INTRODUCTION

Finance is one the basic foundations of all kinds of economic activities. It is

the master key, which provides access to all the sources for being employed in
manufacturing. Hence it is rightly said that finance is lifeblood of any enterprise,
besides being the scarcest elements, it is also the most indispensable requirement.
Without finance neither any business can be started nor successfully run. Provision of
sufficient funds at the required time is the key to success of concern. As matter of fact
finance may be said to be the circulatory system of economic body, making possible
the needed co-operation among many units of the activity.

FINANCIAL MANAGEMENT:
Financial management emerged as a distinct field of study at the turn of this
Century. Many eminent persons defined it in the following ways:

DEFINITIONS:
According to GUTHMANN AND DOUGHAL: Business finance can
broadly be defined as the activity concerned with planning, rising, controlling and
administering of funds used in the business.
According to BONNEVILE AND DEWEY: Financing consists in the rising,
providing and managing of all the money, capital or funds of any kind to be used in
connection with the business.
According to Prof. EZRA SOLOMAN: Financial management is concerned
with the efficient use of any important economic resource, namely capital funds.
Firms create manufacturing capacities for production of goods. Some provides
to consumers. They sell their goods or services to earn profit. They raise funds to
acquire manufacturing and other facilities. Thus, the three most important activities of
a business firm are finance, production, and marketing. A firm secures whatever
capital it needs and employees it (finance activity) in activities which generate returns
on invested capital and marketing activities.

Functions of Financial Management:

Investment decisions
Financing decisions
Dividend decisions
Liquidity decisions

1. Investment Decision:Investment decision or capital budgeting involves the decision of allocation of

capital or commitment of funds to long-term assets, which would yield, benefits in
future. Its one very significant aspect is the task of measuring the prospective
profitability of new investments. Future benefits are difficult to measure and cannot
be predicted with certainty

2. Financing Decision:Financing decision is the second important function to be performed by the

financial manager. Broadly, he must decide when, where and how to acquire funds to
meet the firms investment needs. The central issue before him is to determine the
proportion of equity and debt. The mix of debt and equity is known as the firms
capital structure. The firms capital structure is considered to be optimum when the
market value of shares is maximized.

3. Dividend Decision:Dividend decision is the third major financial decision. The financial manager
must decide whether the firm should distribute a portion and retain the balance like
the debt policy. The dividend policy should determine in terms of impact on the
shareholders value. The optimum dividend divided policy is one, which maximizes
the market value of the firms shares.

4. Liquidity Decision:Current assets management which affects a firms liquidity is an important

finance function. Current assets should be managed efficiency for safe guarding the
firm against dangers of liquidity and insolvency. Investment in current assets affects
firms profitability, liquidity and risk. A conflict exists between profitability and
liquidity while managing current assets.
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm. It is done by establishing relationships between the items of
financial statements viz., balance sheet and profit and loss account. Financial analysis
can be undertaken by management of the firm or by parties outside the firm viz.,
owners creditors, investors and the others.

GOALS OF FINANCIAL MANAGEMENT:

Maximize the value of the firm to its equity shareholders. This means
that the Goals of the firm should be to maximize the market value of its
equity shares (Which represent the value of the firm to its equity
shareholders)

Maximization of profit.

Maximization of earnings per share.

Maximization of return on equity (defined as equity earnings/net worth)

Maintenance of liquid assets in the firm.

Ensuring maximum operational efficiency through planning, directing

and Controlling of the utilization of the funds i.e., through the effective
employment of funds.

Enforcing financial discipline in the use of financial resources through

the coordination of the operation of the various divisions in the
organization.

Building up of adequate reserves for financing growth and expansion.

Ensuring a fair return to the shareholders on their investment.

The key challenges for the finance manager in India appear to be in

the following areas:

Investment Planning

Financial Structure

Treasure Operations

Foreign Exchange

Investor Communication

Management Control

FINANCIAL STATEMENT ANALYSIS

Financial Analysis is the process of identifying the financial strengths and
weaknesses of the firm. It is done by establishing relationships between the items of
financial statements like balance sheet and profit and loss account. Financial analysis
can be undertaken by management of the firm or by parties outside the firm.
Meaning and types of Financial Statements:
A financial statement is an organized collection of data according to logical
and consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business firm. It may show apposition at a moment of time
as in the case of balance sheet, or may reveal a series of activities over a given period
of time, as in the case of an income statement.
The term financial statements generally refers to two basic statements:
the income statement and the balance sheet. Of course, a business may also prepare a
statement of retained earnings and a statement of change in financial position in
addition to the above two statements.
Income Statement:
It explains what happened to a business as a result of operations between two
balance sheet dates. For this purpose of it matches the revenues and cost incurred in
the process of earnings revenues and shows the net profit earned or loss suffered
during a particular period.

Financial statements

Income
statement

Statement
of retain
earnings

Balance
sheet

Statement
of changes
in financial
position

Balance sheet
It is a statement of financial position of a business at a specified moment of
time. It represents all assets owned by the business at a particular moment of time and
the claims of the owners and outsiders against those assets at that time. It is in a way a
snapshot of the financial condition of the business at that time.
The important distinction between a income statement and a balance sheet is
that in the income statement is for a period while balance sheet is on a particular date.
Income statement is, therefore, a flow report, as contrasted with the balance sheet
which is a static report. However, both are complementary to each other.
Statement of retained earnings
The term retained earnings means the accumulated excess of earnings over
losses and dividends. The balance shown by the income statement is transferred to the
balance sheet through this statement, after making necessary appropriations. It is,
thus, a connecting link between the balance sheet and the Income statement. It is
fundamentally a display of things that have caused the beginning-of-the-period
retained earnings balance to be changed into the one shown in the end-of-the-period
balance sheet. The statement is also termed as profit and loss appropriation account in
case of companies.
Statement of Financial position:
Statement of affairs is popularly known as balance sheet it refers to the position of the
long term and short term liabilities on the one hand on the other side current and fixed
assets with the help of statement of affairs one can see whether firms long term and
short term liquidity position is sound or not.
Meaning and Concept of Analysis of Financial Statements:
Financial statement analysis is a process of evaluating relationship between the
component parts of the financial statements to obtain a better understanding of a
firms position and performance.

According to John Meyer:Financial Statement analysis is largely a study of relationship among the various
financial factors in a business as disclosed by single set of statements and a study of
the trend of these factors as shown in a series of statements.
According to Hampton j.j:The statement disclosing status of investments is known as balance sheet and the
statement showing the result is known as profit and loss account
Types of Financial Statements Analysis
We can classify various types of financial analysis into different categories depending
upon
Types of Financial Analysis

On the Basis of Material used

On the basis of modus operand

Extend

Internal

Horizontal

Vertical

Analysis

Analysis

Analysis

Analysis

In the material used According to material used, finance analysis can be of two types
a) External analysis
b) Internal analysis
According to the method of operation followed in the analysis financial analysis can
also be of two types:
a) Horizontal analysis
b) Vertical analysis
1) External analysis:

This analysis is done by outsiders who do not have access to the detailed internal
accounting records of the business firm. Those out sides include investors creditors
government agencies credit agencies and the general public.
2) Internal Analysis:
This Analysis conducted by persons who have access to the internal accounting
records of a business firms.
The methods of preparation followed in the analysis:
According to the method of operation following in the analysis financial analysis can
also be of two types.
a) Horizontal Analysis:
Horizontal analysis refers to the comparison of financial data of company for several
reasons the figures for this type of analysis are presented horizontally over a number
of columns the figures of the various years are compared with standard or have year
this type of analysis is also called as Dynamic Analysis comparative statements and
trend percentages are two tools employed in horizontal analysis.
b) Vertical Analysis:
Vertical analysis refers to the study of the various items in the financial statement of
one accounting period it is also known as Static Analysis common size of financial
statements and financial ratios are two tools employed in vertical analysis.
Steps involved in financial statements analysis:
The analysis of the financial statements requires:
1)
2)

Methodical classification
Tools of financial statements

Each of the above steps has been explained in the following:

1) Methodical classification
In order to have a meaningful analysis it is necessary that figures should be arranged
properly. Usually instead the two column statements, as ordinarily prepared, the
statements are prepared in single column form which should throw up significant

figures by adding or subtracting this also facilities showing the figure of a number of
firms or number of years side of side for comparison purpose.
1) Tools of financial analysis:
A financial analyst can adopt one or more of the following:
Comparative Statement Analysis
Common size Statement Analysis
Trend Analysis
Funds Flow Analysis
Cash flow
Ratio Analysis
Net working capital analysis
Comparative Statement Analysis:
In comparative financial statements are those statements which are designed to
provide time perspective to the consideration of various elements of financial position
embodied in such statements in these statements figures for two or more periods are
shown side by side to facilitate comparison.
1) comparative income statement:
The income statement discloses net profit or net loss on account of operations.
A comparative income statement will show the absolute figures for two or more
periods the absolute change from one period to another and if desired the change in
terms of percentages.
2) Comparative Balance Sheet:
Comparative Balance sheet as on two or more different dates can be used for
comparing assets and liabilities and finding out any increase or decrease in those
items thus while in a single balance sheet the emphasis is an present position it is on
change in the comparative balance sheet even balance sheet is very useful in studying
the trends in an enterprise.
Common Size Statement Analysis:

Common size statement is financial tool of studying key changes and trends in
financial position of a company in common size statement each item is stated as on
percentage of the total of which that item is a part each percentage exhibits the
relation of the individual item to its respective total therefore the common size
percentage method represents a type of ratio analysis.
That is why this statement is also designated as component percentage or 100
percent statement preparation of the common size statement involves two steps:
1) State the total of the statement as 100 percent.
2) Compute the ratio of each item to the total in the statement.
Common Size Income Statement:
The common size income statement is designed to exhibit what proportion of the net
sales has been absorbed by the various costs and expenses incurred by the enterprise
and the proportion that remains as net income.
Common size Balance Sheet:
Common size balance sheet is prepared by stating the total assets as 100, and reducing
individual assets into percentages of the total likewise individual liability items are
expressed as percentages of the total liabilities.
Trend Analysis:Trend analysis depicts of the ratios over a period of time and the trends in the
operation of the enterprise. The trend figures are index figures a birds eye view of the
comparative data by presenting over a period of time this is horizontal analysis
generally financial ratios are studies for a specified number of years it is a dynamic
analysis depicting the oranges over a stated & period.

10

NEED FOR THE STUDY

To find out the prospects of the company.
To know the liquidity position of the company.
To know the solvency position of the company.
To know the profitability performance of the company.
To know the funds flow & cash flow.
To know analysis that represents the figures containing the condensed report of
the position development and problems of the concern.

11

SCOPE OF THE STUDY

The critical scope of the study was confined to the available financial statements of
the company.
The present study is intended to cover a period of five years from 2005-2009 for
comparative balance sheet analysis.
The Study is limited to the financial aspects of the organization and that to with their
aspects which are required for the calculation and analysis of the financial statements
of the company

12

OBJECTIVES OF THE STUDY

To prepare and analyze the comparative statement i.e. income statement and
balance sheet of the company. In order to know the relative changes in the
financial activities.

To evaluate the performance of the company ensuring various accounting and

financial tools as an yardstick to measure the efficiency of the company

To know the current financial position of the company

To analyze the debt equity composition of the company

To study the companys profitability position

To interpret the result of the interpretation itself will facilities smooth decisions
making

To study the financial statements of sub division of the company for the past 5
Years.

To make necessary conclusions and suggestion.

13

METHODOLOGY OF THE STUDY

Methodology is a systematic process of collecting information in order to analyze and

verifies a phenomenon. The collection of data is two principle sources. They are
discussed as
I. Primary data
II. Secondary data
PRIMARY DATA:
Primary data are those which are collected afresh and for the first time, and thus happen to
be original in character.
The primary data is collected by discussions with the functional managers, officers, staff
and other members of the organization.
SECONDARY DATA:
Secondary data are those which have been already collected by some else and which have
been already passed through the statistical process.
The secondary data is obtained from annual report i.e. balance sheet and income
statement, and from the text books of financial management.
Here the project is done on secondary data.

14

LIMITATIONS OF THE STUDY

Some of the important limitations of financial analysis are however summed up as

below.
1. It is only a study of interim reports
2. Financial analysis is based upon only monetary information and non-monetary
factors are ignored.
3. It does not consider changes in price levels.
4. As the financial statements are prepared on the basis of a going concern, it
does not given exact position. Thus accounting concepts and conventions
cause a serious limitation to financial analysis.
5. Changes in accounting procedure by a firm may often make financial analysis
misleading.
Analysis is only a means and not an end in itself. The analyst has to make
interpretation and draw his own conclusions. Different people may interpret
the same analysis in different ways.
6. The period of the project limited to 45 days.

