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A STUDY ON FINANCIAL PERFORMANCE ANALYSIS OF SRI KARPAGAM

ORGANIC COTTON INDUSTRY AT KARUR

CHAPTER I
GENERAL INTRODUCTION
A financial statement is an organised collection of data according to the logical consistent
accounting procedure. Financial statement contain summarized information of firms financial
affairs, organised systematically. They are means of present the firm’s financial situation to
the owners, creditors and general public. The top management is responsible for the
preparation of financial statements. Finance is the life of the business. It is rightly termed, as
the science of money. Finance is very essential for the smooth running of the business.
Financial management is that managerial activity which is concern with planning and
controlling of the firm’s financial reserve. Financial management, as an academic discipline,
has undergone fundamental changes as with regard to its scope and coverage. In the early
years of its evaluation it was treated synonymously with the rising of funds. In the current
literature pertaining to this growing academic discipline a broad scope has to be included, in
addition to procurement of funds. Efficient use of resources is universally recognised.
THEORETICAL BACKGROUND OF STUDY
INTRODUCTION:
Financial statements are primarily prepared for decision-making. They play a dominant role
in setting the framework of managerial decision. The published financial statements of
business may be of considerable interest to present the same to their respective potential
shareholders, managers, moneylenders, industry’s, financial institutions, trade organization
and many others.
MEANING OF FINANCIAL STATEMENT ANALYSIS
DEFINATION:
Financial analysis is the process of identifying the financial strengths and weakness of firm
by properly establishing relationship between the items of the balance sheet and profit and
loss account.
The purpose of financial analysis is to diagnose the information contained in the financial
statements so as to judge the profitability and financial soundness of the firm. A financial
analyst, analyses the financial statements with various tools of analysis before commenting
upon the financial position of the enterprises.
Financial is regarded as the life blood of a business enterprise. In the modern oriented
economy, finance is one of the basic foundations of all kinds of economics activities
.Finance statements are prepared primary for decision -making .They play a dominant role in
setting the frame work and managerial conclusion and can be drawn from these statements is
of immense use in decision- making through analysis and interpretation of financial
statements .As said earlier finance is said to be life blood of any business Every business
under taking needs finance for its smooth working .it has to raise funds from the cheapest
and risky source to utilize this in most effective manner . So every company will be
interested in knowing its financial performance.
The project entitled “Financial performance analysis of SRI KARPAGAM ORGANIC
COTTON INDUSTRY AT KARUR throw light on overall financial performance of the
company.
Finance is a life blood of business it is required from the establishment of the business to
liquidity or winding up of a business, so financial institutions played a very important role
on the operation of the business.
In the early days industry business was been confined to receiving of deposits and
lending of money. But now modern Industries under take wide variety of functions to assist
their customers. They provide various facilities to customers which makes the transaction
easy and comfortable.
Financial institutions such as industry, financial service companies, insurance
companies, securities firms and credit unions have very different ways of reporting financial
information. Running an industry is just difficult as analyzing it for investment purposes.

“Finance is that business activity which is concerned with the organization and
conversation of capital funds in meeting financial needs and overall objectives of a business
enterprise.”- Wheeler
Financial management is that managerial activity which is concerned with the planning
and controlling of a firm financial reserve. Financial management as an academic discipline
has undergone fundamental changes as regards its scope and coverage. In the early years of
its evolution it was treated synonymously with the raising of funds.
In the current literature pertaining to this growing academic discipline, a broader scope
so as to include in addition to procurement of funds, efficient use of resources is universally
recognized. Financial analysis can be defined as a study of relationship between many
factors as disclosed by the statement and the study of the trend of these factors.
The objective of financial analysis is the pinpointing of strength and weakness of a
business undertaking by regrouping and analyzing of figures obtained from financial
statement and balance sheet by the tools and techniques of management accounting.
Financial analysis is as the final step of accounting that result in the presentation of final and
the exact data that helps the business managers, creditors and investors.

Financial performance is an important aspect which influences the long term stability,
profitability and liquidity of an organization. The Evaluation of financial performance using
Comparative Balance Sheet Analysis, Ratio Analysis had been taken up for the study with
“SRI KARPAGAM ORGANIC COTTON INDUSTRY AT KARUR” as the project.

Analysis of Financial performance is of greater assistance in locating the weak spots at the
SRI KARPAGAM ORGANIC COTTON INDUSTRY AT KARUR even though the
overall performance may be satisfactory.

It is the process of identifying the financial strength and weakness of a firm from the
available accounting data and financial statement.

The analysis is done by properly establishing the relationship between the items of
balance sheet and profit and loss account the first take of financial analyst is to determine the
information relevant to the decision under consideration form the total information
contained in the financial statement.

The second step is to arrange information in a way to highlight significant relationship.


The final step is interpretation and drawing of inferences and conclusion.

Thus financial analysis is the process of selection relating and evaluation of the
accounting data information. This studying contain following analysis:
 Ratio analysis,
 Liquid ratios,
 Solvency ratios.

Financial performance of a company, being one of the major characteristics, defines


competitiveness, potentials of the business, and economic interests of the company’s
management and reliability of present or future contractors.

Therefore, financial performance analysis and identification of their weaknesses and


strengths using financial performance indicators has its contribution to the management,
shareholders, the public (customers of the industry), the regulator (the government), the
financial sector, 6 and the economy as a whole. In a competitive financial market, industry
performance provides signal to depositors and investors whether to withdraw or invest funds
respectively from the industry.

Similarly, it flashes direction to industry managers whether to improve its deposit


service or loan service or both. Regulators are also interested in the financial health of
INDUSTRYs for regulation purposes. The objective of financial statements is to provide
information about the financial position, performance and changes in financial position of an
enterprise that is useful to a wide range of users in making economic decisions. Owners and
managers require financial statements to make important business decisions that affect its
continued operations.

Financial analysis which measure financial performance is then performed on these


statements to provide management with a more detailed understanding of the figures.
Furthermore, the rationale of financial analysis is to diagnose the information contained in
financial statement so as to judge the future earning, ability to pay interest, debt maturities,
profitability and sound dividend polices.

NEED FOR FINANCIAL PERFORMANCE ANALYSIS:


Financial statements are prepared to meet external reporting obligations and also for decision
making purposes. 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. This analysis also helps the firm
to evaluate its standings in terms of the financial position.

STATEMENT OF THE PROBLEM


At regular period must prepare documents called financial statements. Financial statements
show the financial performance of an industry. They are used for both internal and external
purposes. When they are used internally, the management and sometimes the employees use
it for their own information. Managers use it to plan ahead and set goals for upcoming
periods. When they use the financial statements that were published, the management can
compare them with their internally used financial statements. They can also use their own and
other enterprises’ financial statements for comparison with macro economical data’s and
forecasts, as well as to the market and industry in which they operate in. The four main types
are balance sheets, profit and loss accounts, cash flow statements, and income statements.

Financial statements for industries present a different analytical problem than manufacturing
and service companies. As a result, analysis of an industry's financial statements requires a
distinct approach that recognizes a industry's somewhat unique risks. Industry takes deposits
from savers, paying interest on some of these accounts. They pass these funds on to
borrowers, receiving interest on the loans. Their profits are derived from the spread between
the rate they pay for funds and the rate they receive from borrowers. This ability to pool
deposits from many sources that can be lent to many different borrowers creates the flow of
funds inherent in the industrying system. By managing this flow of funds, industries
generate profits, acting as the intermediary of interest paid and interest received and taking
on the risks of offering credit. So, the study is conducted to analyse the financial
performance of SRI KARPAGAM ORGANIC COTTON INDUSTRY AT KARUR

Financial Analysis is a powerful mechanism which helps in ascertaining the strengths and
weakness in the operation and financial position of an enterprise. Financial performance
analysis refers to an assessment of the viability, stability and profitability of a business, sub-
business or project.

It is performed by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. These reports are usually
presented to top management as one of their bases in making business decisions.

 Continue or discontinue its main operation or part of its business;


 Make or purchase certain materials in the manufacture of its product;
 Acquire or rent/lease certain machineries and equipment in the production of its
goods;
 Issue stocks or negotiate for a bank loan to increase its working capital;
 Make decisions regarding investing or lending capital;
 Other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.
 The management wants to do a financial performance analysis to know the financial
position of this company based on its strengths and weakness
OBJECTIVES OF THE STUDY

Primary Objectives

 The main aim of the study is to ascertain financial performance of SRI


KARPAGAM ORGANIC COTTON INDUSTRY AT KARUR for the past five
years.

Secondary Objectives
 To find out the financial position of the company overall five years
 To find out the efficiency of the company using financial ratios like profitability
ratios, turnover ratio & solvency ratio of the company.
 To find out the liquidity position of the company.
 To study the performance of company through comparative analysis.
 To find out possibilities to suggest better financial performance of the company.

SCOPE OF THE STUDY

The project is pertained to the company’s data available for the past five years. The
conclusions are drawn from the analysis done with the ratios, comparative study. The study
elucidates the financial position of the company with respect to the past five years. It helps
the company to place itself among various other competitive companies.

The study through the analysis reveals the pros and cons of the company’s financial status. It
enables the reader to understand the various financial aspects of a company through
uncomplicated interpretation and findings for study purpose.

LIMITATIONS OF THE STUDY


The limitations of the study are as follows

 The study is covered only to the past financial performance of SRI KARPAGAM
ORGANIC COTTON INDUSTRY AT KARUR
 The period of the study is restricted to five years from 2012-2017.
 Some of the data has not given by the company due to maintenance of financial
secrecy.
 So the study cannot be covered to all the areas. The financial data cannot be estimated
accurately for the future period due to the financial crisis.
 Time has been a limit factor and it has been difficult the various aspects of finance
with the prescribed time.
 Financial statements are only in terms of reports. They are not final because the exact
financial position can be known only when the business is closed.
 Financial statement are prepare on the basis of certain accounting concepts and
conventions any changes in the method or procedure of accounting limits the utility
the utility of financial statements.

INDUSTRY PROFILE

HISTORY OF TEXTILE INDUSTRY

The history of textiles in India dates back to nearly five thousand years to the days of the
Harappa civilization. Evidences that India has been trading silk in return for spices from the
2nd century have been found. This shows that textiles are an industry which has existed for
centuries in our country. Recently there has been a sizeable increase in the demand for Indian
textiles in the market. India is fast emerging as a competitor to China in textile exports.

The Government of India has also realized this fact and lowered the customs duty and
reduced the restrictions on the imported textile machinery. The intention of the government’s
move is to enable the Indian producers to compete in the world market with high quality
products. The results of the government’s move can be visible as Indian companies like
Arvind Mills, Mafatlal, Grasim; Reliance Industries have become prominent players in the
world. The Indian textile industry is the second largest in the world-second only to China.

The other competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the
total exports of our country.

The history of apparel and textiles in India dates back to the use of mordant dyes and printing
blocks around 3000 BC. The foundations of the India's textile trade with other countries
started as early as the second century BC. Hoards of block printed and resist dyed fabrics,
primarily of Gujarati origin, discovered in the tombs of Foster, Egypt, are the proof of large
scale Indian export of cotton textiles to the Egypt in medieval periods.

During the 13th century, Indian silk was used as barter for spices from the western countries.
Towards the end of the 17th century, the British East India Company had begun exports of
Indian silks and several other cotton fabrics to other economies. These included the famous
fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was
widely practiced between India, Java, China and the Philippines, long before the arrival of the
Europeans. India Textile Industry is one of the largest textile industries in the world. Today,
Indian economy is largely dependent on textile manufacturing and exports

TEXTILE AND CLOTHING INDUSTRY

 India’s textiles and clothing industry is one of the mainstays of the national Economy.
 It is also one of the largest contributing sectors of India’s exports worldwide. The
Report of the Working Group constituted by the Planning Commission on boosting
India’s Manufacturing exports during 12th Five Year Plan (2012-17), envisages
India’s exports of Textiles and Clothing at USD 64.41 billion by the end of March,
2017. The textiles industry Accounts for 14% of industrial production, which is 4% of
GDP; employs 45 million people and accounts for nearly 11% share of the country’s
total exports basket.

