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COMPANY PROFILE
1
1.2 History of the Company
2
In the late 1970s, the company started exporting its product
to European Markets, Given the size of the domestic market; the
proportion of products that are exported remains low at approximately
two percent. The company is in the process of further developing markets
in Africa, Central and Eastern Asia.
3
believes that designs are a key factor in its market and used to produce
some 200 different printed designs each month.
4
The company's production facilities boast of one of India's
most sophisticated textile plants at Vareli, Surat (Western India). Its
weaving plant comprising Nissan and Tsudakoma water jet looms - the
highest number of water jet looms under one roof in India - and rapier
looms, automatic shuttle change looms etc, high-tech yarn preparatory
machines viz, ziro-twist-sizing, draw-warping, texturising and twisting
machines, have a capacity of over 42 Lac meters/month of greige fabric.
The plant has an ISO 9002 certification by BVQI. The company also
markets high quality dyed and printed fabrics that it gets manufactured
from associated firms.
5
Company Secretary
Kamlesh Vyas
Auditors
Natvarlal Vepari & Co.
Charted Accountants
Bankers
Bank of Baroda
Allahabad Bank
State Bank of Saurashtra
Bank of India
Registered Office
Garden Mills Compound,
Sahara Gate,
Surat-395010.
Corporate Office
Manek Mahal,
90, Veer Nariman Road,
Mumbai-400020.
Plants
6
Registrars & Transfer Agents
MCS Limited,
Neelam Apartment,
88, Sampatrao Colony,
Behind Federation Building, Alkapuri,
Baroda 390005.
Categories of Shareholders
No. of Holding
Category
Shares Held Strength
Promoters 19423891 50.73
Mutual Funds & UTI 3186803 8.32
Bank Financial Ins. & Insurance
639757 1.67
Co.
FIIs (including foreign bank &
275682 0.72
GDR) Chairman &
Private Bodies Corporate Managing 2141945 5.59
NRI’s/OCB’s Director910433 2.38
Indian Public 10248256 26.76
GDR 1360925 3.55
Others General 102868 0.27
Financ
Manage
Total Import
38290560& Producti
100.00
e
r (Table 1) Export on
Direct
Marketi Director Director
or
ng
1.6 Organization Structure
Head of
the
Departme
nt
7
Staff
2. RATIO ANALYSIS
8
2.1 INTRODUCTION OF RATIO ANALYSIS: -
9
• Aid to measure general efficiency: Ratios enable the
mass of accounting data to be summarized and simplified
• Aid to measure financial solvency: They point out
firm’s liquidity position to meet its short-tern obligation and
long-tern solvency.
• Aid in forecasting and planning: ratio help to prepare
the future plan of action etc.
• Facilitate decision-making: it throws light on the
degree of efficiency of the management and utilization of the
assets that is why it is called surveyor of efficiency.
• Aid in corrective action: the highlight the factors
associated with successful and unsuccessful firms.
• Aids in intrude firm comparison: inter firm
comparison are facilities. It is an instrument for diagnosis of
financial health of enterprise.
• Evaluation of efficiency: ratio analysis is an effective
instrument which, when properly used is useful to assess
important characteristics of business liquidity, solvency,
profitability etc.
• Effective tool: ratio analysis helps in making effective
control of the business measuring performance; control of cost
etc. ratio ensures secrecy.
10
Ratio analysis is as already mentioned, a widely used tool of
financial analysis. It is because ratios are simple and easy to understand.
But they must be used very carefully. They suffer from various
limitations.
11
2.5 Types of Ratio
LIQUIDITY RATIO:
Liquidity and short term solvency ratios are used to judge the
firm’s ability to meet such current obligations as its accounts payable and
the current position of its long term debt. Liquidity is defined as the
ability to realize value in money, the most liquid of assets. It refers to the
ability to pay in cash, the obligations that are due. The important ratios in
measuring about short term solvency are as under.
Current Ratio:
Current Ratio: Current Assets, Loans and Advances
Current Liabilities & provisions
12
quick ratio of 1:1 indicates highly solved position. This ratio is also called
acid test ratio.