15

INDUSTRY PROFILE
Textile Industry in India is the second largest employment generator after agriculture.
It holds significant status in India as it provides one of the most fundamental
necessities of the people. Textile industry was one of the earliest industries to come
into existence in India and it accounts for more than 30% of the total exports. In fact
Indian textile industry is the second largest in the world, second only to China.
Textile Industry is unique in the terms that it is an independent industry, from the
basic requirement of raw materials to the final products, with huge value-addition at
every stage of processing. Textile industry in India has vast potential for creation of
employment opportunities in the agricultural, industrial, organized and decentralized
sectors & rural and urban areas, particularly for women and the disadvantaged. Indian
textile industry is constituted of the following segments: Readymade Garments,
Cotton Textiles including Handlooms, Man-made Textiles, Silk Textiles, Woolen
Textiles, Handicrafts, Coir, and Jute.
Till the year 1985, development of textile sector in India took place in terms of
general policies. In 1985, for the first time the importance of textile sector was
recognized and a separate policy statement was announced with regard to
development of textile sector. In the year 2000, National Textile Policy was
announced. Its main objective was: to provide cloth of acceptable quality at
reasonable prices for the vast majority of the population of the country, to increasingly
contribute to the provision of sustainable employment and the economic growth of the
nation; and to compete with confidence for an increasing share of the global market.
The policy also aimed at achieving the target of textile and apparel exports of US $ 50
billion by 2010 of which the share of garments will be US $ 25 billion.
Strengths of Indian textile Industry

India has rich resources of raw materials of textile industry. It is one of the
largest producers of cotton in the world and is also rich in resources of fibres
like polyester, silk, viscose etc.

16

India is rich in highly trained manpower. The country has a huge advantage
due to lower wage rates. Because of low labor rates the manufacturing cost in
textile automatically comes down to very reasonable rates.

India is highly competitive in spinning sector and has presence in almost all
processes of the value chain.

Indian garment industry is very diverse in size, manufacturing facility, type of

apparel produced, quantity and quality of output, cost, requirement for fabric
etc. It comprises suppliers of ready-made garments for both, domestic or
export markets.

Weaknesses of Indian textile Industry

Indian textile industry is highly fragmented in industry structure, and is led by

small scale companies. The reservation of production for very small
companies that was imposed with the intention to help out small scale
companies across the country, led substantial fragmentation that distorted the
competitiveness of industry. Smaller companies do not have the fiscal
resources to enhance technology or invest in the high-end engineering of
processes. Hence they lose in productivity.

Indian labour laws are relatively unfavorable to the trades and there is an
urgent need for labour reforms in India.

India seriously lacks in trade pact memberships, which leads to restricted

access to the other major markets.

Outlook for Indian textile Industry

The outlook for textile industry in India is very optimistic. It is expected that Indian
textile industry would continue to grow at an impressive rate. Textile industry is being
modernized by an exclusive scheme, which has set aside $5bn for investment in
improvisation of machinery. India can also grab opportunities in the export market.
The textile industry is anticipated to generate 12mn new jobs in various sectors. Close
to 14% of the industrial output and 30% of the export market share is contributed
directly by the Indian textile industry. Indian textile industry is also the largest
industry when it comes to employment that generates jobs not just within but also in
various support industries like agriculture. As per a recent survey the textile industry
is going to contribute 12 million new jobs in India by 2010 itself.

17

Indian textile industry is as old as the word textile itself. This industry holds a
significant position in India by providing the most basic need of Indians. Starting
from the procurement of raw materials to the final production stage of the actual
textile, the Indian textile industry works on an independent basis.
Indian textile industry concludes of various segments like:
1. Woolen Textile
2. Cotton Textiles
3. Silk Textiles
4. Readymade Garments
5. Jute And Coir
6. Hand-Crafted Textile Like Carpets
7. Man Made Textiles Indian textile industry in a very short span had made a
distinct position globally, alluring the globe towards the World of Indian
textiles. This has happened mainly because:
8. High availability of raw materials
9. Highly skilled economical labor, an added advantage
10. Largest producer of cotton yarn contributing 25% towards worlds cotton
11. Availability of all kinds of fibers like silk, cotton, wool and even high quality
synthetic fibers
12. Flexibility of the readymade garment industry in terms of sizes, fabric variety,
quantity, quality and cost
Its not just the present that is shinning like a bright start but also the future, as the
textile export market of India is expected to reach a high of $50 billion by 2010. This
will eventually make a profit by 300%. In order to attain this target Indian textile
industry has already started improving their design skills, including a combination of
various fibers. Indian textile industry is all set to meet international standards and is
planning to invest $5 billion in machineries very soon.

Most of the international brands like Marks & Spencer, JC penny, Gap have started
procuring most of their fabrics from India. In fact, Wal-Mart, who had procured

18

textile worth $ 200 million last year, intends to procure $ 3 billion worth of textile this
year.
The golden phase of the Indian textile industry has just begun where the world is
chasing it from all nooks and corners.
India Textile Industry is one of the leading textile industries in the world. Though was
predominantly unorganized industry even a few years back, but the scenario started
changing after the economic liberalization of Indian economy in 1991. The opening
up of economy gave the much-needed thrust to the Indian textile industry, which has
now successfully become one of the largest in the world.
India textile industry largely depends upon the textile manufacturing and export. It
also plays a major role in the economy of the country. India earns about 27% of its
total foreign exchange through textile exports. Further, the textile industry of India
also contributes nearly 14% of the total industrial production of the country. It also
contributes around 3% to the GDP of the country. India textile industry is also the
largest in the country in terms of employment generation. It not only generates jobs in
its own industry, but also opens up scopes for the other ancillary sectors. India textile
industry currently generates employment to more than 35 million people. It is also
estimated that, the industry will generate 12 million new jobs by the year 2010.
Various Categories
Indian textile industry can be divided into several segments, some of which can be
listed as below:

Cotton Textiles

Silk Textiles

Woolen Textiles

Readymade Garments

Hand-crafted Textiles

Jute and Coir

The Industry

19

India textile industry is one of the leading in the world. Currently it is estimated to be
around US$ 52 billion and is also projected to be around US$ 115 billion by the year
2012. The current domestic market of textile in India is expected to be increased to
US$ 60 billion by 2012 from the current US$ 34.6 billion. The textile export of the
country was around US$ 19.14 billion in 2006-07, which saw a stiff rise to reach US$
22.13 in 2007-08. The share of exports is also expected to increase from 4% to 7%
within 2012. Following are area, production and productivity of cotton in India during
the last six decades:

Year

Area

in

lakh Production in lakh bales of 170 Yield

hectares

kgs

hectare

1960-61

56.48

30.62

92

1970-71

76.78

56.41

124

1980-81

76.05

47.63

106

2003-04

78.24

78.60

170

2004-05

74.39

117.00

267

2005-06

85.76

140.00

278

2006-07

87.30

158.00

308

2007-08

76.67

136.00

302

2008-09

76.30

179.00

399

2009-10

87.86

243.00

470

2010-11

86.77

244.00

478

2011-12

91.44

280.00

521

2012-13

94.39

315.00

567

2013-14

93.73

290.00

526

kgs

per

Though during the year 2008-09, the industry had to face adverse agro-climatic
conditions, it succeeded in producing 290 lakh bales of cotton comparing to 315 lakh
bales last year, yet managed to retain its position as world's second highest cotton
producer.

20

Strengths

Vast textile production capacity

Large pool of skilled and cheap work force

Entrepreneurial skills

Efficient multi-fiber raw material manufacturing capacity

Large domestic market

Enormous export potential

Very low import content

Flexible textile manufacturing systems

Weaknesses

Increased global competition in the post 2005 trade regime under WTO

Imports of cheap textiles from other Asian neighbors

Use of outdated manufacturing technology

Poor supply chain management

Huge unorganized and decentralized sector

High production cost with respect to other Asian competitors

Cotton Exports from India

Year
2000-01

Quantity (in lakh bales of 170 kgs)

16.82

Value (in Rs./Crores)

1655.00

21

2001-02

3.50

313.62

2002-03

1.01

86.72

2003-04

0.65

52.15

2004-06

0.60

51.43

2006-07

0.50

44.40

2007-08

0.83

66.31

2008-09

12.11

1089.15

2009-10

9.14

657.34

2010-11

47.00

3951.35

2011-12

58.00

5267.08

2012-13

85.00

8365.98

2013-14

50.00

N.A.

Year

Quantity (in lakh bales of 170 kgs.)

Value (Rs./Crores)

2001-02

0.30

56.42

2002-03

4.13

497.93

2003-04

7.87

772.64

2004-05

22.01

1967.92

2005-06

22.13

2029.18

22

2006-07

25.26

2150.01

2007-08

17.67

1789.92

2008-09

7.21

880.10

2009-10

12.17

1338.04

2010-11

5.00

695.77

2011-12

5.53

752.29

2012-13

6.50

986.33

2013-14

7.00

N.A.

Current Facts on India Textile Industry

India retained its position as worlds second highest cotton producer.

Acreage under cotton reduced about 1% during 2008-09.

The productivity of cotton which was growing up over the years has decreased
in 2008-09.

Substantial increase of Minimum Support Prices (MSPs).

Cotton exports couldn't pick up owing to disparity in domestic and

international cotton prices.

Imports of cotton were limited to shortage in supply of Extra Long staple

cottons.

Role of Textile Industry in India GDP:

It has been quite beneficial in the economic life of the country. The worldwide trade
of textiles and clothing has boosted up the GDP of India to a great extent as this sector
has brought in a huge amount of revenue in the country.
In the past one year, there has been a massive upsurge in the textile industry of India.
The industry size has expanded from USD 37 billion in 2004-05 to USD 49 billion in
2006-07. During this era, the local market witnessed a growth of USD 7 billion, that
is, from USD 23 billion to USD 30 billion. The export market increased from USD 14
billion to USD 19 billion in the same period.

23

The textile industry is one of the leading sectors in the Indian economy as it
contributes nearly 14 percent to the total industrial production. The textile industry in
India is claimed to be the biggest revenue earners in terms of foreign exchange among
all other industrial sectors in India. This industry provides direct employment to
around 35 million people, which has made it one of the most advantageous industrial
sectors in the country.
Some of the important benefits offered by the Indian textile industry are as follows:

India covers 61 percent of the international textile market

India covers 22 percent of the global market

India is known to be the third largest manufacturer of cotton across the globe

India claims to be the second largest manufacturer as well as provider of

cotton yarn and textiles in the world

India holds around 25 percent share in the cotton yarn industry across the
globe

India contributes to around 12 percent of the world's production of cotton yarn

and textiles

The Role of Textile Industry in India GDP had been undergoing a moderate increase
till the year 2004 to 2005. But ever since, 2005-06, Indian textiles industry has been
witnessing a robust growth and reached almost USD 17 billion during the same period
from USD 14 billion in 2004-05.
At present, Indian textile industry holds 3.5 to 4 percent share in the total textile
production across the globe and 3 percent share in the export production of clothing.
The growth in textile production is predicted to touch USD 19.62 billion during 200607. USA is known to be the largest purchaser of Indian textiles.
Following are the statistics calculated as per the contribution of the sectors in Textile
industry in India GDP:

India holds 22 percent share in the textile market in Europe and 43 percent
share in the apparel market of the country. USA holds 10 percent and 32.6
percent shares in Indian textiles and apparel.

24

Few other global countries apart from USA and Europe, where India has a
marked presence include UAE, Saudi Arabia, Canada, Bangladesh, China,
Turkey and Japan

Ready made garments accounts for 45 percent share holding in the total
textile exports and 8.2 percent in export production of India

Export production of carpets has witnessed a major growth of 42.23

percent, which apparently stands at USD 654.32 million during 2004-05 to
USD 930.69 million in the year 2006-07. India holds 36 percent share in
the global textile market as has been estimated during April-October 2007

The technical textiles market in India is assumed to touch USD 10.63

billion by 2007-08 from USD 5.09 billion during 2005-06, which is
approximately double. It is also assumed to touch USD 19.76 billion by
the year 2014-15

By 2010, India is expected to double its share in the international technical

textile market

The entire sector of technical textiles is estimated to reach USD 29 billion

during 2005-2010

COMPANY PROFILE
NSL Group came into existence in 1973 through setting up a small seed company
Nuziveedu seeds by the visionary Sri M. Venkata Ramaiah over the last year 30 years
aide principally by tireless efforts and vision of Sri M. Prabhakar Rao (son of M.
Venkata Rarnaiah). Who took over the reins from his father in 1982 , the company
developed strength in research and marketing supply chain to become the largest seed
company in India , in process surpassing several multinational giants. The company
produces high quality hybrid seeds and cotton seeds supplied by company are planted
in 35-40% of the hybrid cotton area in the country in India.

25

The real scope for economic development of the country in terms of impacting larger
number of people lies in agriculture and rural development with in the philosophy.
combined with the success in seeds business ,NSL group widened its activities and
diversity into other agro based and allied industry by setting up units in sugar, textiles
industry and cotton business in various parts of the country.
Major expansions with capital outlays of over INR 2000 crores approx USD 440
Million are underway in these units NSL is poised to be significant player in the
country these business.
Already one of the best wind power companies in India, NSL Group is also planning a
major expansion in the renewable power generation business in capitalize on the huge
potential in the Indian power sector.
NSL group is also in infrastructure business and has five prestigious SEZ projects
under development.
NSL Cotton Corporation, a recent initiative of NSL group has been formed with a
visionary approach of linking cotton production and global textile industry there by
benefiting close to a million farmers and also facilitating industry to source as per
their needs.
Upon completion, the Group turnover to be grow to over INR l0.000crores (Approx
USD 2.2 Billion) in next 5 years from the existing 900 crores (approx USD 200
Million)
Members of Group Advisory Council
M. Prabhakar Rao
M.. Asha Priya
P. Kotaiah
P. Narasihamaramulu
K. Rama Koteswara Rao
M. Giridhar

26

Objectives of Group Advisory Council

The primary objective of the group advisory council is to oversight the
performance, improve, profitability, expansion schemes, generally of issues relations
to E Company in the Group including the followings:
(a.) Advice various NSL group companies in matter related to business and
organization strategies which will include
Recommending Investment polices and decisions and recommend course of
action to various group companies.
Oversee Risk Management Process of various group companies
Mergers and acquisitions, demergers, divesture and any other from business
related organization.
Overall monitoring of group investment and various projects.
(b.) Develop and recommend appropriate polices and systems to be followed by
various NSL group companies with respect to human talent acquisition and retention,
compensation and performance evaluation.