INDUSTRY PROFILE

 The Indian textile industry is one the largest and oldest sectors in the country and among the
most Important in the economy in terms of output, investment and employment. The sector
employs nearly 35million people and after agriculture, is the second‐highest employer in
the country. Its importance is underlined by the fact that it accounts for around 4% of
Gross Domestic Product, 14% of industrial production, 9% of excise collections, 18% of em
ployment in the industrial sector, and 16% of the country’s total exports earnings. With direc
t
 linkages to the rural economy and the agriculture sector, it has been estimated that one of eve
ry six households in the country depends on this sector, either directly or indirectly, for its liv
elihood.A strong raw material production base, a vast pool of skilled and unskilled personnel
, cheap labour, good export potential and low import content are some of the salient
features of the Indian textile industry. This is a traditional, robust, well‐established industry,
enjoying considerable demand in the domestic as well as global markets.
 India has been well known for her textile goods since very ancient times. The traditional
textile industry of India was virtually decayed during the colonial regime. However, the
modern textile industry made its real beginning in Bombay, in 1850’s. The first cotton textile
mill of Bombay was established in 1854 by a Parsi cotton merchant then engaged in overseas
and internal trade. Indeed, the vast majority of the early mills were the handiwork of Parsi
merchants engaged in yarn and cloth trade at home and Chinese and African markets.
 The first cotton mill in Ahmadabad, which was eventually to emerge as a rival centre to
Bombay, was established in 1861. The spread of the textile industry to Ahmadabad was
largely due to the Gujarati trading class. The cotton textile industry made rapid progress in
the second half of the nineteenth century and by the end of the century there were 178 cotton
textile mills; but during the year 1900 the cotton textile industry was in bad state due to the
great famine and a number of mills of Bombay and Ahmadabad were to be closed down for
long periods.

CURRENT POSITION OF TEXTILE INDUSTRY IN INDIA


 Textile constitutes the single largest in India. The segment of the industry during the year
2011-2012 has been positive. The production of cotton declined from 156 lakh bales in 1999-
2000 to 140 lakh bales during 2000-2001. Production of man-made fibre increased from 835
million kilo grams in 2009-2010 to 904 million kilo grams during the year 2010-2011
registering a growth of 8.26 %. The production of spun yarn increased to 3160 million kilo
grams during 2010-2011 from 3046 million kilo grams during 1999-2000 registering a
growth of 2.91 %. The production of fabric registered a growth of 2.7 % during the year
1999-2000. Production of handloom and power loom sector increased by 2 % and 2.7 %
respectively.The exports of textile garments registering a growth of 21%. Growth in the
textile industry in the year 2003-2004 was Rs. 1609 billion.

INDIA’S MAJOR COMPETITORS IN THE WORLD


 To understand India’s position among other textile producing the industry contributes 9 % of
GDP and 35 % of foreign exchange earnings, India’s share in global exports is only 3 %
compared to china’s 13.75 %. In addition to China, other developing countries are emerging
as serious competitive threats to India. Looking at export shares,
 Korea (6%), and Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has already caught
up and others like Thailand (2.3%) and Indonesia (2%) are not much further behind.

 The reasons for this development are the fact that India lags behind these countries in
investment levels, technology, quality and logistics.

PROBLEMS FACED BY THE TEXTILE INDUSTRY IN INDIA


 The cotton textile industry is reeling under manifold problems. The major problems are the
following
Sickness
 Sickness is widespread in the cotton textile industry. After the engineering industry, the
cotton textile industry has the highest industry incidence of sickness. As many as 125 sick
units have been taken over by the Central Government. Sickness is caused by various reasons
like the problems mentioned below.
Obsolescence
 The plant, machinery and technology employed by a number of units are obsolete. The need
today is to make the industry technologically up-to-date rather than expand capacity as such.
This need was foreseen quite some time back and schemes for modernization of textile
industry had been introduced. The soft loan scheme was introduced a few years back and
some units were able to take advantage of the scheme and modernize their equipment.
However, the problem has not been fully tackled and it is of utmost importance that the
whole industry is-technologically updated.

Government Regulations
 Government Regulations like the obligation to produced controlled cloth are against the
interests of the country. During the last two decades the excessive regulations exercised by
the government on the mill sector has promoted inefficiency in both production and
management. This has also resulted in a colossal waste of raw materials and productive
facilities. For example, the mills are not allowed to use filament yam in warp in order to
protect the interest of art silk and power loom sector which use this yarn to cater to the
affluent section of society.
MILESTONES:
 Exports of textiles and clothing products from India have increased steadily overthe
last few years, particularly after 2004 when textiles exports quota stood Discontinued.
 India’s Textiles & Clothing (T&C) exports registered a robust growth of 25% in
 2005-06, recording a growth of US$ 3.5 billion over 2004-05 in value termsthereby
reaching a level of US$ 17.52 billion and the growth continued in 2006-07with T&C
exports of US$19.15 billion recording a increase of 9.28% over theprevious year and
reached USD 22.15 billion in 2007-08 denoting an increase of15.7% but declined by
over 5% in 2008-09.
 Exports of Textiles & Clothing grew from USD 21.22 billion in 2008-09 to USD
22.41 billion in 2009-10 and has touched USD 27.47 billion in 2010-11. In the
financial year 2011-12(P), exports of textiles and clothing, has grown by 20.05% over
the financial year 2010-11 to touch USD 33.31 billion. Textiles exports in the period
2012-13 are witnessing a(-) 4.82 percent growth in dollar terms although there is 8.10
percent growth in rupee terms.
 The details of India’s textiles exports, principal commodity item-wise during thelast
three years and current financial year for the period 2012-13 .
 During the year 2012-13, Readymade Garments account for almost 39% of the total
textiles exports. Apparel and cotton textiles products together contribute nearly 74%
of the total textiles exports.
 India’s textiles products, including handlooms and handicrafts, are exported to More
than a hundred countries. However, the USA and the EU, account for about two-thirds
of India’s textiles exports. The other major export destinations are China, U.A.E., Sri
Lanka, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, Pakistan, Brazil, Hong-
Kong, Canada and Egypt etc.
 Current Textiles & Clothing Exports Trend:

Trend during the period 2011-12 (P).

 In rupee terms, during 2011-12 (P) there has been a surge in exports of Handloom
 Product (68.51%), Coir & Coir Manufactures (40.49%), Cotton Textiles
(37.23%),Man-made textiles (25.99%), RMG (24.80%), Wool & Woolen textile
(20.97%) andJute (4.72%).
 In US$ terms the surge during 2011-12 (P) registered in Handloom product (60.09%),
 Coir & Coir Manufactures (33.46%), Wool & Woolen textile (14.93%), Man-made
textiles (19.69%), RMG (18.56%), Cotton Textiles (30.37%) and Jute (-0.52).

Latest Trend during the period 2012-13 (P)

 The total textile exports during 2012-13 (P) were valued at Rs 172494.71 crore as
 Against 159570.55 core during the financial year 2011-12, registering an increase of
8.10 percent in rupee terms.
 In US dollar terms, the same was valued at US$31705.53 million (2012-13, P) as
 Against US$33310.21 million during the corresponding period of financial year 2011-
12 registering a decline of 4.82 percent.

MARKET SIZE

 The Indian textile industry is set for strong growth, buoyed by both rising domestic
consumption as well as export demand. Abundant availability of raw materials such
as cotton, wool, silk and jute and skilled workforce has made India a sourcing hub.
 The most significant change in the Indian textile industry has been the advent of man-
made fibers (MMF). India has successfully placed its innovative range of MMF
textiles in almost all the countries across the globe. Man-made fiber production
recorded an increase of 2 % during the year 2012-13.
 Cotton yarn production increased by about 15 per cent during March 2013 and by
about 14 per cent during the year 2012-13. Blended and 100 per cent non-cotton yarn
production increased by 10 per cent during March 2013 and production increased by 3
per cent during the year 2012-13.
 Cloth production by mill sector registered a growth of 19 per cent during the year
2012- 2013.
 Cloth production by handloom and hosiery increased by 2 per cent and 14 per cent.
The total cloth production grew by 1 per cent during March 2013 and by 4 per cent
during the year 2012-2013.
COMPANY PROFILE

 Established in 1957 by the late Vengaya Naidu K, sri karpagam Organic Company
was incorporated as a private limited company in 1910. The flagship of the
Coimbatore-based Sri Karpagam, its associate companies is sri karpagam Machine
Works, Sri Karpagam Synthetic Machinery Manufacturers and sri karpagam Auto
Looms. PKR is a composite mill manufacturing a range of cotton, viscose, blended
yarn and a variety of grey and processed cloth. The company has four manufacturing
units located at Coimbatore, Singanallur, Kovilpatti and Palladam, all in Tamilnadu.
The company's cloth processing is done by its subsidiary, United Bleachers. SRI
KARPAGAM exports cotton yarn and grey cloth to the UK, Germany, Italy,
Tamilnadu and Japan. In 1977, Coimbatore Cotton Mills was amalgamated with the
company.

 We are a professionally managed company engaged in the field of manufacturing,


supplying and exporting of high quality knitted and hosiery garments. We started with
a zeal and determination to redefine fashion in the industry. Standing on the grounds
of style and elegance, we offer knitted and hosiery garments that are abreast of the
changing international trends and working the total no of employees are 650.

VISION OF SRI KARPAGAM ORGANIC COTTON


To manufacture products comparable to international standards, to be customer-
focused and globally competitive through better quality, latest technology and continuous
innovation.
MISSION OF SRI KARPAGAM ORGANIC COTTON
To manufacture world-class products of outstanding quality that give our customers a
competitive advantage through superior products and value, so we can make every customer
smile.
o To encourage people's ownership, empowerment and working under team
structure.
o To attain highest level of efficiency, integrity and honesty.

OUR VALUES
 Customer's satisfaction and delight.
 Superior quality of performance.
 Concern for the environment and the community.
 Passionate about excellence.
 Fair to all.
 To provide a safe workplace and promote healthy work habits.

INFRASTRUCTURE

 Karpagam always assures on quality products and timely delivery to its clients. To
substantiate this, karpagam does most of the processes in-house to save time and
ensure quality.
 Karpagam has a total working area of 32,500 sq. Meters. In four locations in karur.
Each location is exclusively taking care of certain processes.

LOCATION - 1: KARPAGAM-MAIN

Karpagam chambers are the corporate office of karpagam export enterprises, which is in the
heart of the town with sufficient manpower and facilities.

Fabric Section:

Fabric section have a huge space to store the fabrics received from weaving and the same are
checked thoroughly before sending them for conversion into made-up items.

Embroidery:

Brings our ideas/designs into beautiful products our in-house computer embroidery facility
enables to bring out our innovative designs on our products with creativity and cost effective.

Sewing:

Fabrics are converted into variety of made-ups with utmost care using skilled workmen. We
have able and experienced team to guide and lead the sewing section to make the finished
goods exactly matching the requirement of our clients

MANAGEMENT & TEAM

M. NACHIMUTHU, CHAIRMAN
He entered into the textile trade in the name of KARPAGAM Fabrics in the year 1975 which
became KARPAGAM Export Enterprises in the year 1978, which is today one of the leading
export houses in Karur.

As a manufacturing exporter of home textile products, by sheer hard work, over the years he
has successfully developed customers in various European Countries, the United States,
United Kingdom and Australia. Over a period of three decades, his export business has
grown multifold and today it is a Star Export House.

Since 2008, he is the President of Karur Exporters’ Association and also, he is the Vice-
Chairman of Handloom Export Promotion Council (HEPC) and earlier for 9 years he has
been a member of the Executive Committee of HEPC and has contributed immensely to the
cause of handloom exports.

He is the founder Chairman of the Karur Textile Park, the Special Purpose Vehicle formed to
implement Integrated Textile Park of Home Textile units with world class infrastructure.

Karur Textile Park was formed under the Scheme for Integrated Textile Parks (SITP) of the
Ministry of Textiles, Government of India. This Textile Park will offer direct employment to
about 5500 workers, besides generating 10000 indirect jobs.

Karur Textile Park was formed under the Scheme for Integrated Textile Parks (SITP) of the
Ministry of Textiles, Government of India. This Textile Park will offer direct employment to
about 5500 workers, besides generating 10000 indirect jobs.

On account of his active contribution towards the all-round improvement of the Karur society
with the above voluntary honorary positions, M. Nachimuthu has become a well-known
personality in Karur and he could achieve this because of his hard work, sincerity, time
consciousness and honesty. According to him all he has done is giving something back to the
soil that made him what he is today, something he believes is one’s responsibility.

MANAGING DIRECTOR

N. SENTHILPRASATH,

N. SenthilPrasath, son of M. Nachimuthu, after completing his MBA in the UK, associates
himself with his father in the export business in KARPAGAM Export Enterprises allowing
his father the comfort of pursuing his efforts to improving Karur society and infrastructure.
KARPAGAM ORGANIC TEAM

The major strength of KARPAGAM is its core management team in all the areas of
its operations. KARPAGAM believes in reinforcement of individual knowledge, experience
and capabilities in achieving the ultimate goal of satisfying every customer with unique and
professional service.

QUALITY POLICY

We endeavor to delight our esteemed customers by designing, manufacturing and supplying


Quality Home Furnishing Fabrics and Made Ups conforming to customer requirements and
adhering social and Cleaner Production Practices.

This is achieved by adopting latest trends in the industry, using effective communication
methods, providing regular training to our workforce and continual improvement in quality
management systems.

CERTIFICATIONS & STRENGTHS

KARPAGAM factory complies with all labor laws relating to wages, working hours, and
health & safety standards and strictly adheres to ethical business practices. We provide a
clean and healthy working environment conducive for our workers. We do not engage any
child labor or forced labor. Utmost importance is given to respect the human values.

