financial performance of textile company

8/12/2019 financial performance of textile company

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CHAPTER I

1.1INTRODUCTION AND DESIGN OF THE STUDY

This study was about AN ORGANISATIONAL STUDY AND STUDY ONFINANCIAL STATEMENT ANALYSIS WITH SPECIAL REFERENCE TO SAKTHI

GANESH TEXTILES (P) LTD ERODE. The main objective of study is to find the

financial strength of sakthi Ganesh.

An organization wishing to understand, and measure how satisfied their customers are

with the product and service they receive from it. The summer project report aims to create

awareness of about the external and internal environment of business organization among the

students. The summer project report contains all the functional areas at the organization and itsfunctions.

The company mainly concentrates on the satisfaction of the customers. The company

also assumes to endow our clients with utmost satisfaction by offering them quality products.

The firm essentially frames its production, purchase, marketing, finance and human resource

plans around the concepts of management and thus supplying the products to their customers.

Customer satisfaction is an integrated process through which companies build strong relationship

with their customers and create value for their customers and for themselves.

Another interesting sociological factor that is worthy of note is that as soon as people in

Coimbatore started textile mills, they sent their sons or nephews to great Britais to study

technology. There young men returned and replaced the highly paid managers, while mills in

other centers were perhaps more efficient form a commercial point of view, Coimbatore mills

have attached greater importance to technological efficiency.

MEANING OF FINANCIAL STATEMENT:

A financial statement (or financial report ) is a formal record of the financial activities

of a business, person, or other entity.


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Relevant financial information is presented in a structured manner and in a form easy to

understand. They typically include basic financial statements, accompanied by a management

discussion and analysis

PURPOSE OF FINANCIAL STATEMENT:

"The objective of financial statements is to provide information about the financial

position, performance and changes in financial position of an enterprise that is useful to a wide

range of users in making economic decisions. Financial statements should be understandable,

relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are

directly related to an organization's financial position.

Financial statements are intended to be understandable by readers who have "a reasonableknowledge of business and economic activities and accounting and who are willing to study the

information diligently. Financial statements may be used by users for different purposes

Owners and managers require financial statements to make important business decisions

that affect its continued operations. Financial analysis is then performed on these

statements to provide management with a more detailed understanding of the figures.

These statements are also used as part of management's annual report to the stockholders.

Employees also need these reports in making collective bargaining agreements (CBA)

with the management, in the case of labor unions or for individuals in discussing their

compensation, promotion and rankings.

Prospective investors make use of financial statements to assess the viability of investing

in a business. Financial analyses are often used by investors and are prepared by

professionals (financial analysts), thus providing them with the basis for making

investment decisions.

Financial institutions (banks and other lending companies) use them to decide whether to

grant a company with fresh working capital or extend debt securities (such as a long-term

bank loan or debentures) to finance expansion and other significant expenditures.
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DEFINITION AND TYPES OF FINANCIAL STATEMENT:

Financial Statements represent a formal record of the financial activities of an entity.

These are written reports that quantify the financial strength, performance and liquidity of a

company. Financial Statements reflect the financial effects of business transactions and events onthe entity.

TYPES OF SINANCIAL STATEMENTS:

1. Statement of Financial Position:

Statement of Financial Position, also known as the Balance Sheet, presents the financial position

of an entity at a given date. It is comprised of the following three elements

Assets: Something a business owns or controls (e.g. cash, inventory, plant and

machinery, etc.)

Liabilities: Something a business owes to someone (e.g. creditors, bank loans, etc.)

Equity: What the business owes to its owners. This represents the amount of capital that

remains in the business after its assets are used to pay off its outstanding liabilities.

Equity therefore represents the difference between the assets and liabilities.

2. Income Statement:

Income Statement, also known as the Profit and Loss Statement , reports the company's financial

performance in terms of net profit or loss over a specified period. Income Statement is composed

of the following two elements:

Income: What the business has earned over a period (e.g. sales revenue, dividend income,

etc.) Expense: The cost incurred by the business over a period (e.g. salaries and wages,

depreciation, rental charges, etc.)

Net profit or loss is arrived by deducting expenses from income.
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3. Cash Flow Statement:

Cash Flow Statement presents the movement in cash and bank balances over a period. The

movement in cash flows is classified into the following segments:

Operating Activities: Represents the cash flow from primary activities of a business.

Investing Activities: Represents cash flow from the purchase and sale of assets other than

inventories (e.g. purchase of a factory plant)

Financing Activities: Represents cash flow generated or spent on raising and repaying

share capital and debt together with the payments of interest and dividends.

4. Statement of Changes in Equity:

Statement of Changes in Equity, also known as the Statement of Retained Earnings , details the

movement in owners' equity over a period. The movement in owners' equity is derived from the

following components:

Net Profit or loss during the period as reported in the income statement

Share capital issued or repaid during the period

Dividend payments

Gains or losses recognized directly in equity (e.g. revaluation surpluses)

Effects of a change in accounting policy or correction of accounting error
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1.2ABOUT THE INDUSTRY

Indian Apparel and Textile Industry

Introduction

The apparel and textile industry occupies a unique and important place in India. One of

the earliest industries to come into existence in the country, the sector accounts for 14% of the

total Industrial production, conduces to about 30% of the total exports and is the second largest

employment creator after agriculture.

The apparel and textile industry caters to one of the most basic requirements of people

and holds importance; maintaining the prolonged growth for improved quality of life. The sector

has a unique position as a self-reliant industry, from the production of raw materials to the

delivery of end products, with considerable value-addition at every stage of processing. Over the

years, the sector has proved to be a major contributor to the nations' economy.

Its immense potential for generation of employment opportunities in the industrial,

agricultural, organized and decentralized sectors & rural and urban areas, especially for women

and the disadvantaged is noteworthy.