Primary functions of the Council

I (a) Evaluate the current composition of the Boards of NSL Group Companies and its
committees in order to ensure that the Board is comprised of members reflecting the
roper expertise, skills, attributes and personal and professional backgrounds for
service Director of the company.
(b) Develop and recommend set of Corporate Governance guidelines and principles
for NSI. Group Companies.
(c) Formation of sub-committees for making recommendations on the issues referred
to n as and when necessary.

27

(d).Any other matter which will serve the achievement of overall objective of the
GAC/ refereed by the chairman of GAC.
Corporate Social Responsibility
NSL Group is committed to nation-building by way of contribution to GDP growth
and uplifiment and development of the weaker sections of society. This is a legacy of
our founders and trustees, Sri M. Venkatramaiah, Smt. M. Rama Devi, Sri M.
Prabakar Rao, Smt. M. Asha Priya, Sri G.V.purnachandra Rao, and Dr. M. Gangadhar
Rao who founded Mandava Foundation.
We work closely with the Mandava Foundation to initiate programmers for
development, education and healthcare. We have set up a core committee for
Corporate Social responsibility to spearhead our efforts to integrate Social
responsibility concerns the companys values, culture, operations and business
decisions, at all levels of the organization.
Implementation Strategy
To ensure the involvement of our rural community, NSL Group relies on a
participatory approach in implanting all its projects.
In addition, the trust secures the participation of local Grarnpanchay at (village
Council), co-operative Societies, self help groups women and fourth clubs in decision
making.
NSL Group undertakes large scale human resource development projects in
agriculture, animal husbandry, dairy, horticulture, health, education and income
generation to accelerate the pace of development activities.
NSL Group disengages from the village that achieves 80% of development as per our
social indicators and discontinues active participation but monitors their progress in
case they need assistance and guidance.
Children are the future of the society. Every child has a right to enjoy its childhood. It

28

is the mandatory job of the government to take all possible steps to put an end to the
problem of child labor. It is the obligation of every generation to bring up children
who citizens of tomorrow in a proper way. Todays children will be leaders of
tomorrow who will hold the countries banner high and maintain the prestige of the
nation, NSL Group is making plans for Child Labor Eradication.
To carry on the business of manufacturing, buying, selling, importing, exporting and
dealing in textiles, cotton, silk, art silk, rayon, nylon, synthetic fibers, staple fibers,
polyester, worsted, wool, hemp and other fiber materials, yarn, cloth, linen, rayon and
other goods or merchandise whether textile felted, netted or looped.
To carry on the business of importers, exporters, buyers, sellers, dealers and as agents,
stockiest, distributors and suppliers of all kinds of ready made garments,
coverings, coated fabrics, textiles, hosiery and silk or merchandise of every kind and
description and other production goods, articles and things as are made from or with
cotton, nylon, silk, polyester, acrylics, wool, jute and other such kinds of fiber by ever
name called or made under any process, whether natural or artificial and by
Mechanical or other means and all other such products of allied nature made thereof.

NSL Group of Companies

NSL Textiles

Cotton to Clothing

NSL COTTON

Pioneering Branded Cotton

NSL SUGAR

Sustainable Food, Power & Fuel

NSL POWER

Clearly Energy for a Green Tomorrow

NSL INFRASTRUCTURE

Creating a Better Tomorrow

NSL COTTON
NSL Cotton Corporation (NCC) was established to serve as a link between cotton
farming and the textile industry. By establishing Integrated Cotton Farming involving
5.0 lakh farmers, it manages the entire operations including providing farmers with
Quality inputs. Credit, Insurance and Technical Advisory Services, thereby increasing
their profitability.

29

NSL SUGAR
NSL Sugars Ltd, was established as an associate company of the NSL Group, with an
aim to explore the Agro Industry in rural India. With a capital outlay of about RS.300
Crores, NSL Sugars Ltd, runs a 4500-ton capacity, sugar Mill with 26 MW cogon
and60 KLD Ethanol Plant. Three more sugar mills with a capital outlay of RS. 850
Crores are under implementation, and the turnover of Sugar business is estimated to
touch Rs.650 Corers by 2010.
NSL POWER
NSL Power Private Ltd, was established to facilitate faster implementation
Thermal and renewable power projects such as Wind, water, Solar, Thermal and
Biomass. The company presently has 60 MW of operating capacity comprising of
Wind & Biomass. Additional capacity of 440 MW will be implemented next 3-4
years.

NSL INFRASTRUCTURE
NSL Infrastructure Ltd. is one of Indias leading names in the field of realty and
infrastructure development. The company has created may World-Class landmarks
including IT Parks, banks and other commercial property and is currently
implementations Five Prestigious SEZ Projects at Hyderabad, Delhi and Chennai. It
plans for the future includes development of 14.50 million square feet of World-Class.
It and residential spaces in a phased manner over the next 5-6 years.
NSL TEXTILES LTD
NSL Textiles Limited, is one of Indias leading textile and apparel companies
established with the unique concept of Cotton to Clothing. With a state-of-the-art
manufacturing centre in Hyderabad, the company engages in all operations right from
extraction of cotton lint to garment manufacturing and is known for producing
excellent quality fabric.

30

NSL Textiles Ltd has set up State-of-Arts facilities in the State of AP with the unique
concept of Cotton to Clothing and is poised to emerge as one of the biggest players
in the cotton textiles & apparel arena. NSL Textiles is one of the companies of
Hvderabad based NSL Group.
NSL Group is an INR 1500 Crores conglomerate having interests in Seeds.
Infrastructure, Power, Sugar and Textiles. The parent company Nuzeevidu Seeds Ltd
is the largest Seed Company in India. Its Cotton Seeds Hybrid Varities Bunny and BT
and Mallika BT are household names in rural India. It is the first Indian Seed
Company to achieve a turnover of INR 500 Crores. A part from the Seed business, the
group has ambitious plans in Power, Infrastructure and Textiles business.
SL PRODUCTS
Cotton Modal Yarn
Cotton Yarn
Viscose Yarn
Acrylic Yarn
Fiber Glass Yarn
OVERVIEW:
NSL Textiles Limited Ltd has set up State-of-Arts facilities in the state of Andhra
Pradesh with the unique concept of Cotton to Clothing and is poised to emerge as
one of the biggest players in the cotton textiles & apparel arena. NSL Textiles Limited
is one of the companies of Hyderabad based NSL Group.
NSL Group is an INR 1500 Crores conglomerate having interests in Seeds,
Infrastructure, Power, Sugar and Textiles. The parent company Nuzeevidu Seeds
Limited is the largest seed company in India. Its cotton seeds hybrid varieties - Bunny
BT and Mallika BT are household names in rural India. It is the first Indian seed
company to achieve a turnover of INR 500 Crores. Apart from the seed business, the
group has ambitious plans in power, infrastructure and textile businesses.
Vision

31

NSL Textiles Limited & Apparel aspires to become one of the leading innovative,
eco- friendly and entrepreneurial companies in the Natural Fiber to Affordable
Fashion domain.
Mission
Fabrics and garments
To be the preferred and large share supplier of shirting fabrics, bottom weight fabrics
and garments sourced in and from India or other strategic locations for discerning
customers worldwide. To be among the top three garments producer in India and to
market at least 50% of our fabric capacity as garment packages.
Brands
To be the largest VFM (Value For Money) destination Store brand for shirts in India
in three years from its launch
Yarn
To be among the largest premium fine count cotton spinners in the world in the next
five years.
Location
NSL Textiles (Edlapadu) Ltd.
Edlapadu Mandel & Post,
Edlapadu 522233
Near Chilakaluripet,
Guntur (Dt)
AP.
India.
GINNING
Our business starts right from kappas - the raw material for producing cotton. Our
highly experiend Kappas procurement team personally visits the fields to check the
quality of supply. The stringent quality criteria followed before the procurement
allows us lo pick the best quality kappas for ginning. Au our ginning units are fitted
with the automated systems with pre cleaners. We have humidification plants in all

32

our ginning units to maintain the optimum levels of humidity. The result is high
quality cotton lint, which is the most important factor affecting the various stages of
textile value chain.

SPINNING
All of our manufacturing facilities are in the high quality cotton producing belt districts of Krishna, Cuddapah, Prakasam & Guntur, Added to that is the close
relationship that NSL group enjoys with the cotton farmers. As a result of the above,
we are able source very good quality cotton at the right time. In our constant
Endeavour to maintain quality and lead time commitments, we have heavily invested
in latest technology.
The entire yarn production capacity is autolevelled, autoconed and spliced with SIRO
clearers to eliminate contamination at various stages in process. Our machineries at
every stage are some of the best in the industry mainly imported from Germany and S
witzerland. We take special care in removing the foreign materials from cotton at
every stage.
The raw material is hand cleaned thoroughly before being used in the production line.
Our blow room is equipped with highly efficient cleaning and mixing equipments.
This ensures minimum levels of contamination in the final product.
WEILVIIIG
Unparalleled Air Jet Technology in our Pinole and Dornier machines makes it
possible to lend a flawless finish to our products. Our products are the preferred
choices of end users like pmcssing houses and leading garment manufacturers.
The entire manufacturing process and the plant layout have been engineered to ensure
safe, reliable and smooth material flow from raw material to the dispatch of finished
gray fabric. Supervision by highly qualified and richly experiment technical experts
and un-interrupted quality power supply ensure insistency in quality and meeting the
delivery schedules. Our manufacturing units are equipped with 1 1/2 times the
required capacity of utilities like, air, steam and humidity controls to ensure maximum

33

utilization of the Rooms. We have a highly efficient real time process control system
Loom Data System which helps analyze the operational data and immediately take
action based on this. We are also in the process of implementing comprehensive
operating systems based on TQM.
PROCESSING
Our highly advanced ETP system will ensure that there is zero effluent discharge from
our manufacturing facility. Apart from that, we will have energy saving devices in our
machines like heat systems from hot water and air.
AII of our machineries will be state of the art with fully automated days / chemical
dispensing system. These mainly will be-imported from Germany, Switzerland and
Italy. Apart from the standard processing machines, we will have latest technology
high end finishing machines for seeding, calendaring and aim wash.
Coupled to the latest technology will be our seasoned supervisory and management
team and experienced work force.
Moreover, integration of the process with our spinning and weaving verticals will
allow us to have better control over the inputs leading to supply best quality products
in reasonable time.
GARMENTING
Our fully vertically integrated value chain enables us to serve our customers in
the best manner on two major areas - quality and lead time. Because of our own
significant processing capacity, we will be able to source quality fabric without delay
leading to on time supply with shorter lead times. We will have state of the art
machineries, material handling equipments and inventory management systems with
latest technology washing facilities. Our washing facilities will be pled in our process
house which has zero discharge from the plant.

34

Our State of art design studio at Hyderabad will be equipped with

sophisticated textile CAD and Mac systems. Highly creative and skilled design team
from international design schools are already on borate.
MARKETING AND YARN
a. Singles Carded, Combed and Combed Compact in the range 20s to l00s.
b. Eli and double yarn in the range 2/20s to 211 20s
C. OEvarnintherange8sto2os
d. Gas and Gas Mercenzed Yarn
Product will be available from Sep 2010
Au the above n be offered in basic like plains poplin, twins, classical oxfords and pinpoint oxfords as well as in fancy structures like Royal oxford, Matt, Herringbone,
Satin, Gabardine, Tussore, Bedford rds and Dobbies.
MARKETING AND FABRIG
a. Yarn Dyed Shirting and Khakis
b. Pie Dyed Shirting and Khakis
c. Printed Shirting and Sheeting
d. Bleached Spiriting
e. Greige Fabric
MARKETING AND GARMENTING
On the project is completed we n offer:
a. Shirts Formal and Casuals
b. Ladies Tops Formals and Casuals

CONTACT US
NSL ICON, 4th Floor, Road No 12, Banjara Hills City: H yderabad
+91 (040) 3051 44 44*
+91 (040) 2332 79 19*
+91 (040) 3051 43 50

35

info@nsltextiles.com
productinlo@nsltextiles.com
hri nfo@ NSL Textiles Limited. corn

#608, Span Trade Centre,

Opp. Kochrab Ashrarn,
Paldi Ahrnedabad-380006
+91 (079) 2657 76 62*
I akhoti a. nk@ NSL Textiles Limited. corn

WELFARE
We have good canteens at each of our manufacturing units with provides
nutritious food to on employees at subskhzed prices. There is a managing
committee which manages frequent checks on capacity and quantity of food.
There are co-operative stores in each production units, that provides all items
at cost basis.
There is a full-fledged dispensary with doctor availability round the dock
Creche is provided.
Every employee contributes towards a benevolent ftmd which is given to the
needy en1oyee in case of F,
LIFE@NSL
At NSL you will have the chance to take on challenging responsibilities,
working with top-notch profesonals.
You will be part of a culture of excellence.
You would not be just working for a living you will be pt of a professional
team that focused on making a difference in the everyday lives of people
People are center to NSLs growth strategy.
A large in-house pool of intellectual capital is the driving farce behind NSLs
rapid growth, and one of its competitive advantages.
NSL is a young company, with an average age of 40 years.