KARPAGAM voluntarily gets its facilities certified for various - by maintaining all the
required standards in terms of infrastructure, employee welfare, social compliances,
environment consciousness, etc.

ISO 9001 – Quality Management System - In order to provide quality products at right time.
SA8000 – Social Accountability System – Fair labor practice system is followed in order to
ensure the products manufactured by adhering social compliance.
ISO 14001 – Environment Management System – Our company adheres Environment
regulation and thus contributes to save the environment.

OHSAS 18001 – Occupational Health and Safety Assessment Series – Taking care
ofemployees’ health and safety.

Organic Cotton (GSV & OE) – Adhering social compliance and environmental regulations.
Oeko Tex 100 – Meeting the customer’s Requirements for this Standard Products.

ORGANIZATION STRUCTURE

Managing Director

General Manager

Dyeing Manager Production HR Manager Marketing Finance


Manager Manager Manager

Employees Quality control Assistant Assistant Assistant


Manager Manager Manager

Supervisor Supervisor Supervisor Supervisor

EDP Development HRD Assist Employees


Checking Weaving Packing

CHAPTER II
LITERATURE REVIEW
REVIEW OF LITERATURE
Literature Review was done by referring previous studies, articles and books to know
the areas of study and analyze the gap or study not done so far. There are various studies
were conducted relating to operational performance of the company from which most
relevant literatures were reviewed.
 Kennedy and Muller (1999), has explained that “The analysis and interpretation of
financial statements are an attempt to determine the significance and meaning of
financial statements data so that the forecast may be made of the prospects for future
earnings, ability to pay interest and debt maturines (both current and long term) and
profitability and sound dividend policy.”
 T.S.Reddy and Y. Hari Prasad Reddy (2009), have stated that “The statement
disclosing status of investments is known as balance sheet and the statement showing
the result is known as profit and loss account”
 Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot
about good sense and understanding of the difficulties that a company will face. We
have to make sure that people know exactly how we arrived to the final financial
positions. We have to show the calculation but we have to avoid anything that is too
mathematical. A business performance analysis indicates the further growth and the
expansion. It gives a physiological advantage to the employees and also a planning
advantage.
 I.M.Pandey (2007), had stated that the financial statements contain information about
the financial consequences and sources and uses of financial resources, one should be
able to say whether the financial condition of a firm is good or bad; whether it is
improving or deteriorating. One can relate the financial variables given in financial
statements in a meaningful way which will suggest the actions which one may have to
initiate to improve the firm’s financial condition.
 Chidambaram Rameshkumar & Dr. N. Anbumani (2006), he argue that Ratio
Analysis enables the business owner/manager to spot trends in a business and to
compare its performance and condition with the average performance of
similar businesses in the same industry. To do this compare your ratios with
the average of businesses similar to yours and compare your own ratios for several
successive years, watching especially for any unfavorable trends that may be starting.
Ratio analysis may provide the all-important early warning indications that allow you
to solve your business problems before your business is destroyed by them.
 Jae K.Shim & Joel G.Siegel (1999), had explained that the financial statement of an
enterprise present the raw data of its assets, liabilities and equities in the balance sheet
and its revenue and expenses in the income statement. Without subjecting these to
data analysis, many fallacious conclusions might be drawn concerning the financial
condition of the enterprise. Financial statement analysis is undertaken by creditors,
investors and other financial statement users in order to determine the credit
worthiness and earning potential of an entity.
 Susan Ward (2008), emphasis that financial analysis using ratios between key values
help investors cope with the massive amount of numbers in company financial
statements. For example, they can compute the percentage of net profit a company is
generating on the funds it has deployed. All other things remaining the same, a
company that earns a higher percentage of profit compared to other companies is a
better investment option.
 M Y Khan & P K Jain (2011), have explained that the Financial statements provide
a summarized view of the financial position and operations of a firm. Therefore, much
can be learnt about a firm from a careful examination of its financial statements as
invaluable documents / performance reports. The analysis of financial statements is,
thus, an important aid to financial analysis.
 Elizabeth Duncan and Elliott (2004), had stated that the paper in the title of
efficiency, customer service and financing performance among Australian financial
institutions showed that all financial performance measures as interest margin, return
on assets, and capital adequacy are positively correlated with customer service quality
scores.
 Jonas Elmerraji (2005), tries to say that ratios can be an invaluable tool for making
an investment decision. Even so, many new investors would rather leave their
decisions to fate than try to deal with the intimidation of financial ratios. The truth is
that ratios aren't that intimidating, even if you don't have a degree in business or
finance. Using ratios to make informed decisions about an investment makes a lot of
sense, once you know how use them.
 Carlos Correia (2007), had explained that any analysis of the firm, whether by
management, investors, or other interested parties, must include an examination of the
company’s financial data. The most obvious and readily available source of this
information is the firm’s annual report. The financial statements shall, in conformity
with generally accepted accounting practice, fairly present the state of the affairs of
the company and the results of operations for the financial year.
 Greninger et al.(1996), identified and refined financial ratios using a Delphi study in
the areas of liquidity, savings, asset allocation, inflation protection, tax burden,
housing expenses and, insolvency. Based on the Delphi findings, they proposed a
profile of financial well-being for the typical family and individual.
 Rachchh Minaxi A (2011), have suggested that the financial statement analysis
involves analyzing the financial statements to extract information that can facilitate
decision making. It is the process of evaluating the relationship between component
parts of the financial statements to obtain a better understanding of an entity’s
position and performance.
 Salmi, T. and T. Martikainen (1994), in his "A review of the theoretical and
empirical basis of financial ratio analysis", has suggested that A systematic
framework of financial statement analysis along with the observed separate research
trends might be useful for furthering the development of research. If the research
results in financial ratio analysis are to be useful for the decision makers, the results
must be theoretically consistent and empirically generalizable.

 John J.Wild, K.R.Subramanyam & Robert F.Halsey (2006), have said that the
financial statement analysis is the application of analytical tools and techniques to
general-purpose financial statements and related data to derive estimates and
inferences useful in business analysis. Financial statement analysis reduces reliance
on hunches, guesses, and intuition for business decisions. It decreases the uncertainty
of business analysis
 Bansal and Gupta (1985) in their study entitled, “Financial Ratio Analysis and
Statistics” enlightened that the coefficient of variation in the study period had a wide
gap varying between 7.1 per cent and 51.3 per cent for current ratio and ratio of fixed
assets to sales. The correlation of components of short term liquidity ratio generally
possesses low correlation as against long term solvency ratio components but the
components of both ratios independently possess quite satisfactory correlation in
cotton textile industry. The profitability ratio elements in the industry also have quite
high correlation in cotton industry as compared to synthetic industry

 Arun Ghosh (1987) in his article entitled “ Education and Environment Contribution
of the Rubber Industry” has reported that the growth of the rubber industry was
impressive and that the annual growth rate over the period 1951-1986 was 8.7 per
cent for capacity and that of production, 7.4 per cent. He has observed that the overall
capacity utilization had been declined from ninety six per cent in 1951 to sixty per
cent in 1986. He has also observed that the capacity utilization was not in accordance
with the growth of capacity of the rubber industry.

 Kulkarni (1989) in his article entitled “Rubber and Rubber Board” has examined the
capacity utilization of the Indian Rubber Industry during the two decades. He has
observed that the capacity utilization declined very sharply from 823 per cent to 66.4
per cent during the first decade and to 60.41 per cent during the second decade of the
study. He has further found the installed capacity was increased to 28.51 lakh tones
per annum during the year 1988 as against the installed capacity of 9.54 lakh tonnes in
the year 1971. The production of rubber and rubber boards was also increased in a
similar manner as from 7.75 lakh tonnes to 17.20 lakh tones during the same period.
Thus, it is noted that the capacity utilization of the rubber industry has an inverse
relationship with the installed capacity and production.

 Khan and Mohol Tutail Khan (1990)in their study, “Rubber Industry: An appraisal”
pointed out that the rubber industry is a highly capital intensive industry. Due to
steady rise in the cost of inputs, heavy overheads, paucity of power and adverse
impact of control orders over the industry, this industry has been unable to function
vigorously. They have selected some of the important companies for the analysis
during the period 1980-81 to 1985-86. The statistical analysis shows that the
profitability of these companies during the period under review is not satisfactory.
The profitability of these companies has been hampered because of controls over
prices and production of printing rubber. The study concluded that the control over
price and production of printing rubber should be removed.

 Praveen Kumar Jain (1993) conducted a study among seven rubber companies in
India to “Analyze the basic components of Working Capital”. The study revealed that
the current ratio in public sector undertakings during the study period was found to be
highly erratic while the same in private sector undertakings registered continuous
decrease. As far as the inventory was concerned, the study revealed that it was highly
unplanned in public sector undertaking units when compared to private sector units.
The study contributed much in terms of realizing the importance of effective
management of working capital.

 Srinivasa Rao and Indrasena Reddy (1995) in their study entitled “Financial
Performance in Rubber Industry- A Case Study” stated that the financial position of
the company had been improving from year to year. The company’s performance in
relation to generating internal funds in the form of reserves and surplus was excellent
and also was doing well in mobilizing outside funds. The liquidity position of the
company was sound as it was revealed by current and liquid ratios which were above
the standard. The solvency ratios showed that the company had been following the
policy of low capital gearing from 1990-91 as these ratios had been decreasing from
this year. The performance of the company in relation to its profitability was not up to
the expected level. The company’s ability to utilize assets for generation of sales had
not been improved much during the study period as it was revealed by its turnover
ratios.

 Sukamal Datta (1995) in his study entitled “Working Capital Management through
Financial Statements:” found that most of the firms were suffering from shortage of
working capital. One of the primary causes of such shortage of working capital was
that most of the firms under study were not capable of earning adequate profit and
were also suffering from losses. The expansion of fixed asserts also caused the
working capital crisis. The utilization of fund had not been covered by sufficient
amount of fund by way of long-term investment. Roger M. Shelor & et al. (1998) this
study examines changes in “Operating Performance among Real Estate Investment
Trusts” following an Initial Public Offering (IPO). The purpose is to determine
whether there is an enhancement in the value of the underlying asset that is related to
the IPO.
 Gangadhar (1998) has made an attempt on “Financial Analysis of Companies in
Criteria: A Profitability and efficiency focus” one of the objectives of the study is to
analyze the liquidity position of the companies and to point out the factors responsible
for such a position. It is concluded that the liquidity position was quite alarming since
these are facing chronic liquidity problems. Their proportion current assets in relation
to the current liabilities are very low. It is suggested that, they may be improved by
reducing excessive burden of current liabilities or increasing the level of current assets
depending upon the requirements.

 Muhammad Rafiqul Islam (2000) “Working Capital Management of Rubber Mills


in Bangladesh-An Overall View” concluded that all the units of the rubber industry
had failed to manage their working capital requirements properly. The reasons for
working capital crisis were improper use of short-term funds, operating losses, over
stocking to stores and spares; and non-availability of raw- materials.

 Harris (2001) analyses the link between market orientation and performance has been
claimed largely on the basis of the analysis of subjective measures of performance.
Consequently, the aim of this study is to examine the links between market orientation
and objectively measured financial performance. The rubber begins with a brief
examination of the definition and components of market orientation..

 Mahes Chand Garg and Chander Shekhar (2002) found that the asset composition
is to be significantly negatively related with total Debt equity and long term dept
equity in cement industries. Value of the assets and life of the company were
significantly positively related to total debt equity. Life of the company was
significantly positively related with long term debt equity in cement industries. The
regression coefficient of collateral value of assets was significant at 10 per cent level
and was positively associated with total debt equity.

 Bortolotti & et al. (2002) examine the financial and operating performance of thirty
one national telecommunication companies in twenty five countries that were fully or
partially privatized through public share offering. Using conventional pre-versus post-
privatization comparisons and panel data estimation techniques, they find that the
financial and operating performance of telecommunications companies improves
significantly after privatization, but that a sizable fraction of the observed
improvement results from regulatory changes-alone or in combination with major
ownership changes-rather than from privatization alone.

 Sahu (2002) in his article titled “A Simplified Model for Liquidity Analysis of
Rubber Industry” has examined the liquidity of rubber industry. The model developed
by him has been based on the assumption that the liquidity management of a company
in a particular year is effective if an its‟ earnings before depreciation is positive and
not effective if its‟ earnings before depreciation is negative. The findings have
revealed a very high predictive ability of the estimated discriminator function.

 Feroz & et al. (2003) Ratio analysis is a commonly used analytical tool for verifying
the performance of a firm. While ratios are easy to compute, which in part explains
their wide appeal, their interpretation is problematic, especially when two or more
ratios provide conflicting signals. Indeed, ratio analysis is often criticized on the
grounds of subjectivity that is the analyst must pick and choose ratios in order to
assess the overall performance of a firm. In this rubber they demonstrate that Data
Envelopment Analysis (DEA) can augment the traditional ratio analysis. DEA can
provide a consistent and reliable measure of managerial or operational efficiency of a
firm.

