Deep Singh Ratio Analysis

7/30/2019 Deep Singh Ratio Analysis

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A

SUMMER TRAINING PROJECT REPORT

ON

RATIO ANALYSIS

IN FLEXITUFF INTERNATIONAL LTD

THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF

THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

(2011-2013)

SUBMITTEDTO: SUBMITTED BY

SUKRITI HSA KULDEEP SINGHMBA III

rdSEM.

AMRAPALI INSTITUTE,SHIKSHA NAGER, KALADHUNGI

ROAD, HALDWANI (NAINITAL) UTTRAKHAND


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ACKNOWLEDGEMENT

We take this opportunity to express our deep gratitude to the management of FLEXITUFF

INTERNATIONAL LIMITED A&R Division, Pipalgao Road,Near Idgaha Mahuakhera Gang,

KASHIPUR U.S Nager (UTTARAKHAND) for providing us the opportunity to get an exposure

of their esteemed unit.

We are sincerely thankful to the HRD Deptt. Which co-ordinate our training and WE

especially express our thanks to Mr. SNJAY SINGH BHAR DY. MANAGER (A/C.D.)

D.N. UPDHYA, DY.MANAGER (H.R) for their continued help and guidance during our stay

here.

We wish to express our sincere gratitude to HOD & personnel of Account Office where we

had detailed interaction & inspiring guidance and motivation from them.

Last but not the least we express our deep gratitude to our respective Training & Placement

Officers for sending us to such a large integrated industry for summer training and giving us a

chance to acquire an experience of my life time.

We also express our sincere indebt ness to our parents and family members for

providing their continued moral support during our training period.

KULDEEP SINGH

MBA III SEM.

AMRAPALI GROUP OF

INSTITUTES, HALWANI


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PREFACE

This is more than one factor at work, while which can ensure the true completion of the

project. It is not an idea held on certain topic that matter, but it is complete knowledge attaining

process and therefore requires an in depth knowledge of the topic of the project.

The project includes an overview of Ratio analysis in FLEXITUFF INTERNATIONAL

KASHIPUR UNIT.

The varies and varied aspects of the problems has logically discussed and systematically

presented in a simple language.


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S.NO. CONTENTS PAGE NO

1 Acknowledgements 2

2 Preface 3

3 Industry Profile 6-11

4 Company Profile 12-43

5 Theoretical Background 44-81

6 Objectives and Scope 82-83

7 Research Methodology 84-87

8 Data Presentation And Analysis 88-99

9 Summery of Findings 100-101

10 Suggestions and Recommendations 102-103

11 Conclusions 104-105

12 Annexure

Limitations and scope106

13 Bibliography 107-108


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HISTORY OFORGANISATION


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HISTORY OF THE ORGANISATION

The flexible intermediate bulk container popularly nomenclature as FIBCs is said to have

been first manufactured in the late 1950s / early 1960s in the United States, Europe and Japan.

The FIBCs manufactured with polyolefin fabrics were experimented in Uk, Canada and the US

around late 1960s and early 1970s.The growth of the flexible intermediate bulk bags that are

universally used today is however spurned with the development of the high strength lightweight

fabric (polypropylene). The FIBCs are giant size bags in drum or box shapes, with capacities

ranging from 250-2000 kg depending on the bulk density of the product. Whereas the basic

material is polypropylene (PP), high-density Polyethylene (HDPE) or polyamide (Nylon) are

also used. The FIBCs can be custom built to meet specific requirement and also UV stabilized.

The concept of bulk packaging revolves around environmental aspects apart from reducing

the cost of packaging and faster handling. They also facilitate to minimize losses in spillage and

pilferage and create better working atmosphere.

India witnessed the introduction of FIBCs during early 1990s and has since grown to be

frontline manufacturers in the world. Although the domestic market growth is still at a slow

pace, the converting industry has found export acceptance and nearly ninety percent of

production is exported providing the exchequer an excellent FE earning. Both the domestic

demand and exports are envisaged to record excellent growth potential.


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ABOUT FLEXITUFF

Flexituff International Ltd, a company promoted by the renowned Kalani group from

Indore. Flexituff has the largest capacity in India (2nd largest in the World) to produce PP woven

based products. It has the most modern Plant & Equipments under one roof to convert PP

granules to tapes, fabric, printing, extrusion lamination & bag making.

Flexituff is the first company to start BOPP printed & laminated pp woven bags in India about

seven years back. It is the leader in Jumbo bags, Big bags and container liners. Due to continuous

support and strength derived from its own R& D and the international quality set & maintained

by its team of scientists, engineers & professionals, today, Flexituff is exporting to more than 40

countries in the world and has been receiving Best export awards year after year. Flexituff is the

first and only Asian company now successfully audited and certified by AIB (American Institute

of Food Bakers, USA) and BRC (British Retailers Consortium UK) to make direct food contact

bags for supplies to American and European companies. It is also certified for ISO 9001: 2008,

ISO 14001:2004, ISO 22000:2005 and HACCP. In addition to three Units at Pithampur near

Indore, they are coming up with another most modern Unit at Kashipur at Uttarakhand.

Flexituff caters to different sectors like; Agriculture produce-vegetables, fruits, rice, wheat,

atta, besan, salt, spices, as well as to other sectors like; fertilizer, chemicals, cement, etc.,. It also

has the experience & expertise to produce any type of PP / HDPE bags to customer

specifications. Flexituff offers packaging solutions of their products right from 1 KG to 20, 000

KG.


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GLOBAL FIBC PRODUCTION & CONSUMPTION


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ADVANTAGES OF FIBC

Each FIBC can carry up to 1000 times its own weight.

Each FIBC has integral lifting loops, eliminating the need for pallets.

Excellent printability.

Efficient use of space with Specific Designs

Simple to use

Cost effective

Very strong yet flexible

Low per mt packaging cost

Variety of dimensions available

Variety of filling, discharging and lifting facilities

Can be used for hazardous chemicals as specified in the UN Chapter 6.5

recommendations.


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COMPANY PROFILE

Be it polywoven products (like FIBCs, geotextiles, BOPP bags) or thermo-formed FLEXITUFF

INTERNATIONAL LIMITED, worlds largest poly-woven packaging company, occupies the

enviable status of being the sparkling jewel in the diverse Kalani Industrial Enterprise - one of

the leading and respected business Groups of Central India.

With 4 multi-locational manufacturing plants, combined annual capacities of over 40,000 MT

and dedicated distribution footprints in more than 40 countries, Flexituff, with its 6000 strong

work-force, has emerged as worlds most preferred one-stop-shop for bulk packaging products

and solutions.

Set up to fulfill the demanding bulk packaging and transporting requirements of a host of

industries across the globe, Flexituff has an enviable number of attributes working for its most

discerning buyers. Economies of scale, the edge of attitude, 100% integration under one roof,

global foot print, nearly 2 decades of being in the industry, global manufacturing standards and

cost advantage of Asia.

Its state of the art manufacturing facilities at SEZ Indore (M.P.), Kandla (Gujarat) and

Kashipur (Uttranchal) measure up to the exacting global norms of GMP, AIB and BRC-IoP.

Flexituffs ISO-9001-2000 certified facility with its integrated manufacturing base permits

scaling the throughput to match demanding deadlines.


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articles (food trays, boxes, punnets) or retail packagings (leno/net bags for vegetables),

Flexituffs products find ready acceptability in all continents. A pro-active customer-centric

approach has helped Flexituff gain a larger global market share. A fact acknowledged by the

Government of India with the highest FIBC Exporter Award for past seven years in a row.

Since its inception in the year 1993, Flexituff core values of commitment to Safety,

Health and the Environment, high ethical standards and respect for people have been the

cornerstone of its existence and what it stands for. At Flexituff workforce is assumed to be the

stake holders of its efficiency. A people driven enterprise, it makes every effort to nurture a team

that can grow with the organization. A team that shares the responsibilities and rewards, fairly

and squarely.