36

 Tent is drawn from divers academic and profession backgrounds.

World-class exposure, growth opportunities and competitive compensation
packages offered by F4SL enables it to attract retain excellent talent
NSL endeavors to create a workplace where every person can reach his or her
fl potential.

THEORETICAL FRAMEWORK
Meaning of Financial Statements
Objectives of Financial Statements
Types of Financial Statements
Characteristics of Financial Statements
Limitations Financial Statements
Financial Statements Analysis
Methods of Financial Analysis

37

Meaning of Financial Statements:A financial statement is a collection of data organized according logical and
consistent accounting procedures. Its purpose is to convey an understanding of some
financial aspects of a business firm. It may show a position at a moment in time, as in
the case of an income statement, thus the term financial statements generally refers to
the two statements: (I) the position statement or the balance sheet, and (ii) the income
statement or the profit and loss account. These statements are used to convey to
management and other interested outsiders the profitability and financial position to a
firm.
Financial statements are the outcome of summarizing process of accounting.
In the words of John N. Her, the financial statements provide a summary of the
accounts of a business enterprise, the balance sheet reflecting the asset, liabilities and
capital as on a certain date and the income statement showing the results of operations
during a certain period.
Financial statements are prepared as an end result of financial accounting
and are the major sources of financial information of an enterprise Smith and Osborne
define financial statements as. The product of financial accounting in asset of
financial statements prepared by the accountant of a business enterprise that purport to
reveal the financial position of the enterprise, the result of its recent activities, and an
analysis of what has been done with earnings.
Financial statements are also called financial reports. In the words of Anthony,
financial statements, essentially, are interim reports, presented annually and reflect a
division of the life of an enterprise onto more or less arbitrary accounting periodmore frequently a year.
Objectives of Financial Statements:Financial statements are the sources of information on the basis of which conclusions
are drawn about the profitability and financial position of a concern. they are the
major means employed by firms to present their financial situation of owners,
creditors and the general public, the primary objective of financial statements is to

38

assist in decision making,. The accounting principles board of America (APB) sates
the following objectives of financial statements.

To provide reliable financial information about economic resources and

obligations of a business firm.

To provide other needed information about changes in such economic resources

and obligations.
To provide reliable information about changes in net resources (resources less

obligations) arising out of business activities.

To provide financial information that assists in estimating the earning potentials of

business.
To disclose, to the extent possible, other information related to the financial
statements that is relevant to the needs of the users of these statements.

Types of Financial Statements:Financial statements primarily comprise two basic statements: (1) the position
statement or the balance sheet and (2) the income statement or the profit and loss
account. However, (Generally Accepted Accounting Principles (GAAP) specifies that
a complete set of financial statements must include:
(1). A Balance Sheet.
(2). an Income Statement (Profit and Loss Account).
(3). A Statement of Changes in Financial Position.
1. Balance Sheet:The America institute of certified public accountants defines balance sheet
as. A tabular statement of summary of balances (debits and credits) carried forward
after an actual and constructive closing of books of account and kept according to
principles of accounting.
The purpose of the balance sheet is to show the resources that the company has, i.e. its
assets, and from where those resources come from i.e., its liabilities and investments
by owners and outsiders.
The balance sheet is one of the important statements depicting the financial
strength of the concern. It shows on the one hand the properties that it utilizes and on

39

other hand the sources of those properties. The balance sheet shows all the assets
owned by the concern and all the liabilities and claims it owes to owners and
outsiders.
2. Income Statement (or) Profit and Loss Account:Income statement is prepared to determine the operational position of the
concern. It is a statement of revenues earned and the expenses incurred for earning
that revenue, if there is excess of revenues over expenditures it will show a profit and
if the expenditures are more than the income then there will be a loss. The income
statement is prepared for a particular period, generally a year. When income statement
is prepared for the year ending, then all revenues and expenditures falling due in that
year will be taken into account irrespective of their receipt or payment.
The income statement may be prepared in the form of a manufacturing
account to find out the cost of production, in the form of trading account to determine
gross profit or gross loss. In the form of a profit and loss account determine net profit
or net loss, a statement of retained earnings may also be prepared to show the
distribution of profits.
3. Statement of Changes in Owners Equity (Retained Equity):The term owners equity refers to the claims of the owners of the business
shareholders against the assets or the firm.
It consists of two elements (1) paid-up share capital, I.e. the initial amount of funds
invested by the shareholders and (2) retained earnings/reserves and surplus
representing undistributed profits. The statement of changes in owners equity simply
shows the beginning balance of each owners equity account the reasons for increases
and decreases in each, and its ending balance.
However in most cases, the only owners equity account that changes
significantly is retained earnings and hence the statement of changes in owners equity
becomes merely a statement of retained earnings.
A statement of retained earnings is also known as profit and loss
Appropriation Account or income Disposal Statement. As the name suggests it shows

40

appropriations of earnings. The previous years balance is first brought toward. The net
profit during the current year is added to this balance. On the debt side, appropriations
like interim dividends paid. Proposed dividend in preference and equity share capital,
amounts transferred to debenture redemption fund, capital redemption funds. General
reserves etc are shown. The balance in tills account will show this amount of profit
retained in hand and carried forward. The appropriations cannot lie more than the
profits so this account will not have a debit balance. There cannot be appropriations
without profits.
4. Statement of Changes in Financial Position:The basic financial statements, I.e., the balance sheet and the profit and loss
account or income statement of a business reveal the net effect of the various
transactions on the operational and financial position of the company. The balance
sheet gives a static view of the resources of a business and the uses to which these
resources have been put at a certain point of time. The profit and loss account in a
general way. Indicates the resources provided by operations. But there are many
transactions that do not operate through profit and loss account. Thus, for a better
understanding another statement called statement of changes in financial position has
to be prepared show the changes in assets and liabilities from the end of one period to
the end of another point of time. The objective of this statement is to showing the
movement of funds (working capital or cash) during a particular period. The
statement to changes in financial position may take any of the following two forms.
Characteristics of Ideal Financial Statements:The financial statements are prepared with a view to depict financial position of the
concern. A proper analysis and interpretation of these statements enables a person to
judge the profitability and financial strength of the business. The financial statements
should be prepared in such away that they are able to give a clear and orderly picture
of the concern. The ideal financial statements have the following characteristics.
1. Depict True Financial Position:The information contained in the financial statements should be such that a true and
correct idea is taken about the financial position of the concern. No material
information should be with held while preparing position of the concern. No material
information should be with held while preparing these statements.

41

2. Effective Presentation:The financial statements should be presented in a simple and lucid way so as to make
them easily understandable. A person who is not well versed with accounting
terminology should also be able to understand the statements without much difficulty.
This characteristic will enhance the utility of these statements.
3. Relevance: Financial statements should be relevant to the objectives of the enterprises. This will
be possible when the person preparing these statements is able to properly utilize the
accounting information. The information which is not relevant to the statements
should be avoided; otherwise it will be difficult to make a distinction between
relevant and irrelevant data.
4. Attractive:The financial statements should be prepared in such a way that important information
is underlined so that it attracts the eye of the reader.
5. Easiness:Financial statements should be easily prepared. The balances of different ledger
accounts should be easily taken to these statements. The calculation work should be
minimum possible while preparing these statements.
The size of the statements should not be very large. The columns to be used for gibing
the information should also be less. This will enable the saving of time in preparing
the statements.
6. Comparability:The results of financial analysis should be in a way that can be compared to the
previous years statements. The statement can also be in compared with the figures of
other concerns of the same nature. Sometimes budgeted figures are given along with
the present figures. The comparable figures will make the statements more useful. The
Indian companies Act. 1956 has made it obligatory to give previous years figures in
the balance sheet. The comparison of figures will enable a proper assessment for the
working of the concern.

42

7. Analytical representation:The information should be analyzed in such a way that similar date is presented at the
same place. A relationship can be established in similar type of information. This will
be helpful in analysis and interpretation.
8. Brief:If possible, the financial statements should be presented in brief. The reader will be
able to form an idea about the figures. On the other hand, it figures are given in details
then it will become difficult to judge the working of the business.
9. Promptness:The financial statements should be prepared and presented at the earliest possible.
Immediately at the close of the financial year, statements should be ready.
Limitations of Financial Statements:Though financial statements are relevant and useful for the concern, still
they do not present a final picture of the concern. The utility of these statements is
dependent upon a number of factors. The analysis and interpretation of these
statements should be done very carefully otherwise misleading conclusions may be
drawn; the financial statements suffer from the following limitations:
1. Only interim reports:These statements don not give a final picture of the concern. The data given
in these statements is only approximate. The actual position can only be determined
when the business is sold or liquidated. However, the statements have to be prepared
for different accounting periods, generally one year, during the life time of the
concern. The costs and incomes are apportioned to different periods with a view to
determine profits etc. the allocation of expenses and incomes will depend upon the
personal judgment of the accountant. The existence of cotangent assets and liabilities
also makes the statements imprecise. So financial statements do not give the final
picture and they are the most interim reports.
2. Do not give exact position:-

43

The financial statements are expressed in momentary values so they appear

to give final and accurate position. The value of fixed assets in the balance sheet
neither represents the value for which fixed assets can be sold nor did the amount,
which will lie, require replacing these assets. The balance sheet is prepared on the
presumption of a going concern. The concern is expected to continue in the figure. So
fixed assets are shown all cost less accumulated depreciation.
There are certain assets in the balance sheet such as preliminary expenses, goodwill,
discount on issue of shares which will realize nothing at the time of liquidation
through they are shown in the balance sheet.
3. Historical Costs:The financial statements are prepared on the basis of historical costs or
original costs. The value of assets decreases with the passage of time current price
changes are not taken into account. The statements are not prepared keeping in view
the present economic conditions. The balance sheet losses the significance of being an
index of current economic realities. Similarly, the profitability shown by the income
statement may not represent the earning capacity of the concern. The increase I profits
may be due to an increase in prices or due to sonic abnormal causes and not due to
increase in efficiency. The conclusions drawn from financial statements may not give
a lair picture of the concern.

4. Impact of Non-Monetary Factors Ignored:There are certain f actors which have a bearing on the financial position and
operating results of the business but they do not become a pan of these statement s
because they cannot be measured I monetary terms. Such factors may include the
reputations of the management, credit worthiness of the concern, sources and
commitments for purchases and sales, co-operation of the employees, etc. The
financial statements only show the position of the financial accounting for business
and not the financial position.
5. No Precision:The precision of financial statement data is not possible because the
statement deal with matters which cannot be precisely stated. The data are recorded

44

by convention procedure is followed over the years. Various conventions, postulates

personal judgments etc, are used for developing the data.
Financial Statements Analysis:Financial statements are prepared primarily for decision making. They play a
dominant role in setting the frame work of managerial decision. But the information
provided in the financial statements is not an end in itself as no meaningful
conclusions can be drawn from these statements alone. However, the information
provided in the financial statements is of immense use in making decisions through
analysis and interpretation of financial statements.
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss amount. There are various methods or techniques
used in analyzing financial statements, such as comparative statements, trend analysis,
common-size statements, schedule of changes in working capital, funds flow and
analysis, cost volume profit analysis and ratio analysis.

Meaning and Concept of Financial Analysis:The term financial analysis also known as analysis and interpretation of
financial statements, refers to the process of determine financial strengths and
weakness of the firm by establishing strategic relationship between the items of the
balance sheet, profit and loss account and oilier operative data. Analyzing financial
statements,
According to Metcalf and Titard. Is a process of evaluating the relationship
between component parts of financial statement to obtain a better understanding of a
firms position and performance? In the words of Myers, Financial statement
Analysis is largely a study of relationship among the various financial factors in a

45

business as disclosed by a single set of statements, and study of the trend of

these(actors as shown in a series of statements.)
The purpose of financial analysis is to diagnose the information contained in
financial statements so as to judge the profitability and financial soundness of the
firm, just like a doctor examines ills patient by recording his body temperature, blood
treatment, a financial analyst analysis the financial statements with various tools of
analysis before commenting upon the financial health or weakness of an enterprise.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. Financial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so
that forecast may be made of the future earnings, ability to pay interest and debt
maturities (both current and long-term) and profitability of a sound dividend policy.
Methods or Devices of Financial Analysis:The analysis and interpretation of financial statement is used to determine
the financial position and results of operations as well. A number of methods or
devices are used to study the relationship between different statements. An effort is
made to use those devices, which clearly analyze the position of the enterprise. The
following methods of analysis are generally used:
1. Comparative Statements
2. Trend Analysis
3. Common sized statements
4. Ratio Analysis.
1. Comparative Statements:The comparative financial statements are statements of the financial position
at different periods of time. The elements of financial position are shown in a
comparative form so as to give an idea of financial position at two or more periods.
Any statements prepared in a comparative term will be covered in comparative
statements. From practical point of view, generally two financial statements (balance
sheet and income statement) are prepared in comparative form for financial analysis
purposes.

46

Not only the comparison of the figures of two periods but also be
relationship between balance sheet and income statement enables an in-depth study of
financial position a cooperative results.

