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A Summer Training report on “RATIO ANALYSIS” of PRATAP SPINTEX PVT. LTD.

Presented to: Ms. Neha Sharma Asst. professor AIMT.

Presented by: Manish Jain MBA (3rd semester) Roll No.- 1714

• • • • • • • • • • • • Industrial Profile Company Profile Ratio Analysis Objectives Research Design Scope Data Collection Limitations Data Analysis Findings Conclusion Bibliography & Suggestions

 The textile industry grew out of the industrial revolution in the 18th Century as mass production of yarn and cloth.  Textile industry is one of the oldest industries existing until date.  Textile refers to a flexible material comprising of a network of natural or artificial fibers, known as yarn.  Textiles are formed by weaving, knitting, crocheting, knotting and pressing fibers together.  Around 35 million people are directly employed in the textile manufacturing activities.  India’s textile industry is one of the economy’s largest  India is the third largest producer of cotton with the largest area under cotton cultivation in the world.


 From 1987 to 2002.  In nineties this group was the largest oil producer in Northern India. the group diversified into textile sector with the latest technology Open-End Spinning unit in Punjab.  In 2008-09. set-up Agro based unit in Haryana. group’s Managing Director.  In 2011. group entered in the real estate with a magnificent investment. .  In 2002-03.  Then installed first solvent plant in 1979 in Haryana. the group remained in oil industry business. Ram Partap Bansal. the group with numerous expansions turned into the second largest manufacturer of denim fabric in India.  The group first setup rice mill in 1977.Introduction To Company Partap Group of Companies made a humble beginning in mid 70’s when late Sh. earlier engaged in the business of hire-purchase financing/ real-estate investment.


O Yarn Conditioning .Process of Spinning • • • • • • • • • • Sorting Blow Room Mixing Carding Finisher Draw Frame Speed Frame Ring Frame Auto Coner T.F.

• THREATS:  Fashion may change. which is the major raw material • OPPORTUNITIES:  “Made in India” denim fabric  Independent researches indicate the global demand is expected to increase by 5% to 6 % annually for another 5 to 10yrs.  Well-established marketing network • WEAKNESSES:  The price of the cotton yarn. . impacting the demand for cotton yard.Swot Analysis • STRENGTHS  Global bench marking.

INTRODUCTION TO RATIO ANALYSIS • DEFINITION OF RATIO ANALYSIS  Ratio Analysis is a fundamental means of examining the health of a company by studying the relationships of key financial variables. • Significance and Usefulness of Ratio Analysis:  A useful tool in the hands of analyst:  Inter-Firm comparison:  Trend Analysis:  Decision Making:  Financial Forecasting and Planning:  Control is more Effective:  Usefulness to the Owners/Shareholders:  Usefulness to the Creditors: .

FOLLOWING ARE THE MAIN ADVANTAGES OF RATIO ANALYSIS: • • • • • • • • • Helpful in Decision Making Helpful in Financial Forecasting and Planning Helpful in Communication Helpful in Co-ordination Helps in Control Helpful for Shareholder's decision Helpful for Creditors' decisions Helpful for employees' decisions Helpful for Govt. decisions .

. • Profitability ratios. Short term creditor’s main interest is the liquidity position or short term solvency of the firm. • Leverage ratios.DIFFERENT TYPES OF RATIOS The parties interested in financial analysis are short and long term creditors. They are classified into 4 categories: • Liquidity ratios. owners and management. • Activity ratios.

 To provide useful financial information to the management  To know about the financial position. risk bearing capacity of the company.OBJECTIVES OF STUDY “Success is achieved by those who try where there is nothing to be loose by trying and a great deal to gain” • PRIMARY OBJECTIVE: To analyze the financial position of PARTAP SPINTEX and interpret the same using financial tool Ratio Analysis. . • SECONDARY OBJECTIVES:  To simplify and summarizes a long arrangement of accounting data and makes them understandable  To helps in forecasting and in preparing financial plans for the future.

we have to use facts and information already available and analysis these to make an evaluation for project.TYPES OF RESEARCH • Descriptive Research: Descriptive research has been conducted to describe the various characteristics related to working capital. • Quantitative Research:Quantitative research is obtained to evaluate the different parameters relating to the working capital management. • Analytical Research:In it. . It includes the facts finding inquiries of different kinds.

 Product & Services which is offered by the company.  Opportunities available to the company are sized up and its growth potential assessed .SCOPE OF STUDY Studies due with the details that affect the profit of the company along with that the financial ratios will the help us to know the financial position and liquidity of the company.  Examines key information about company for business intelligence. .

which can be helpful in the study. .  Manager some time denied disclosing some important financial matters.  The staff members of the company were too much busy in their audit work because that was for audit time.LIMITATIONS OF STUDY  Six weeks training is not sufficient to know the details of the organization.

Ratio Analysis Of Partap Spintex .