Team Flexituff is committed to serving all your FIBC requirements. The

commitment stems less from the mammoth manufacturing facilities they possess and more from

theirr 2000 strong work force. Nothing defines Flexituff better than its people. Young in outlook

and rich in experience, Team Flexituff strives for total customer satisfaction, continuous

improvement in quality and delivering ever larger value to its buyers.

Despite the over arching team spirit that prevails at Flexituff, we believe, commitment

to customers begins with the individual. Although, our 2000 member team works like a well

greased machine, it is the individuals - the cogs, who fuel its driving commitment to quality and

responsiveness.


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100% customer orientation has helped Flexituff gain wide global market share. A fact,

acknowledged by the Govt. of India with this highest FIBC exporters award, for last 6

years in a row.

Awards, citations, growing volumes, expanding product range and satisfied customers

are achievements we now take in our stride. But nothing fails to tickle us more than the idea of

an impossibility.

Throw us a challenge and you have us hooked. Team Flexituff nurtures its hunger to hit

the ball out of the park. We like to be known as partners who can rise to the moment, who can be

counted upon to meet a crisis head on...

Flexituff has an enviable number of attributes working for you. Economies of scale, the

edge of attitude, 100% integration under one roof, global footprint, a decade of being in the

industry and the cost advantages of Asia.


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FACT SHEET

Year of Establishment : 2002

Nature of Business : Manufacturer, Exporter

Number of Employees : 501 to 1000 People

Turnover : US$ 10-25 Million (or Rs. 40-100 Crore Approx)

MISSION:- is to function clean, safe, environment friendly and provide packaging solutions to

its customer with the best quality products and service.

VISION :- is to continue to invest in its human resources, state of art equipments, technology

and to stand as reputable, vibrant, innovative, honest, reliable organization and to provide quality

product & services at competitive price to its customer

VALUES:-

a) Meeting commitments made to customer.

b) Faster learning creativity and speed of response.

c) Respect of dignity and potential of individual.d) Loyalty and pride in the company.e) Team playing.f) Zeal to excel.g) Integrity and fairness of all matters.

GROWTH:- To ensure the steady growth by enhancing the competitive edge in existing

business, new Areas and international operations areas fulfill the nationals expectations

from Flexituff International Ltd.


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PRIMARY COMPETITIVE ADVANTAGES:-

It is gained by focusing on three main features:

Modern technology. Traditional craftsmanship. Best quality with experience.

PROFITABILITY:To provide a reasonable and adequate return on capital , capacity

utilization and productivity and generalization of adequate internal resources to finance the

companys growth .

CUSTOMER FOCUS:To build a high degree of customer confidence by providing

increased value for money through international standards of product quality , performance

and superior customer .

PEOPLE ORIENTATION:To enable each employee to achieve his potential improve

his capabilities , perceive his role and responsibility and participate and contribute

positively to the growth and success of company to invest in human resource

continuously.

TECHNOLOGY: To achieve technological excellence in operations by the development

of indigenous technologies to suit business need and provide a competitive adequate to

the company .

IMAGE: To fulfill the expectations which stockholder like government as owners,

employees customers (buyers) and country at large have from Flexituff International Ltd.


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INTEGRATED PLANT - ALL FACILITIES UNDER ONE ROOF

Flexituff International Limited is one of the very few fully integrated plants is the world.

Its 100% integration permits us to deliver our products in multiple options while retaining

100% control over the manufacturing process. Needless to say, Flexituff is fully independent

from the vagaries of outsourced material or workmanship.

Last minute change in specifications, add on orders can be quickly and comfortably accom-

modated at Flexituff. We are able to maintain full traceability of material and workmanship

in our Quality Assurance systems.

Total Quality Control.

Enhanced customization, last minute changes, faster sampling and lower turn

around delivery time are the winning advantages of our vertical integration.

The Power of Integration

Quoted at 1st World FIBC Congress,

Amsterdam, Netherlands.

" We are highly concerned with the quality of bags and give credit to those suppliers

who are vertically integrated and thus able to keep 100% control of every step of the manufactur-

ing process from the moment you qualify the virgin resin, extrude and weave the fabric, to sewin

-g and finishing."

Dr. Thomas Gerdau Head of Procurement, International Packaging Hoechst Procurement

International, GMBH, Germany.


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Flowchart showing the Integrated Plant of Flexituff.


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EXTRUSION

Microprocessor controlled extrusion ensure excellent input for the subsequent

operations. Extrusion plants at Flexituff - the very life blood of the manufacturing process, are

state-of-the-art Starlinger. This ultimate extrusion technology comes alive in the experienced

hands of our workforce to process over 60,000 kgs. of virgin polymer everyday. Producing

impeccable high tensile strength tapes with optimum elongation - a pre requisite for perfect

fabric. Precision winding being the key to weave fine fabrics, all tapes are wound by new

generation inverter controlled winders to produce even bobbins. Quality checks begin from the

very initial stages of Tape-making. Every lot produced is checked for its Denier, Strength,

Elongation and Color.

3 layer co extruded liner plant.


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If 3 layer co-extruded liner plant is a luxury, so be it. Our buyers deserve this luxury. This over

qualified plant ensures that we produce liners with zero pinholes, fish eyes or any other

extrusion flaw. At Flexituff, microprocessor controlled Form-fit Liner Machine cuts, seals and

form-fits the liner in a dust-free clean room environment conforming to ISO Level-7 (< 10,000

PPM). Be it Glued, Tabbed or Flanged-in, well executed process eliminates liner twisting inside

the bag.

The vital facility of coatingthe essential prerequisite for making FIBCs is a 2.4

meter wide coating plant laminating both circular and flat fabric in thicknesses ranging from 15

to 80 microns. A unique fabric cleaning device, designed and developed in-house, is mounted on

the coating machine to avoid any foreign particle going in-between fabric and the coating.

The quality is free.

As the foremost manufacturer of FIBC in the world, they are sensitive to

decoding customer needs. Their design and development team is committed to evolving bulk

packaging solutions for your specific requirements. Infact, they try to preempt them.

Form fit liner sealing.


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Extrusion coating.

FABRIC

Flawless weaving, off the floor stacking of stretch wrapped rolls and unsurpassed

6 color printing.


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Fine and consistently even fabric is the face of our FIBCs. Over 3 million square feet of high

quality fabric is woven everyday on an array of wide width Starlinger looms. Computerized

weaving machines with the help of skilled hands produce consistent quality fabric. In the end

what you have from this state-of-the-art facility is an amazing collection of poly woven fabric,

ranging 60 GSM to 300 GSM ready to be turned into burly jumbo bags for stringent end

applications.

Flexituff's R&D initiatives are amply reflected in its ultrasonic slitting and sealing technology

which makes our fabric comparable to tuck in fabric of a Sulzer loom.

Flexituff recognizes that for a critical food contact application, its not enough to mere make a

high quality fabric, the fabric also needs to be contamination-free, carrying no foreign particle or

even a speck of dirt. To achieve this high level of fabric cleanliness, fabric is stretch-wrapped on

looms itself. Raising the bar on cleanliness, the stretch sealed fabric rolls never touch the ground.

4 color printinga rare facility with others is pass at Flexituff. For, we utilize a 6 color flexo

-graphic printing machine of a kind, which makes the fabric come alive. This excellence finds it's

match in the fabric's evenness to create sharp, even, non-fading printsrepeats after repeats.


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Off the floor stacking.

The quality mantra.

At Flexituff, we hardly believe that quality is what clients demand. Out here,we believe, quality is what you live. And breathe. Quite simply, the cost of making a quality

product is seldom more than that of a sub standard product. But its value, far higher.