The comparative statement may show:

I. Absolute Figures (rupee amounts)
II. Changes in absolute figures i.e., increase or decrease in absolute figures.
III. Absolute data in terms of percentages.
The analyst is able to draw useful conclusions when figures are given in a
comparative position. The figures of sales for a quarter, half-year or one year may tell
only the present position of sales efforts. When sales figures of previous periods, are
given along with the figures of current periods then the analyst will be able to study
the trends of sales over different periods of time. Similarly, comparative figures will
indicate the trend and direction of financial and operating results.
The financial data will be comparative only when same accounting principles are used
in preparing these statements. In case of a deviation in the use of accounting
principles this fact must be mentioned at the foot of financial statements and the
analyst should be careful in using these statements. The two comparative statements
are (I) balance sheet and (ii) income statement.

I. Comparative income statement:The income statement gives the results of the operation of a business. The
comparative income statement gives an idea of the progress of a business over a
period of time. The changes in absolute data in money values and percentages can be
determined to analyze the profitability of the business. Like comparative balance
sheet, income statement also has four columns. First two columns give figures of
various items for two years. Third and fourth columns are used to show increase is
decrease in figures in absolute amounts and percentages respectively.

47

ii. 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 sheet 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 opinion about the progress of an enterprise.
The comparative balance sheet has two columns for the data of original valance
sheets. A third column is used ti show increases in figures. The fourth column may be
added for giving percentages of increases or decreases.
2. Trend analysis:The financial statements may be analyzed by computing trends of series of
information; this method determines the direction upwards of downwards and
involves the computation of the percentage relationship that each statement item bears
to the same item in base year. The information for a number of years is taken rp and
one year, generally the first year, is taken as a bade year. The figures of the base year
are taken as 100 and trend ratios for other years are calculated on the bases of base
year. The analyst is able to see the trend of figures, whether upward or downward.
3. Common- size statement:The common size statements, balance sheet and income statement are shown
in analytical percentages. The figures are shown as percentages of total assets, total
liabilities and total sales. The total assets ate taken as 100 and different assets are
expressed as a percentage of the total.
Similarly various liabilities are taken as a part of total liabilities. These statements are
also known as component percentage or 100 percent statement because every
individual item is stand as a percentage of the total 100. The short-comings in
comparative statements and tend percentages where changes in items could not be
compared with the totals have been covered up. The analyst is able to assess the
figures in relation lo total values.
Ratio Analysis:-

48

One of the techniques of analysis of financial statements is to calculate

ratios. Ratio is the numerical or an arithmetical relationship between two figures. It is
expressed when one figure is divided by another. If 4000 is divided by 10,000 the
ration can be expressed as 4 or 2:5 or 40%.
Absolute figures are valuable but they standing alone convey no meaning
unless compared with another. Accounting ration inter-relationships, which exist
among various accounting data? When relationships among various accounting data
supplied by financial statements are worked out, they are known as accounting ratios.
Accounting ratios can be expressed in various ways such as:
i. A pure ratio say ratio of current assets to current liabilities is 2:1 or
ii. A rate say current assets are two times of current liabilities or
iii. A percentage say current assets are 200% of current liabilities.
Each method of expression has distinct advantage over the other. The analyst will
select that mode which wills best-suit his convenience and purpose.
Classification of Ratios:Ratios may be classified in a number of ways keeping in view the particular
purpose. Ratios indicating profitability are calculated on the basis of the profit and
loss account, those indicating financial position are computed on the basis of the
balance sheet and those which operating efficiency or productivity or effective use of
resources are calculate on the basis of figures in the profit and loss account and the
balance sheet.
This classification is rather crude and unsuitable to determine the
profitability and financial position of the business. To achiever this purpose
effectively ratios may be classified as:
1. Profitability Ratios
2. Turnover Ratios
3. Financial Ratios
4. Leverage Ratios
1. Profitability Ratios:-

49

Profitability Ratios are of outmost importance for a concern; these ratios are
calculated to enlighten the end results of business activities, which is the sole criterion
of the overall efficiency of a business concern
2. Turnover (Performance or Activity) Ratios:These ratios are very important for a concern to judge how well facilities at
the disposal of the concern are being used or to ratios are usually calculated on the
basis of sales or cost of sales and are expressed in integers rather than as percentage.
Such ratios should be calculated separately for each type of asset. Higher the turnover
ratio, the profitability and use of capital or resources will be. The following are the
important turnover ratios usually calculated by a concern.
3. Financial Ratios:These ratios are calculated to judge the financial position of the concern
from long-term as well as short-term solvency point of view. The following are the
ratios, which are calculated in the respect.
4. Leverage Ratios:Leverage Ratios to an increased means of accomplishing some purpose. In
financial management it refers to employment of funds to accelerate rate of return to
owners. It may be favorable or unfavorable. An unfavorable leverage exists if the rate
of return remains to however. It can be used as a tool of financial planning by the
finance manager.

DATA ANALYSIS AND INTERPRETATION

Common Size Balance Sheet of NSL TEXTILES LTD
As on 31 Dec. 2010 and 2011
2010
2011
PARTICULARS
Amount
Percentage Amount
Percentage
(%)
(%)
ASSETS:Current Assets
Inventories
Sundry Debtors

8,19,81,006
5,41,91,956

50

38.57
25.49

105820864
85056587

37.10
29.82

Cash & Bank

Interest Accrued
Loans & Advances
Total Current Assets (A)
Fixed Assets (B)
Investments (C)
Total Assets (A+B+C)
LIABILITIES:Current Liabilities
Sundry Creditors
Other Liabilities
Provisions
Total Current Liabilities
(D)
Long Term Loans:Secured loans
Unsecured Loans
Total Long Term Loans (E)
Total Liabilities (D+E)
Capital & Surpluses:Share Capital
Reserves
Profit & Loss A/c
Total
Capital
&
Surpluses(F)
Deferred Tax Liability/Asset
Total Liabilities (D+E+F)

10,95,667
2,17,719
92,28,113
14,67,14,461
6,58,54,756
850
21,25,70,067

0.52
0.10
4.34
69.02
30.98
0.00
100.00

692625
223190
16758583
208548849
76655204
850
285204903

0.24
0.08
5.88
73.12
26.88
0.00
100.00

2,07,83,973
43,65,785
13,86,391

9.78
2.05
0.65

29885920
4853195
1848521

10.48
1.70
0.65

2,65,36,149

12.48

36587636

12.83

7,07,31,166
1,71,75,185
8,79,06,351
11,44,42,500

33.27
8.08
41.35
53.84

115536386
18842570
134378956
170966592

40.51
6.61
47.12
59.95

79,00,000
7,09,64,025
1,69,48,381

3.72
33.38
7.97

7900000
70935417
32081791

2.77
24.87
11.25

110917208
3321103
285204903

38.89
1.16
100.00

9,58,12,406 45.07
23,15,161
1.09
21,25,70,067 100.00

Common Size Balance Sheet of NSL TEXTILES LTD

As on 31 Dec. 2011 and 2012
2011
2012
PARTICULARS
Amount
Percentage Amount
Percentage
(%)
(%)
ASSETS:Current Assets
Inventories
Sundry Debtors
Cash & Bank
Interest Accrued
Loans & Advances
Total Current Assets (A)

105820864
85056587
692625
223190
16758583
208548849

51

37.10
29.82
0.24
0.08
5.88
73.12

173659692
46158454
3875890
234791
31202752
255131579

52.73
14.01
1.18
0.07
9.47
77.46

Fixed Assets (B)

Investments (C)
Total Assets (A+B+C)
LIABILITIES:Current Liabilities
Sundry Creditors
Other Liabilities
Provisions
Total Current Liabilities
(D)
Long Term Loans
Secured loans
Unsecured Loans
Total Long Term Loans (E)
Total Liabilities (D+E)
Capital & Surpluses:Share Capital
Reserves
Profit & Loss A/c
Total
Capital
&
Surpluses(F)
Deferred Tax Liability/Asset
Total Liabilities (D+E+F)

76655204
850
285204903

26.88
0.00
100.00

74234856
850
329367285

22.54
0.00
100.00

29885920
4853195
1848521

10.48
1.70
0.65

17720782
4602955
924261

5.38
1.40
0.28

36587636

12.83

23247998

7.06

115536386
18842570
134378956
170966592

40.51
6.61
47.12
59.95

132313738
53421796
185735534
208983532

40.17
16.22
56.39
63.45

7900000
70935417
32081791

2.77
24.87
11.25

7900000
70906809
37665794

2.40
21.53
11.44

110917208
3321103
285204903

38.89
1.16
100.00

116472603
3911150
329367285

35.36
1.19
100.00

Common Size Balance of Sheet NSL TEXTILES LTD

as on 31 Dec. 2012 and 2013
2012
2013
PARTICULARS
Amount
Percentage Amount
Percentage
(%)
(%)
ASSETS:Current Assets
Inventories
Sundry Debtors
Cash & Bank
Interest Accrued
Loans & Advances
Total Current Assets (A)

173659692
46158454
3875890
234791
31202752
255131579

52

52.73
14.01
1.18
0.07
9.47
77.46

181631921
78882160
3776145
275025
25599558
290164809

50.57
21.96
1.05
0.08
7.13
80.79

Fixed Assets (B)

Investments (C)
Total Assets (A+B+C)
LIABILITIES:Current Liabilities
Sundry Creditors
Other Liabilities
Provisions
Total Current Liabilities
(D)
Long Term Loans
Secured loans
Unsecured Loans
Total Long Term Loans (E)
Total Liabilities (D+E)
Capital & Surpluses:Share Capital
Reserves
Profit & Loss A/c
Total
Capital
&
Surpluses(F)
Deferred Tax Liability/Asset
Total Liabilities (D+E+F)

74234856
850
329367285

22.54
0.00
100.00

68997088
850
359162747

19.21
0.00
100.00

17720782
4602955
924261

5.38
1.40
0.28

21437408
7344433
2677595

5.97
2.04
0.75

23247998

7.06

31459436

8.76

132313738
53421796
185735534
208983532

40.17
16.22
56.39
63.45

115684680
85486312
201170992
232630428

32.21
23.80
56.01
64.77

7900000
70906809
37665794

2.40
21.53
11.44

7900000
70878201
43654409

2.20
19.73
12.15

116472603
3911150
329367285

35.36
1.19
100.00

122432610
4099709
359162747

34.09
1.14
100.00

Common Size Balance Sheet of NSL TEXTILES LTD

as on 31 Dec. 2013 and 2014
2013
2014
PARTICULARS
Amount
Percentage Amount
Percentage
(%)
(%)
ASSETS:Current Assets
Inventories
Sundry Debtors
Cash & Bank
Interest Accrued
Loans & Advances
Total Current Assets (A)

8,17,71,005
5,31,92,957
10,95,667
2,17,719
92,28,113
14,67,14,461

53

36.55
25.50
0.52
0.10
4.34
69.02

104921854
85056587
692625
223190
16758583
208548849

37.15
29.82
0.24
0.08
5.88
73.12

Fixed Assets (B)

Investments (C)
Total Assets (A+B+C)
LIABILITIES:Current Liabilities
Sundry Creditors
Other Liabilities
Provisions
Total Current Liabilities
(D)
Long Term Loans:Secured loans
Unsecured Loans
Total Long Term Loans (E)
Total Liabilities (D+E)
Capital & Surpluses:Share Capital
Reserves
Profit & Loss A/c
Total
Capital
&
Surpluses(F)
Deferred Tax Liability/Asset
Total Liabilities (D+E+F)

6,58,54,756 30.98
850
0.00
21,25,70,067 100.00

76655204
850
285204903

26.88
0.00
100.00

2,07,83,973
43,65,785
13,86,391

9.78
2.05
0.65

29885920
4853195
1848521

10.48
1.70
0.65

2,65,36,149

12.48

36587636

12.83

7,07,31,166
1,71,75,185
8,79,06,351
11,44,42,500

33.27
8.08
41.35
53.84

115536386
18842570
134378956
170966592

40.51
6.61
47.12
59.95

79,00,000
7,09,64,025
1,69,48,381

3.72
33.38
7.97

7900000
70935417
32081791

2.77
24.87
11.25

110917208
3321103
285204903

38.89
1.16
100.00

9,58,12,406 45.07
23,15,161
1.09
21,25,70,067 100.00

INTERPREATION:
1. From the analysis of Common size Balance Sheet of the NSL TEXTILES LTD
Company, we find that the NSL TEXTILES LTD

Company invested more

percentage of resources in Current Assets than the Fixed Assets in every year.
2. The NSL TEXTILES LTD Company was investing more percentage of
resources in Current Assets, compared to previous year Current Assets.
3. The NSL TEXTILES LTD company percentage of Current Liabilities is less
than the percentage of Fixed Liabilities in every year.
4. From the Analysis of Common Size Balance Sheet, find that the percentage of
Fixed Assets was less than the Percentage of fixed liabilities in every year.
5. We find that the percentage of Fixed Assets was continuously decreasing in
every year compared to the previous year percentage of Fixed Assets.

54

6. And the percentage of Fixed Liabilities was continuously increasing in every

year compared to the previous year percentage of Fixed Liabilities. It clearly
indicates that, the NSL TEXTILES LTD

Company using Fixed Liabilities

also for the Working Capital. It is a wise plan.

7. The percentage of profit of the NSL TEXTILES LTD

is continuously

increasing in every year, it indicates that the financial position of the NSL
TEXTILES LTD is good and it following good financial policy plans.