55 2.75 2. Since the current ratio of the firm for the past 2 years is more than 2:1.85 2.Current Ratio = Current assets Current Liabilities 2.65 2. .7 2. therefore the firm has been in good liquid position.6 2.8 CURRENT RATIO CURRENT RATIO RATIO 2010 Interpretation: As a convention the minimum of 2:1 ratio is referred to as Banker’s Rule of thumb.8 2.6 YEAR 2.5 2011 2.

82 2011 YEAR 2010 0.87 LIQUID RATIO Interpretation: As a convention.Liquid Assets Ratio = Liquid Assets Current Liabilities LIQUID RATIO 0. the ability of the firm to realize the debtors has been decreased.875 0.865 0.855 0.e.86 0.85 RATIO 0.84 0.87 0. But the liquid ratio for the past 2 years has been declining & this is due to decreasing cash balance & increasing debtors i.84 0.835 0.83 0. .845 0.825 0. ratio of 1:1 is considered satisfactory.

03 0. RATIO Interpretation: The acceptable norm for this ratio is 0.08 ABSOLUTE LIQ.04 0. .09 0.06 0. RATIO 0.08 0.013 0.01 0 2011 YEAR 2010 0.02 0.05 RATIO 0.Absolute Liquid Ratio = Absolute Liquid Assets Current Liabilities ABSOLUTE LIQ. This ratio of the firm for the past 2 years is not satisfactory & is showing a decreasing trend.5:1.07 0. It means that the company is not in a position to meet its short-term obligations.

7 2.75 RATIO 2.8 2. Inventory STOCK TURNOVER RATIO 2. Inventory Turnover Ratio = COGS Avg.63 2.the ITR was 2.65 2.82 STOCK TURNOVER RATIO Interpretation: In 2010.82 This indicates efficient management of the inventory of the company & over investment in the inventory.55 2.85 2.6 2.65 and in 2011.EFFICIENCY RATIOS :1. the ITR of the company was 2. .5 2011 2010 YEAR 2.

Debtors Turnover Ratio = Net sales Avg. .66 4 7.47 DEBTORS TURNOVER RATIO 2 0 2011 2010 YEAR Interpretation: DTR has increased from 7.47 times to 9. Debtors DEBTORS TURNOVER RATIO 12 10 8 RATIO 6 9.66 which shows that now company has improved in managing its debtors.

CTR has increased from 3.4 2 3.4. Creditors creditors turnover ratio 6 5 4 RATIO 3 5. which shows that now company is inefficient in managing creditors.13 1 creditors turnover ratio 0 2011 2010 YEAR Interpretation: In 2010. .Creditor’s Turnover Ratio = Purchases Avg.13 to 5.

Working Capital Turnover Ratio = Sales Avg.83 3.78 2011 2010 YEAR Interpretation: The working capital has been increasing which shows the efficient utilization of working capital.82 RATIO 3. .81 3.79 3.8 3.85 3. W. Capital working capital turnover ratio 3.4.84 3.8 3.84 working capital turnover ratio 3.

065 1. Debt Equity ratio 1.07 1. it is 1.05 1.04 2011 2010 YEAR 1. A high DER indicates that the claims of the outsiders are greater than those of owners. Debt Equity Ratio = Outsider’s Fund Shareholders Fund Interpretation: In 2010.06 RATIO 1.073:1 & decreased to 1.05 1.075 1.055:1 in 2011. because this gives lesser margin of safety for them at the time of liquidation of the company.SOLVENCY RATIO: 1. A low ratio is considered favorable from the long-term creditor’s point of view.055 1.07 Debt Equity ratio . Because a high proportion of owner’s fund provide a larger margin of safety for them.045 1. which may not be considered by the creditors.

Funded Debt to Total Capitalization Ratio = Funded Debt X 100 Total capitalization Debt to Capitalisation ratio 43.5 40 2011 2010 YEAR 41 43 Debt to Capitalisation ratio Interpretation: In 2011. this ratio is considered to be tolerable. the better it is for the company. Up to 50 % to 55%.5 43 42. it was 41%.2. . Since this ratio of the company is below this limit therefore the company is in better solvency position as lesser reliance on outsiders.5 42 RATIO 41.5 41 40.

2 49 48.6 48.8 48 47.4 RATIO 48.4 2011 2010 YEAR .6 47.2 48 49 X 100 Interpretation: In 2010 & 2011 there was no significant change in ER as it was 48% in 2010 & 49% in 2011. 47. Higher the ER better is the longterm solvency position Equity Ratio of the company otherwise not.3. Equity Ratio = Shareholder’s Fund Total Assets Equity Ratio 49.8 48.

3 51.8% & in 2011 it is decreased to 51.4.6 51. Ratio of Total Liabilities to Total Assets = Total Liab.7 51.9 51.8 51.1 51 2011 2010 YEAR Interpretation: Further in 2010 it was 51.8 Liabilities to Assets ratio X 100 51. To outsiders Total Assets Liabilities to Assets ratio 51.3 51.3% which means that the ratio of the company has become more satisfactory. .2 51.4 51.5 RATIO 51.