ZERO OUTSOURCING OF CRITICAL AUXILLARIES

For consistency in quality and schedules, even the smallest auxillary is

manufactured in-house. Genuine quality, is a chain without a weak link. Any FIBC, therefore, is

as good as the quality of input that goes into making it. Recognizing that even a small leak can

sink a ship, Flexituff rather chose to invest in establishing facilities for making every FIBC input

in-house. It has paid rich dividends in terms of customer satisfaction.


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Take for example high tenacity sewing yarn for FIBCs. Flexituff commissioned state-of-the-art Fare multifilament plant which produces 7 GPD UV stabilized sewing thread in the

deniers ranging 420 to 5200. Also set up in-house is the facility of twisting the filament yarn into

sewing thread to required specifications. Or take the all important webbing.

A battery of needle looms make 75 million metres of webbings required to produce bags at

Flexituff. In-house production not only ensures required level of UV stability and the strength

but also customizing of webbing to colours and weaving required by the client. The list is quite

exhaustive. Be it filler-cord for sift proofing, Tie-tape, rope and B-lock bag for closure,

document pouch, identification labels, printing stereosall inputs get made in-house.

ASSEMBLING THE FINAL PRODUCT

An intelligent, skilled and trained workforce assembles the components into efficient bulk

containers.21,000 FIBCs a day in addition to Builder bags and single loop bags make Flexituff

the largest production facility in the world. Be it Form-stable Q-bag, U.N. Certified Hazmat bag

or Type-C/D bag, Flexituff offers the most cost-effective solutions for carrying bulk

commodities up to 2500 kgs. Every Flexituff FIBC design is certified by NEL, UK.

The assembly section is planned for neat and clean environment, smooth workflow and

strict adherence to Clean Room Specifications. The specially trained work force, qualified for

basic intelligence parameters and quality orientation works as a team to deliver consistent

product quality. Full scale production for any bag starts only after the first prototype bag has

been certified by the QC in all respects, including Load Test. Each and every bag is inspected for

all critical and aesthetic parameters.


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Metal detection.

To ensure contamination-free bag, every bag is cleaned on pneumatically-operated cleaning

machine where double action blowers with alternating blowing and suction cycles eliminate the

smallest loose particles from the bag. All food contact application bags essentially pass through a

Metal Detector unit eliminating any chance of metal no matter how light or small to slip in

the bag.

Appreciating the need to be 100% right every time, as an abundant precaution, Flexituff has

instituted additional layer of quality audit. Where a team of professionals randomly draw 10%

bags for inspection from duly baledready to go bags. Any minor deviation in the drawn sample

leads to entire lot to go back for re-inspection and segregation. Packaging these packages is an

art in itself at Flexituff. Each batch is packed in compact cuboid bales which are duly stretch-

wrapped and marked for easy readability and stackability at clients place. The new European

and the U.S. Pallet Norms ISPM-15 are followed as every individual pallet is treated and marked


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Eager to reach out.

Flexituff is keen to forge a business relationship with you. Our capacities can smoothly

tackle your most demanding requirements. No challenge, in terms of quantity or quality is too

large to keep us from catering to your need.

Dual action bag cleaning


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A responsible corporate in worlds largest integrated clean room

FIBC manufacturing facility.

People Focus

Dreams are what drive us. We respect people and value their individual differences

and this has led to a free, vital corporate culture that encourages creativity.

We are fortunate to have so many talented people with different backgrounds, interests

and skills who come together to create offerings for the future.

Flexituff is a place where teamwork is essential. Yet our employees also maintain the

freedom to work on their own, be creative and make their own decisions. And most of all,

grow both personally and professionally.

Equal Opportunity & Meritocracy:

Recruitment and promotions in Flexituff are all based strictly on merit.Equal opport -

unities are provided to all without regard to race, caste, religion, colour, ancestry, marital

status, gender, age or nationality.

The Company believes that people accept meritocracy as a just and equitable system,

and contribute best under optimum challenges and opportunities & differential rewards

commensurate with performance.


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CorporateGovernance

At Flexituff, our pursuit to achieve good governance is an ongoing process, thereby

ensuring truth, transparency, accountability and responsibility in all our dealings with our

employees, shareholders, consumers and communities. We aim to develop capabilities

and identify opportunities that best serve the goal of value generation, thereby creating an

outstanding organization.

Environment, Health and Safety:

Since its inception, the Flexituff core values of commitment to safety, health and the

environment, high ethical standards and respect for people have been the cornerstone of

who we are and what we stand for.

Well communicated EHS policies ensure that production targets never override the

safety of a person and that as a responsible corporate, we remain an environmentally

responsible neighbor in the communities where we operate, acting promptly and surely to

correct incidents or conditionsthat endanger health, safety or the environment.


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PLASTIC INDUSTRY AT A GLANCE

Globalization has become the most important message for the development of the

industrial sector in India which means the industries have to become both competitive

and cost effective. During 2001 Flexituff acquired two large units: Special Economic

zone Pithampur and A&R Devision, Mahuakhera Gang. Flexituff worlds Largest

Integrated Clean Room FIBC Manufacturing facilities.turiye is the worlds second

Largest Exporter of FIBC.

Today, modern Turkiye ranks 17th among the largest economies in the world

and 7th in Europe with its GDP reaching almost US $ 500 billion in 2007. The

Turkish economy is growing during the last 22th quarters, averagely 7 percent in

the last five years. As a result of the eminent change of Turkiyes economic and

trade policies in the early 80s, its foreign trade has constantly boosted, reaching a

value of 270 billion dollars in 2007.

Flexituff is the worlds largest integrated Clean-Room FIBC manufacturing

facility. We produce over 11 million FIBCs every year which get exported to over

30 countries across all the continents.


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Flexituff, besides being the largest integrated manufacturer, also have

qualitative edge substantiated by :-

1. Food-grade certification from American Institute of Baking i.e. AIB(USFDA),

USA with highest ranking i.e. Superior Grade. We have this certification for past

three years.

2. Europes most-coveted certification, BRC-IoP i.e. British Retail Consortium and

Institute of Packaging for direct food contact packaging for past three years.

3. ISO9001:2000 certification from TUV, Germany.

4. HACCP certification i.e. Hazard Analysis Critical Control Points.

Flexituff also has a fully established Research & Development (R&D) Wing

with 12 Design Engineers who continuously work on offering cost-efficient and

safe packaging solutions. To support the R&D function, we have also employed

chemical scientists and microbiologists. We have the most modern in-house Test

Laboratory equipped with Load Test Rig, UV Weatherometer, MFI Tester, and all

other required Test Equipment.

This well equipped and state of art manufacturing facility helps us in

maintaining a vast product range. Our team of design engineers are working day in


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and day out to increase our offerings to niche markets. Till date we have some

patented product listed with our name, along with being licensee of some others.

We are not confined to the existing product range only, but do take over R & D on

any new project of viability. Our design engineers and scientists are dedicated to

manufacture new products to come up to customers expectation.

In the end with we take pride in informing you that we have received "The

Top Exporters Award" for our products from government of India continuously for

last 6 years.


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ORGINAZATION STRUTURE

Flexituff International Limited

CHAIRMAN

PRESIDENT

VICE PRESIDENT

(UNITHEAD)

SENIOR GENERAL MANAGER

GENERAL MANAGER

DY. GENERAL MANAGER

MANAGER


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DY. MANAGER

ASST. MANAGER

OFFICER

ASST. OFICER

GRADED STAFF


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RAW MATERIALS:-

Companies main raw materials are:

1. Polypropylene2. Films and Fabrics3. Plastic Dana4. Printing Chemical5. Waste Plastic6. High polyethylene:HMHDPE, HDPE Blow moulding grade

COMPANIES MARKETING POLICY:-

Companies marketing policy is targeted to meet customers need and

satisfaction. Presently the company is also exporting its items to various countries.

