16.09 5.0 31.57

2006 17.67 4.8 36.30
2007 19.88 5.0 39.49
2008 21.03 5.9 35.11
2009 21.58 6.2 34.32
Source: Same as Table No. 3.1.
Form the above table shows that the Interest coverage ratio is low for the first year
(2005). Increased or high for another year 2006-2009. In the year 2005, the low ratio described
the danger signal that the firm is using debt and does not have the ability to offer assured
payment of interest to the lender. The high ratio 2006-2008 may imply unused debt capacity.

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 ADMINISTRATIVE & OFFICE EXPENSE RATIO
It indicates the office and administrative expense to sales. It is calculated by dividing office
and administrative expense by sales higher the ratio minimum will be the profit.

Administrative & Office

Expensesx100
Administrative & Office Expense ratio =
Sales
TABLE NO :3.9
ADMINISTRATIVE& OFFICE EXPENSE RATIO

ADMINISTRATIVE& SALES
Year Ratio %
OFFICE EXPENSES
2005 12.85 36.03 35.67
2006 14.93 41.21 36.23
2007 15.29 40.83 37.46
2008 16.25 44.51 36.50
2009 16.85 45.97 36.65
Source: Same as Table No. 3.1.
The above table shows that theAdministrative & Office Expenses ratio of the company is
higher in the year 2007(37.46 per cent), ratio is lower in the year 2005(35.67 percent). The ratio
is higher the profit of the concern is lower, the ratio is lower the profit of the concern is higher.

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 TABLE NO :3.10
THE FINANCIAL PERFORMANCE FOR THE YEAR 2005-2006
Particular 2005 2006 % Change
EBIT 16.09 17.67 1.58
Net Profit 13.56 14.92 1.36
EPS 135.60 149.20 13.60
No.ofSahre 1000000 100000 -
Source: Same as Table No. 3.1.
Net Profit(after tax and preference divt)
EPS =
No. of equitryShares
13.56
EPS in 2006 =
1000000
= 13.56
14.92
EPS in 2009 =
1000000
= 149.20
% of change in EPS/EPS
Degree of financial leverage =
% of change in EBIT/EBIT
13.60/149.20
=
1.58/17.67
= 1.02
The above table shows that the percentage change in EBIT for the year 2006 is 1.58 and the
percentage change in EPS for the year 2007 is 13.60. It implies that for a given change in
EBIT, EPS will change by 1.02 times. The company gets medium degree of financial leverage,
it is moderate.

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 TABLE NO :3.11
THE FINANCIAL PERFORMANCE FOR THE YEAR 2006-2007
Particular 2006 2007 % Change
EBIT 17.67 19.88 2.21
Net Profit 14.92 16.86 1.94
EPS 149.2 168.6 19.4
No. of Share 1000000 100000 -
Source: Same as Table No. 3.1.
Net Profit(after tax and preference divt)
EPS =
No. of equitryShares
14.92
EPS in 2006 =
1000000
= 149.2
16.86
EPS in 2007 =
1000000
= 168.6
% of change in EPS/EPS
Degree of financial leverage =
% of change in EBIT/EBIT
19.4/168.6
=
2.21/19.88
= 1.036
The above table shows that the percentage change in EBIT for the year 2007 is 2.21 and the
percentage change in EPS for the year 2007 is 19.4. It implies that for a given change in EBIT,
EPS will change by 1.036 times. The company gets medium degree of financial leverage; it
makes effect to the financial position of the company.

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 TABLE NO :3.12
THE FINANCIAL PERFORMANCE FOR THE YEAR 2007-2008
Particular 2006 2007 % Change
EBIT 19.88 21.06 1.18
Net Profit 16.86 17.96 1.1
EPS 168.6 179.6 1.1
No.ofSahre 1000000 100000 -
Source: Same as Table No. 3.1.
Net Profit(after tax and preference divt)
EPS =
No. of equitryShares
16.86
EPS in 2007 =
1000000
= 168.6
17.96
EPS in 2008 =
1000000
= 179.6
% of change in EPS/EPS
Degree of financial leverage =
% of change in EBIT/EBIT
11/179.6
=
1.18/21.06
= 0.10

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 TABLE NO: 3.13
THE FINANCIAL PERFORMANCE FOR THE YEAR
2008-2009

Particular 2006 2007 % Change

EBIT 21.06 21.58 1.18
Net Profit 17.96 18.44 0.48
EPS 179.6 184.4 4.8
No.ofSahre 1000000 100000 -
Source:Same as Table No. 3.1.
Net Profit(after tax and preference divt)
EPS =
No. of equitryShares
17.96
EPS in 2007 =
1000000