PROFITABILITY RATIO:
The purpose of study & analysis of profitability ratios are to help
assessing the adequacy of profits earned by the company & also to
discover whether, profitability is increasing or declining. The profitability
of the firm is the net result of a large number of policies and decisions.
The firm profitability ratios are as under:
13
competitions to determine the trend in NP margins of the co & its
performance in the industry.
14
Return on Shareholders fund or Return on Net Worth:
Return on Net worth = NP after Interest & Tax x 100
Net Worth
Where, Net worth = Equity + Reserves & surplus
This ratio expresses the NP in terms of the equity shareholders
funds. This ratio is an important yardstick of performance for equity
shareholders since it indicates the return on the funds employed by them.
This ratio is useful in measuring the rate of return as a percentage of the
book value of shareholders equity.
This ratio indicates the relationship between loan funds and net
worth of the company. This is known as gearing. It the proportion of debt
to equity is low, a company is said to be low and vice versa. A debt
equity ratio of 2:1 is the boom accepted by financial institutions for
financing of projects. A debt equity ratio which shows a declining trend
over the years is usually taken as a positive sign reflecting on increasing
cash accrual and debt repayment.
15
Proprietary Ratio:
It expresses the relationship between net worth & total asset.
PR = Net worth
Total Assets
Net worth = Equity share capital + preference share capital +
Reserve – Fictitious Assets
Total Assets = Fixed Asset + Current Assets
Reserves earmarked specifically for a particular purpose should not
be included in calculation of Net worth. A high proprietary ratio is
indicative of strong financial position of the business. The higher the
ratio, the better it is.
Interest Cover:
Interest Cover = Profit before Interest, depreciation & Tax
Interest
The interest coverage ratio shows how many times interest charges
are covered by funds that are available for payment of interest. AN
interest cover of 2:1 considered reasonable by financial institutions. A
very high ratio indicates that the firm is conservative in using debt and a
very low ratio indicates excessive use of debt.
TURNOVER RATIO:
16
Fixed Assets Turnover Ratio:
F. A. T. Ratio = sales
Fixed Assets
This ratio will be analyzed further with ratios for each main
category of asset. This is a difficult set of ratios to interpret as asset
values are based on historic cost. An increase in the fixed assets figure
may result from the replacement of an asset at an increased price on the
purchase of an additional asset intended to increase production capacity.
17
3. CALCULATION OF RATIO ANALYSIS
Classification of Ratio
Classification of
Ratio
1. Gross Profit
Ratio
2. Net Profit
Ratio
Profit & Loss A/c Ratio 3. Operating
Ratio
4. Stock
Turnover Ratio
1. Current Ratio
2. Liquid Ratio
3. Debt Equity
Balance Sheet Ratio
Ratio 4. Propritory Ratio
5. Capital Gearing
Ratio
1. Return on Investment
Ratio
2. Return on Propritory
Fund
Inter-Statement Ratio Ratio
3. Net Profit to Total
Assets Ratio
4. Creditors Turn Over
Ratio
5. Debtor Turnover Ratio
18
3.1 PROFIT & LOSS A/C RATIO
(Graph 1)
Interpretation :
19
The gross profit of the company is incresing day by day. It is
increase to 15.98 % in 2002-03 as comapre to 2001-02 i.e 13.38 %.
Net Profit
Net Profit Ratio = ------------------- * 100
Net Sales
Years Net profit Net sales Ratio(%)
(a) (b) (a/b)
98-99 837.40 46044.16 1.82
99-00 593.50 40347.01 1.47
00-01 2061.84 44459.79 4.63
01-02 2926.51 45167.17 6.48
02-03 3858.95 52431.08 7.36
(Table 3)
Net Profit Ratio
8
73
. 6
7 64
. 8
6
P
5 46
. 3
e
r 4
. 3
18
. 2
2 14
. 7
1
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 2)
Interpretation :
20
The net profit of the company is incresing day by day. In 1999-00
it was decrease to 1.47% but company take corrective action so that it
continuously increase from that time.
3. Operating ratio :-
21
Operating Ratio
100 904
. 9
835
. 7 917
. 2
824
. 3
80 761
. 1
P
e 60
r
40
.