The head office of the Company is at Dhar.

MARKET FOOTPRINT

GERMANY; FRANCE; IRELAND; NETHERLANDS; SPAIN; MEXICO; UNITED

KINGDOM; BELGIUM; ITALY; PORTUGAL; GREECE; BRAZIL; USA; UAE; RUSSIA;


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KENYA; RWANDA; CHILE; ERETRIA; CANADA; SWITZERLAND; AUSTRALIA;

ALGERIA; JAPAN; NEW ZEALAND; CHINA; EGYPT; SINGAPORE; SWEDEN; ISRAEL;

AUSTRIA.

FIBC USER SEGMENTS:

1-Chemicals

2-Fertilisers

3-PHARMACEUTICALS

4-Polymers

5-HAZARDOUS GOODS

6-Minerals

7-Cement

8-Agri Produce

9-Building Materials

.


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CARE FOR ENVIRONMENT

Preserving and Protecting the Environment is a top priority at Century. We always

sensitive to our bio-diversity of the soil, water and Air around us. Flexituff power plant

maintains an efficient system for reducing air emissions. Electrostatic Precipitators have been

installed to remove particulates form recovery boilers, coal fired boilers and lime kiln flue gases.

In strict adherence to the standards & guidelines, the effluents are treated in a modern

ETP, which is recognized as a model plant for its efficiency & performance.

Companys adoption of a systematic approach to the environment matters including waste

minimization, water recycling & re-use programs of by products has facilitated the company in

getting the ISO-14001:2004 certification for its Environment Management System.

Companys friendship with Environment has also reflected in its Bagasse based plastic

being licensed for Eco labeling, a distinct honor to be attained.

CARING OF THE COMMUNITY

Flexituff cares for the community at large & strives to be a good corporate & social

citizen. We actively contribute to the community development of the areas in our surroundings &

regularly conduct medical camps, undertake construction work of schools, drinking water

facilities, self-employment schemes etc.


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PROCESS DESCRIPTION

A process for bag manufacture of a bag having a first dimension from a sealed bottom of

the bag to an open top of the bag, the bag being fabricated from a continuous tube of plastic film

bag material.

The process includes the steps of providing a continuous tube of plastic film bag material.

The side edges of the bat material are folded between a front bag panel and a rear bag panel to

form gussets. A sealing station having apparatus for placing two parallel and spaced apart seals

and a knife for cutting the continuous tube of the plastic film bag material between the two

parallel and spaced apart seals; First adjacent double seals are formed across the front bag panel

and the rear bag panel, the double seals in parallel side-by-side relation with one another with the

plastic film bag material there between.

The continuous tube of plastic film bag material is at least twice the first dimension from

the sealed bottom of the bag to the open top of the bag. This forms second adjacent double seals

across the front bag panel and the rear bag panel, the second adjacent double seals in parallel

side-by-side relation with one another. By cutting the continuous tube of plastic film bag

material between the second adjacent double seals, a double bag unit is formed and severed

having single seals at opposite ends of the double bags.


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PRODUCTS

OFFERED


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PRODUCT RANGE

Flexituff manufactures one of the widest range of FIBCs in the world. Whatever be your

packaging and bulk transportation requirement, you will find a suitable product in our

comprehensive range. Moreover, with our in house Design & Development Center, any

packaging requirement can be aptly developed, tested and offered as sample very quickly. Some

of the standard designs at Flexituff are as under:

1. TYPE C & D.

2. ASSORTED.

FIBCs (coated/uncoated)

Form Stable Baffle Bags

Form Fitted Liner Bags

Glued Liner bags

Conductive Type C Bags

Dissipative Type D Bags

Type C +D Bags

Sling Bags

Drum Bags

Asbestos bags

Container Liner Bags


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Food Grade Bags

Tunnel Lift Bags

Builder Bags

PP / Paper Sandwich Bags

Sand Bags

BOPP Printed Bags

Garden Waste Bags

Carry Bags

TYPE C & D

Safely managing the occurrence of static electricity during FIBC filling and emptying

operations is a critical concern in the chemical process industry. Static discharges from an FIBC

can range from operator shocks to those capable of igniting flammable gases, vapors and dust.

By using an FIBC with static protective properties, the risk of a hazardous static discharge is

significantly reduced.

STATIC DISSIPATIVE TYPE-D FIBC:

Flexituff offers static dissipative FIBC using static protective yarn. Static protective yarn

protects from hazardous electro static discharges by safely dissipating charge into the

atmosphere.


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STATIC GROUNDABLE TYPE-C FIBC:The conductive Type C bag from Flexituff uses conductive threads in a woven grid

structure. These threads are grounded to avoid accumulation of charge.

Left : Static Dissipative type-D

Right : Static Groundable type-C

ASSORTED

Garden Waste Bags:

Your way to a better and cleaner environment... versatile garden waste bags for County

Councils, Collection Services, Farms and Individual Residences:

Ideally suited for:

Grass cutting

Hedge trimming Woody waste

Kitchen waste

Leaves & Shrubs


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Garden Waste Bag.

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RATIO ANALYSIS

Ratio Analysis is the most commonly used analysis to judge the financial strength of a

company. A lot of entities like research houses, investment bankers, financial institutions

and investors make use of this analysis to judge the financial strength of any company.

This analysis makes use of certain ratios to achieve the above-mentioned purpose. There are

certain benchmarks fixed for each ratio and the actual ones are compared with these benchmarks

to judge as to how sound the company is the type of ratio analysis that is most effective dependsupon who needs the information. Credit analysts are concerned with risk evaluation, and they

therefore will concentrate of ratios that measure whether a company can pay its financial

obligations and how much debt is involved in capital structure. On the opposite end of the

spectrum, analysts looking at a business in terms of an investment opportunity will employ ratios

that determine if a company is efficient and how great is its potential profitability.

For example, knowing that a company has a particular profit margin as determined by a

corresponding ratio is meaningless by itself. Financial analysts know it's more important to determine

how that ratio looks in terms of other similar companies, or even how that ratio looks compared to priorprofitability levels of that same company. In addition, these ratios must be studied over a proper time

period, allowing for major changes within the company to be taken into consideration.

Balance sheet ratio analysis is useful in determining the solvency of a business and the amount of

reliance it has on its creditors. Specific ratios included in this group are current ratio, which measures

financial strength by dividing a company's assets by its liabilities, and quick ratio, which takes the essence

of the current ratio but excludes inventory. By focusing on the liquid assets of a business, a quick ratio

can measure its strength even in a worst-case scenario whereby all of its funding was suddenly removed

A ratio is a mathematical relationship between two related terms expressed in quantitative form.

An accounting ratio is defined as quantitative relationship between two or more items of the

financial statements connected with each other. The quantitative relationship may be expressed

in either of the following ways:-
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TYPES OF RATIOS

Normally, ratios are used for the purpose of assessing the profitability, activity or operating

efficiency and position of a business concern. Thus ratio according to the purpose, which they

serve, may put into the following groups.

1-Profitability Ratio

2-Activity Ratio

3-Liquidity Ratio

4-Leverage Ratios or Long Term Solvency Ratios.

PROFITABILITY RATIOS:-

The profitability ratios are used to measure how well a business is performing in terms of

profit. The profitability ratios are considered to be the basic bank financial ratios.

In other words, the profitability ratios give the various scales to measure the success of the firm.

The profitability ratios can also be defined as the financial measurement that evaluates the

capacity of a business to produce yield against the expenses and costs of business over a

particular time period. If a company is having a higher profitability ratio compared to its

competitor, it can be inferred that the company is doing better than that particular competitor.

The higher or same profitability ratio of a company compared to its previous period also

indicates that the company is doing well. The return on assets, profit margin and return on equity

are the examples of profitability ratios


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One of the most common profitability ratios is the profit margin. This can be expressed as the

gross profit margin or net profit margin, and it can be expressed by company, by sector, by

product, or by individual unit. The information reported on the income statement will enable you

to determine the overall profit margin. If additional breakdowns are provided, more detailed

margins can be calculated.