Fixed Assets to Net Worth Ratio = Fixed Assets X 100 Shareholders Funds Fixed assets to Net worth ratio 120 100 80 RATIO 60 99.5.7 40 81. In 2010 and 2011 it was below 100%. When the Fixed assets to Net worth ratio ratio is more than 100% it implies that owner’s funds are not sufficient to finance the fixed assets & the firm has to depend upon outsiders to finance fixed assets. .5 20 0 2011 2010 YEAR Interpretation: When the ratio is less than 100% it implies that owner funds are more than total fixed assets & a part of working capital is provided by the shareholders.

100% is considered to be satisfactory. But in case of this company the ratio is less than 100%.8 Fixed assets ratio Interpretation: In 2011 it came down to 48%. which implies that a part of working capital requirement is met out of the long-term funds of the firm. Generally. .6. Fixed Assets Ratio = Fixed Assets X 100 Total Long Term Funds Fixed assets ratio 58 56 54 52 RATIO 50 48 46 44 42 2011 2010 YEAR 48 56.

6 29 Gross Profit ratio Interpretation:. Finally in 2011 GP Ratio decreased to 25. .PROFITABILITY RATIOS:- • 1.6% because percentage increase in sales is more than percentage increase in Gross Profit. Gross profit Ratio = Gross Profit Net Sales Gross Profit ratio 30 29 28 27 X 100 RATIO 26 25 24 23 2011 2010 YEAR 25.

04% due to increase in NP. .19% & it increased to 5.2.04 2 Net Profit ratio 1 2. Net Profit Ratio = Net Profit Net Sales Net Profit ratio 6 X 100 5 4 RATIO 3 5.19 0 2011 2010 YEAR Interpretation: In 2010 the NPR of the company was 2.

Operating Ratio = Operating Cost Net Sales Operating Ratio 78. .5 75 74.5 78 77.3.5 75 74 73.5 RATIO 76 78 75.5 2011 2010 YEAR Operating Ratio X 100 Interpretation: In 2011 OR increased to 78% because % change in OC is higher than percentage change in sales.5 77 76.

) from 35. 39 38 37 36 35 34 33 Return On Investment 2011 2010 .Profitability Ratios Based On Investment • 1. better it is for the firm.43% in 2010. Higher the ROI. In 2011 the Return on Investment has increased to 39% (approx. Return On Investment= Profit before Interest & Taxes X 100 Capital Employed Return On Investment 40 Interpretation: The Return on Investment should be high.

. the ROE has increased to 11% (approx. more benefits will be enjoyed by the shareholders and the Goodwill of the firm will also increase.2. In 2011. Return On Equity= Net Profit After Interest& taxes Equity/shareholders funds X 100 Return On Equity 12 10 8 Return On Equity 6 4 2 0 2011 2010 Interpretation: Higher the Return on Equity.) from 4% in 2010.

79/share with 25 lakhs shares from Rs. Earnings Per Share = Profit After Tax Number of shares Earning Per Share 90 80 70 60 50 Earning Per Share Interpretation: Higher the earnings of a firm. 40 30 20 10 0 2011 2010 . the E. In 2011.S. 37/share with 20 lakhs shares.3. the more investors will be attracted to the firm for investment.P. has increased to Rs.

 We found that liquid ratio is below the ideal ratio which occurs due to decreasing cash and increasing debtors.Findings  From the calculated current ratio.  From the calculated stock turnover ratio.  We found that creditors turnover ratio has been increasing which means that company is inefficient in managing its creditors . we find that it has been increasing which means that company is efficient in managing its stock. we find that it is above the ideal ratio which means firm is having good liquidity position.  The company’s absolute liquidity ratio is below the ideal ratio which means the firm is unable to meet its short term obligations.  The company’s debtors turnover ratio has been increasing which means company is efficient in managing its debtors.

 The equity ratios has been increasing which means that a company is having good solvency position.. From the calculated working capital ratio. we find that company is efficiently utilizing its working capital as it is increasing. we find that a company is having a good solvency position as it is decreasing.  The company’s net profit and operating profit ratio has been increasing which means that a firm is having good profitability. .  From the calculated debt equity and funds to capitalization ratio.

 Company should select proper and fast techniques to reduce the excess paperwork . This will save the amount of tax paid by company  Company should concentrate on reducing the manufacturing expenses because this year its sales has increased but gross profit is less as compare to sales.SUGGESTIONS  Company should raise funds from long term loans or debentures.

There should be proper coordination between different departments of the organization especially between production and purchase department for the timely availability of required goods Organization should sale the waste on the daily basic because it will not only generate the cash and but also help in the making space in the godown. .

asp http://www.aspx?mpgid=2&pgid=3 .partapgroup. INTERNET SEARCH: whttp://www. Financial Management by Shashi • BOOKS: • • • • • Management accounting by R. Gupta -11th Addition.partapgroup.

Thank You .