COMPARATIVE BALANCE SHEET

Balance sheet reflects the financial position of a business concern on a particular
date. It does not reveal the trends in the business over a period of year. To study the
trends of the business over a period say two or three years, a Comparative Balance
Sheet is prepared. Comparative Balance Sheet as on two or more different dates can
be used for comparing assets and liabilities and finding out increase or decrease in
those items. A comparative study of balance sheet will reveal the causes for changes
in the financial position on account of numerous business transactions that took place
between two periods of time in the business.
The Comparative Balance Sheet consists of two columns for the original data. A
third column is used to show increase or decrease in various items. A fourth column
containing the percentages of increase or decrease my be added.
Methodology for analysis of the Balance Sheet:

55

1. In the first step change in absolute figures i.e., increase or decrease or decrease
should be calculated.
2. In the second step percentage of change should be calculated by using the
following formula.
Change in Amount
Percentage of Change = ------------------------- X 100
Base Year Amount
3. After calculation of percentage of change, interpretation should be made.

Comparative Balance Sheet as on March 31st, 2009-10

Particulars
Assets
Current Assets
Interest Accrued
Inventories
Sundry Debtors
Cash & Bank
Advances & loans
Total
Current
Assets
Fixed Assets
Investments
Total Assets
Liabilities
Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities

2009

2010

Increase/

Percentage

Decrease

(%)

1,25,970
8,61,99,05
3,92,71,109
2,52,718
1,65,04,881
14,23,53,683

2,12,202
7,90,50,427
3,12,39,881
35,09,191
1,12,23,119
12,52,34,820

86,232
-71,48,578
-80,31,228
32,56,473
-52,81,762
1,71,18,863

68.45
8.29
20.45
1288.57
32
12.02

6,54,45,118
850
20,77,99,651

6,52,20,421
850
19,05,87,184

-2,24,697
0
1,72,12,467

-0.34
0
8.28

79,00,000
6,82,23,241
7,85,58,221
2,21,36,137
2,94,93,103

79,00,000
7,68,77,359
5,64,81,947
2,22,30,886
2,48,35,378

0
86,54,118
-2,20,76,274
94,749
-46,57,725

0
12.68
28.10
0.42
-15.75

& Provisions

56

Differed

tax

liabilities/ Assets
Total liabilities

14,88,949

22,61,614

7,72,665

51.89

20,77,99,651

19,05,87,184

1,72,12,467

8.28

Interpretation:
Current financial position:
The current assets have increased by 12.02% and the current liabilities have
decreased by 15.75%. Where as the percentage of the liabilities is less. The liquidity
position of the company is good. The working capital is negative. The current assets
are increased at the same time current liabilities are decreases.
Long term financial position:
The balance sheet of the company reveals that during year 2009-10ere is
decreased fixed assets 2,24,697 i.e. 0.34%. The long term liabilities to outsiders have
relatively increased by 94749 i.e., 0.42%. It shows that the sources company is
purchasing fixed assets by using long term sources and this effect the working capital.

57

Comparative Balance Sheet as on March 31st, 2010-11

Particulars

2010

Assets
Current Assets
Interest Accrued
Inventories
Sundry Debtors
Cash & Bank
Advances & loans
Total
Current
Assets
Fixed Assets
Investments
Total Assets
Liabilities
Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities
& Provisions
Differed
liabilities/ Assets
Total liabilities

tax

2011

Increase /

Percentage

Decrease

(%)

2,12,202
7,90,50,427
3,12,39,881
35,09,191
1,12,23,119
12,52,34,820

2,17,719
8,19,81,006
5,41,91,956
10,95,667
92,28,113
14,67,14,461

5,517
29,30,579
2,29,52,075
-24,13,524
-19,95,006
2,14,79,641

2.59
3.70
73.40
68.77
17.77
17.15

6,52,20,421
850
19,05,87,184

6,58,54,756
850
21,25,70,067

6,34,335
0
2,19,82,883

0.97
0
11.53

79,00,000
7,68,77,359
5,64,81,947
2,22,30,886
2,48,35,378

79,00,000
8,79,12,406
7,07,31,166
1,71,75,185
2,65,36,149

0
1,10,35,047
1,42,49,219
-50,55,701
17,00,771

0
14.35
25.22
22.74
6.84

22,61,614

23,15,161

53,547

2.36

19,05,87,184

21,25,70,067

2,19,82,883

11.53

58

Interpretation:
Current financial position:
The current assets have increased by 17.15% and the current liabilities have
increased by 6.84%. Where as the percentage of the liabilities is less. The liquidity
position of the company is good. The working capital is positive. The current assets
are increased at the same time current liabilities are increases.
Long term financial position:
The balance sheet of the company reveals that during year 2010-11 were is
increased fixed assets 634335 i.e. 0.97%. The long term liabilities to outsiders have
relatively decreased by 5055701 i.e., 22.74%. It shows that the sources company is
purchasing fixed assets by using long term sources and this effect the working capital.

59

Comparative Balance Sheet as on March 31st, 2011-12

Particulars

2011

Assets
Current Assets
Interest Accrued
Inventories
Sundry Debtors
Cash & Bank
Advances & loans
Total
Current
Assets
Fixed Assets
Investments
Total Assets
Liabilities
Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities
& Provisions
Differed
liabilities/ Assets
Total liabilities

tax

2012

Increase /

Percentage

Decrease

(%)

2,17,719
8,19,81,006
5,41,91,956
10,95,667
92,28,113
14,67,14,461

2,23,190
10,58,20,864
8,50,53,587
6,92,625
1,67,58,583
20,85,48,849

5,471
2,38,39,858
3,08,61,631
-4,03,042
75,30,470
6,18,34,388

2.51
29.08
57
36.78
81.60
42.15

6,58,54,756
850
21,25,70,067

7,66,55,204
850
28,52,04,903

1,08,00,448
0
7,26,34,836

16.40
0
34.16

79,00,000
8,79,12,406
7,07,31,166
1,71,75,185
2,65,36,149

79,00,000
10,30,17,208
11,55,36,386
1,88,42,570
3,65,87,636

0
-1,51,04,802
-4,48,05,220
-16,67,385
-1,00,51,487

0
17.18
63.34
9.71
37.89

23,15,161

33,21,103

-10,05,942

43.45

21,25,70,067

28,52,04,903

7,26,34,836

34.16

Interpretation:
Current financial position:

60

The current assets have increased by 42.15% and the current liabilities have
increased by 37.89%. Where as the percentage of the liabilities is less. The liquidity
position of the company is good. The working capital is positive. The current assets
are increased at the same time current liabilities are increases.
Long term financial position:
The balance sheet of the company reveals that during year 2011-12 were is
increased fixed assets 1,08,00,448 i.e. 16.40%. The long term liabilities to outsiders
have relatively increased by 16,67,385 i.e., 9.71%. It shows that the sources company
is purchasing fixed assets by using long term sources and this effect the working
capital.

Comparative Balance Sheet as on March 31st, 2012-13

61

Particulars

2012

Assets
Current Assets
Interest Accrued
Inventories
Sundry Debtors
Cash & Bank
Advances & loans
Total
Current
Assets
Fixed Assets
Investments
Total Assets
Liabilities
Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities
& Provisions
Differed
liabilities/ Assets
Total liabilities

tax

2013

Increase /

Percentage

Decrease

(%)

2,23,190
10,58,20,864
8,50,53,587
6,92,625
1,67,58,583
20,85,48,849

2,34,791
17,36,59,692
4,61,58,454
38,75,890
3,12,02,752
25,51,31,579

11,601
6,78,38,828
-3,88,95,133
31,83,265
1,44,44,169
4,65,82,730

5.20
64.10
45.73
459.59
86.19
22.34

7,66,55,204
850
28,52,04,903

7,42,34,856
850
32,93,67,285

-24,20,348
0
4,43,62,382

3.16
0
15.55

79,00,000
10,30,17,208
11,55,36,386
1,88,42,570
3,65,87,636

79,00,000
10,85,72,603
13,23,13,738
5,34,21,796
2,32,47,998

0
-55,55,395
-1,67,77,352
-3,47,79,226
1,33,39,638

0
5.40
14.52
186.56
36.46

33,21,103

39,11,150

-5,90,047

17.77

28,52,04,903

32,93,67,285

4,43,62,382

15.55

Interpretation:
Current financial position:
The current assets have increased by 22.34% and the current liabilities have
increased by 36.46%. Where as the percentage of the liabilities is high. The liquidity
position of the company is good. The working capital is positive. The current assets
are increased at the same time current liabilities are increases.
Long term financial position:

62

The balance sheet of the company reveals that during year 2012-13ere is
decreased fixed assets 24,20,348 i.e. 3.16%. The long term liabilities to outsiders have
relatively increased by 3,47,79,226 i.e., 186.56%. It shows that the sources company
is purchasing fixed assets by using long term sources and this effect the working
capital.

Comparative Balance Sheet as on March 31st, 2013-14

Particulars
Assets
Current Assets
Interest Accrued
Inventories
Sundry Debtors
Cash & Bank
Advances & loans

2013

2,34,791
17,36,59,692
4,61,58,454
38,75,890
3,12,02,752

2014

2,75,025
18,16,31,921
7,88,82,160
37,76,145
2,55,99,558

63

Increase /

Percentage

Decrease

(%)

40,234
79,72,229
3,27,23,706
-99,745
-56,03,194

17.14
4.59
70.89
2.57
17.96

Total

Current

Assets
Fixed Assets
Investments
Total Assets
Liabilities
Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities
& Provisions
Differed
liabilities/ Assets
Total liabilities

tax

25,51,31,579

29,01,64,809

3,50,33,230

13.73

7,42,34,856
850
32,93,67,285

6,89,97,088
850
35,91,62,747

-52,37,768
0
2,97,95,462

7.05
0
9.05

79,00,000
10,85,72,603
13,23,13,738
5,34,21,796
2,32,47,998

79,00,000
11,45,32,610
11,56,84,680
8,54,86,312
3,14,59,436

0
-59,60,007
1,66,29,058
-3,20,64,516
-82,11,438

0
5.49
12.57
60.02
35.32

39,11,150

40,99,709

-1,88,559

4.82

32,93,67,285

35,91,62,747

2,97,95,462

9.05

Interpretation:
Current financial position:
The current assets have increased by 13.73% and the current liabilities have
increased by 35.52%. Where as the percentage of the liabilities is high. The liquidity
position of the company is good. The working capital is negative. The current assets
are increased at the same time current liabilities are decreases.
Long term financial position:
The balance sheet of the company reveals that during year 2013-14 were is
decreased fixed assets 52,37,768 i.e. 7.05%. The long term liabilities to outsiders have
relatively increased by 3,20,64,56 i.e., 60.02%. It shows that the sources company is
purchasing fixed assets by using long term sources and this effect the working capital.

64

TREND ANALYSIS
Trend analysis depicts behavior of the ratio over a period of time and the trend in
the operation of the enterprise. This is horizontal analysis of financial statement,
often called as pyramid method of ratio analysis. It is dynamic analysis depicting
the changes over a stated period. The method of analysis is one of direction.
Selection of a base year.
Assignment of an index number of 100 to each item of the base year.
Calculation of percentage relationship that each item bears to the same item in
the base year.

65

It is of great significance in making comparative study of financial statements for

several years. It shows the direction of movement over a period of time. Trend
analysis indicates the direction of movement or changes in over along period of time.

Trend Percentage (%) 2009-10 to 2013-14 (Base Year 2008-09:100)

Particulars

2009 To 2010
2010
2011

To 2011
2012

To 2012
2013

To 2013
2014

Assets
Current Assets
Interest Accrued
Inventories
Sundry Debtors
Cash & Bank
Advances & loans
Total
Current

100
100
100
100
100
100

102.60
103.71
173.47
31.22
82.22
117.15

105.18
133.87
272.26
19.74
149.32
166.53

110.65
219.68
147.75
110.45
278.02
203.72

129.61
229.77
252.50
107.61
228.10
231.70

Assets
Fixed Assets
Investments
Total Assets

100
100
100

100.97
0
111.53

117.53
0
149.65

113.82
0
172.82

105.80
0
188.45

66

To

Liabilities
Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities

100
100
100
100
100

0
114.35
125.23
77.26
106.85

0
134
204.55
83.86
147.32

0
141.23
234.26
240.30
93.61

0
148.98
204.82
384.54
126.67

& Provisions
Differed

100

102.37

146.85

172.94

181.27

100

111.53

149.65

172.82

188.45

liabilities/ Assets
Total liabilities

tax

Interpretation:
The analysis of current assets and current liabilities reveals that the working
capital increased over the year. The fixed assets of company through decline and
increased substantially in the later year. More particularly the company invested less
amounts of cash at bank during 2009 and 2014.
There is increasing and decreasing trend in current liabilities during the
period of study. The total assets of the company increased by 88.45 % in the year
2012-13.
There is a two-fold increase in the reserves position of the company. And also
continuous increase in secured and unsecured loans during the period of study.
There is increasing and decreasing trend in current liabilities during the
period of study.

67

RATIO ANALYSIS
Ratio Analysis is the most powerful tool of financial analysis. It is an
important and age old technique of analysis and interpretation of financial statements.
It is also used to analyze various aspects of operational efficiency and degree of
profitability. Ratios indicate the trend or progress or down fall of the business.
Meaning of Ratio:
Ratio is one figure expressed in terms of another. It is an expression of
relationship between one figure and other figure which are mutually interdependent. It
is the numerical or an arithmetical relationship between two figures which are
mutually interdependent. In other words a ratio is a mathematical relationship
between two items expressed in quantitative form. When ratio is explained with
reference to the items shown in the financial statements, it is called accounting ratio.
Types of ratios:There are mainly four types of ratios, those are
I.
II.
III.