What Does Profitability Ratios Mean?

Classes of financial metrics that help investors assess a business's ability to generate earnings

compared with its expenses and other relevant costs incurred during a specific period. Whenthese ratios are higher than a competitor's ratio or than the company's ratio from a previous

period, this is a sign that the company is doing well.

The profitability ratio should be compared with the relevant time period. The profitability ratio

of the industries that experience operations on the seasonal basis should be compared properly.

For example, in case of the retail industry, high revenue is earned during the Christmas season.

Hence comparing the profit margin of the 4th quarter with the 1st quarter of a retailer will not

give clear picture of the profitability of the retail business. Hence in order to judge the

profitability of the retailer perfectly, the profit margin of the 4th quarter of a retailer should be

compared with the profit margin of the 4th quarter of the previous year.


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The measures of profitability ratios are:

1.Gross Profit Ratio (GP Ratio):

Definition of gross profit ratio:

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a

percentage. It expresses the relationship between gross profit and sales.

Components:

The basic components for thecalculation of gross profit ratioare gross profit and net sales. Net

sales means that sales minus sales returns. Gross profit would be the difference between net sales

and cost of goods sold.Cost of goods sold in the case of a trading concern would be equal to

opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases.

In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials,

wages, direct expenses and all manufacturing expenses. In other words, generally the expenses

charged to profit and loss account or operating expenses are excluded from the calculation of

cost of goods sold.

Formula:

Following formula is used to calculate gross profit ratios:

[Gross Profit Ratio = (Gross profit / Net sales) 100]

Example:

Total sales = $520,000; Sales returns = $ 20,000; Cost of goods sold $400,000

Required: Calculate gross profit ratio.

Calculation:

Gross profit = [(520,00020,000)400,000]

= 100,000

Gross Profit Ratio = (100,000 / 500,000) 100

= 20%
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Significance:

Gross profit ratio may be indicated to what extent the selling prices of goods per unit

may be reduced without incurring losses on operations. It reflects efficiency with which a firm

produces its products. As the gross profit is found by deducting cost of goods sold from net sales,

higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from

business to business. However, the gross profit earned should be sufficient to recover all

operating expenses and to build up reserves after paying all fixed interest charges and dividends.

Causes / reasons of increase or decrease in gross profit ratio:

It should be observed that an increase in the GP ratio may be due to the following factors.

1. Increase in the selling price of goods sold without any corresponding increase in the costof goods sold.

2. Decrease in cost of goods sold without corresponding decrease in selling price.3. Omission of purchase invoices from accounts.4.

Under valuation of opening stock or overvaluation of closing stock.

On the other hand, the decrease in the gross profit ratio may be due to the following factors.

1. Decrease in the selling price of goods, without corresponding decrease in the cost ofgoods sold.

2. Increase in the cost of goods sold without any increase in selling price.3. Unfavorable purchasing or markup policies.4.

Inability of management to improve sales volume, or omission of sales.

5. Over valuation of opening stock or under valuation of closing stockHence, an analysis ofgross profit margin should be carried out in the light of the information

relating to purchasing, mark-ups and markdowns, credit and collections as well as merchandising

policies.


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This ratio measures the relationship between gross profit and net sales.

Objective:-the main objective of computing this ratio to determine the efficiency with which

Production and purchase operation are carried on .

GROSS PROFIT RATIO =(GROSS PROFIT/NET SALES )*100

2. NET PROFIT RATIO:-

Components of net profit ratio:

The two basic components of thenet profit ratio are the net profit and sales. The net profits are

obtained after deducting income-tax and, generally, non-operating expenses and incomes are

excluded from the net profits for calculating this ratio. Thus, incomes such as interest on

investments outside the business, profit on sales of fixed assets and losses on sales of fixed

assets, etc are excluded.

Formula:

[Net Profit Ratio = (Net profit / Net sales) 100]

Example:

Total sales = $520,000; Sales returns = $ 20,000; Net profit $40,000

Calculate net profit ratio.

Calculation:

Net sales = (520,00020,000) = 500,000

Net Profit Ratio = [(40,000 / 500,000) 100]

= 8


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Significance:

NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The

ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a

satisfactory return on its investment.

This ratio also indicates the firm's capacity to face adverse economic conditions such as price

competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while

interpreting the ratio it should be kept in mind that the performance of profits also be seen inrelation to investments or capital of the firm and not only in relation to sales.

3. Operating Ratio:

Definition:

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is

generally expressed in percentage.

Components:

The two basic components for the calculation ofoperating ratio are operating cost (cost of goods

sold plus operating expenses) and net sales. Operating expenses normally include (a)

administrative and office expenses and (b) selling and distribution expenses. Financial charges

such as interest, provision for taxation etc. are generally excluded from operating expenses.

Formula of operating ratio:

Operating Ratio = [(Cost of goods sold + Operating expenses) / Net sales] 100

Example:

Cost of goods sold is $180,000 and other operating expenses are $30,000 and net sales is

$300,000.


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Calculate operating ratio.

Calculation:

Operating ratio = [(180,000 + 30,000) / 300,000] 100

= [210,000 / 300,000] 100

= 70%

Significance:

Operating ratio shows the operational efficiency of the business. Lower operating ratio shows

higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is

generally considered as standard for manufacturing concerns. This ratio is considered to be a

yardstick of operating efficiency but it should be used cautiously because it may be affected by a

number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, non-

operating expenses from a substantial part of the total expenses and in such cases operating ratio

may give misleading results.

4. Return on Shareholders Investment or Net Worth Ratio:

Definition:

It is the ratio of net profit to share holder's investment. It is the relationship between net profit

(after interest and tax) and share holder's/proprietor's fund.

This ratio establishes the profitability from the share holders' point of view. The ratio is generally

calculated in percentage.

Components:

The two basic components of this ratio are net profits and shareholder's funds. Shareholder's

funds include equity share capital, (preference share capital) and all reserves and surplus

belonging to shareholders. Net profit means net income after payment of interest and income tax

because those will be the only profits available for share holders.


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Formula of return on shareholder's investment or net worth Ratio:

[Return on share holder's investment = {Net profit (after interest and tax) / Share holder's

fund} 100]

Example:

Suppose net income in an organization is $60,000 where as shareholder's investments or funds

are $400,000.

Calculate return on shareholders investment or net worth

Return on share holders investment = (60,000 / 400,000) 100= 15%

This means that the return on shareholders funds is 15 cents per dollar.

Significance:

This ratio is one of the most important ratios used for measuring the overall efficiency of a firm.

As the primary objective of business is to maximize its earnings, this ratio indicates the extent to

which this primary objective of businesses being achieved. This ratio is of great importance to

the present and prospective shareholders as well as the management of the company. As the ratio

reveals how well the resources of the firm are being used, higher the ratio, better are the results.

The inter firm comparison of this ratio determines whether the investments in the firm are

attractive or not as the investors would like to invest only where the return is higher.

5. Return on Equity Capital (ROEC) Ratio:

In real sense, ordinary shareholders are the real owners of the company. They assume the highest

risk in the company. (Preference share holders have a preference over ordinary shareholders in

the payment of dividend as well as capital.

Preference share holders get a fixed rate of dividend irrespective of the quantum of profits of the

company). The rate of dividends varies with the availability of profits in case of ordinary shares


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only. Thus ordinary shareholders are more interested in the profitability of a company and the

performance of a company should be judged on the basis of return on equity capital of the

company. Return on equity capital which is the relationship between profits of a company and its

equity, can be calculated as follows:

Formula of return on equity capital or common stock:

Formula of return on equity capital ratio is:

Return on Equity Capital = [(Net profit after tax Preference dividend) / Equity share

capital] 100

Components:

Equity share capital should be the total called-up value of equity shares. As the profit used for

the calculations are the final profits available to equity shareholders as dividend, therefore the

preference dividend and taxes are deducted in order to arrive at such profits.