 Anshan Lakshmi (2003) made “A Study of the Financial Performance with


Reference to Steel Industries Kerala Ltd”. This study covered from 1977-1998 to
2001-2002. The objectives of the study was to analyze and evaluate the working
capital management, to analyze the liquidity position of the company, to evaluate the
receivables, payables and cash management and to suggest ways and means to
improve the present date of working capital. The major tools used for the analysis said
that the working capital management suggested that the inventory management have
to be corrected.

 Sudarsana Reddy (2003) under took a study on “Financial Performance of Rubber


Industry in Andhra Pradesh” for the period from 1989-90 to 1998-99. The primary
objective of the study was to analyze the investment pattern and utilization of fixed
assets, ascertaining the working capital condition, reviewing the profitability
performance and suggesting measures to improve the profitability. He concluded that
the introduction of additional funds along with restructuring of finances and
modernization of technology were needed for better operating performance.
 Sukudev Singh & et al. (2003) undertook a study entitled “Status and Growth of
Rubber and Pulp Board Industry in North India – A Case study”. The study has
revealed that due to the availability of raw materials and labour, eighty per cent of the
mills are running with the optimum capacity utilization.

 Alovsat Muslumov (2005) “The Financial and Operating Performance of


Privatization Companies in Turkish Cement Industry”. This rubber examines the post-
privatization performance of privatized companies in the Turkish cement industry.
The findings indicate that, when performance criteria for both the state and private
enterprises are considered, privatization in the cement industry results in significant
performance deterioration. Total value added and the return on investment declines
significant after privatization. This decrease mainly stems from deterioration in asset
productivity. The decline in asset productivity, however, is not caused by an increase
in capital investment, since post- privatization capital investment did not change
significantly. Significant contraction in total employment and an increase in financial
leverage after privatization are among the key research findings. Privatization through
public offering, gradual privatization and domestic ownership are found to stimulate
the financial and operating performance of firms.

 Ooghe & et al. (2006) in their rubber examine the financial performance of the
acquiring firm after the acquisition, using statistical analysis of industry- adjusted
variables. Their findings show that following: the acquisition, the profitability, the
solvency and the liquidity of most of the combined companies decline. This decline is
also reflected in the failure prediction scores. With respect to the added value,
acquisitions are found to be accompanied by increases in the labour productivity, but
this is caused by the general improvement of gross added value per employee of
Belgian companies in the last ten years. So, it seems that, contrary to the general
expectations and beliefs, acquisitions usually do not seem to improve the acquirer's
financial performance. 27

 Sudarsana Reddy & et al. (2006) Examined the internal funds availability for
financing fixed assets in rubber industry in Andhra Pradesh. The study found that the
owner funds were insufficient to finance fixed assets and observed that fixed assets
did not have significant relationship with the sales.
 Vishnani and Shah (2007)investigated the impact of working capital management
policies on the corporate performance of the India consumer electronics industry.
They noted that inventory holding period, debtors‟ collection period and net working
capital cycle had negative relationship on the profitability of firms. Whereas, the
average payment periods positive correlation with profitability.

 Krishnaveni (2008 )studied the performance appraisal might be said that the adoption
of liberalization measure and above suggestions would doubtlessly help the Indian
chemical industry to improve their performance individually and other industry as a
whole. This study also suggests that the policy of liberalization should further be
strengthened. Thus, the dreams of our planners to accelerate the economic growth in
the country are still possible to be translated into reality

 Adolphus (2008) showed that there was a statistically significant relationship


between measure of liquidity and selected measures of profitability, efficiency and
indebtedness in Nigerian quoted manufacturing companies. The impact of one per
cent increase in average liquidity measures produces a more significant increase in
average profitability (21.9 per cent), efficiency (16.1 per cent) and indebtedness (16.6
per cent).

 Burange & et al. (2008deals with the “Performance of Indian Cement Industry - The
Competitive Landscape”. The Cement Industry is experiencing a boom on account of
the overall growth of the Indian Economy primarily because of increased industrial
activity, and expanding investment in the cement sector. The industry experienced a
complete shift in the technology of production. The competitiveness among the firms
in Indian Cement Industry has also been 28 evaluated for the year 2006-2007, out of
seventeen firms (90.21 per cent of the total market share), about 47 per cent have been
recorded, above industry average performance in the overall competitiveness index.

 Ramanchandran and Janakiraman (2009) analyzed the relationship between


working capital management efficiency and earnings before interest and tax of the
rubber industries in India. The study revealed that cash conversion cycle and
inventory days had negative correlation with earning before interest and tax. While
accounts payable days and accounts receivable days related positively with earning
before interest and tax.
 Pieter Van Beurden & et al. (2009) reported the “Relation between Corporate Social
and Financial Performance”. One of the older questions in the debate about Corporate
Social Responsibility (CSR) is whether it is worthwhile for organizations to pay
attention to societal demands. This debate was emotionally, normatively, and
ideologically loaded. Up to the present, this question has been an important trigger for
empirical research in CSR. However, the answer to the question has apparently not
been found yet, at least that is what many researchers state. This apparent
ambivalence in CSR consequences invites a literature study that can clarify the debate
and allow for the drawing of conclusions. The results of the literature study performed
here reveal that there is indeed a clear empirical evidence for a positive correlation
between corporate social and financial performance. Voices that state the opposite
refer to out-dated material. Since the beginnings of the CSR debate, societies have
changed. It can therefore clearly state that, for the present Western society, “Good
Ethics is Good Business.”

 Protopappa & et al. (2009) reported that Financial flows are often frosted in a
fragmented and discounted way from the physical product flow. Managers‟ false
division from an operational point of view concerning inventory, service level of
capacity needs. The implementation of such division influences financial performance
informs of profit margin working capacity requirements and return on investment.
However, the interdependency of operational and financial objectives is rarely well
understood. Such proactiveness has serious implication on the profitability of a
company and its responsiveness to market needs. Therefore, companies increasingly
acknowledge the importance of financial supply chain management as an effective
way approved to optimize the working capital levels and to direct the cash flow
efficient working capital allocation and visibility of accounts payable and receivables
can achieve significant cost savings, enhance cash flow predictability and boost
company performance.

 Choi Jaepil & et al. (2009) examined the effect of a firm's relationship with its non-
financial stakeholders, including its employees, suppliers, customers, and
communities, on the persistence of both superior and inferior financial performance.
In particular, integrating and extending the resource-based view of the firm and
stakeholder management literatures, develops the arguments that good stakeholder
relations not only enable a firm with superior financial performance to sustain its
competitive advantage for a longer period of time, but more importantly, also help
poorly performing firms to recover from disadvantageous positions more quickly. The
arguments are supported by the analysis of a series of first-order autoregressive
models.

 Kaur Raghvir & et al. (2009) observed that the factors determinant of Capital
Structure - Experience of Indian Cotton Textile Industry. This study has 3two
objectives: First, to identify important determinants of capital structure and secondly
to test for the applicability of trade-off and pecking order theories based on sample
data drawn from the Indian Cotton Textile Industry for the five year period 2003-04 to
2007-08. Multiple Regression Analysis and Step-wise regression analysis have been
carried out taking total debt to equity ratio as the dependent variable. Profitability,
growth opportunities, liquidity and business risk turned out to be the most important
determinants, followed by non-debt tax shield and uniqueness. Only firm size and
asset structure, two of the eight explanatory variables of the study, were not found to
be significant even at ten per cent level. On the basis of the signs of the regression
coefficients trade-off theory has been found to be applicable, rather than pecking
order theory, a position upheld by other empirical research works in the area.

 Sumathi (2009) stated that the Indian Textile industry occupies an important place in
the economy of the country because of its contribution to the industrial output,
employment generation and foreign exchange earnings. One of the earliest to come
into existence in India, it accounts for 14 per cent of the total Industrial production,
contributes to nearly 30 per cent of the total exports and is the second largest
employment generator after agriculture. Profit earning is the aim of business. In the
course of analysis of this study various Statistical techniques have been made. The
Statistical techniques used are correlation, t-test, and Multiple Regression analysis to
find out the relationship between the variable and to identify the factor influencing the
profitability. Based on the analysis net sales and net profit have some relationship and
working capital management was a highly influencing factor to find out profitability
of selected textile companies in Coimbatore district. Companies must concentrate
with other influencing factor for better profit of the company.

 Amalendu Bhunia (2010) has undertaken an analysis of financial performance of


pharmaceutical companies to understand how management of finance plays a crucial
role in the growth. The study covers to public sector drug & pharmaceutical
enterprises listed on Bombay Stock Exchange (BSE). The study has been undertaken
for the period of twelve year from 1997-98 to 2008-09. In order to analysis financial
performance in terms of liquidity, solvency, profitability and financial efficiency,
various accounting ratios have been used. Statistical measures namely Liner Multiple
Regression Analysis and Test of Hypothesis – t test has been used.

 Dharmendra Mistry (2010) in his study “A Comparison of Financial Performance of


Major Gujarat Pharma” players through value added and economic value added”. The
purpose of this study is to classify major Gujarat pharmacy players in cohesive
categories on the basis of their financial characteristic revealed by the financial
statements. The study also revealed that economic value added has also positive
correlation with firm size, funds of proprietors, and funds of money lenders and have
significant impact on economic value added.

 Gaur Jighyasu (2010) focuses on the financial performance measures of business


group companies of India non-metallic mineral products industries. The study uses
financial data of fifty seven business group companies of Indian non-metallic mineral
products industries namely cement, glass, gems & jeweler, refractoriness, ceramic
tiles, over a period of ten years (1999-2008) and examines the firm‟s financial
performance using performance measures through Operating Profit and Return on net
worth, the size, Leverage, Working Capital Ratio and Age of the firm are included as
determinants of firm performance. Non-metallic mineral product categories consist of
important industries of the manufacturing sector (which contributes almost fifteen per
cent to the GDP) and three- four per cent to the GDP.

 Prasanta Paul (2011) reported that “Financial Performance Evaluation - A


Comparative Study of Some Selected NBFCs”. In this study, five listed NBFCs 32
have been considered for analyzing comparative financial performance. Different
statistical tools like, Arithmetic mean, Standard Deviation, Coefficient of Variance,
Correlation and Analysis of Variance have been used extensively. Arithmetic Mean
(AM) is an ideal measure of central tendency, which is rigidly defined, easy to
calculate, based on all observations and affected least by fluctuations of sampling has
been applied in this study. It has been used to get a stable average and it is easy to
understand the results of the study. It concludes that the selected companies differ
significantly in terms of their financial performance indicators from one to another,
may be for the different services they provide. There are no significant differences in
the last five years in the management of financial performance of each selected
NBFCs, except marginal deviation in some cases in the year 2006-07 may be for the
effect of general recession in that period

 Neha Mittal (2011) studies the determination of capital structure choice of the
selected Indian industries. The main objective is to investigate whether and to what
extent the main structure theories can explain the capital structure choice of Indian
firms. It has applied multiple regression models on the selected industries by taking
data for the period 2001-2008. It examines the relevance of capital structure in
selected Indian industries based on a regression analysis and data study. It concludes
that the main variables determining capital structure of industries in India are agency
cost, assets structure, non-debt tax shield and size. The coefficients of these variables
are significant at one per cent and five per cent levels.

 Velmathi and Ganesan (2012) in their article entitled “Inventory Management of


Commercial Vehicle Industry in India” reported that the overall analysis of inventory
management of all units in the Indian commercial vehicle industry is very good.
Among the firms in the commercial vehicle industry TML occupies the first place in
the management of inventory. It is evidently proved through strong correlation
between inventory and sales. FML‟s average growth 33 rate of sales has been more
than the growth rate of inventory which indicates that very good administration of
inventory. The study concluded that the proper management of inventory is important
to maintain and improve the health of an organization. Efficient management of
inventories will improve the profitability of the organization.

 Mehran Ali Memon and Izah Mohd Tahir (2012) in their study entitled
“Performance Analysis of Manufacturing Companies in Pakistan” stated that the main
objective is to examine the performance of fourteen manufacturing companies in
Pakistan using financial accounting ratios. The study suggested as ENGRO being the
largest company by total assets over three years (2006, 2007, 2008) spent more,
making low sales, having less PBT and ROA than the other thirteen smaller
companies

 Amir Hossein Jamali and Asghar Asadi (2012) in their study investigated the
relationship between the management efficiency and the firms profitability for a
sample of thirteen auto manufacturing companies listed on the Bombay Stock
Exchange. The analysis is carried out using Minitab 14 and conducting Pearson
Coefficient correlation test on variables of the study including Gross Profit Ratio and
Assets Turnover Ratio. The central conclusion of the study is that profitability and
management efficiency are highly correlated to each other and based on the results of
the study recommendations for improving the management efficiency and
profitability in this industry are suggested.