20
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 3)
Interpretation:
Sales revenue is increasing in 2002-03, lower operating ratio shows
the higher operating profit and vice versa. For manufacturing concerned
an operating ratio between 75% & 80% is expected.
22
Years Cost of Goods Sold Avg. Inventory Ratio
(a) (b) (a/b)
98-99 42387.08 7186.88 5.90
99-00 37528.80 6546.48 5.73
00-01 40525.54 5530.16 7.33
01-02 37506.16 5653.43 6.63
02-03 43573.96 5500.88 7.92
(Table 5)
Stock Turnover Ratio
8 73
. 3 79
. 2
7 66
. 3
59
. 57
. 3
T
i
6
m 5
e 4
s 3
. 2
1
0
1998- 1999- 2000- 2001- 2002-
99 00 01 02 03
Year
(Graph 4)
Interpretation:
A higher inventory turnover ratio is better than a lower inventory
turnover ratio. A higher ratio implies good inventory management and an
indication of under investment lower inventory turnover ratio indication
of excessive inventory and over investment in inventory.
23
3.2 BALANCE SHEET RATIO
1. Current ratio :-
current assets
Current Ratio = --------------------------
curent liabilities
Current Ratio
5
41
. 1
T 4 33
. 7 33
. 7
31
. 8
i
3
m
e 2 17
. 3
s 1
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 5)
24
Interpretation :
In last five years the current ratio is between 3.18 to 4.11 which
was very good for the company. But in the last year it was 3.37 while it
was highest in the 1998-99 i.e. 4.11 so compnay should take corrective
action for increase the ratio.
2. Liquidity ratio :-
Liquidity Assets
Liquidity Ratio = ------------------------
Curent Liabilities
25
Liquidity Ratio
25
.
20
. 5 19
. 6 19
. 3
T
2
i 15 14
. 7
.
m
e 1 08
. 4
s
05
.
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 6)
Interpretation :
26
(a) (b) (a/b)
98-99 5238.49 35284.66 0.15
99-00 7417.12 32682.88 0.23
00-01 8304.24 34053.66 0.24
01-02 8846.48 30482.55 0.29
02-03 9645.26 30908.01 0.31
(Table 8)
(Graph 7)
Interpretation :
In last five years the debt equity ratio is between 0.15 to 0.31
which shows that the claim of creditors are less than that of owners but
the claims of creditors is increases in last five years.
4. Propritory ratio :-
This ratio shows the relationship between shareholder’s fund and
total assets. The result clearly shows the share of owners in the total
27
assets of the company. When the proprietary ratio is substracted from
one, the resultant figure represents the share of outsider’s claim on the
assets of the company.
shareholder fund
Propritory Ratio = --------------------------
total assets
Years Shareholder fund Total assets Ratio
(a) (b) (a/b)
98-99 35284.66 50676.34 0.70
99-00 32682.88 46590.91 0.70
00-01 34053.66 46828.82 0.73
01-02 30482.55 52184.81 0.58
02-03 30908.01 58004.16 0.53
(Table 9)
Propritory Ratio
08
. 07 07
. 3
. 07
.
T 06 05
. 8
.
i 05
. 3
m 04
.
e
s 02
.
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 8)
Interpretation :
In last five years the propritory ratio is between 0.58 to 0.73.
It was almost stable during last four years but in 2002-03 it was
0..53 which shows a greater risk to creditors.
5. Capital gearing ratio :-
The term capital gearing is used to describe the relationship
between fixed interest bearing securities, and the equity shareholder’s
funds. Therefore this ratio establishes a meaningful relationship between
28
the funds bearing fixed interest on the one hand, and the equity
shareholder’s funds on the other.
Fixed interest bearing fund
Capital Gearing Ratio = ---------------------------------------
equity share capital
3
T 25
. 23
. 1 25
. 2
21
. 7
i 2 19
. 4
m 15
. 13
. 7
e 1
s 05
.
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 9)
Interpretation :
The capital gearing ratio is between 1.37 to 2.52 during last five
years. In 2002-03 it was 2.52, the capital gearing is said to be high, this
position is under capitalisation.