Example:

Calculate return on equity share capital from the following information:

Equity share capital ($1): $1,000,000; 9% Preference share capital: $500,000; Taxation rate:50% of net profit; Net profit before tax: $400,000.

Calculation:

Return on Equity Capital (ROEC) ratio= [(400,000 200,000 45,000) / 1000,000 ) 100]

= 15.5%

Significance:

This ratio is more meaningful to the equity shareholders who are interested to know profits

earned by the company and those profits which can be made available to pay dividends to them.

Interpretation of the ratio is similar to the interpretation of return on shareholder's investments

and higher the ratio better is.
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6. Return on Capital Employed Ratio (ROCE Ratio):

The prime objective of making investments in any business is to obtain satisfactory return on

capital invested. Hence, the return on capital employed is used as a measure of success of a

business in realizing this objective.

Return on capital employed establishes the relationship between the profit and the capital

employed. It indicates the percentage of return on capital employed in the business and it can be

used to show the overall profitability and efficiency of the business.

Definition of Capital Employed:Capital employed and operating profits are the main items. Capital employed may be defined in

a number of ways. However, two widely accepted definitions are "gross capital employed" and

"net capital employed". Gross capital employed usually means the total assets, fixed as well as

current, used in business, while net capital employed refers to total assets minus liabilities. On

the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and

loss account balance), debentures and long term loans.

Calculation of Capital Employed:

Method--1. If it is calculated from the assets side, It can be worked out by adding the following:

1. The fixed assets should be included at their net values, either at original cost or atreplacement cost after deducting depreciation. In days of inflation, it is better to include

fixed assets at replacement cost which is the current market value of the assets.

2. Investments inside the business3. All current assets such as cash in hand, cash at bank, sundry debtors, bills receivable,

stock, etc.

4. To find out net capital employed, current liabilities are deducted from the total of theassets as calculated above.


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Gross capital employed = Fixed assets + Investments + Current assets

Net capital employed = Fixed assets + Investments + Working capital*.

*Working capital = current assets current liabilities.

Precautions For Calculating Capital Employed:

While capital employed is calculated from the asset side, the following precautions should be

taken:

1. Regarding the valuation of fixed assets, nowadays it is considered necessary to value theassets at their replacement cost. This is with a view to providing for the continuing

problem of inflations during the current years. Under replacement cost methods the fixed

assets are to be revalued on the basis of their current market prices either by reference to

reliable published index numbers, or on valuation of experts. When replacement cost

method is used, the provision for depreciation should be recalculated since depreciation

charged might have been calculated on original cost of assets.

2. Idle assetsassets which cannot be used in the business should be excluded from capitalemployed. However, standby plant and machinery essential to the normal running of the

business should be included.

3. Intangible assets, like goodwill, patents, trade marks, rights, etc. should be excluded.However, if they have sale value or if they have been purchased they may be included.

Investments made outside the business should be excluded.

4. All current assets should be properly valued. Any excess balance of cash or bank thanrequired for the smooth running of the business should be excluded.

5. Fictitious assets, like preliminary expenses, accumulated losses, discount on issue ofshares or debentures, advertisement, suspense account, etc. should be excluded.

6. Obsolete assets which cannot be used in the business or obsolete stock which cannot besold should be excluded.


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Method--2.Alternatively, capital employed can be calculated from the liabilities side of a balance

sheet. If it is calculated from the liabilities side, it will include the following items:

Share capital:

Issued share capital (Equity + Preference)

Reserves and Surplus:

General reserve

Capital reserve

Profit and Loss account

Debentures

Other long term loans

Some people suggest that average capital employed should be used in order to give effect of the

capital investment throughout the year. It is argued that the profit earned remain in the business

throughout the year and are distributed by way of dividends only at the end of the year. Average

capital may be calculated by dividing the opening and closing capital employed by two. It can

also be worked out by deducting half of the profit from capital employed.

Computation of profit for return on capital employed:

The profits for the purpose of calculating return on capital employed should be computed

according to the concept of "capital employed used". The profits taken must be the profits

earned on the capital employed in the business. Thus, net profit has to be adjusted for the

following:

Net profit should be taken before the payment of tax or provision for taxation because taxis paid after the profits have been earned and has no relation to the earning capacity of the

business.

If the capital employed is gross capital employed then net profit should be consideredbefore payment of interest on long-term as well as short-term borrowings.


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If the capital employed is used in the sense of net capital employed than only interest onlong term borrowings should be added back to the net profits and not interest on short

term borrowings as current liabilities are deducted while calculating net capital

employed.

If any asset has been excluded while computing capital employed, any income arisingfrom these assets should also be excluded while calculating net profits. For example,

interest on investments outside business should be excluded.

Net profits should be adjusted for any abnormal, non recurring, non operating gains orlosses such as profits and losses on sales of fixed assets.

Net profits should be adjusted for depreciation based on replacement cost, if assets havebeen added at replacement cost.

Formula of return on capital employed ratio:

[Return on Capital Employed=(Adjusted net profits*/Capital employed)100]

*Net profit before interest and tax minus income from investments.

Significance of Return on Capital Employed Ratio:

Return on capital employed ratio is considered to be the best measure of profitability in order

to assess the overall performance of the business. It indicates how well the management has used

the investment made by owners and creditors into the business. It is commonly used as a basis

for various managerial decisions. As the primary objective of business is to earn profit, higher

the return on capital employed, the more efficient the firm is in using its funds. The ratio can be

found for a number of years so as to find a trend as to whether the profitability of the company is

improving or otherwise.


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7. Dividend Yield Ratio:

Definition:

Dividend yield ratio is the relationship between dividends per share and the market value of the

shares.

Share holders are real owners of a company and they are interested in real sense in the earnings

distributed and paid to them as dividend. Therefore, dividend yield ratio is calculated to evaluate

the relationship between dividends per share paid and the market value of the shares.

Formula of Dividend Yield Ratio:

Following formula is used for the calculation of dividend yield ratio:

[Dividend Yield Ratio = Dividend Per Share / Market Value Per Share]

Example:

For example, if a company declares dividend at 20% on its shares, each having a paid up value of

$8.00 and market value of $25.00.

Calculate dividend yield ratio:

Calculation:

Dividend Per Share = (20 / 100) 8

= $1.60

Dividend Yield Ratio = (1.60 / 25) 100

= 6.4%

Significance of the Ratio:

This ratio helps as intending investor is knowing the effective return he is going to get on the

proposed investment.


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8. Dividend Payout Ratio:

Dividend payout ratio is calculated to find the extent to which earnings per share have been

used for paying dividend and to know what portion of earnings has been retained in the business.

It is an important ratio because ploughing back of profits enables a company to grow and pay

more dividends in future.

Formula of Dividend Payout Ratio:

Following formula is used for the calculation of dividend payout ratio

[Dividend Payout Ratio = Dividend per Equity Share / Earnings per Share]

A complementary of this ratio is retained earnings ratio. Retained earning ratio is calculated by

using the following formula:

[Retained Earning Ratio = Retained Earning Per Equity Share / Earning Per Equity

Share]

Example:

Calculate dividend payout ratio and retained earnings from the following data:

Net Profit

Provision for taxation

Preference dividend

10,000

5,000

2,000

No. of equity shares

Dividend per equity share3,000

$0.40

Payout Ratio = ($0.40 / $1) 100

= 40%

Retained Earnings Ratio = ($0.60 /$1) 100

= 60%


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The payout ratio and the retained earning ratio are the indicators of the amount of earnings that

have been ploughed back in the business. The lower the payout ratio, the higher will be the

amount of earnings ploughed back in the business and vice versa. A lower payout ratio or higher

retained earnings ratio means a stronger financial position of the company.