 Owolabi and Obida (2012) in their article titled “Liquidity Management and
Corporate Profitability: Case Study of Selected Manufacturing Companies Listed on
The Nigerian Stock Exchange” an attempt is made to measures the relationship
between liquidity management and corporate profitability using data from selected
manufacturing companies quoted on the floor of the Nigerian Stock Exchange. The
result of the study was obtained using descriptive analysis and the finding shows that
liquidity management measured in terms of the companies Credit Policies, Cash Flow
Management and Cash Conversion Cycle has significant impact on corporate
profitability. They found that managers can increase profitability by adopting good
credit policy, short cash conversion cycle and effective cash flow management
procedures.

 Hima Bindu and Subrahmanyam (2012) in their study dealt with the evaluation of
earning power, analysis of operating efficiency, analysis of financial efficiency and
measurement of financial health of Dairy Industry in Andhra Pradesh using Z score
analysis. The financial health of Amrit Corp Limited, GSKCH Limited, Heritage
Foods India Limited and NDDB differs and these companies fall under too healthy
zone. The financial health of Ravi Leela Dairy Products Limited is in danger and the
unit is considered to be in bankruptcy zone. Its failure is certain and it would occur
probably within a period of two years. 35

 Venkataramana and Ramakrishnan (2012) evaluate the profitability and financial


position of selected cement companies in India through various financial ratio and
applied correlation, mean, standard deviation and variance. The study uses liquidity
and profitability ratios for assessment of impact of liquidity ratios on profitability
performance of selected cement companies.

 Seyed Mohammad Alavinasab and Esmail Davoudi (2013) in their study examined
the relationship between working capital management and profitability for listed
companies on Tehran stock exchange. Hundrden forty seven companies were selected
for the period of 2005-2009. The effect of various variables of working capital
management including cash conversion cycle, the current ratio, current asset to total
asset ratio, current liabilities to total asset ratio and debt to total asset ratio on return
on assets and return on equity are studied. Multivariate regression and Pearson
correlation are used to test the hypothesis. The results of the statistical test of the
hypothesis show a negative significant relationship exist between cash conversion
cycle and return on assets and cash conversion cycle and return on equity. However,
the relationship between current ratio and return on equity is insignificant.

 Hari Govinda Rao & et al. (2013) in their study entitled “An Empirical Analysis on
Financial Performance of Public Sector Housing Corporation in India: A Case Study
of HUDCO”, stated that the main concept of their study is Profitability and liquidity
management is of crucial importance in financial management decision. The most
favorable financial performance could be achieved by a company that can trade off
between profitability and liquidity performance indicators. The purpose of this study
is to find out the financial position of and know the significance of them. Descriptive
statistics discloses that performance of the selected unit in terms of liquidity, solvency
and profitability position is very satisfactory and relatively efficient financial position
is found in all the cases. They suggested that both the institutions under the study
should concentrate on financial profitability, especially unexplained variables in
purpose of creating shareholders‟ wealth.

 Vivek Kumar and Major Singh (2013) conducted a study on “Profitability of Indian
Banks – A Comparative Study of SBI and HDFC”. The study revealed that the
various profitability ratios of two banks as the measure of profitability. SBI- the
largest public sector bank and HDFC- the largest private sector bank. The
comparative analysis of the profitability of the two banks clearly reveals that there is a
large difference between the profitability of the two banks. HDFC‟s profitability is
more than that of SBI.

 Dharmaraj and Kathirvel (2013)in their study related to “Analyzing the Financial
Performance of Selected Indian Automobile Companies”, suggested that the financial
performance of Atul Auto Ltd, Ashok Leyland, HMT Ltd, Tata Motors Ltd, and SML
ISUZU Ltd are highly improved as compared to the group average value for all ratios.
In India there is a huge scope for automobile companies. They are financially strong
and they are growing at the rate of 17 per cent per annum and contributing to the
Indian economy reasonably. Finally, the study provides companies with
understanding of the activities that would enhance their financial performances. The
results of this study imply that it might be necessary for all companies to take all
required decisions to enhance their financial position.

 Moses Joshuva Daniel (2013in his study “A Study on Financial Status of TATA
Motors Ltd” stated the main objectives to analyzing the overall financial status of the
TATA Motors Ltd by using various financial tools. In order to analyze financial status
in terms of Profitability, Solvency, Activity and Financial stability various accounting
ratios have been used. It is cleared from the study that the company’s financial
performance is satisfactory. The company has stable growth and it shows a greater
status in all the areas it works. The company has been suggested to reduce the
expenditure as it increases every year. Decrease in expenses will increase the
profitability.

 Kavitha and Palanivelu (2013) main objectives of their study is know about the
financial health of the steel industries and to analyze and compare the financial
performances of NSE listed steel industries based on ratio analysis and „Z‟Score
(Altman/s model). They suggested that the companies‟ try to increase production and
sales get maximize profit to strengthen financial position of the NSE listed
companies. The management may utilize maximum production capacity and reduce
interest burden increase profit. The policy of borrowed financing in selected steel
group of companies under study was not proper. So the companies may use widely
borrowed funds and can try to reduce the fixed charges burden gradually by
decreasing borrowed funds and enhancing the owner’s fund. They concluded that the
companies might enlarge their equity share capital by issuing new equity shares. For
regular supply of raw materials and the final product infrastructure facilities are
required further improvement
CHAPTER III
RESEARCH METHDOLOGY
RESEARCH METHODOLOGY
Research can be defined as “A Scientific and Systemic Search for pertinent information on a
specific topic”. Therefore, research could be understood as an organized activity with specific
objectives on a problem or issues supported by compilation of related data and facts,
involving application of relevant tools of analysis and deriving logically on originality.
RESEARCH DESIGN
Research Design is the arrangement of condition for collection and analysis of data in manner
that aims to combine relevance to the research purpose with the economy in procedure.
Research Design is important primarily because of the increased complexity in the market as
well as marketing approaches available to the researchers. A research design specifies the
methods and procedures for conducting a particular study.
TYPE OF RESEARCH
ANALYTICAL RESEARCH
In this type of research has to use facts or information already available, and analyze these to
make a critical evaluation of the material. The researcher depends on existing data for his
research work. The analysis revolves round the material collected or available.
SOURCE OF INFORMATION
Basically there are two sources of information. The researcher has collected
secondary data for his study.
PRIMARY DATA
Information was collected through this source comprises of discussions with the personnel of
SRI KARPAGAM ORGANIC COTTON INDUSTRY AT KARUR
SECONDARY DATA
The data was collected from sources like magazine, journals, company reports and industrial
magazines (annual reports).
SELECTION OF SAMPLES
The study has been carried out on the micro-level, as it is not possible for the researcher to
conduct it on the macro-level. The population of the study consists of all types of the
companies having different operations of business and totally different nature of industries.
As the study is to be carried out by the individual researcher it is not easy to select all the
companies as the samples for the study. So, selection based upon growth aspect of companies
from Indian industry in present scenario.
PERIOD OF STUDY
The study was conducted for a period of five years from the year financial year 2012- 2017
HYPOTHESIS OF THE STUDY
On the basis of data collection, the researcher identified the following broader hypothesis for
the study:
NULL HYPOTHESIS
There would be no significant difference in means score of Financial Performance in selected
units, before and after merger and acquisition.
ALTERNATE HYPOTHESIS
There would be significant difference in means score of Financial Performance in selected
units, before and after merger and acquisition
TOOL USED FOR ANALYSIS
The data collected from the annual reports of the bank were subjected to analysis using tool
relevantly.
The following are major tools used in analysis and interpretation.
 Ratio analysis
 Comparative balance sheet statement.

CHAPTER IV
DATA ANALYSIS AND INTERPRETATION

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and


weaknesses of the firm and establishing relationship between the items of the balance sheet
and profit & loss account.

Financial ratio analysis is the calculation and comparison of ratios, which are
derived from the information in a company’s financial statements. The level and historical
trends of these ratios can be used to make inferences about a company’s financial condition,
its operations and attractiveness as an investment. The information in the statements is used
by
 Trade creditors, to identify the firm’s ability to meet their claims i.e. liquidity position
of the company.

 Investors, to know about the present and future profitability of the company and its
financial structure.

 Management, in every aspect of the financial analysis. It is the responsibility of the


management to maintain sound financial condition in the company.

RATIO ANALYSIS

The term “Ratio” refers to the numerical and quantitative relationship between
two items or variables. This relationship can be exposed as

 Percentages

 Fractions

 Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the
financial statements. So that the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined. Ratio reflects a quantitative
relationship helps to form a quantitative judgment.

STEPS IN RATIO ANALYSIS

 The first task of the financial analysis is to select the information relevant to the
decision under consideration from the statements and calculates appropriate ratios.

 To compare the calculated ratios with the ratios of the same firm relating to the pas6t
or with the industry ratios. It facilitates in assessing success or failure of the firm.

 Third step is to interpretation, drawing of inferences and report writing conclusions


are drawn after comparison in the shape of report or recommended courses of action.

BASIS OR STANDARDS OF COMPARISON

Ratios are relative figures reflecting the relation between variables. They
enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool
of financial analysis involves the comparison with related facts. This is the basis of ratio
analysis. The basis of ratio analysis is of four types.
 Past ratios, calculated from past financial statements of the firm.

 Competitor’s ratio, of the sum most progressive and successful competitor firm at the
same point of time.

 Industry ratio, the industry ratios to which the firm belongs to

 Projected ratios, ratios of the future developed from the projected or pro forma
financial statements

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial


statements. It is the process of establishing and interpreting various ratios for helping in
making certain decisions. It is only a means of understanding of financial strengths and
weaknesses of a firm. There are a number of ratios which can be calculated from the
information given in the financial statements, but the analyst has to select the appropriate data
and calculate only a few appropriate ratios. The following are the four steps involved in the
ratio analysis.

 Selection of relevant data from the financial statements depending upon the objective
of the analysis.

 Calculation of appropriate ratios from the above data.

 Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from projected financial statements or the ratios of some other firms
or the comparison with ratios of the industry to which the firm belongs.

INTERPRETATION OF THE RATIOS

The interpretation of ratios is an important factor. The inherent limitations of


ratio analysis should be kept in mind while interpreting them. The impact of factors such as
price level changes, change in accounting policies, window dressing etc., should also be kept
in mind when attempting to interpret ratios. The interpretation of ratios can be made in the
following ways.

 Single absolute ratio

 Group of ratios

 Historical comparison
 Projected ratios

 Inter-firm comparison

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS

The calculation of ratios may not be a difficult task but their use is not easy.
Following guidelines or factors may be kept in mind while interpreting various ratios are

 Accuracy of financial statements

 Objective or purpose of analysis

 Selection of ratios

 Use of standards

 Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS

 Aid to measure general efficiency

 Aid to measure financial solvency

 Aid in forecasting and planning

 Facilitate decision making

 Aid in corrective action

 Aid in intra-firm comparison

 Act as a good communication

 Evaluation of efficiency

 Effective tool

LIMITATIONS OF RATIO ANALYSIS

 Differences in definitions

 Limitations of accounting records

 Lack of proper standards

 No allowances for price level changes


 Changes in accounting procedures

 Quantitative factors are ignored

 Limited use of single ratio

 Background is over looked

 Limited use

 Personal bias

CLASSIFICATIONS OF RATIOS

The use of ratio analysis is not confined to financial manager only. There are
different parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Various accounting ratios can be classified as follows:

1. Traditional Classification

2. Functional Classification

3. Significance ratios

1. Traditional Classification

It includes the following.

 Balance sheet (or) position statement ratio: They deal with the relationship between
two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both
the items must, however, pertain to the same balance sheet.

 Profit & loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit & loss account items, e.g. the ratio of gross profit to
sales etc.,

 Composite (or) inter statement ratios: These ratios exhibit the relation between a
profit & loss account or income statement item and a balance sheet items, e.g. stock
turnover ratio, or the ratio of total assets to sales.

2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity
ratios and profitability ratios.

3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and
secondary ratios. The primary ratio is one, which is of the prime importance to a concern.
The other ratios that support the primary ratio are called secondary ratios.