ABOVE FIGURE SHOWS SEGMENTS IN INDIAN APPERRAL I NDUSTRY


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PROCESS OF THE TEXTILE INDUSTRY:


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The present Status of Apparels In The world:

The Indian apparel industry is estimated to be worth Rs. 1,876 billion in

FY11 and is expected to grow at a CAGR of 8.7 per cent till FY16. The growth would

primarily be driven by the surge in demand for readymade apparels in rural areas, rising

income levels and youth population and increasing preference for branded apparels.

Indian apparel industry is highly fragmented in nature. Due to the low entry

barriers, numerous players have entered the industry

Indias apparel exports grew at a CAGR of 6 per cent from INR 382 billion in FY06 to

INR 511 billion in FY11. The growth in exports can be attributed to shifting of the apparel

manufacturing base from the developed countries like the US and the EU to the low cost

countries like China, Vietnam, India, Bangladesh and many others. Multi Fiber Agreement phase-out at the end of 2004 also helped India to increase its exports.

To remain competitive in the international market, Indian apparel industry needs to build

up a strong weaving and processing link so as to provide support to the apparel manufacturers

and also set up large units for reaping the benefits of economies of scale.

Apparel industrys profitability is mainly influenced by the raw material and in put prices.

Domestic players enjoy better margins as against the exporters. The raw material prices for

apparel players have been on rise in the recent past due to the soaring cotton and crude oil prices.

The government has announced various schemes to encourage the investments in the textile

Industry like National Textile Policy (NTP), Scheme for Integrated Textile Parks (SITP),

Global Apparel Trade : India vis--vis competitors in 2007

Trade in US$ Bn Avg Growth rate % Share

World 345 12 100

Bangladesh

10.6 10 2.9

India

9.7 7 2.8

Vietnam

7.2 29 2.1


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Technology Up gradation Fund Scheme (TUFS), Export Promotion Capital Goods (EPCG),

Duty Entitlement Pass Book Scheme (DEPB) etc. The government has also allowed 100% FDI

in the textile sector through automatic route and up to 51% FDI in the retail trade of single

brand products (with prior government approval)

TEXTILE INDUSTRY IN INDIA

The Textile industry in India traditionally, after agriculture, is the only industry that has

generated huge employment for both skilled and unskilled labor in textiles. The textile industry

continues to be the second largest employment generating sector in India. It offers direct

employment to over 35 million in the country. The share of textiles in total exports was 11.04%

during April July 2010, as per the Ministry of Textiles. During 2009-2010, Indian textiles

industry was pegged at US$55 billion, 64% of which services domestic demand. In 2010, there

were 2,500 textile weaving factories and 4,135 textile finishing factories in all of India.

HISTORY OF TEXTILE INDUSTRY

The archaeological surveys and studies have found that the people of Harappan

civilization knew weaving and the spinning of cotton four thousand years ago. Reference to

weaving and spinning materials is found in the Vedic Literature also.

There was textile trade in India during the early centuries. A block printed and resist-dyedfabrics, whose origin is from Gujarat is found in tombs of Foster, Egypt. This proves that Indian

export of cotton textiles to the Egypt or the Nile Civilization in medieval times were to a large

extent. Large quantity of north Indian silk were traded through the silk route in China to the

western countries. The Indian silk was often exchanged with the western countries for their

spices in the barter system. During the late 17th and 18th century there were large export of the

Indian cotton to the western countries to meet the need of the European industries during

industrial revolution. Consequently there was development of nationalist movement like the

famous Swadeshi movement which was headed by the Aurobindo Ghosh.

There was also export of Indian silk, Muslin cloth of Bengal, Bihar and Orissa to other countries

by the East Indian Company. Bhilwara is known as textile city.
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PRODUCTION PROCESS

India is the second largest producer of fiber in the world and the major fiber produced is

cotton. Other fibers produced in India include silk, jute, wool, and man-made fibers. 60% of the

Indian textile Industry is cotton based.

The strong domestic demand and the revival of the Economic markets by 2009 have led to huge

growth of the Indian textile industry. In December 2010, the domestic cotton price was up by

50% as compared to the December 2009 prices. The causes behind high cotton price are due to

the floods in Pakistan and China. India projected a high production of textile (325 lakh bales for

2010 -11) .[5] There has been increase in India's share of global textile trading to seven percent in

five years .[5] The rising prices are the major concern of the domestic producers of the country.

Man Made Fibers: These include manufacturing of clothes using fiber or filament

synthetic yarns. It is produced in the large power loom factories. They account for the

largest sector of the textile production in India. This sector has a share of 62% of the

India's total production and provides employment to about 4.8 million people .[6]

The Cotton Sector: It is the second most developed sector in the Indian Textile industries.

It provides employment to huge amount of people but its productions and employment is

seasonal depending upon the seasonal nature of the production.

The Handloom Sector: It is well developed and is mainly dependent on the SHGs fortheir funds. Its market share is 13% .[6]Of the total cloth produced in India.

The Woolen Sector: India is the 7th largest producer .[6]Of the wool in the world. India

also produces 1.8% of the world's total wool.

The Jute Sector: The jute or the golden fiber in India is mainly produced in the Eastern

states of India like Assam and West Bengal. India is the largest producer of jute in the

world.

The Sericulture and Silk Sector: India is the 2nd largest producer of silk in the world.

India produces 18% of the world's total silk. Mulberry, Eri, Tasar, and Muga are the main

types of silk produced in the country. It is a labor-intensive sector.
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IMPORTS AND EXPORTS

Export

In economics, an export is any good or commodity, transported from one country to another

country in a legitimate fashion, typically for use in trade. Export is an important part of

international trade. Its counterpart is import.

Export goods or services are provided to foreign consumers by domestic producers. Export of

commercial quantities of goods normally requires involvement of the Customs authorities in both

the country of export and the country of import.

The advent of small trades over the internet such as through Amazon, e-Bay and the like, havelargely by-passed the involvement of Customs in many countries due to the low individual

values of these trades. Nonetheless these small exports are still subject to legal restrictions

applied by the country of export, particularly in respect of strategic export limitations.