9. Earnings Per Share (EPS) Ratio:

Definition:

Earnings per share ratio (EPS Ratio) is a small variation ofreturn on equity capital ratio and iscalculated by dividing the net profit after taxes and preference dividend by the total number of

equity shares.

Formula of Earnings Per Share Ratio:

The formula of earnings per share is:

[Earnings per share (EPS) Ratio = (Net profit after tax Preference dividend) / No. of

equity shares (common shares)]

Example:

Equity share capital ($1): $1,000,000; 9% Preference share capital: $500,000; Taxation rate:

50% of net profit; Net profit before tax: $400,000.

Calculate earnings per share ratio.

Calculation:

EPS = 1,55,000 / 10,000

= $15.50 per share.

Significance:

The earnings per share is a good measure of profitability and when compared with EPS of

similar companies, it gives a view of the comparative earnings or earnings power of the firm.

EPS ratio calculated for a number of years indicates whether or not the earning power of the

company has increased.
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10.Price Earnings Ratio (PE Ratio):

Definition:

Price earnings ratio (P/E ratio) is the ratio between market price per equity share and

earning per share.

The ratio is calculated to make an estimate of appreciation in the value of a share of a

company and is widely used by investors to decide whether or not to buy shares in a particular

company.

Formula of Price Earnings Ratio:

Following formula is used to calculate price earnings ratio:

[Price Earnings Ratio = Market price per equity share / Earnings per share]

Example:

The market price of a share is $30 and earning per share is $5.

Calculate price earnings ratio.

Calculation:

Price earnings ratio = 30 / 5

= 6

The market value of every one dollar of earning is six times or $6. The ratio is useful in financial

forecasting. It also helps in knowing whether the share of a company are under or over valued.

For example, if the earning per share of AB limited is $20, its market price $140 and earning

ratio of similar companies is 8, it means that the market value of a share of AB Limited should

be $160 (i.e., 8 20). The share of AB Limited is, therefore, undervalued in the market by $20.

In case the price earnings ratio of similar companies is only 6, the value of the share of AB

Limited should have been $120 (i.e., 6 20), thus the share is overvalued by $20.


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Significance of Price Earning Ratio:

Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares of a

particular company at a particular market price.

Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the management

should look into the causes that have resulted into the fall of this ratio.

I. ACTIVITY RATIO:-

This category of ratios includes those ratios, which highlight upon the activity and operational

efficiency ratios of the business concern. These ratios are also called efficiency ratios or assets

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 grater is the rate of turnover or

conversion the more efficient is the utilization\management other things are being are equal.

Turnover is the primary mode for measuring the extent of efficient employment of assets to

sales. An activity ratio may, therefore, be defined as a test of the relationship between sales and

the various assets of a firm.

1. Inventory Turnover Ratio or Stock Turnover Ratio (ITR):

Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet

the requirements of the business. But the level of inventory should neither be too high nor too

low.

A too high inventory means higher carrying costs and higher risk of stocks becoming obsolete

whereas too low inventory may mean the loss of business opportunities. It is very essential to

keep sufficient stock in business.


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Definition:

Stock turn over ratio and inventory turn over ratio are the same. This ratio is a relationship

between the cost of goods sold during a particular period of time and the cost of average

inventory during a particular period. It is expressed in number of times. Stock turn over ratio /

Inventory turn over ratio indicates the number of time the stock has been turned over during the

period and evaluates the efficiency with which a firm is able to manage its inventory. This ratio

indicates whether investment in stock is within proper limit or not.

Components of the Ratio:

Average inventory and cost of goods sold are the two elements of this ratio. Average inventory is

calculated by adding the stock in the beginning and at the and of the period and dividing it by

two. In case of monthly balances of stock, all the monthly balances are added and the total is

divided by the number of months for which the average is calculated.

Formula of Stock Turnover/Inventory Turnover Ratio:

The ratio is calculated by dividing the cost of goods sold by the amount of average stock at cost.

(a) [Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost]

Generally, the cost of goods sold may not be known from the published financial statements. In

such circumstances, the inventory turnover ratio may be calculated by dividing net sales by

average inventory at cost. If average inventory at cost is not known then inventory at selling

price may be taken as the denominator and where the opening inventory is also not known the

closing inventory figure may be taken as the average inventory.

(b) [Inventory Turnover Ratio = Net Sales / Average Inventory at Cost]

(c) [Inventory Turnover Ratio = Net Sales / Average inventory at Selling Price]

(d) [Inventory Turnover Ratio = Net Sales / Inventory]


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Example:

The cost of goods sold is $500,000. The opening stock is $40,000 and the closing stock is

$60,000 (at cost).

Calculate inventory turnover ratio

Calculation:

Inventory Turnover Ratio (ITR) = 500,000 / 50,000*

= 10 times

This means that an average one dollar invested in stock will turn into ten times in sales

*($40,000 + $60,000) / 2

= $50,000

Significance of ITR:

Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high

inventory turnover/stock velocity indicates efficient management of inventory because more

frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A

low inventory turnover ratio indicates an inefficient management of inventory. A low inventoryturnover implies over-investment in inventories, dull business, poor quality of goods, stock

accumulation, accumulation of obsolete and slow moving goods and low profits as compared to

total investment. The inventory turnover ratio is also an index of profitability, where a high ratio

signifies more profit, a low ratio signifies low profit. Sometimes, a high inventory turnover ratio

may not be accompanied by relatively a high profits. Similarly a high turnover ratio may be due

to under-investment in inventories.

It may also be mentioned here that there are no rule of thumb or standard for interpreting theinventory turnover ratio. The norms may be different for different firms depending upon the

nature of industry and business conditions. However the study of the comparative or trend

analysis of inventory turnover is still useful for financial analysis.


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2. Debtors Turnover Ratio | Accounts Receivable Turnover Ratio:

A concern may sell goods on cash as well as on credit. Credit is one of the important elements of

sales promotion. The volume of sales can be increased by following a liberal credit policy.

The effect of a liberal credit policy may result in tying up substantial funds of a firm in the form

of trade debtors (or receivables). Trade debtors are expected to be converted into cash within a

short period of time and are included in current assets. Hence, the liquidity position of concern

to pay its short term obligations in time depends upon the quality of its trade debtors.

Definition:

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt

collection of a firm. In simple words it indicates the number of times average debtors

(receivable) are turned over during a year.

Formula of Debtors Turnover Ratio:

[Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors]

The two basic components of accounts receivable turnover ratio are net credit annual sales and

average trade debtors. The trade debtors for the purpose of this ratio include the amount of Trade

Debtors & Bills Receivables. The average receivables are found by adding the opening

receivables and closing balance of receivables and dividing the total by two. It should be noted

that provision for bad and doubtful debts should not be deducted since this may give an

impression that some amount of receivables has been collected. But when the information about

opening and closing balances of trade debtors and credit sales is not available, then the debtors

turnover ratio can be calculated by dividing the total sales by the balance of debtors (inclusive of

bills receivables) given. and formula can be written as follows.

[Debtors Turnover Ratio = Total Sales / Debtors]

Example:

Credit sales $25,000; Return inwards $1,000; Debtors $3,000; Bills Receivables $1,000.


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Calculate debtors turnover ratio

Calculation:

Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors

= 24,000*/ 4,000**

= 6 Times

*25000 less 1000 return inwards, **3000 plus 1000 B/R


Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times thedebtors are turned over a year. The higher the value of debtors turnover the more efficient is the

management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio

implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the

time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to

interpret the ratio as it may be different from firm to firm.