RATIO ANALYSIS
A ratio is a mathematical relationship between two items expressed in a quantitative
form. Ratio can be defined as “Relationship expressed kin quantitative terms between figures
which have cause and effect relationship which are connected with each other in some
manner or the other. Ratio analysis involves the process of computing determining and
presenting the relationship of items or groups of items of financial statements.
CURRENT RATIO
The ratio of current assets to current liabilities is called current ratio. In order to measure the
short-term liquidity or solvency of a concern, comparison of current assets and current
liabilities is inevitable. Current ratio indicates the ability of a concern to meet its current
obligations as and when they are due for payment.
Current ratio = Current assets / Current liabilities

LIQUID RATIO
A measure of company’s liquidity and ability to meet its obligations. Quick ratio,
often referred to as acid-test ratio, is obtained by subtracting inventories from current assets
and then dividing by current liabilities.
Liquid ratio = Liquid assets / current liabilities
WORKING CAPITAL TURNOVER RATIO
A measure comparing the depletion of working capital to the generation of sales over
a given period. This provides some useful information as to how effectively a company is
using its working capital to generate sales.
Working capital turnover ratio = Net sales / Working Capital
PROFITABILITY RATIO
Profit making is the main objective of business. Aim of every business concern is to
earn maximum profits in absolute term and also in relative terms i.e. profit is to be maximum
in term of risk undertaken.
Profitability Ratio =Profit after tax / Sales
CASH POSITION RATIO
This ratio also known as absolute liquidity ratio or super quick ratio. It’s calculated
when liquidity is highly restricted in terms of cash and cash equivalents.
Cash position ratio= cash and bank balances + marketable securities/ current
liabilities.
OPERATING RATIO
Operating ratio represent the different between the cost of goods sold and sales.
Operating ratio measures the amount of expenditure incurred in production, sales and
distribution of output. It indicates operational efficiency of the concern.
OPERATING RATO= cost of goods sold + operating expenses / net sales *100
DEBTORS TURNOVER RATIO
It represents how quickly the debtors are converted into cash. This ratio is used to
measure the firm’s liquidity position. This ratio establishes the relationship between
receivables and credit sales.
Debtors turnover ratio = Net sales / Average debtors.
PROPRIETARY RATIO
This ratio is also termed as capital ratio or net worth to total asset ratio. This is one of the
variant of dept equity ratio. This shows the relationship between shareholders funds and total
assets
Proprietary ratio = Net worth / Total Assets
GROSS PROFIT RATIO
Gross profit ratio establishes the relationship between gross profit and net sales. It
also reveals the amount of gross profit for each rupee of sale. This ratio is calculated by
dividing the gross profit by Net sales. It is usually indicated as a percentage.
Gross Profit Ratio = Gross Profit / Net sales * 100
NET PROFIT RATIO
Net profit ratio is also termed as sales margin ratio or profit margin ratio or net profit
to sales ratio. This ratio reveals the firm’s overall efficiency in operating the business. Net
profit ratio is used to measure the relationship between net profit (either before or after taxes)
and sales.
Net Profit Ratio = Net Profit / Net Sales * 100

COMPARETIVE 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 conduct of a
business the changes can be observed by comparison of the balance sheet at the
beginning at the end of period and these changes can help in forming an opinion about
the progress of an enterprise.

Procedure of Comparative Balance Sheet:

The Comparative balance sheet has two columns for the data of original balance sheet.

Third column is used to show increases in figures.

The Fourth column is use to give percentages of increase or decrease.

Uses of comparative balance sheet:

comparative statement helps to comparing the figures with those of the previous year’s
event, it is possible to determine where expenses increased or decreased

Comparative balance sheet helps to how to plan the following year’s event.

COMPARATIVE BALANCE SHEET


TABLE 4.1
COMPARATIVE BALANCE SHEET IN THE YEARS OF 2012-2013 AND 2013-2014
2012-2013 2013-2014 Absolute Change Percentage
(Increase/ Decrease) (Increase/ Decrease)
A B C=B-A C/A*100
SOURCES OF FUNDS
Total Share Capital 514.05 570.6 56.55 11.00
Equity Share Capital 514.05 570.6 56.55 11.00
Share Application Money 0 0 0 0
Preference Share Capital 0 0 0 0
Reserves 11,855.15 14,208.55 2353.4 19.85
Revaluation Reserves 25.07 24.63 -0.44 1.755
Net worth 12,394.27 14,803.78 2409.51 19.44
Secured Loans 5,251.65 7,742.60 2490.95 47.43
Unsecured Loans 7,913.91 8,883.31 969.4 12.24
Total Debt 13,165.56 16,625.91 3460.35 26.28
Total Liabilities 25,559.83 31,429.69 5869.86 22.96
Application Of Funds
Gross Block 13,905.17 18,416.81 4511.64 32.44
Less: 6,259.90 7,212.92 953.02 15.22
Accum. Depreciation
Net Block 7,645.27 11,203.89 3558.62 46.54
Capital Work in Progress 6,954.04 5,232.15 1721.89 24.76
Investments 12,968.13 22,336.90 9368.77 72.244
Inventories 2,229.81 2,935.59 705.78 31.65
Sundry Debtors 1,555.20 2,391.92 836.72 53.80
Cash and Bank Balance 638.17 612.16 26.01 4.07
Total Current Assets 4,423.18 5,939.67 1516.49 34.28
Loans and Advances 5,909.75 5,248.71 661.04 11.18
Fixed Deposits 503.65 1,141.10 637.45 126.56
Total CA, Loans & 10,836.58 12,329.48 1492.9 13.77
Advances
Differed Credit 0 0 0 0
Current Liabilities 10,968.95 16,909.30 5940.35 54.15
Provisions 1,877.26 2,763.43 886.17 47.20
Total CL & Provisions 12,846.21 19,672.73 2826.52 22.00
Net Current Assets -2,009.63 -7,343.25 5333.62 265.40
Miscellaneous Expenses 2.02 0 2.02 100
Total Assets 25,559.83 31,429.69 5869.89 22.96
Contingent Liabilities 5,433.07 3,708.33 1724.74 31.74
Book Value (Rs) 240.64 259.03 18.39 7.64
INTERPRETATION
 The capital of industry increased by 11% in 2012-2013, 11% in 2013-2014; this shows
that there is fluctuation in the rate of increase in the capital.
 There is a huge fluctuation in the rate of increase in reserves and surplus also. This
shows that industry is effectively utilizing its reserves and surplus.
 In 2012-2013 and 2013-2014 fixed deposits increase by 126.69 %, deposits fall by this
shows that the industry has replayed its deposits in this year.
 The borrowings are also showing a fluctuating rate of increase in 2012-2013 the
borrowings have increased at a very low rate. This shows that industry has repaid a
large amount of borrowings in this year and thereby reducing the dependence on
outside debt.
 The investments are also increasing but with lower rates compared to the preceding
years
Similarly advances rose by 72.444 % in 2012-2013 and 2013-2014
Three has been a consistent decline in the fixed assets over years in total current assets
in the years of 2012-2013 and 2013-2014 decreased by 34.26 %. This is mainly due to
increase in the rate of depreciation in the subsequent years.
 A huge fluctuation is revealed from net current assets. it increased by 265.40 % in
2012-2013and 2014-2015 ,rate of increase rose to .this shows that the industry is
effectively utilizing its working capital. this is mainly due to the repayment of deposits
in the years 2012-2013 and 2013-2014.

TABLE 4.2
COMPARATIVE BALANCE SHEET IN THE YEARS OF 2013-2014 and 2014-2015
2013-2014 2014- Absolute Change Percentage
2015 (Increase/ Decrease) (Increase/ Decrease)
A B C=B-A C/A*100
Sources Of Funds
Total Share Capital 570.6 634.65 64.05 11.22
Equity Share Capital 570.6 634.65 64.05 11.22
Share Application 0 3.06 3.06 0
Money
Preference Share Capital 0 0 0 0
Reserves 14,208.55 19,351.40 5142.85 12.48
Revaluation Reserves 24.63 24.19 0.44 1.78
Net worth 14,803.78 20,013.30 5209.52 35.19
Secured Loans 7,742.60 7,766.05 23.45 0.30
Unsecured Loans 8,883.31 8,132.70 750.51 8.44
Total Debt 16,625.91 15,898.75 727.16 4.37
Total Liabilities 31,429.69 35,912.05 4482.36 14.26
Application Of Funds
Gross Block 18,416.81 21,883.32 3466.51 18.82
Less: Accum. 7,212.92 8,466.25 1253.33 17.37
Depreciation
Net Block 11,203.89 13,417.07 2213.18 19.75
Capital Work in 5,232.15 4,058.56 1173.59 22.43
Progress
Investments 22,336.90 22,624.21 287.31 1.28
Inventories 2,935.59 3,891.39 955.8 32.55
Sundry Debtors 2,391.92 2,602.88 210.96 8.81
Cash and Bank Balance 612.16 638.79 26.63 4.35
Total Current Assets 5,939.67 7,133.06 1193.39 20.09
Loans and Advances 5,248.71 5,852.42 603.71 11.50
Fixed Deposits 1,141.10 1,790.13 649.03 56.87
Total CA, Loans & 12,329.48 14,775.61 2446.13 19.83
Advances
Differed Credit 0 0 0 0
Current Liabilities 16,909.30 15,740.69 1168.61 6.91
Provisions 2,763.43 3,222.71 459.28 16.61
Total CL & Provisions 19,672.73 18,963.40 709.33 3.60
Net Current Assets -7,343.25 -4,187.79 3155.46 42.97
Miscellaneous Expenses 0 0 0 0
Total Assets 31,429.69 35,912.05 4482 14.26
.36
Contingent Liabilities 3,708.33 4,798.83 1090.5 29.40
Book Value (Rs) 259.03 314.93 55.93 21.59

INTERPRETATION
 The capital of industry increased by 11.22% in 2013-2014 and 2014-2015 ; this shows
that there is fluctuation in the rate of increase in the capital.
 There is a huge fluctuation in the rate of increase in reserves and surplus also. This
shows that industry is effectively utilizing its reserves and surplus.
 In 2013-2014 and 2014-2015 fixed deposits increase by 56.87 %, deposits fall by this
shows that the industry has replayed its deposits in this year.
 The borrowings are also showing a fluctuating rate of increase in 2013-2014 and 2014-
2015 the borrowings have increased at a very low rate. This shows that industry has
repaid a large amount of borrowings in this year and thereby reducing the dependence
on outside debt.
 The investments are also decreasing but with lower rates compared to the preceding
years
Similarly advances rose by 1.2% in 2013-2014 and 2014-2015
Three has been a consistent decline in the fixed assets over years in total current assets
in the years of 2013-2014 and 2014-2015 decreased by 20.09%. This is mainly due to
increase in the rate of depreciation in the subsequent years.
 A huge fluctuation is revealed from net current assets. It increased by 42.97 % in
2013-2014 and 2014-2015 rate of increase rose to .this shows that the industry is
effectively utilizing its working capital. This is mainly due to the repayment of
deposits in the years 2013-2014 and 2014-2015.

TABLE 4.3
COMPARATIVE BALANCE SHEET IN THE YEARS OF 2014-2015 and 2015-2016

2014-2015 2015-2016 Absolute Change Percentage


(Increase/ Decrease) (Increase/ Decrease)
C=B-A C/A*100
Sources Of Funds
Total Share Capital 634.65 634.75 0 0
Equity Share Capital 634.65 634.75 0 0
Share Application 3.06 0 3.06 0
Money
Preference Share Capital 0 0 0 0
Reserves 19,351.40 18,709.16 642.24 3.31
Revaluation Reserves 24.19 23.75 0.44 1.81
Net worth 20,013.30 19,367.66 646 3.22
Secured Loans 7,766.05 6,915.77 850.28 10.94
Unsecured Loans 8,132.70 4,095.86 4036.84 49.63
Total Debt 15,898.75 11,011.63 4886.89 30.73
Total Liabilities 35,912.05 30,379.29 5532.76 15.40
Application Of Funds
Gross Block 21,883.32 27,111.76 5228.38 23.89
Less: Accum. 8,466.25 9,965.87 1499.62 17.71
Depreciation
Net Block 13,417.07 17,145.89 3728.82 27.79
Capital Work in 4,058.56 2,073.96 1984.6 48.89
Progress
Investments 22,624.21 20,493.55 2130.66 9.41
Inventories 3,891.39 4,588.23 696.84 17.90
Sundry Debtors 2,602.88 2,708.32 150.44 5.77
Cash and Bank Balance 638.79 1,115.08 476.29 74.54
Total Current Assets 7,133.06 8,411.63 1278.57 17.92
Loans and Advances 5,852.42 6,400.65 548.23 9.36
Fixed Deposits 1,790.13 725.88 1064.25 59.45
Total CA, Loans & 14,775.61 15,538.16 762.55 5.16
Advances
Differed Credit 0 0 0
Current Liabilities 15,740.69 21,271.45 5530.76 35.13
Provisions 3,222.71 3,600.82 378.11 11.73
Total CL & Provisions 18,963.40 24,872.27 5908.87 31.15
Net Current Assets -4,187.79 -9,334.11 5146.32 122.88
Miscellaneous Expenses 0 0 0 0
Total Assets 35,912.05 30,379.29 5532.76 15.40
Contingent Liabilities 4,798.83 3,284.12 1514.71 31.56
Book Value (Rs) 314.93 60.95 253.98 80.64