Import

In economics, an import is any good or commodity, brought into one country from another

country in a legitimate fashion, typically for use in trade. Import goods or services are providedto domestic consumers by foreign producers. Import of commercial quantities of goods normally

requires involvement of the Customs authorities in both the country of import and the country of

export.

The Textile industry is a term used for industries primarily concerned with the design or

manufacture of clothing as well as the distribution and use of textiles .The textile industry

occupies a unique place in our country. One of the earliest to come into existence in India, it

accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports

and is the second largest employment generator after agriculture.

The textile industry fulfills a pivotal role in the Indian economy. It is a major foreign exchange

earner and, after agriculture, it is the largest employer with a total workforce of 35 mn. In 2005


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textiles and garments accounted for about 14 per cent of industrial production and 16 per cent of

export earnings. The industry covers a wide range of activities. These include the production of

natural raw materials such as cotton, jute, silk and wool, as well as synthetic filament and spun

yarn. In addition, an extensive range of finished products are also made. The Indian textile

industry accounts for about 23 per cent of the worlds spindle capacity, making it the second

highest after China, and around six per cent of global rotor capacity. Also, it has the highest loom

capacity including hand looms with a 61 per cent share. India accounts for about 12 per cent

of the wor lds production of textile fibers and yarns. This includes jute, of which it is the largest

producer.

The Vision

Although low growth scenario of 6% annual growth rate is likely for the next 2 years, Cvision is based on sustained growth of top five apparel suppliers. Based on the past export trends

of India and feasibility study and assuming that the world apparel market grows moderately at

8%, AEPC fixed the target for apparel export

1.3 ABOUT COMPANY PFOFILE

SAKTHI GANESH are an Export House of Knitted Garments, Exporting Garments for

the last 15 years, located in erode the cluster of Knitted Garment Industry. The company is a

partnership firm established on 1993. The company sets the own standards par with the bestcompanies in India on.

The company exports knit wears include T- shirt, Polos, Sweat shirts, Woven shirts ,

leggings, Pajamas, Bath Line & Bath Ropes products to Babies, Kids, Ladies & Gents.

For details visit our Gallery Page. The Capability to cater the needs of esteemed Buyers, the

infrastructure is filled with all modern machineries and equipment to give high degree of

accuracy and the capacity to produce 1.5 Lakes to 2 Lakes garments depends upon styles and

shades.

A portion of the Fabric also being exported to the garment manufacture in Bangladesh, Egypt &

srilanka.

QUALITY POLICY

The company is more conscious about its quality certified by OEKO TEX and our

efficient and well equipped QC team is our back bone. It follows all the stringent procedures and


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test applicable for all international standards. The centralized QC team with team of highly

efficient and follow the standards right from yarn to packing, to see nothing is missed.

The company follows Systemized approach o f con con and JIT and all TQM

policies make the QC team is decidedly professional.

The quality programmed starts right from yarn to packing .On every step of production the

company concentrates on quality, to make sure all the parameters are followed. The QC team is

managed by the QC manager, under his strict guidance to follow all the methods to fulfill

international standards.

PRODUCTS

The company manufactures Knit wears include

T-shirt

Polos Sweat Shirts Woven Shirts

INFRASTRUCTURE

The firm has all modern Machineries and equipments to prepare our self to meet the

changes. Well trained work force efficient staffs with determined and analytical skills to give

the best services. Its fabric and knitting dept,. Have all latest Machineries imported from

Germany, Italy, and Japan to produce right quality fabrics for our production.

It work on 100% cotton and blended fabrics and our knitting division and Blended fabrics

and we knit Jerseys, Interlocks, Engg., stripes, Ribs, Fleece, Pique, Pointelle, Mini / Full

jacquards, Micro thermals, Ottomans, French terry, etc, and if needed we import fabrics.

It have fully fledged knitting printing embroidery garmenting production centers

and the soft flow dyeing m/aces suppor ted by range of other m/ace. And fabrics are processedwith Balloon paddlers and Imported relax dryers to remove moisture in a softest way.

The factories are covered with all gorgeous greenery grass and trees to preserve nature

and ecological balance, which is been appreciated by our esteemed buyers andthe production


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capacity is to produce garments 1.5 lakes to 2 lakes pieces per month.

The Garmenting divisions have all latest machineries and are well equipped to produce

any bountiful quantity of orders in time with the help of our committed work force guided by the

production managers. They adopt one to one approach for each order using right persons for the

required finish and quality is achieved with the guidance of QC team.

CLIENTS

1. Next

2. Wall Mart

3. Basic London

4. Home Basic

EMPLOYEES

Part time employees 50

Seasonal employees 20

Production employees 30

TOTAL 100

SWOT ANALYSIS

Strength

Experienced management

Efficient payables management

Diversified customer base


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Weakness

Cut throat competition

Inconsistency in collection days

Low short term solvency ratios

Opportunities

Growing fashion consciousness globally will drive the demand for subjects products

Mass market : extending availability of products to broad market


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1.4 NEED FOR THE STUDY

There some questions, which arise from the study of financial statements. These could be

is companys profitability adequate? Why is a profit low in spite of increased sales? Why is

there liquidity problem though profitability is good? Why no reason for changes in assets,

liabilities and equity between two dates? Why no dividends are paid though there are good

profits? From where have come cash flows and how they are applied? these and many other

questions need answers, which can be possible when the financial statements are suitably

analyzed

The financial statement analysis deals with meaningful interpretation of financial data

available in financial statements to serve specific purpose of organizations of such data for their

decision making this involves identifying the purpose and selecting suitable means of analysis.

Financial statement analysis is essentially purposive.


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1.5 OBJECTIVES OF THE STUDY

Primary Objective:

To analyze the working capital management of the company and to know about the

profitability of the firm.

Secondary Objective:

To study the various sources and application of funds of the company. To study the organizational function of the company. To evaluate the performance of Inventory, receivables and cash management of the

company.

To examine the liquidity position of the company.


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1.6 SCOPE OF THE STUDY:

In order to find the working capital analysis for different period and its trend of sakthi

Ganesh from the annual report has been considered. The study given a clear cut picture regarding

working capital of the company.