= 179.6
18.44
EPS in 2008 =
1000000

= 184.4
% of change in EPS/EPS
Degree of financial leverage =
% of change in EBIT/EBIT
4.8/184.4
=
0.52/21.55

= 1.08

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 CHAPTER IV
FINDINGS, SUUGESTIONS AND CONCLUSION

4.1 FINDINGS

 The operating ratio of the company shows that the operating cost decreased due to
increase in the company overall profit increased.
 The current ratio of the company is higher in (3.85 per cent) in 2005 and the current ratio
is lower (2.50 per cent) in 2006.
 The absolute liquid ratio is higher in the year 2008 (0.52 per cent). The ratio is lower in
the year 2006 (0.33 per cent).
 The acid ratio is higher in 2005 (6.60 per cent) and this ratio is lower in 2009 (5.14 per
cent).
 The debtors turnover ratio is higher in the year 2007(49.93 per cent) and it is lower in
2006(44.06 per cent).
 The gross profit ratio is higher in the year 2007(49.93 per cent) and it is lower in
2006(44.06 per cent).
 The cash profit ratio in the year 2007 is high percentage 45.23. in the year 2009 the low
percentage is 42.64
 Interest coverage ratio in the year 2007 is the high percentage 45.23 per cent. In the year
2009 the low percentage is 42.64
 The administrative and offices expenses ratio of the company is higher in the year 2006
(37.46 per cent), ratio is lower in the year 2004 (35.67 per cent).
 In the year 2005, the financial lower leverage shows that EBIT and EPS are 1.02 times.
 In the year 2009, the financial lower leverage shows that EBIT and EPS are 1.08 times.
 In the year 2005, the operating leverage shows that the percentage change in EBIT for
the year 2005 is 1.58 and the percentage change in sales is 5.18.
 In the year 2009, the operating leverage shows that the percentage change in EBIT for
the year 2008 is 0.52 and the percentage change in sales is 1.46.

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4.2 SUGGESTIONS
o The company should improve the absolute liquid asset.
o The company should concentrate more on the working capital.
o The company should try to avoid holding the huge stock.
o The company should concentrate more on the current assets.
o The company should try to control the expenses; otherwise it will affect the future
wealth of the company.
o The company maintains it debit in order to have profit maximizations.
o The firm has to raise the long term liabilities in order to reduce down it utilization in
working capital.
o From the analysis, we can say that the mill has invested more money on inventories
which lead to locking of capital work-in-progress. So the mills take necessary steps
to reduce investment on inventories.
o The company maintains its resource of funds in order to have frequent growth in
market to raise the strength of the customer.
o The company assets turnover is high. So that, the company raise to manage the assets
turn over.
o The company should take necessary steps to maintain their earnings per share (EPS)
and the fluctuations in the earnings before interest and taxes (EBIT).
o From the debit and equity ratio, it is suggested that the company has to increase it
debit and equality position.

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 4.3 CONCLUSION
The study conducted on performance and ratio analysis pioneer spinners of national
textile corporation ltd gives a view of analysis evaluation of liquidity position of the
company.Based on the tools used analysis and interpretation have been made giving way for
useful and constructive suggestions. Thus the leverage analysis of the company is satisfactory.
The company should enhance its performance for meeting challenges and exploiting
opportunities in future.
A study of the financial performance of the Pioneer spinners Mill has given a good
opportunity  to find out how much funds are needed when the sales growth at different rates. A
firm should be managed effectively and efficiently. This implies that the firm should be able to
achieve its objectives by minimizing the resources. Managing implies co-ordination controls of
the efforts of the firm for achieving the organizational objectives.  The study has given light to
the researcher and the company on how to identify the funds needed how to raise the fund
required. The various options were studied and identified in this project, which will help the
company to the maximum.

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 BIBILOGRAPHY

BOOKS
 Rasmussen et al., 2003, 97: Forecasting and ProfitPlanning. The Determinants and
Consequences of Financial Education in the Workplace: Evidence from a Survey of
Households. NBER Working Paper No. 5667. Cambridge, Mass.: National Bureau of
Economic Research.
 Thompson and Gates, 2007, 825. “State Curriculum Mandates and Student Knowledge of
Personal Finance,” Journal of Consumer Affairs. (Winter).
 Jack Welch, “Winning” (With and Dijkman, 2008. “Ignorance is Not Bliss: The Importance of
Financial Education,” TIAA-CREF Institute Research Dialogue, No. 78 (December).
 Shim and Siegel, 2009, 2: Planning and Budgeting Managing the Politics of Reform:
Overhauling the legal Infrastructure of Public Procurement in the Philippines. Washington:
World Bank.
 Shim and Siegel, 2009, 21 “Household Finance.” NBER Working Paper 12149. (March). 2006.

WEBSITES
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