3.3 INTER-STATEMENT RATIO
1 Return on investment ratio :-
This ratio is an indicator of the earnign capicity of the capital
employed in the business. This ratio reflects the overall efficiency with
which capital is used.
29
PATI
Return on Investment Ratio = -----------------------
capital employed
8 77
.
7 65
. 6
T 6 54
. 1
i 5
m 4
e 3 24
. 8
19
.
s 2
1
0
19979
- 8 19989
- 9 19990
- 0 20000
- 1 20010
- 2
Year
(Graph 10)
Interpretation :
The return on investment is higher in last year i.e 7.70 times which
is good sign for the company but it was very low in 1999-00 which is
increase in couple of years.
2 Return on propritory fund ratio :-
This is an important ratio as it shows the amount of profit available
to the shareholders which determines the rate of dividend.
EAT
Return on Propritory Fund Ratio = ------------------------x 100
shareholder fund
30
Years Earning after tax Shareholder fund Ratio
(a) (b) (a/b)x100
98-99 837.40 35284.66 2.37
99-00 593.50 32682.88 1.82
00-01 2061.84 34053.66 6.05
01-02 2926.51 30482.55 9.60
02-03 3858.95 30908.01 12.48
(Table 12)
Return on Propritory Fund Ratio
14
124
. 8
12
96
.
T 10
i
8
m 60
. 5
e 6
s 4 23
. 7 18
. 2
2
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 11)
Interpretation :
The return on propritory fund ratio of last five years shows that
sharholders gate 12.48 profit which is very good for company’s image.
But it was very low in 1999-00 i.e. 1.82.
3 Net profit to total assets ratio :-
This ratio establishes the relationship between the net profit and
otal assets. This ratio tries to findout how efficient the company was in
utilizing the funds to generate or earn profit.
Net profit
Net Profit to Total Assets Ratio = ------------------
total assets
31
Years Net profit Total assets Ratio
(a) (b) (a/b)
98-99 837.40 50676.34 0.02
99-00 593.50 46590.91 0.01
00-01 2061.84 46828.82 0.04
01-02 2926.51 52184.81 0.06
02-03 3858.95 58004.16 0.07
(Table 13)
(Graph 12)
32
98-99 2322.75 26805.11 31.63
99-00 2631.58 19599.14 13.43
00-01 1696.07 24158.08 7.02
01-02 2575.36 23612.85 10.91
02-03 2473.88 29673.28 8.33
(Table 14)
Creditors Turnover Ratio
35 316
. 3
30
T 25
i
m
20
15 134
. 3
e 109
. 1
s 10 70
. 2 83
. 3
5
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 13)
Interpretation :
Creditor turnover ratio was 8.33 times in 2002-03 which shows that
the disbursment of money is faster in the company. It was very slow in
1998-99when ratio was 31.63 times.
5 Debtors turnover ratio :-
Debtor turnover ratio, also known as receivables turnover ratio or
debtors velocity establishes the relationship between the net credit sales
of the year and the average receivable.
Debtors
Debtors Turnover Ratio = ----------------------- * 365
Net credit sales
33
99-00 6532.28 40347.01 59.09
00-01 3120.00 44459.79 25.61
01-02 3423.73 45167.17 27.67
02-03 3797.57 52431.08 26.43
(Table 15)
Debtors Turnover Ratio
60 590
. 9
529
.
50
T
i 40
m 30 256
. 1 276
. 7
264
. 3
e
s
20
10
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year
(Graph 14)
Interpretation :
Debtor turnover ratio was 26.43 times in 2002-03 which shows
speady collection of money. But it was lower in 2000-01 i.e. 25.6. so
company should take corrective measures.
FINDINGS
In last five year the current ratio is between 1.73 to 3.37 which was
very good for company .
In last five year, the claim of creditors are less than that of owner,
but the claims of creditors is decrease in last year.
The propritory ratio was almost stable during last four year.
34
The capital gearing ratio in 2002-03 was 2.52, the capital gearing is
said to be high, this position is under capitalisation.
The return on propritory fund ratio of last five years shows that
sharholders get 12.48 profit which is very good for company’s
image.