The present study attempts to obtain a general view of the working capital analysis of

the company.

The main attempts are made to know the financial position and strength of the

company.

The company to understand its own position over time.


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1.7 LIMITATION OF THE STUDY:

The study covers only five accounting year started from 2008 to 2013.

The working capital analysis is based on the published balance sheet of the company.

The limitations of ratios and comparative balance sheet are in maid.

The study time duration is not enough.

Since this analysis is based on the annual reports, the manipulations in it will affect the

study.


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The first experiment manipulates three variables that we hypothesize will

contribute to this effect: choice to use transformed financial statements, effort spends on the

transformation process, reconciliation of pre- and post- transformation number. We provide

evidence that, in the constructive-capitalization setting we operationalize, information has a

greater effect on judgments when effort was expended to obtain the information and the

information is displayed in a reconciled format. The second experiment focuses on the effort

effect and replicated it with additional controls. These results have implications for standard-

setters users who transform financial statements as part of their analysis. This combination if

found to improve the default prediction compared with financial statements alone.

Albrecht, W. S. and C. C. Albrecht (2003) In financial statement, analysis are

accumulated by departments, operations, or processes. The work performed on each unit is

standardized, or uniform where a continuous mass production or assembly operation is involved.For example, process costing is used by companies that produce appliances, alcoholic beverages,

tires, sugar, breakfast cereals, leather, paint, coal, textiles, lumber, candy, coke, plastics, rubber,

cigarettes, shoes, typewriters, cement, gasoline, steel, baby foods, flour, glass, men's suits,

pharmaceuticals and automobiles. Process costing is also used in meat packing and for public

utility services such as water, gas and electricity. Chapter 5 illustrates a cost accounting system

that includes normal historical costing as the basic cost system, full absorption costing as the

inventory valuation method and process costing as the cost accumulation method.

E harris (2008) This book covers the more complex areas of the costing of processes and

operations. It explains how to determine the average cost per unit in process costing in a simple

step-by-step approach, starting with normal losses with no scrap value and working through the

treatment of scrap values, abnormal losses and gains and the sometimes confusing areas of

opening and closing work in progress. The topic of joint product costing is explained covering

both the different methods which can be used to value stock for determining the profit for the

period, and the type of information which is required for a further processing decision. The book

also covers the distinction between joint products and by products and the accounting treatment

required by these types of products.

Randika Lalith Abeysinghe (2009) Process costing / continuous operational costing is

defined in as "The costing method applicable where goods or services result from a sequence of

continuous or repetitive operations or process. Costs are averaged over the units produced during


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the period."It is used where it is not possible to identify separate units of production, or jobs,

usually because of the continuous nature of the production processes involved.

The features of process costing which make it different from specific order costing

methods such as job costing or batch costing are as follows.

The output of one process is the input to subsequent process unit a completed

product is produced.

The continuous nature of production in may processes means that there will

usually be closing work in progress which must be valued. In process costing it is not possible to

build up cost records of the cost of each individual unit of output because production in progress

is an indistinguishable homogeneous mass.

There is often a loss in process due to spoilage, wastage, evaporation and so on.Output from production may be a single product, but there may also be a byproduct (or by

products) and joint products.

The overhead expenses are generally expended over all the processes involved in

production. These are to be apportioned over the various processes in an amicable manner.


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CHAPTER III

RESEARCH METHODLOGY

3.1 RESEARCH

Research is defined as a systematized effort to gain knowledge. Research comprises

defining and redefining problems, formulating hypothesis or suggest solutions, collecting,

organizing and evaluating data , making determine whether they fit the formulating hypothesis,

collection the fact the data, analyzing the facts the reaching certain generalization for some

theoretical formulation.

A research methodology forms the frame work of the entire research process. This

includes the necessary information about materials, techniques for the collection of data

appropriate to particular problem, statistics, questionnaires and controlled experimentation and in

recording evidence sorting it out and interpreting it.

3.2 RESEARCH DESIGN

Descriptive research studies are those studies which are concerned with describing the

characteristics of a particular individual, or of a group. We use descriptive research method for

our research work.

3.3 SAMPLE DESIGN

Sample design refers to the technique or the procedure the research would adopt in

selecting for the sample.

3.4 COLLECTION OF DATA

The study based on both primary data and secondary data. Primary data is collected from

account officers. Secondary data is obtained from annual report and other published documents

of the company. Secondary data


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3.5TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

RATIO ANALYSIS

Current ratio

Quick ratio Cash position ratio Solvency ratio Inventory turnover ratio Debtor turnover ratio Debtor collection period Creditor turnover ratio Creditor collection period Working capital analysis Sales to net working capital ratio Current liabilities to net worth Net profit ratio

COMPARATIVE STATEMENT

3.6 DATA COLLECTION METHOD

Annual report Internal report

3.7 Period of the Study

2008 to 2013


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CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

FINANCIAL ANALYSIS:

Financial analysis is the analysis of the statement of the company to assess its financial

health and soundness of its management. Financial statement analysis involves a study of the

financial statement of a company to ascertain its prevailing state of affair and the reason thereof.

Such a study would enable the public and the investors to ascertain whether one company is

more profitability then the other and also to state the causes and factors that are probably

responsible.

Analytical Designs:-

o Ratio Analysiso Mean

o Standard deviationo Coefficient variation

o Comparative balance sheet

RATIO ANALYSIS:

Ratio analysis is a technique of analysis and interpretation of financial statements. It is

the process of establishing and interpreting various ratios for helping in making certain decisions

in these ratios.

A ratio indicates a quantitative relationship, which can be in term used to make a

judgment. Current ratio Quick ratio Cash position ratio

Solvency ratio Inventory turnover ratio Debtor turnover ratio Debtor collection period Creditor turnover ratio


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Creditor collection period Working capital analysis Sales to net working capital ratio Current liabilities to net worth Net profit ratio Comparative balance sheet

MEANING OF MEAN :

In statistics, the mean is the mathematical average of a set of numbers. The average is

calculated by adding up two or more scores and dividing the total by the number of scores.