Liquidity Ratios
Leverage Ratios
Activity Ratios

68

IV.

Profitability Ratios

(I). Liquidity Ratios:These ratios are used to measure the firms ability to meet short term
obligations when they fall due. A company should have enough cash and other current
assets, which can be converted into cash, so that it can pay it creditors and lenders on
time.
The following ratios throw light on the liquidity of short-term financial position of a
firm.
1. Current Ratio
2. Quick Ratio or Acid Test Ratio or Liquid Ratio
3. Cash Ratio or Absolute Liquid Ratio
1. Current Ratio:It is also known as working capital ratio. It is the most widely used ratio. This ratio
brings out relationship between current assets and current liabilities. The main
purpose computing of this ratio to ascertain to what extent current assets are sufficient
to meet the current liabilities of the business concern. This ratio helps to analyze the
short term financial position or liquidity of a firm. Current ratio is calculated by the
following formula.
Formula:Current Assets
Current Ratio = -------------------------Current liabilities

Current Ratios of the NSL TEXTILES LTD

TABLE -1

69

Year
2009-10

Current Assets
12,52,34,820

Current Liabilities
2,47,04,291

Current Ratio
5.06

2010-11

14,67,14,461

2,65,36,149

5.53

2011-12

20,85,48,849

3,65,87,636

5.69

2012-13

25,51,31,579

2,32,47,998

10.97

2013-14

29,01,64,809

3,14,59,436

9.22

Interpretation:
Generally 2:1 ratio is considered to be ideal for concern i.e., current assets
should be twice the current liabilities.

70

The current ratio has been fluctuating in the study period. In the year 2009-10
the current ratio was recorded 5.06 (5.06 : 1) it represents that for every current
liability of Re 1, the firm has the current assets of Rs 5.06.
In the year 2010-11 the current ratio increased from 5.06 to 5.53 (5.53 : 1) later
on in the year 2011-12 the ratio slightly increase from 5.53 to 5.69 (5.69 : 1). Then
after the ratio gone up from 2012-13 i.e., the ratio gone up from 5.69 to 10.97 (10.97 :
1). in the year 2013-14 the ratio will be decrease from 10.97 to 9.22 (9.22 : 1) the
maximum current ratio recorded 10.97 in the year 2012-13.The minimum current
ratio recorded 5.06 in the year 2009-10.
Here all years are satisfying the rule of the current ratio. So the short term
financial position or Liquidity position of the company is satisfactory.

2. Liquid Ratio or quick Ratio:

Liquid Ratio is also known as Quick Ratio or Acid test ratio. It is the Ratio
of Liquid Assets to Current liabilities. Liquid Ratio is designed to find out the extent
to which assets are immediately convertible into cash and current liabilities
instantaneously discharged.
Formula:
Liquid Assets
Liquid/Quick Ratio = ------------------------------Current Liabilities

TABLE -2

71

Year

Liquid Assets

Current liabilities

Quick Ratio

2009-10

11,80,86,342

2,47,04,291

4.77

2010-11

6,76,64,034

2,65,36,149

2.55

2011-12

12,65,67,843

3,65,87,636

3.46

2012-13

18,50,91,678

2,32,47,998

7.96

2013-14

19,28,41,814

3,14,59,436

6.13

Interpretation:
As per rule of Liquid Ratio 1 to 1 ratio (1 : 1 ) is considered ideal ratio for a
concern i.e., Re. 1 Liquid assets to discharge Re. 1 Current liability.
The quick ratio has been varying throughout the study period. The quick ratio was
noticed 4.77 (4.77 : 1) in the year 2009-10. In the year 2010-11 the quick ratio falls
down from 4.77 to 2.55 (2.55 : 1). Later on there is an improvement from the year
2011-12 i.e., the liquid ratio was increased from 2.55 to 3.46 (3.46 : 1). In the year
2012-13 the ratio will be highly increased from 3.46 to 7.96(3.46 : 1). Later in the
next year the quick ration decrease in 7.69 to 6.13. In the year 2012-13 highest ratio
will be noticed and lowest value are 2.55 in the year 2010-11.

72

Here all years are satisfying the rule of the Quick ratio. So the Liquidity position
of the company is satisfactory.

3. Cash Ratio or Absolute Liquid Ratio:

It is also known as super quick ratio or cash ratio. When liquidity is highly
restricted in terms of cash and cash equivalents this ratio is to be calculated. This ratio
measures the relationship between the cash and near cash items on one hand and
immediately maturing obligations on the other hand. Although debtors and bills
receivables are more liquid than stocks (Inventories), there are certain doubts on their
relation into cash immediately on time. Hence, a new absolute liquid ratio is designed
to test the firms liquidity position. It is the ratio of absolute liquid assets to current
liabilities. It is calculated as follows,
Formula:
Absolute Liquid Assets
Absolute Liquid Ratio = ---------------------------------Current Liabilities
TABLE -3
Year

Current Liabilities

Absolute
Ratio

35,09,191

2,47,04,291

0.14

10,95,667

2,65,36,149

0.04

2011-12

6,92,625

3,65,87,636

0.19

2012-13

38,75,890

2,32,47,998

0.17

2013-14

37,76,145

3,14,59,436

0.11

2009-10
2010-11

Absolute
Assets

Liquid

73

Liquid

Interpretation:
Generally the rule of Absolute Liquid Ratio is 0.5 : 1 is considered as ideal Ratio. It
means Rs 0.5 Absolute Liquid Assets as against the Re. 1 current Liability.
The absolute quick ratio has been varying in the study period. In the year
2009-10 the absolute quick ratio was recorded 0.14. In the year 2010-11 the absolute
quick ratio fall down from 0.14 to 0.04. Later on the absolute quick ratio was
increased from the year 2011 2012 .i.e, the ratio was increased from 0.04 to 0.19. in
the year 2012- 13 the cash ratio will be decreased 0.19 to 0.17 . The highest ratio was
noticed 0.19in the year 2011-12. The lowest ratio was noticed 0.04 in the year 201011.

74

Above the changes happened owning to the reason that the cash volume has been
varying year to year in the study period. The company has maintained highest cash
volume in the year 2011-12.But no one year satisfied the rule of Absolute Liquid
Ratio rule. So the Financial Condition of the business interns of this ratio is very
unsatisfactory.

II. Leverage Ratios:

The second category of financial ratios is leverage or capital structure ratios. The
long term solvency of a firm can be examined by using leverage or capital structure
ratios. The following are the important ratios come under Leverage ratios.
1. Debt Equity Ratio

2. Proprietary Ratio

1. Debt Equity Ratio:

Debt equity ratio is also called as external internal equity ratio. The ratio
is determined to ascertain the soundness of the long term financial policies of
the company. It is calculated to measure the relative claims of outsiders i.e.,
shareholders against the firm assets. It may be calculated as follows.
Formula:

Debt Equity Ratio =

Outsiders Fund
------------------------------Shareholders Fund

TABLE -4
Year
2009-10
2010-11

Outsiders Fund

Shareholders fund

Debt Equity
Ratio

10,34,17,124

8,47,77,359

1.22

11,44,42,500

9,58,12,406

1.22

75

2011-12
2012-13
2013-14

17,09,66,592

11,09,17,208

1.54

20,89,83,532

11,64,72,603

1.79

23,26,30,428

12,24,32,610

1.90

Interpretation:
Generally the rule of debt Equity Ratio is 2 : 1 is considered as ideal ratio.
Debt Equity Ratio has been varying in the study period. In the year 2009-10
the Debt Equity Ratio was recorded1.22. In the year 2010-11 the Debt Equity Ratio
was recorded 1.22. Later on the Debt Equity Ratio was increased in the year 20112012 .i.e, the ratio was increased from 1.22 to 1.54., in the year 2012-13 the Debt
Equity Ratio will be increased from 1.54 to 1.79 ., and in the year 20132014 the
Debt Equity Ratio increased from 1.79 to 1.99. The highest t ratio was noticed 1.99 in
the year 2013-14. The lowest ratio was noticed 1.22 in the year 20092010 and 201011.

76

Here no one year satisfied the ideal ratio of the debt equity ratio. But the debt
equity ratio of the concern is continues growth, so long term financial policies of the
company is not satisfactory but it was good.

2. Proprietary Ratio:
This ratio is also known as equity assets ratio or ratio of net worth to total assets
or stockholders equity ratio.
It is a variant of equity ratio. It establishes relationship between the proprietors or
shareholders funds and the total assets of the firm; this ratio is worked out as follows.
This ratio can also be expressed in percentage.
This ratio indicates the general financial strength of the concern. It is a test of the
soundness of the financial structure of the concern. The ratio is great significance to
creditors since it enables them to find out the proportion of shareholders funds in the
total investment of the business.
Formula:
Shareholders fund
Proprietary Ratio = ---------------------------------- X 100
Total Tangible Assets

TABLE -5
year
2009-10
2010-11
2011-12

Shareholders fund

Total
Assets

8,47,77,359

19,05,87,184

44.48

9,58,12,406

21,25,70,067

45.07

11,09,17,208

28,52,04,903

38.89

77

Tangible Proprietary Ratio

(%)

2012-13
2013-14

11,64,72,603

32,93,67,285

35.36

12,24,32,610

35,91,62,747

34.09

Interpretation:
In the year 2009-10 the proprietary ratio was noticed 44.48. In the year 2010-11
the proprietary ratio increased from 44.48 to 45.07. Then after in the year 2011-12 the
proprietary ratio falls down from 45.07 to 38.89. Later on the proprietary ratio
decreased from 38.89 to 35.36. In the year 2013-14 the proprietary ratio decreased
from 35.36 to 34.09. The maximum proprietary ratio is 45.07 in the year 2010-11. The
minimum proprietary ratio is 34.09 in the year 2013-14.
A high ratio is welcomes to the creditors because it secures their position by
providing a high margin of safety. A ratio above 50% is generally considered safe for
the creditors.

78

Here no one year satisfied the ideal ratio of the proprietary ratio. So this position
is difficult to the company for gathering the shareholders fund.

III. Activity Ratios:

Activity ratios measure the efficiency or effectiveness with which a firm manages
its resources or assets. The following are the important ratios which are commonly
included under this category.
Inventory Turnover Ratio
Fixed Assets Turnover Ratio
Working Capital Turnover Ratio
Debaters Turnover Ratio
1. Inventory turnover Ratio:
Inventory turnover ratio is also known as Stock turnover ratio. It establishes the
relationship between cost of goods sold during a given period and the average amount
of inventory held during that period. This ratio measures how many times on an
average stock is sold during the year. Promptness of sales indicates better
performance of the business..
Formula
Cost of Goods Sold
Stock turnover Ratio = ---------------------------Average

Stock

TABLE -5

2009-10

Cost of Goods
Average Stock
Sold
45,26,36,812
2,11,19,554

Stock
turnover
Ratio(times)
21

2010-11

60,19,60,283

2,00,14,322

30

2011-12

63,23,53,653

2,61,34,003

24

Year

79

2012-13

63,72,10,474

2,87,29,414

22

2013-14

66,29,77,566

5,82,16,893

11

Interpretation:
Here except 2013-14, remaining all years inventory turnover ratios are
satisfactory position. In the year 2009-10 the inventory turnover ratio was recorded 21
(times). In the year 2010-11 the inventory turnover ratio increases from 22 to 30
(times). Later the inventory turnover ratio was decreased from the year 2011-12.i.e,
the ratio was decreased from 30 to 24 (times). In the year 2012-13 the inventory
turnover ratio decreased from 24 to 22 (times). In the year 2013-2014 the inventory
turnover ratio was decreased from 22 to 11 (times). The highest ratio was noticed 30
in the year 2010-11. The lowest ratio was noticed 11 in the year 2013-14.
Immediate sale of goods produced requires further production which
consequently activities the productive process and is responsible for rapid
development of the business. Higher inventory turnover ratio is always beneficial to
the concern. It shows the effective performance of the business and management.
Lower inventory turnover ratio shows that the stock is blocked and not immediately

80

sold. It shows the poor performance of the business and inefficiency of the
management.

2. Fixed assets turnover Ratio:

Fixed assets are used in the business for producing goods to be sold. The
effective utilization of fixed assets will result in increased production and reduced
cost. It also ensures whether investment in the assets have been judicious or not. This
ratio expresses the number of times fixed assets are being turnover in a stated period.
The following formula is used for measurement of the ratio.
Formula:
Sales or Cost of Sales
Fixed Assets turnover Ratio= ------------------------------Fixed Assets

TABLE -6
Year
2009-10
2010-11
2011-12
2012-13
2013-14

Sales

Fixed Assets

Fixed
Assets
Turnover Ratio

54,63,50,198

6,52,20,427

8.39

69,44,57,939

6,58,54,756

10.55

72,77,49,830

7,66,55,204

9.50

64,26,38,301

7,42,34,856

9.31

82,60,67,355

6,89,97,088

11.97

81

Interpretation:
In the year 2009-10 the Fixed Assets turnover Ratio was recorded 8.39 (times).
In the year 2010-11 the Fixed Assets turnover Ratio increases from 8.39 to 10.55
(times). Later the Fixed Assets turnover Ratio was decreased from the year 2011-12
.i.e, the ratio was decreased from 10.55 to 9.50 (times). In the year 2012-13 the Fixed
Assets turnover Ratio decreased from 9.50to 9.31 (times). In the year 2013-2014 the
Fixed Assets turnover Ratio was increased from 9.31 to 11.97 (times). The highest
ratio was noticed 11.97 in the year 2013-14. The lowest ratio was noticed 8.39 in the
year 2009-10.
According to this ratio, a higher is the ratio, the better is the performance. A
lower ratio indicates that the fixed assets are not being efficiently utilized. Overall the
company performance is good in utilization of fixed assets, but not satisfactory.