INTERPRETATION
 The capital of industry decreased by 0% in 2014-2015 and 2015-2016 ; this shows that
there is fluctuation in the rate of increase in the capital.
 There is a huge fluctuation in the rate of increase in reserves and surplus also. This
shows that industry is effectively utilizing its reserves and surplus.
 In 2014-2015 and 2015-2016 fixed deposits increase by 56.87 %, deposits fall by this
shows that the industry has replayed its deposits in this year.
 The borrowings are also showing a fluctuating rate of increase in 2014-2015 and 2015-
2016 the borrowings have increased at a very low rate. This shows that industry has
repaid a large amount of borrowings in this year and thereby reducing the dependence
on outside debt.
 The investments are also decreasing but with lower rates compared to the preceding
years
Similarly advances rose by 9.41% in 2014-2015 and 2015-2016
Three has been a consistent decline in the fixed assets over years in total current assets
in the years of 2014-2015 and 2015-2016 decreased by 17.92 %. This is mainly due to
increase in the rate of depreciation in the subsequent years.
 A huge fluctuation is revealed from net current assets. It increased by 122.88 % in
2014-2015 and 2015-2016 rate of increase rose to .this shows that the industry is
effectively utilizing its working capital. This is mainly due to the repayment of
deposits in the years 2014-2015 and 2015-2016.
TABLE 4.4
COMPARATIVE BALANCE SHEET IN THE YEARS OF 2015-2016 AND 2016-2017

2015-2016 2016-2017 Absolute Change Percentage


(Increase/ Decrease) (Increase/ Decrease)
C=B-A C/A*100
Sources Of Funds
Total Share Capital 634.75 638.07 3.32 0.52
Equity Share Capital 634.75 638.07 3.32 0.52
Share Application 0 0 0 0
Money
Preference Share Capital 0 0 0 0
Reserves 18,709.16 18,496.77 212.39 1.135
Revaluation Reserves 23.75 0 23.75 100
Net worth 19,367.66 19,134.84 232.82 1.20
Secured Loans 6,915.77 5,877.72 1038.05 15.00
Unsecured Loans 4,095.86 8,390.97 4295.11 104.86
Total Debt 11,011.63 14,268.69 3257.06 29.57
Total Liabilities 30,379.29 33,403.53 3024.24 9.95
Application Of Funds
Gross Block 27,111.76 30,312.14 3200.38 11.80
Less: Accum. 9,965.87 11,611.44 1645.6 16.51
Depreciation
Net Block 17,145.89 18,700.70 1554.81 9.06
Capital Work in 2,073.96 1,507.84 566.12 27.29
Progress
Investments 20,493.55 19,934.39 559.16 2.72
Inventories 4,588.23 4,455.03 133.2 2.90
Sundry Debtors 2,708.32 1,818.04 890.28 32.87
Cash and Bank Balance 1,115.08 462.86 652.22 58.49
Total Current Assets 8,411.63 6,735.93 1675.7 19.92
Loans and Advances 6,400.65 5,305.91 1094.74 17.10
Fixed Deposits 725.88 0 725.88 100
Total CA, Loans & 15,538.16 12,041.84 3496.32 22.50
Advances
Differed Credit 0 0 0 0
Current Liabilities 21,271.45 16,580.47 4690.98 22.05
Provisions 3,600.82 2,200.77 1400.05 38.88
Total CL & Provisions 24,872.27 18,781.24 6091.03 24.48
Net Current Assets -9,334.11 -6,739.40 2594.71 27.79
Miscellaneous Expenses 0 0 0 0
Total Assets 30,379.29 33,403.53 3024.24 9.95
Contingent Liabilities 3,284.12 2,838.67 445.45 13.56
Book Value (Rs) 60.95 59.98 0.97 1.59

INTERPRETATION
 The capital of industry decreased by 0.52% in 2015-2016 and 2016-2017; this shows
that there is fluctuation in the rate of increase in the capital.
 There is a huge fluctuation in the rate of increase in reserves and surplus also. This
shows that industry is effectively utilizing its reserves and surplus.
 In 2015-2016 and 2016-2017fixed deposits increase by 100 %, deposits fall by this
shows that the industry has replayed its deposits in this year.
 The borrowings are also showing a fluctuating rate of increase in 2015-2016 and 2016-
2017 the borrowings have increased at a very low rate. This shows that industry has
repaid a large amount of borrowings in this year and thereby reducing the dependence
on outside debt.
 The investments are also decreasing but with lower rates compared to the preceding
years
Similarly advances rose by 2.72 % in 2015-2016 and 2016-2017.
Three has been a consistent decline in the fixed assets over years in total current assets
in the years of 2015-2016 and 2016-2017 decreased by 19.92 %. This is mainly due to
increase in the rate of depreciation in the subsequent years.
 A huge fluctuation is revealed from net current assets. It increased by 27.79 % 2015-
2016 and 2016-2017 rate of increase rose to .this shows that the industry is effectively
utilizing its working capital. This is mainly due to the repayment of deposits in the
years 2015-2016 and 2016-2017.

CURRENT RATIO:
The two liquidity ratios, the current ratio and the acid test ratio, are the most important ratios
in almost the whole of ratio analysis and they are also the simplest to use. Liquidity ratios
provide information about a firm‘s ability to meet its short- term financial obligations. They
are of particular interest to those extending short term credit to the firm. Two frequently-used
liquidity ratios are current and quick ratio.

While liquidity ratios are most helpful for short-term creditors/suppliers and bankers, they are
also important to financial managers who must meet obligations to suppliers of credit and
various government agencies. A company's ability to turn short-term assets into cash to cover
debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts
and mortgage originators frequently use the liquidity ratios to determine whether a company
will be able to continue as a going concern. A complete liquidity ratio analysis can help
uncover weaknesses in the financial position of the business. Generally, the higher the value
of the ratio, the larger the margin of safety that the company possesses to cover short-term
debts.

Current Assets
Current ratio = -------------------------
Current Liabilities

TABLE 4.1
CURRENTRATIO
Rupees (in Cores)

YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017


Current Assets 4423.18 5939.67 7133.06 8411.63 6735.93
Current Liabilities 10968.95 16909.30 15740.69 21271.45 16580.47
CURRENT 0.40 0.35 0.45 0.39 0.40
RATIO

CHART 4.1
CURRENT RATIO

Current ratio
0.5
0.45
0.45
0.4 0.39 0.4
0.4
0.35
0.35
PERCENTAGE

0.3
0.25
0.2 Current ratio
0.15
0.1
0.05
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALAYSIS:
As per the figure shown the company current liabilities are more than company assets, for the
good position the ratio should be above the one, but hers the rubber industry current ratio is
less than one, the assets stabilities are less than liabilities

QUICK OR ACID TEST RATIO:

The essence of this ratio is a test that indicates whether a firm has enough short-term assets to
cover its immediate liabilities without selling inventory. So it is the backing available to
liabilities that must be paid almost immediately. There are two terms of liquid asset and
liquid liabilities in this formula, Liquid asset is all current assets except the inventories and
prepaid expenses, because prepaid expenses cannot be converted to cash. The liquid liabilities
include all current liabilities except bank overdraft and cash credit since they are not required
to be paid off immediately.
Liquid Assets
Quick or acid test Ratio = -----------------------
Liquid Liabilities

TABLE 4.2
QUICK OR ACID TEST RATIO:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Liquid Assets 2193.37 3004.08 3,241.67 3,823.40 2,280.90
Liquid Liabilities 10968.95 16909.30 15740.69 21271.45 16580.47
QUICK RATIO 0.20 0.18 0.20 0.18 0.14

CHART 4.2
QUICK OR ACID TEST RATIO:
0.2 0.2
0.2
Quick ratio
0.18 0.18
0.18
0.16 0.14
0.14
PERCENTAGE

0.12
0.1
Quick ratio
0.08
0.06
0.04
0.02
0
201-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEARS

ANALYSIS:
The above graph suggests that the company has more liquid liabilities than liquid assets, it is
bad sign for the company, and company should not be able to meet the liquid liabilities which
are higher as compare to liquid assets. The company liquid assets are continuously shows
negative impact on liquid assets

TURN OVER RATIO:


Accounting ratios that measure a firm's ability to convert different accounts within their
balance sheets into cash or sales. Companies will typically try to turn their production into
cash or sales as fast as possible because this will generally lead to higher revenues.
Such ratios are frequently used when performing fundamental analysis on different
companies.

CURRENT ASSETS TURN OVER RATIO:


It is almost like the fixed asset turnover ratio, it calculates the capability of organization to
earn sales with usage of current assets. So it indicates with what ratio current assets are
turned over in the form of sales.
Net Sales
Current Assets turnover ratio = ----------------------
Current Assets

TABLE 4.3
CURRENT ASSETS TURN OVER RATIO:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Net Sales 25,660.67 35,373.29 47,957.24 54,217.22 44,765.72

Current Assets 4423.18 5939.67 7133.06 8411.63 6735.93


Current assets 5.80 5.95 6.72 6.44 6.64
turnover ratio

CHART 4.3
CURRENT ASSETS TURN OVER RATIO:
Current Asset Turnover Ratio
6.72
6.8 6.64
6.6 6.44
6.4
PERCENTAGE

6.2
5.95
6 5.8
5.8
5.6
5.4
5.2
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALYSIS:
As per the graph shown the company’s current turnover ratio is rapidly is increase but 2014-
2015 is at highest 6.72 TIMES

WORKING CAPITAL TURNOVER RATIO:


As its name suggests it is the relationship between turnover and working capital. It is a
measurement comparing the depletion of working capital to the generation of sales over a
given period. This provides some useful information as to how effectively a company is
using its working capital to generate sales.
A company uses working capital to fund operations and purchase inventory. These
operations and inventory are then converted into sales revenue for the company. The
working capital turnover ratio is used to analyze the relationship between the money used to
fund operations and the sales generated from these operations.

The formula related is:


Net Sales
Working Capital turnover ratio = ----------------------
Working Capital
TABLE 4.4
WORKING CAPITAL TURNOVER RATIO
Rupees (in cores)
Year 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Net sales 25,660.67 35,373.29 47,957.24 54,217.22 44,765.72

Working capital 6,545.77 10,969.63 8,607.63 12,859.82 9,844.54


Working capital 3.92 3.22 5.58 4.22 4.55
turnover ratio

CHART 4.4
WORKING CAPITAL TURNOVER RATIO
Working Capital Turnover Ratio
6 5.58

5 4.55
4.22
3.92
4
PERCENTAGE

3.22
3

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALYSIS:
The graph shows that when shareholder’s invested their money in to the business, it helps to
increase the sales. At the year starting in increasing continuously, it means that 1 rupees the
shareholders investing the result shows direct impact on sales, the net sales in increasing
reasoned may be requirement of working capital or machinery etc. But in the last year it gives
decreasing trend.

CAPITAL EMPLOYED TURNOVER RATIO:


The capital employed turnover ratio tells us the state of the relationship between the
shareholders' investment in the business and the sales that the management of the business
has been able to generate from it.
Net Sales
Capital employed turnover ratio = -----------------------
Capital Employed
TABLE 4.5
CAPITAL EMPLOYED TURNOVER RATIO:

Rupees (in cores)


Year 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Net sales 25,660.67 35,373.29 47,957.24 54,217.22 44,765.72

Capital employed 25,559.83 31,429.69 35,912.05 30,379.29 33,403.53


Current employed 1.00 times 1.13 times 1.34 times 1.78 times 1.34 times
turnover ratio

CHART 4.5
CAPITAL EMPLOYED TURNOVER RATIO
1.78
1.8 Current Employed Turnover Ratio
1.6
1.34 1.34
1.4
1.13
1.2
PERCENATGE

1
1
0.8
0.6 Current Assets Turnover Ratio
0.4
0.2
0

YEAR

ANALYSIS:
The graph shows that when shareholder’s invested their money in to the business, it helps to
increase the sales. At the year starting in increasing continuously, it means that 1 rupees the
shareholders investing the result shows direct impact on sales, the net sales in increasing
reasoned may be requirement of working capital or machinery etc.. But in the last year it
gives negative trend.

SOLVENCY OR GEARING RATIO:


Gearing is concerned with the relationship between the long terms liabilities that a business
has and its capital employed. The idea is that this relationship ought to be in balance. It is a
general term describing a financial ratio that compares some form of owner's equity (or
capital) to borrowed funds. The shareholders and lenders of long term loans may be
interested in this ratio.
DEBT EQUITY RATIO:
This ratio reflects the relative claims of creditors and share holders against the assets of the
firm, debt equity ratios establishment relationship between borrowed funds and owner capital
to measure the long term financial solvency of the firm. The ratio indicates the relative
proportions of debt and equity in financing the assets of the firm.

It is calculated as:
Debt
Debt equity ratio = -------------------------
Shareholder’s fund

The debts side consists of all long term liabilities of the firm. The shareholders‘fund is the
share capital plus reserve and surpluses. The lower the debt equity ratio the higher the degree
of protection enjoyed by the creditors.
The debt equity ratio defined by the controller of capital issue, debt is defined as long term
debt plus preference capital which is redeemable before 12 years and shareholders‘fund is
defined as paid up equity capital plus preference capital which is redeemable after 12 years
plus reserves & surpluses.
The general norm for this ratio is 2:1. on case of capital intensive industries as norms of 4:1 is
used for fertilizer and cement industry and a norms of 6:1 is used for shipping units.