Mean = X

N

MEANING OF STANDARD DEVIATION :-

Standard deviation is a number that tells you approximately how far the values in a data

set deviate from the mean (the average). The larger the standard deviation, the larger the

deviation. The smaller the standard deviation, the smaller the deviation. If all of the values are

equal, the standard deviation is equal to zero.

(X - X) 2

MEANING OF COFFICIENT VARIATION :-

A statistical measure of the dispersion of data points in a data series around the mean.

The coefficient of variation represents the ratio of the standard deviation to the mean, and

it is a useful statistic for comparing the degree of variation from one data series to another, even

if the means are drastically different from each other


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4.1 CURRENT RATIO

The ratio of current assets to current liabilities is called current ratio. In order to

measure the short term liquidity or solvency of the concern, comparison of current assets and

current liabilities is inevitable. Current ratio in the case liability of a concern to meet its current

obligations as and well they are due for payment

Current Ratio = Current asset / Current liabilities

TABLE NO 4.1 SHOWING CURRENT RATIO

YEARCurrent Asset

(in Rs)

Current Liability

(in Rs)

Current Ratio

(In Rs)

2007-08 18,67,000 15,88,000 1.17

2009-10 36,40,000 19,95,000 1.82

2010-11 31,75,000 28,88,000 1.09

2011-12 51,94,500 43,79,000 1.18

2012-13 95,79,500 79,00,000 1.21MEAN SD CV

1.29 0.4 0.12

Source: Secondary data

Interpretation:-

Generally current ratio should be 2:1 but as per our calculation in 2009-10 it was 1.826, it

meanscompany has 1.826 rupees current assets against current liability on rupees 1. Company

hasfewer current assets than current claims against them. In 2012 13 companys current ratiois1.215 which is not satisfactory. Its short-term solvency is threatened.


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FIGURE NO 4.1 SHOWING CURRENT RATIO

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.82

2007-08 2009-10 2010-11 2011-12 2012-13

CURRENT RATIO

Current Ratio


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4.2 QUICK RATIO

The term quick assets refers to current assets which can be converted into cash

immediatelyor at a short notice without diminution of value. Included in this category of current

assets are(1) cash and bank balance; (2) short term marketable securities and (3)

debtors/receivables.Thus, the current assets which are excluded are: prepaid expenses and

inventory.

Quick Ratio = Liquid Assets / Liquid Liabilities

Liquid Assert = Current Assert - Stock - Prepaid Expenses

TABLE NO 4.2SHOWING QUICK RATIO

YEARSQUICK ASSERT

(In Rs)

CURRENT ASSERT

(In Rs)

QUICK ASSERT

RATIO

(In Rs)

2007-08 15,97,000 18,67,000 0.85

2009-10 15,97,000 36,40,000 0.43

2010-11 15,97,000 31,75,000 0.50

2011-12 15,97,000 51,94,500 0.30

2012-13 15,97,000 95,79,500 0.16

MEAN SD CV

2.24 16.30 0.80


INTERPRETATION:-

Generally quick ratio of 1:1 represents a satisfactory current financial condition. But we

haveseen in table that not evens a single year it has achieved. In all five years liquid ratios arelessthan 1.It indicates that firm has found difficult to meet its obligations because its quick

assetsare lesser than current liabilities. Similarly both years 2009-10 the companyhas good

finance position but later stages it dropped to 0.4 and then to last to 0.1. Companys current

financial condition is not satisfactory because liquid assets are less thanLiabilities.


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FIGURE NO 4.2SHOWING QUICK RATIO

4.3 CASH POSITION RATIO

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2006-07 2007-08 2008-09 2009-10 2010-11

QUICK ASSET RATIO

QUICK ASSET RATIO


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It may be defined as therelationship between the available cash both at bank and in hand

and current liabilities. A ratio of 1.1 is considered to be a good ratio but a rate of 0.75:1 is also

good. Such a ratio would imply that the firm has enough cash on hand to meet all the current

liabilities.

Cash position ratio = cash / current liabilities

TABLE NO 4.4 SHOWING CASH POSITION RATIO

YEARS CASHCURRENT

LIABILITIESRATIO

2007-08 300000 15,88,000 0.18

2009-10 850000 19,95,000 0.42

2010-11 412000 28,88,000 0.14

2011-12 1246000 43,79,000 0.28

2012-13 1188000 79,00,000 0.15

MEAN SD CV

1.17 4.43 0.42


INTERPRETATION:-

The bank cash balance to current liabilities recorded is 0.18, 0.42, 0.14, 0.28 and 0.15 in

the year 2008, 2009, 2010, 2011, 2012 and 2013 respectively. In the year 2010, the highest ratio

was recorded.


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FIGURE NO 4.3SHOWING CASH POSITION RATIO

4.4 SOLVENCY RATIO

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2007-08 2009-10 2010-11 2011-12 2012-13

CASH POSITION RATIO

CASH POSITION RATIO


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It can be define as the relationship between total liabilities and total assets

Solvency ratio = total liabilities / total assets*100

Generally lower the solvency ratio, more satisfactory or stable is the long-term solvency

position of a firm.

TABLE NO 4.4SHOWING SOLVENCY RATIO

YEAR Total Liabilities Total AssetsSolvency Ratio

2007-08 1588000 1867000 85.05

2009-10 1995000 3640000 54.80

2010-11 2888000 3175000 90.96

2011-12 4379000 5194500 84.30

2012-13 7900000 9579500 82.46

MEAN SD CV

397.5 506.36 4.5


INTERPRETATION:-

The above ratio shows90.96% in the year 2011. It has also remained the same in the year

2008. In the year 2012, it was 84.30% and the year 2013 was decreases to 82.46. we can notice

from the ratios calculated above that they have remain almost the same in the five consecutive

years.