3. Average Collection Period Ratio:

Definition:

The Debtors / Receivable Turnover ratio when calculated in terms of days is known as Average

Collection Period or Debtors Collection Period Ratio

The average collection period ratio represents the average number of days for which a firm has to

wait before its debtors are converted into cash.

Formula of Average Collection Period:

Following formula is used to calculate average collection period:

[(Trade Debtors No. of Working Days) / Net Credit Sales]

Example:

Credit sales $25,000; Return inwards $1,000; Debtors $3,000; Bills Receivables $1,000.
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Calculate average collection period.

Calculation:

Average collection period can be calculated as follows:

Average Collection Period = (Trade Debtors No. of Working Days) / Net Credit Sales

4,000* 360** / 24,000

= 60 Days

* Debtors and bills receivables are added.

**For calculating this ratio usually the number of working days in a year are assumed to be 360.


This ratio measures the quality of debtors. A short collection period implies prompt payment by

debtors. It reduces the chances of bad debts. Similarly, a longer collection period implies too

liberal and inefficient credit collection performance. It is difficult to provide a standard collection

period of debtors.

4. Creditors / Accounts Payable Turnover Ratio:

Definition and Explanation:

This ratio is similar to the debtors turnover ratio. It compares creditors with the total credit

purchases.

It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include

both sundry creditors and bills payable. Same as debtors turnover ratio,creditors turnover ratio

can be calculated in two forms, creditors turnover ratio and average payment period.

Formula:

Following formula is used to calculate creditors turnover ratio:

[Creditors Turnover Ratio = Credit Purchase / Average Trade Creditors]
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Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors. It can

be calculated using the following formula:

[Average Payment Period = Trade Creditors / Average Daily Credit Purchase]

[Average Daily Credit Purchase= Credit Purchase / No. of working days in a year]

Or

[Average Payment Period = (Trade Creditors No. of Working Days) / Net Credit

Purchase]

(In case information about credit purchase is not available total purchases may be assumed to

be credit purchase.)


The average payment period ratio represents the number of days by the firm to pay its creditors.

A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being

paid promptly. This situation enhances the credit worthiness of the company. However a veryfavorable ratio to this effect also shows that the business is not taking the full advantage of credit

facilities allowed by the creditors.

5. Working Capital Turnover Ratio:

Definition:

Working capital turnover ratio indicates the velocity of the utilization of net working capital.

This ratio represents the number of times the working capital is turned over in the course of year

and is calculated as follows:

Formula of Working Capital Turnover Ratio:

Following formula is used to calculate working capital turnover ratio

[Working Capital Turnover Ratio = Cost of Sales / Net Working Capital]


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The two components of the ratio are cost of sales and the net working capital. If the information

about cost of sales is not available the figure of sales may be taken as the numerator. Net

working capital is found by deduction from the total of the current assets the total of the current

liabilities.

Example:

Cash

Bills Receivables

Sundry Debtors

Stock

Sundry Creditors

Cost of sales

10,000

5,000

25,000

20,000

30,000

150,000

Calculate working capital turnover ratio

Calculation:

Working Capital Turnover Ratio = Cost of Sales / Net Working Capital

Current Assets = $10,000 + $5,000 + $25,000 + $20,000 = $60,000

Current Liabilities = $30,000

Net Working Capital = Current assetsCurrent liabilities

= $60,000 $30,000

= $30,000

So the working Capital Turnover Ratio = 150,000 / 30,000

= 5 times


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Significance:

The working capital turnover ratio measure the efficiency with which the working capital is

being used by a firm. A high ratio indicates efficient utilization of working capital and a low

ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of

sufficient working capital which is not a good situation.

6. Fixed Assets Turnover Ratio:

Definition:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures theefficiency and profit earning capacity of the concern

Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-

utilization of fixed assets. The ratio is calculated by using following formula:

Formula of Fixed Assets Turnover Ratio:

Fixed assets turnover ratio turnover ratio is calculated by the following formula:

Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets

II. LEVERAGE RATIOS OR LONG TERM SOLVENCY

RATIOS

Debt equity ratio

Proprietary or Equity ratio Ratio of fixed assets to shareholders funds Interest coverage or debt service ratio Capital gearing ratio
http://www.accountingformanagement.com/debt_equity_ratio.htmhttp://www.accountingformanagement.com/equity_ratio.htmhttp://www.accountingformanagement.com/fixed_assets_to_proprietors_fund_ratio.htmhttp://www.accountingformanagement.com/interest_coverage_ratio.htmhttp://www.accountingformanagement.com/capital_gearing_ratio.htmhttp://www.accountingformanagement.com/capital_gearing_ratio.htmhttp://www.accountingformanagement.com/interest_coverage_ratio.htmhttp://www.accountingformanagement.com/fixed_assets_to_proprietors_fund_ratio.htmhttp://www.accountingformanagement.com/equity_ratio.htmhttp://www.accountingformanagement.com/debt_equity_ratio.htm


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1.

Debt to Equity Ratio:Definition:

Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds

and the internal equities or shareholders funds.

It is also known as external internal equity ratio. It is determined to ascertain soundness of the

long term financial policies of the company.

Formula of Debt to Equity Ratio:

Following formula is used to calculate debt to equity ratio

[Debt Equity Ratio = External Equities / Internal Equities]

Or

[Outsiders funds / Shareholders funds]

As a long term financial ratio it may be calculated as follows:

[Total Long Term Debts / Total Long Term Funds]

Or

[Total Long Term Debts / Shareholders Funds]

Components:

The two basic components ofdebt to equity ratio are outsiders funds i.e. external equities and

share holders funds, i.e., internal equities. The outsiders funds include all debts / liabilities to

outsiders, whether long term or short term or whether in the form of debentures, bonds,

mortgages or bills. The shareholders funds consist of equity share capital, preference share

capital, capital reserves, revenue reserves, and reserves representing accumulated profits and

surpluses like reserves for contingencies, sinking funds, etc. The accumulated losses and

deferred expenses, if any, should be deducted from the total to find out shareholder's funds


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Some writers are of the view that current liabilities do not reflect long term commitments and

they should be excluded from outsider's funds. There are some other writers who suggest that

current liabilities should also be included in the outsider's funds to calculate debt equity ratio for

the reason that like long term borrowings, current liabilities also represents firm's obligations to

outsiders and they are an important determinant of risk. However, we advise that to calculate

debt equity ratio current liabilities should be included in outsider's funds. The ratio calculated on

the basis outsider's funds excluding liabilities may be termed as ratio of long-term debt to share

holders funds.

Example:

From the following figures calculate debt to equity ratio:

Equity share capital

Capital reserve

Profit and loss account

6% debentures

Sundry creditors

Bills payable

Provision for taxation

Outstanding creditors

1,100,000

500,000

200,000

500,000

240,000

120,000

180,000

160,000

Required: Calculate debt to equity ratio.

Calculation:

External Equities / Internal Equities

= 1,200,000 / 18,000,000

= 0.66 or 4 : 6

It means that for every four dollars worth of the creditors investment the shareholders have

invested six dollars. That is external debts are equal to 0.66% of shareholders funds.
http://www.debtconsolidationcare.com/http://www.debtconsolidationcare.com/


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Significance of Debt to Equity Ratio:

Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the

firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation

of the firm. However, the interpretation of the ratio depends upon the financial and business

policy of the company. The owners want to do the business with maximum of outsider's funds in

order to take lesser risk of their investment and to increase their earnings (per share) by paying a

lower fixed rate of interest to outsiders. The outsiders creditors) on the other hand, want that

shareholders (owners) should invest and risk their share of proportionate investments. A ratio of

1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or

standard norm for all types of businesses. Theoretically if the owners interests are greater than

that of creditors, the financial position is highly solvent. In analysis of the long-term financial

position it enjoys the same importance as the current ratio in the analysis of the short-term

financial position.

2.

Proprietary Ratio or Equity Ratio:Definition:

This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net wor

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