In last five years the net profit is between 1.47 to 7.36 which was
very good for the company.
SUGGESTIONS
In last years, the current ratio was 1.73, while it was highest in
1998-99 i.e. 4.11, so company should take corrective action for
incease the ratio .
In last, liquidity ratio was 0.84 while it was highest in 1998-99 i.e.
2.05 so company should take corrective action for increase the ratio
35
The propritory ratio in 2002-03 was 0.53 which show a greater risk
to creditor. So company should take care to increase ratio.
BIBLIOGRAPHY
Books
Management accounting
By J.made gowda
Management accounting
By Bhagavati & pillai (second edition)
36
Financial management
By V. K. Bhalla
Websites
www.gardenvareli.com
www.corporateinformation.com
37
Total 46295.39 40979.86 43077.48 44454.92 51950.56
Expenditure
Consumption Of RM 26335.24 19543.91 24079.43 23611.85 296673.28
(Increase)/Decrease
(364.91) 1658.33 273.70 424.70 307.73
In Stock
Purchases 1327.39 3488.50 3698.66 3093.56 2216.49
Mfg.& Other
15089.36 12798.06 10543.71 11225.45 13376.46
Expenses
Total 42387.08 37528.80 40525.54 37506.16 43573.96
Profit Before 8376.80
Financial
Charges, 3908.31 3451.06 4481.98 6948.76
Depreciation &
Tax
- Financial Charges 1798.41 1446.27 906.26 787.05 1243.84
Profit before Dep. & 7132.76
2109.90 2004.79 3575.72 6161.71
Tax
- Depreciation 1263.44 1408.29 1511.38 2245.21 2707.81
Net Profit Before Tax 846.46 596.50 2064.34 3916.5 4724.95
- Provision For Tax
Current 9.06 3.00 2.50 3.00 163.00
Deferred 0.00 0.00 0.00 986.01 703.00
Earlier Years 0.00 0.00 0.00 0.98 0.00
Net Profit After Tax 837.40 593.50 2061.84 2926.51 3858.95
+ Balance B/F 3822.86 4129.29 4147.37 76.27 28.42
Balance For
Appropriation 4660.26 4722.79 6209.21 3002.78 3887.37
38
2. Loan Funds
Secured Loan 8772.48 9645.37 9512.75 9336.48 9939.26
Unsecured Loan 2988.07 254.09 84.40 4764.55 7224.22
11760.55 9899.46 9597.15 14101.03 17163.48
Total 47045.41 42582.14 43650.81 44583.58 48071.49
Application Of Fund
1. Fixed Assets
Gross Block 35272.73 37178.21 39640.88 43320.78 55686.81
Less : Depreciation 14580.72 15891.57 16594.55 18783.39 21000.06
Net Block 20692.01 21286.64 23046.33 24537.39 34686.12
Less : Lease Adjs. A/C 69.50 122.47 6.89 6.89 0.00
Capital Wip 1863.24 542.00 1482.79 3811.19 2657.82
22485.75 21706.17 24522.23 28341.69 37343.94
2. Investment 3049.86 3400.28 5760.96 4070.30 3284.61
3. Current Assets
Inventories 7460.98 5631.97 5428.34 5878.52 5123.24
Sundry Debtors 6673.30 6532.28 3120.00 3423.73 3797.57
Cash & Bank Balance 655.97 1248.23 1553.20 4457.39 1000.27
Loan & Advances 10169.44 7936.42 6390.40 5915.06 7352.98
Other Current Assets 126.19 83.48 0.00 0.00 00.00
25085.88 21432.38 16491.94 19674.70 17274.06
Less : Current Liabilities 2886.68 3214.35 2323.87 3325.99 4292.90
Provision 744.25 794.42 854.14 761.51 1429.04
3630.93 4008.77 3178.01 4093.50 5721.94
21454.95 17423.61 13313.93 15581.20 11552.12
4. Deferred Tax Liability 0.00 0.00 0.00 -3507.73 4210.73
5. Misleading Expenses 54.85 52.08 53.69 98.12 101.55
47045.41 42582.14 43650.81 44583.58 48071.49
39