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FIGURE NO 4.4SHOWING SOLVENCY RATIO

4.5 INVENTORY TURNOVER RATIO

0

10

20

30

40

50

60

70

80

90

100

YEAR 2007-08 2009-10 2010-11 2011-12 2012-13

Solvency Ratio

Solvency Ratio


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This ratio measures the stock in relation to turnover in order to determine how often the

stockturns over in the business.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Cost of Goods Sold=Sales-Gross Profit

TABLE NO 4.5SHOWING INVENTORY TURNOVER RATIO

YEARS

COST OF GOODS

SOLD

(In Rs)

AVERAGE

INVENTORY

(In Rs)

INVENTORY

TURNOVER RATIO

(In Times)

2007-08 19,21,000 3,81,000 5.04

2009-10 33,81,000 4,43,000 7.63

2010-11 37,24,000 4,01,000 9.28

2011-12 50,24,000 4,37,000 11.49

2012-13 46,40,000 5,14,000 9.02

MEAN SD CV

42.46 5791.65 15.22


INTERPRETATION:

The company inventor turnover ratio of 2007-08 5.04 times and 2011 -12 it increase to 11.49

times which indicates company efficiently manage in inventory it shows that company take

effort to efficient inventory management.


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FIGURE NO 4.5SHOWING INVENTORY TURNOVER RATIO

4.6 DEBTOR TURNOVER RATIO

0

2

4

6

8

10

12

2007-08 2009-10 2010-11 2011-12 2012-13

INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO


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It is determined by dividing the net credit sales by average debtors outstanding during

theyear. The analysis of the debtors turnover ratio supplements the information regarding

theliquidity of one item of current assets of the firm. The ratio measures how rapidly

receivablesare collected.

Debtors Turnover Ratio = Net credit sales / Average Debtors

TABLE NO 4.6 SHOWING DEBTOR TURNOVER RATIO

YEARSNET CREDIT SALES

(In Rs)

AVERAGE DEBTOR

(In Rs)

DEBTOR TURN

OVER RATIO

( in Times)

2007-08 16,68,660 5,06,050 3.30

2009-10 27,24,090 4,37,030 6.23

2010-11 39,90,050 5,47,340 7.28

2011-12 63,20,800 7,97,160 7.92

2012-13 56,81,090 8,50,070 6.68

MEAN SD CV

31.14 3102 11.13


INTREPRETATION

The companys debtors turnover ratio of 2007-08 3.30 times, in 2011-12 7.93 times in ayearwhich indicates company collects its receivable rapidly. We can say year to year the shorter

Time lag between credits sells and collection.


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FIGURE NO 4.6SHOWING DEBTOR TURNOVER RATIO

0

1

2

3

4

5

6

7

8

2007-08 2009-10 2010-11 2011-12 2012-13

DEBTOR TURNOVER RATIO

DEBTOR TURN OVER RATIO


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4.7 DEBTOR COLLECTION PERIOD

Debtors Collection Period is calculated from following formula:

Debtors Collection Period = 360 days / Debtors Turnover Ratio

TABLE NO 4.7 TABLE SHOWING DEBTOR COLLECTION PERIOD


INTREPRETATION

According to debtor collection period from above table, Company was following liberalCredit policy as its collection period of 2007-08 was 109 days. But on account of

negativeWorking it has changed its credit policy and reduced its collection period in 2012-13 by

54 days

YEARS DAYS IN YEAR

DEBTOR

TURNOVER RATIO

(In Times)

DEBTOR

COLLECTION

PERIOD

(in days)

2007-08 360 3.30 109

2009-10 360 6.23 58

2010-11 360 7.28 49

2011-12 360 7.92 45

2012-13 360 6.68 54

MEAN SD CV

315 320262 113.18


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FIGURE NO 4.7SHOWING DEBTOR COLLECTION PERIOD RATIO

0

20

40

60

80

100

120

2007-08 2009-10 2010-11 2011-12 2012-13

DEBTOR COLLECTION PERIOD

DEBTOR COLLECTION PERIOD


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4.8 CREDITORS TURNOVER RATIO

Creditors Turnover Ratio = Net Credit Purchase / Average Creditors

TABLE 4.8 SHOWING CREDITOR TURNOVER RATIO


INTERPRETATION:-

Above stated graph indicates that in Mar06 Company has settled its creditors accounts

2.61Times in a year. In Mar07 it had increased by 3.22 which show that company had settled its

account rapidly. From Mar08 to Mar10 it has paid its creditors account average of 3 times. If

creditors Turnover ratio is high , companys requirements of working capital will increase and

vice versa.

YEARS

NET CREDIT

PURCHASE

(Rs)

AVERAGE CREDITOR

(In Rs)

CREDITOR

TURNOVER RATIO

(Times Per Year)

2007-08 20,58,057 7,86,059 2.61

2009-10 32,94,400 10,20,590 3.22

2010-11 33,54,500 11,21,190 2.99

2011-12 52,05,670 17,17,900 3.03

2012-13 46,50,700 19,73,300 2.35

MEAN SD CV

14.2 645.72 5.08


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FIGURE 4.8 SHOWING CREDITOR TURNOVER RATIOS

0

0.5

1

1.5

2

2.5

3

3.5

2007-08 2009-10 2010-11 2011-12 2012-13

CREDITOR TURNOVER RATIO

CREDITOR TURNOVER RATIO


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FIGURE 4.9 SHOWINGCREDITOR COLLECTION PERIOD

0

20

40

60

80

100

120

140

160

2007-08 2009-10 2010-11 2011-12 2012-13

CREDITORS COLLECTION PERIOD

CREDITORS COLLECTIONPERIOD


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FIGURE NO 4.10 SHOWING WOKING CAPITAL FOR YEARENDED

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2008-09 2009-10 2010-11 2011-12 2012-13


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4.11SALES TO NET WORKING CAPITAL RATIO

Sales to Net Working Capital Ratio = Sales / Net Working Capital

TABLE NO 4.11 SHOWING NET WORKING CAPITAL RATIO

YEARSNET CREDIT SALES

(In Rs)

NET WORKING

CAPITAL

(In Rs)

NET WORKING

CAPITAL RATIO

(In Rs)

2007-08 1668660 2,79,000 5.98086

2009-10 2724090 16,45,000 1.655982

2010-11 3990050 2,87,000 13.90261

2011-12 6320800 8,15,500 7.750828

2012-13 5681090 16,79,500 3.382608

MEAN SD CV

32.4 3920.04 12.52


INTERPRETATION

The sales to net working capital ratio holds good. There is step increase in the year 2010-

11 because of the increase in the liability of the firm. The working capital of the firm is

decreasing after 2012-13 due to delay in collection period.