82

2. DEBTORS TURNOVER RATIO:

This ratio measures a number of times; the Debtors are converted into cash. If
Debtors are high it indicates the firm is following strict credit policy. If the debtors
turnover ratio is low indicate the firm following liberal credit policy.
Formula:
NET SALES
DEBTORS TURNOVER RATIO =
DEBTORS
Debtors constitute an important constituent of current assets.

Quality of

debtors determines to a great extent a firms liquidity. Debtors turnover ratio is very
important as it depicts the efficiency of the staff entrusted with the task of collection
from debtors.

TABLE -7
YEAR
2009-10
2010-11
2011-12
2012-13
2013-14

NETSALES

DEBTORS

RATIO (%)

54,63,50,198

3,12,39,881

17.49

69,44,57,939

5,41,91,956

12.81

72,91,38,804

8,50,53,587

8.57

64,26,38,301

4,61,58,454

13.92

82,60,67,355

7,88,82,160

10.47

83

INTERPRETATION:
In the year 2009-10 the Debtor Turnover ratio was noticed 17.49. In
the year 2010-11 the Debtor Turnover ratio decreased from 17.49 to 12.81. Then after
in the year 2011-12 the Debtor Turnover ratio fall down from 12.81 to 8.57. Later on
the Debtor Turnover ratio gone up from 8.57 to 13.92. In the year 2013-14 the Debtor
Turnover ratio decreased from 13.92 to 10.47. The maximum Debtor Turnover ratio
is 17.49 in the year 2009-10. The minimum Debtor Turnover ratio is 8.57 in the year
2011-12.

84

3. Working capital turnover ratio:

This ratio measures the relationship between working capital and sales. The ratio
shows the number of times the working capital results, in sales. Working capital as
usual is the excess of current assets over the current liabilities. The following formula
is used to measure this ratio.
Formula:
Net or cost of Sales
Working capital Turnover Ratio = -------------------------------Working Capital

Working Capital = Current Assets Current Liabilities

Networking capital = working capital + safety of margin

TABLE -8
Year
2009-10
2010-11
2011-12
2012-13
2013-14

Sales

Working Capital

Working
Capital
Turnover Ratio

54,63,50,198

10,05,30,529

5.43

69,44,57,939

12,01,78,312

5.78

72,77,49,830

17,19,61,213

4.23

64,26,38,301

23,18,83,581

2.77

82,60,67,355

25,87,05,373

3.19

85

Interpretation:
Generally the rule of Working capital turnover ratio is. A high Working capital
turnover ratio indicates the efficient utilization of Working capital.
The current ratio has been fluctuating in the study period. In the year 2009-10
the Working capital turnover ratio was recorded 5.43 (times). In the year 2010-11 the
Working capital turnover ratio increases from 5.43 to 5.78 (times). Later the Working
capital turnover ratio was decreased from the year 2011-12.i.e, the ratio was decreased
from 5.78 to 4.23 (times). In the year 2012-13 the Working capital turnover ratio
decreased from 4.23 to 2.77 (times). In the year 2013-2014 the Working capital
turnover ratio was increased from 2.77 to 3.19 (times). The highest ratio was noticed
5.78 in the year 2010-11. The lowest ratio was noticed 2.77 in the year 2012-13.
Here except 2012-13 and 2013-14, remaining all years working capital
turnover ratios are good, but the company need to improve the utilization of the
Working capital.

IV. Profitability Ratios:

86

Ratios indicating profitability are calculated on the basis of profit and loss
account. Profitability is an indication of the efficiency with which the operations of
the business are carried on. Profitability ratios measure the degree of operating
success of a business firm in an accounting period. The following are the important
profitability ratios. There are some important profitability ratios those are,
I. Gross profit ratio
Gross profit ratio measure the relationship between gross profit and net sales. It is
usually represented as a percentage. Its formula is,
Formula:
Gross Profit
Gross profit ratio = -------------------- X 100
Net Sales
Gross profit = Net sales cost of goods sold

Gross profit ratio is probably one of the most widely used ratios especially in
wholesale and retail trading concern. It is considered to be a reliable guide as
adequacy of selling prices. Further it acts as an indicator of the efficiency of inventory
control. In short, it tells gross margin on trading.

TABLE -9
Year
2009-10
2010-11
2011-12
2012-13
2013-14

Gross Profit

Net Sales

Gross Profit
Ratio (%)

7,37,58,567

54,63,50,198

13.50

8,19,15,457

69,44,57,939

11.78

9,42,60,501

72,77,49,830

12.95

6,66,87,058

64,26,38,301

10.38

8,80,78,116

82,60,67,355

10.66

87

Interpretation:
The Gross profit margin reflects the efficiency with which management
produces each unit of product. Higher the ratio better it is. A low ratio indicates
unfavorable trends in the form of reduction in selling price not accompanied by
proportionate decrease in cost of goods or increase in cost of production.
In the year 2009-10 the gross profit ratio was recorded 13.50. In the year
2010-11 the gross profit ratio decreased from 13.50 to 11.78. Later the gross profit
ratio was increased in the year 2011 to 2012 .i.e; the ratio was increased from 11.78 to
12.95. in the year 2012-13 the gross profit decreased from 12.95 to 10.38 . in the year
2013-14 the gross profit ratio is recorded as 10.66
In the year 2009-10 the gross profit ratio is 13.50 highest to the all years.
Overall the gross profit ratio is not satisfactory. So the firm needs to improve their
activities.

2. Net Profit Ratio:

88

Net profit ratio reveals the over all profitability of the concern and this
ratio provides considerable insight into the overall efficiency of the business. Net
profit ratio establishes relationship between net profit (after taxes) and sales. It is
expressed as percentage to sales. It indicates the efficiency of management in
manufacturing, selling and administrative and other activities of the concern. This
ratio is very useful to the proprietors because it reveals the over all profitability of the
concern. The formula for computing this ratio is,
Formula:
Net profit (after taxes)
Net Profit Ratio = ---------------------------------X 100
Net Sales
Net profit (after taxes) = gross profit income to be received office expenditure +
selling and distribution expenditure

TABLE -10
Year
2009-10
2010-11
2011-12
2012-13

2013-14

Net Profit

Net Sales

Net Profit
Ratio (%)

92,64,683

54,63,50,198

1.70

1,19,51,046

69,44,57,939

1.72

1,89,81,931

72,77,49,830

2.61

85,08,264

64,26,38,301

1.32

93,75,006

82,60,67,355

1.13

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Interpretation:
The net profit ratio reveals the over all profitability efficiency of the concern. A
higher ratio is an indication of efficient use of total resources. A low ratio on the
contrary would mean poor financial planning and low efficiency.
The net profit ratio has been varying in the study period. The net profit ratio was
noticed 1.70 in the year 2009-10. In the year 2010-11 the net profit ratio increased
from 1.70 to 1.72. Then after the net profit ratio was highly increased from 1.72 to
2.61., in the year 2011-12. Later on the net profit ratio fell down from 2.61 to 1.32
from the year 2012 to 2013 in the year 2013-14 the net profit ratio decreased from
1.32 to 1.13
The highest value of net profit ratio was noticed 2.6 in the year 2011-12. The
lowest value of net profit ratio was noticed 1.13 in the year 2013-14. Overall the net
profit ratio is not satisfactory. It indicates the financial planning and efficiency of the
firm is low. So the firm needs to improve their activities.

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3. Return on investment:
Return on investment also called as return on capital employed. This is one
of the important profitability ratios. This ratio indicates the earning capacity of the
capital employed in the business. It indicates the relation of net profit with capital
employed in the business. This ratio is calculated as follows,
Formula:
Net Profit (before taxes)
Return on Investment = --------------------------------- X 100
Capital Employed
Capital employed = Fixed Assets + Current Assets Current Liabilities.

TABLE -11
Year
2009-10
2010-11
2011-12
2012-13
2013-14

Net Profit (before

Capital Employed
taxes)

Return
on
Investment (%)

1,59,84,108

16,57,50,956

9.64

1,81,69,329

18,60,33,068

9.77

2,86,99,684

24,86,16,417

11.54

1,05,06,392

30,61,18,437

3.43

1,51,20,657

32,77,02,461

4.61

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Interpretation:
The Return on investment ratio was noticed 9.64 in the year 2009-10. In the
year 2010-11 the Return on investment ratio slightly increased from 9.64 to 9.77.
Then after the Return on investment ratio increased from 9.77 to 11.54 in the year
2011-12. Later on the Return on investment ratio fell down from 11.54 to 3.43 in the
year 2012 to 2013. In the year 2013-14 the Return on investment ratio increased from
3.43 to 4.61. The highest value of Return on investment ratio was noticed 11.54 in the
year 2011-12. The lowest value of Return on investment ratio was noticed 3.43 in the
year 2012-13.
Here overall of the company performance is not satisfactory, so company need to
improve their activities

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FINDINGS
It was observed that the NSL TEXTILES LTD

company current assets

position was increasing over the period of time. In the same way except the
year 2011 the company current liabilities position was increasing over the
period of time from the year 2009 to year 2014. It tells that the firm is in
continious success in collect the short term funds.
The percentage of increase current assets is more than the increasing
percentage of current liabilities. It tells that the firm maintaining a good
working capital and having the good liquidity position.
From the comparative analysis we found that the percentage of sundry debtors
was increasing every year compare to previous year, except the year 2013. It
tells that an increase in risk in collecting the amount of dues.
From the observation of comparative analysis we found that the NSL
TEXTILES LTD

Company fixed assets position was slight increasing over

the period of time except the year 2013 and year 2014. In 2013 and 2014 there
is slide fall in fixed assets. It tells that the firm to calculate the depreciation.
The NSL TEXTILES LTD

company long term liabilities position was

increasing over the period of time from the year 2010 to year 2014. It tells that
the firm to take the loans from the bank..
The percentage of increasing fixed assets is less than the increasing percentage
in long term liabilities. It means part of long term finance is made available for
the working capital.
The Net Profit of the company was continuous increasing from the year 2009
to year 2014. It clearly tells that the company controlling was good on selling
and administrative expenses.
The current ratio of the company is found to be satisfactory in all the years
(2009 to 2014). It means the short term financial position or liquidity position
of the company is satisfactory.

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 The cash ratio of the company is found to be unsatisfactory in all years (2009
to 2014). It means the financial condition of the business in terms of ratios is
very unsatisfactory.
There is an increase in reserves and surplus this indicates that the profits has
been increased when compare to the past years. Because company gain in
more profits in manufacturing sector.
The company maintained good fixed assets turnover ratio in all years it has the
highest fixed assets turnover ratio in the year 2013. It tells that the firm to be
purchasing fixed assets in high level.
The working capital turnover ratio of the company is found to be good in all
years. But company need to improve the utilization of the working capital.
The company gross profit ratio was come down on the year on year basis. In
the year 2009 the gross profit ratio was 13.50, it is fall down 10.66 in the year
2014. The net sales were increasing all years but the gross profit ratio was
decrease, it indicates that the cost of production was increased.
There is low level of the working capital can be used in the day to day
expenses. And the sources can be fully sufficient level of the applications of
funds in all years. Because they can proof the efficient working activities of
the goods producing system.
.

SUGGESTIONS
The current assets and current liabilities has been increased observation period
the company to take necessary steps for maintaining proper balance in
between current assets and current liabilities.
The current assets position was increased all the five years the company to
maintain proper current assets for better short term fund management.

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 The company, to reduce the sundry debtors for to reducing the collection risk
and improving the cash turnover.
The company to invest more funds to its fixed assets to generate sales by
utilizing them.
The net profit of the company has been increased over the observation period,
but the percentage of net profit is less compared to previous years the
company to control the selling & administrative expenses for to improve the
net profit.
From the observed period the current ratio was satisfactory and it is met to the
standard norms the company to take necessary steps to maintain the same
position in future also.
The cash ratio of the company was not satisfying the ideal ratio of the cash
ratio the company maintain required cash balance to meet the current
liabilities.

CONCLUSION
NSL TEXTILES LTD is formulating the contingent plans towards the growing
up of financial status of the organization. In the year 2011-2012 there have to be a
loss due to purchase of fixed assets for improving the production capacity. The point
of years from 2012-2014 there have the continuous improvement in sales.
By formulating the contingent plans in the organization in the year 2011 and
2012. There have the continuous growth year by year. The working capital; position
has been increased during the period of 2013-2014 the working capital potential is
good. The comparative statement position is also needed to be increased to certain
extent. The company maintains the good current ratio for all years. The company tries
to improving its gross ratio and net profit ratio.

95

BIBLIOGRAPHY

Financial management by I.M. PANDAY

Financial management theory and practices by PRASANI\JA CHANDRA

Financial management text problems by M.Y. KHAN & P.K.JAIN
Financial management and polices by V.K. BHALLA
Financial management by S.N. Maheswari

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Web sites:
www.Project mba .com
www. Accounting for management.com
www. Financial management. Com
www. Financial ratios. com

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