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FIGURE NO 4.11 SHOWING NET WORKING CAPITAL RATIO

0

2

4

6

8

10

12

14

2007-08 2009-10 2010-11 2011-12 2012-13

NET WORKING CAPITAL RATIO

NET WORKING CAPITAL RATIO


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4.12 CURRENT LIABILITIES TO NET WORTH

Current Liability to Net Worth = Current Liability / Net Worth

TABLE NO 4.12 SHOWING CURRENT LIABILITIES TO NET WORTH

YEARSCURRENT

LIABILITYNET WORTH

CURRENT

LIABILITY TO NET

WORTH (%)

2007-08 15,88,000 10,94,000 145.1554

2009-10 19,95,000 17,30,000 115.3179

2010-1128,88,000

26,64,000 108.4084

2011-1243,79,000

43,79,000 100

2012-1379,00,000

79,00,000 100

MEAN SD CV

568.8 1036789 203.64


INTERPRETATION:

The current liability to net worth ratio shows the ability of the firm to meet its liability.

The above analysis shows that the company has less net worth to meet the liabilities. If this

continues the company may face a huge problem. The company should increase its net worth by

increasing its capital and it should reduce the liabilities especially the loans secured.


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FIGURE NO 4.12 SHOWING CURRENT LIABILITIES TO NET WORTH

0

20

40

60

80

100

120

140

160

2007-08 2009-10 2010-11 2011-12 2012-13

CURRENT LIABILITY TO NET WORTH

CURRENT LIABILITY TO NETWORTH


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4.13 NET PROFIT RATIO

This ratio determines the overall efficiency of the business. The relationship of net profit

To sales is known as net profit ratio. It also called as sales margin ratio (or) profit margin ratio.

Net Profit Ratio = Net Profit / Sales*100

TABLE NO 4.13 SHOWING CURRENT LIABILITIES TO NET WORTH

YEARSSALES

(In Rs)

NET PROFIT

(In Rs)NET PROFIT RATIO

2007-08 1668660 2,79,000 16.72

2009-10 2724090 16,45,000 60.38

2010-11 3990050 2,87,000 7.19

2011-12 6320800 8,15,500 12.90

2012-13 5681090 16,79,500 29.56

MEAN SD CV

126.75 53213.6 46.13


INTERPRETATION:

The above table financial analysis of the net working capital ratio of the company is good

financial performance of the statement. In the year 2009-12 most increase in 60.38 and another

year decrease from the period.


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FIGURE NO 4.12 SHOWING NET WORKING CAPITAL TO NET WORTH

0

10

20

30

40

50

60

70

2007-08 2009-10 2010-11 2011-12 2012-13

NET PROFIT RATIO

NET PROFIT RATIO


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4.12 COMPARATIVE BALANCE SHEET

The Comparative balance sheet analysis is the study of the trend of the same items, group

of items and computed items in two or more balance sheets of the same business enterprise on

different dates.

The changes in periodic balance sheet items reflect the conduct of a business. The

changes can be observed by comparison of the balance sheet at the beginning and at the end of a

period and these changes can help in forming an option about the progress of an enterprise.

The comparative balance sheet has two columns for the data of original balance sheets. A

third column is used to show increase in figures. The fourth column may be added for giving

percentages of increases or decreases


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TABLE NO 4.12.1 COMPARATIVE BALANCE SHEET FOR 2009 TO 2010

Years2009

(In Rs)

2010

(In Rs)

Comparative 2009

and 2010

(In Rs)

Increase or

Decrease in

percentage (%)

Capital 2,54,000 3,52,000 98,000 16.1

Net worth 17,30,000 26,64,000 9,34,000 21.2

Total

Liabilities19,95,000 28,88,000 8,93,000 18.2

Reserves 1,37,90,000 2,31,20,000 93,30,000 25.2

Net Block 16,90,00,000 28,41,00,000 11,51,00,000 25.4

Investments 3,51,000 13,28,000 9,77,000 58.1Sundry

Debtors10,28,000 2,47,000 -7,81,000 -61.2

Cash and

bank

balance

8,50,000 4,12,000 -4,38,000 -34.7

Net Current

assert30,79,000 24,23,000 -6,56,000 -11.9

Current

Assert36,40,000 31,75,000 -4,65,000 -6.8


INTREPR.ETATION

As per the table 2oo9 Kodiss apparels total liability was increased to 18.2 % as compare

with 2010. The asset was decreased to -6.8%. So company should increase their asset and

reduce liability over all financial performances is little lower when compare to 2009.the

company should take necessary steps to overcome.


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-80

-60

-40

-20

0

20

40

60

80

100

Capital Reserves Investments Inventories Sundry

Debtors

Cash and

bankbalance

Fixed

deposit

I n c r e a s i n g - -

>

Decreasing -->

Comparative Balance sheet for 2009 to 2010 in %


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TABLE NO 4.13.1 SHOWING COMPARATIVE BALANCE SHEET FOR 2010TO 2011

Years 2010 2011

Comparative

Balance

Sheet Of

2010 and

2011

Comparative

Balance Sheet Of

2010 and 2011 in(%)

Capital 7,05,000 70,00,000 62,95,000 81.70

Net worth 43,79,000 79,00,000 35,21,000 28.67

Reserves 3,67,60,000 7,19,50,000 3,51,90,000 32.37

Net Block 2,92,40,000 2,82,50,000 -9,90,000 -1.72

Inventories 3,66,000 50,90,000 47,24,000 86.58

Sundry Debtors 18,47,000 7,48,000 -10,99,000 -42.35

Cash and bank

balance12,46,000 11,88,000 -58,000 -2.38

Net Current

assert38,15,500 83,28,700 45,13,200 37.16

Fixed deposit 3,69,000 9,84,100 6,15,100 45.45

Cur rent Assert 51,94,500 95,79,500 43,85,000 29.68


INTREPR.ETATION

As per the table 2o11 company sundry debtor was decreased to 42.2 % as compared with

2010. O company follow strict collection policy in order to get receivables the company was

inventory increased nearly 80%. so company should decreased the inventory by reduce the

stocks. Over all financial performances is good when compare to 2011.the Company should take

necessary steps to overcome.


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-60

-40

-20

0

20

40

60

80

100

Comparative Balance Sheet for 2010 to 2011 in (%)


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5.2 SUGGESTIONS

Keeping in view the stated observation relating to the project study, the following are the

measurers and terms of suggestions are founded out which the SAKTHI GANESH TEXTILES

(P) LTD should follow to improve the performance of the company.

The company locked large amount of current assets. So the company should try to control

the cost among the inventories and other current assets.

The management of SAKTHI GANESH TEXTILES (P) LTD should adopt the practical of

periodical intercompany comparison. This comparative study will help to pin point the

area of weakness and strength the management to take timely corrective action.

Problem of surplus investment in inventory and receivables in SAKTHI GANESH

TEXTILES (P) LTD can largely be tackled through improved co-ordination in functioning

of some strategic departments such as purchase, production, marketing and finance,

strengthening up of management information system in SAKTHI GANESH TEXTILES (P)

LTD .


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5.3 RECOMMENDATIONS

The company has to reduce the collection period.

The company should get into an agreement with the debtors in order to collect the

money back.

The company should try to pay back the loans obtained so that the liability of the

company is brought down.

Net profit of the company can also be increased by increasing the sales and other

incomes simultaneously reducing the cost of goods sold, operating and other expenses.

The amount of working capital of the company has reduced in 2006 to 07.so company

may increase asset by increasing cash and bank balance through efficiently.

The company may take steps to see that time allotted for the debtor to repay.

To have the efficient working capital management, the short term funds should be used

efficiently in the operations of the business. In the management capital investment in

current assets must be systematically planned. It is advice able to follow a studied andcredit policy it improve the standard of liquidity

Cash and bank balance was very low. It is suggested that cash and bank balance should

be increased, so as to meet working capital needs and current liabilities.


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5.4CONCLUSION

The project entitled AN ORGANISATIONAL STUDY AND STUDY ON WORKING

CAPITAL ANALYSIS WITH SPECIAL REFERENCE TO SAKTHI GANESH

TEXTILES (P) LTD ERODE is undertaken with the objective of examining theworking capital analysis and to measure the profitability.

From the study the current ratio and quick ratio is not up to the standard norms 2:1 and

1:1; Gross profit and Net profit position of the company is not good; Liquidity position

of the company is good; Long-term solvency position of the company is also good from

the analysis; Return on total assets quite good; Growth in sales is good; The company

should increase its sales and to decrease its expenses.


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5.5BIBILIOGRAPHY

Management Accounting - R.K. Sharma and Shashi Gupta, 2001 ( New Delhi)

Financial Management - I.M. Pandy Vikas Publishing House Private Ltd 2009 -09-07Management Accounting M.K. Khan and P.K Jain Tata Mcgraw -Hill publishing house

P.Mohana Rao and Alok L.Pramanik, working capital management -Deep & Deep Publications

Ltd,

New Delhi

WEB SOURCE

www.Google.com

www.fincialthoughtsinindia.co.in
http://www.google.com/http://www.google.com/http://www.fincialthoughtsinindia.co.in/http://www.fincialthoughtsinindia.co.in/http://www.fincialthoughtsinindia.co.in/http://www.google.com/


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BALANCE SHEET AS ON YEAR ENDED

Balance Sheet of AN ORGANISATIONAL STUDY AND STUDY ON WORKINGCAPITAL ANALYSIS WITH SPECIAL REFERENCE TO SAKTHI GANESH TEXTILES

(P) LTDERODE

Years 2008-09 2009-10 2010-11 2011-12 2012-13

Source Of F unds

Capital 2,54,000 2,54,000 3,52,000 7,05,000 70,50,000

Net worth 10,94,000 17,30,000 26,64,000 43,79,000 79,00,000

Total Dept 4,94,000 2,65,000 2,24,000 0 0

Total L iabili ties 15,88,000 19,95,000 28,88,000 43,79,000 79,00,000

Total Share Capital 25,40,000 25,40,000 35,20,000 70,50,000 70,50,000

Reserves 84,00,000 1,37,90,000 2,31,20,000 3,67,60,000 7,19,50,000Secured Loans 11,50,000 4,10,000 40,000 0 0

Unsecured Loans 37,90,000 22,40,000 22,10,000 0 0

Application Offunds

Gross Block 3,04,10,000 40,53,00,000 5,35,00,000 5,59,50,000 56,60,00,000

Less Depreciation 1,55,50,000 23,63,00,000 2,50,90,000 2,67,10,000 28,35,00,000

Net Block 1,48,60,000 16,90,00,000 2,84,10,000 2,92,40,000 28,25,00,000Working Capital In

Progress 0 0 0 3,20,000 3,64,000

Investments 6,00,000 3,51,000 13,28,000 3,56,500 9,38,700

Inventories 3,13,000 8,50,000 4,36,000 3,66,000 50,90,000

Sundry Debtors 3,84,000 10,28,000 2,47,000 18,47,000 7,48,000

Cash and bank balance 3,00,000 8,50,000 4,12,000 12,46,000 11,88,000

Net Current assert 15,97,000 30,79,000 24,23,000 38,15,500 83,28,700

Loan And Advance 2,61,000 5,48,000 5,61,000 10,10,000 2,66,700

Fixed deposit 9,000 13,000 1,91,000 3,69,000 9,84,100

Documents

financial performance of textile company