TABLE 4.6
DEBT EQUITY RATIO:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Debt 13,165.56 16,625.91 15,898.75 11,011.63 14,268.69
Shareholder’s fund 514.05 570.6 634.65 634.75 638.07
Debt equity ratio 25.61 TIME 29.14TIME 25.05TIME 17.35TIME 22.36TIME

CHART 4.6
DEBT EQUITY RATIO:

Debt equity ratio


35
29.14
30
25.61 25.05
25 22.36
PERCENTAGE

20 17.35

15
Debt equity ratio
10

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALYSIS:
The graph shows that company shareholders have lesser contribution than creditors. The huge
amount of debt is the reason behind that, it is not good for the company to increase his debt
and not fully utilize the shareholder’s funds. High amount of debt increase the interest upon
it, indirectly it affect to the income and profit.
PROPRITERY RATIO:
It is primarily the ratio between the proprietor‘s funds and total assets. It indicates the
relationship between owners fund and total assets. And shows the extent to which the owner
s‘fund are sunk in assets or different kinds of it.
NOTE: Owner‘s funds is equal to Shareholders Funds

Proprietor’s fund
Proprietary ratio = ----------------------
Total Assets
TABLE 4.7
PROPRIETARY RATIO

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Proprietor’s Fund 514.05 570.6 634.65 634.75 638.07
Total Assets 25,559.83 31,429.69 35,912.05 30,379.29 33,403.53
Proprietary ratio 2.01% 1.82% 1.77% 2.09% 1.91%

TABLE 4.7
PROPRIETARY
RATIO
2.20%
Proprietary ratio
2.09%
2.10%
2.01%
2.00%
PERCENTAGE

1.91%
1.90%
1.82% Proprietary ratio
1.80% 1.77%

1.70%

1.60%
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALYSIS:
As per data, Proprietor ratio shows overall positive relationship between proprietors fund and
total assets. When the proprietor fund is increasing at that time investment in assets value or
return also increased. In year 2015-2016 there is boom of 2.09%, but in last year 2016-2017
again decrease by 1.91%. .

GROSS PROFIT RATIO:

The gross profit margin ratio tells us the profit a business makes on its cost of sales. It is a
very simple idea and it tells us how much gross profit our business is earning. Gross profit is
the profit we earn before we take off any administration costs, selling costs and so on. So we
should have a much higher gross profit margin than net profit margin.
High ratios are favourable in this, since it indicates the business is earning a good return on
the sale of its merchandise.

Gross Profit
Gross profit ratio = ------------------ X 100
Net Sales

TABLE 4.8
GROSS PROFIT RATIO:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Gross Profit 13,905.17 18,416.81 21,883.32 27,111.76 30,312.14
Net Sales 25,660.67 35,373.29 47,957.24 54,217.22 44,765.72

Gross Profit Ratio 54.19 % 52.06% 45.63% 50.01% 67.71%

CHART 4.8
GROSS PROFIT RATIO:
Gross profit ratio
70.00%
60.00%
50.00%
PERCENTAGE

40.00%
67.71%
30.00% 54.19% 52.06% 50.01%
45.63%
20.00% Gross profit ratio
10.00%
0.00%

YEAR

ANALYSIS:
From the above graph the Gross profit ratio shows the decrease trend in the GP which is bad
sign for the company, company should have to increase or maintain its high level of GP but is
going in negative way. As compare to year 2016-2017 , there is big increase in gross profit in
all five years, it is 67.71%.

NET PROFIT RATIO:

This shows the portion of sales available to owners after all expenses. A high profit ratio is
higher profitability of the firm. This ratio shows the earning left for shareholder as percentage
of Net sales.
Net Margin Ratio measures the overall efficiency of production, Administration selling,
financing, pricing and Taste Management.
Net Profit After tax
Net profit ratio = ----------------------------- X 100
Net Sales

TABLE 4.9
NET PROFIT RATIO:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
NPAT 1,001.26 2,240.08 1,811.82 1,242.23 301.81
Net Sales 25,660.67 35,373.29 47,957.24 54,217.22 44,765.72

Net Profit Ratio 3.90% 6.33% 3.78% 2.29% 0.67%

OPERATING NET PROFIT RATIO:


The graph shows the increase and decrease trend, in first two year it was increasing than it
went down, it indicate decrease in profitability of the shareholders. As compare to first two
year last year it has been boom in decreasing.
This ratio establishes the relation between the net sales and the operating net profit. The
concept of operating net profit is different from the concept of net profit operating net profit
is the profit arising out of business operations only. This is calculated as follows:

Operating net profit = Net Profit + None operating expenses – non operating income.

Alternatively, this profit can also be calculated by deducting only operating expenses from
the gross profit.

This ratio is calculated with help of the following formula.

Operating net Profit


Operating net profit ratio = ---------------------------- X 100
Net Sales
TABLE 4.10
OPERATING NET PROFIT RATIO

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
Operating Net Profit 1,723.10 4,032.83 4,705.72 4,177.55 1,717.98
Net Sales 25,660.67 35,373.29 47,957.24 54,217.22 44,765.72

Operating Net Profit 6.71% 11.40% 9.81% 7.70% 3.84%


Ratio

CHART 4.10
OPERATING NET PROFIT RATIO

Operating Net Profit Ratio


12.00%
11.40%
10.00% 9.81%

8.00%
PERCENTAGE

7.70%
6.71%
6.00%

4.00% 3.84%
Operating Net Profit Ratio
2.00%

0.00%

YEARS

ANALYSIS:
As shown in graph, in year 2013-2014 the operating net profit ratio increases, it continuous
till second year an than it is going up to its highest level of 11.40. It shows the negative
direction which is decrease in operating net profit ratio. In the last year as compare to first
year it goes to below the first year level.

OVER ALL PROFITABILITY RATIO OR ROR RATIO:

The ROI is perhaps the most important ratio of all. It is the percentage of return on funds
invested in the business by its owners. In short, this ratio tells the owner whether or not all the
effort put into the business has been worthwhile. If the ROI is less than the rate of return on
an alternative, the owner may be wiser to sell the company, put the money in risk-free
investment such as a bank savings account, , and avoid the daily struggles of small business
management.
These Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to
identify trends in a business and to compare its progress with the performance of others
through data published by various sources. The owner may thus determine the business's
relative strengths and weaknesses.

RETURN ON ASSETS RATIO:

This ratio actually measures the profitability of the investments in the firm. And the related
formula is:

Net Profit After tax


Returns on assets = ---------------------------- X 100
Assets

TABLE 4.11
RETURN ON ASSETS RATIO:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
NPAT 1,001.26 2,240.08 1,811.82 1,242.23 301.81
Assets 5435.87 5936.76 6621.14 6607.32 7959.92
Returns on Assets 3.50% 7.14% 9.53% 8.57% 5.45%

CHART 4.11
RETURN ON ASSETS RATIO:

Returns on Assets
12.00%

10.00%
9.53%
8.57%
8.00%
PERCENTAGE

7.14%
6.00%
5.45%
Returns on Assets
4.00%
3.50%
2.00%

0.00%
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALYSIS:
The graph shows the trend increasing in first three years and after that it goes down. In
starting years the return on asset ratio is increase. This means that the company is increasing
their revenue per unit of asset but then it becomes negative. This is bad signs for the
company. But overall company is average returns of 9.53.

RETURNS ON CAPITAL EMPLOYED:


This Ratio is considered to be very important. It indicates the percentage of net profits before
interest and tax to total capital employed. It reflects the overall efficiency with which capital
is used. The ratio of a particular business should be compared with other business firms in the
same industry to find out the exact position of the business.

It is calculated as:

Net Profit before interest and tax


Returns on capital employed = ----------------------------------------- X 100
Capital Employed

Note: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus +
Long Term Debt- Fictitious Assets

TABLE 4.12
RETURNS ON CAPITAL EMPLOYED:

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
NPBIT 1769.85 4219.82 3686.48 2559.65 1562.69
Capital Employed 25,559.83 31,429.69 35,912.05 30,379.29 33,403.53
Returns on capital 6.92% 13.43% 10.27% 8.43% 4.68%
employed

CHART 4.12
RETURNS ON CAPITAL EMPLOYED:
Return On Capital Ratio
16.00%
13.43%
14.00%

12.00% 10.27%
PERCENTAGE

10.00% 8.43%
8.00% 6.92%

6.00% 4.68%

4.00%

2.00%

0.00%
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEARS

ANALYSIS:

In graph, return on capital employed is Decreasing year 2016-2017 , in year 2013-2014


shareholders get benefit maximum 13.43%.the overall business efficiency is increasing. In
last year it is very less.

RETURNS ON EQUITY:
This ratio also known as return on shareholders‘ funds or return on proprietors‘ funds or
return on net worth, indicates the percentage of net profit available for equity shareholders to
equity shareholders‘ funds and not on total capital employed.
It is calculated as:

NPAT – Preference Dividend


Return on equity ratio = --------------------------------------- X 100
Equity shareholders fund
TABLE 4.13
RETURNS ON EQUITY

Rupees (in Cores)


YEAR 2012-2013 2013-2014 2015-2016 2015-2016 2016-2017
NPAT 1,001.26 2,240.08 1,811.82 1,242.23 301.81
Equity Shareholder 514.05 570.6 634.65 634.75 638.07
fund
Returns on equity 194.78% 392.58% 285.48% 195.70% 47.30%
ratio

CHART 4.13
RETURNS ON EQUITY

Return On Capital Ratio


450.00%
392.58%
400.00%
350.00%
300.00% 285.48%
PERCENTAGE

250.00%
194.78% 195.70%
200.00%
150.00%
100.00%
47.30%
50.00%
0.00%
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

ANALYSIS:
The figure shows that the returns on equity is increasing in the beginning and touches highest
level in the year 2013-2014 which is 392.58% then it is declining in last two year the reason
is decrease in company profit
CHAPTER V

FINDING, SUGESSTION AND CONCLUSION

FINDINGS OF THE STUDY

1. The current ratio has shown in a fluctuating trend as 7.41, 2.19, 4.48, 1.98, and 3.82
during 2012 of which indicates a continuous increase in both current assets and
current liabilities.

2. The quick ratio is also in a fluctuating trend throughout the period 2012-2017
resulting as 7.41, 1.65, 4.35, 1.9, and 3.81. The company’s present liquidity position
is satisfactory.

3. The absolute liquid ratio has been decreased from 3.92 to 1.18, from 2012-2017.

4. The proprietor ratio has shown a fluctuating trend. The proprietary ratio is increased
compared with the last year. So, the long term solvency of the firm is increased.

5. The working capital increased from 0.72 to 1.13 in the year 2012-2017.

6. The fixed assets turnover ratio is in increasing trend from the year 2012-2017. (1.26,
1.82, 4.24, 3.69, and 6.82). It indicates that the company is efficiently utilizing the
fixed assets.

7. The capital turnover ratio is increased form 2012-2015017. (0.98, 1.01, and 1.04) and
decreased in 2016 to 0.98. It increased in the current year as 1.00.

8. The current assets to fixed assets ratio is increasing gradually from 2012-2017 as
2.93, 3.74, 4.20, 6.07 and 8.17. It shows that the current assets are increased than
fixed assets.

9. The net profit ratio is in fluctuation manner. It increased in the current year compared
with the previous year from 2012-2017 0.33 to 0.42.

10. The net profit is increased greater in the current year. So the return on total assets
ratio is increased from 0.17 to 0.31.

11. The Reserves and Surplus to Capital ratio is increased to 4.19 from 2.02. The capital
is constant, but the reserves and surplus is increased in the current year.

12. The earnings per share was very high in the year 2012 i.e., 101.56. That is decreased
in the following years because number of equity shares are increased and the net
profit is decreased. In the current year the net profit is increased due to the increase in
operating and maintenance fee. So the earnings per share is increased.

13. The operating profit ratio is in fluctuating manner as 0.99, 0.51, 0.41, 0.57 and 0.69
from 2012-2017respectively.

14. Price Earnings ratio is reduced when compared with the last year. It is reduced from
3.09 to 2.39, because the earnings per share is increased.

15. The return on investment is increased from 0.32 to 0.42 compared with the previous
year. Both the profit and shareholders’ funds increase cause an increase in the ratio.
SUGGESTION
 The company’s future plans for expansion seem clear due to increased investment
in Fixed Assets .Efficient use of these Assets has enabled the company to observe
an increased profit.
 Though the company’s sale is continuously rising but the net profit is not so much
increased so management should take some steps to decrease its expenses.
 Company should try its best to increase sales and profit.
 The profit margin ratio shows decline in current year so that company should tray
to increase profit after tax
 Current ratio is very good it is 2.13:1 so company has fully utilize cash liquidity
for business development.
CONCLUSION
In the study of Financial Performance of SRI KARPAGAM ORGANIC COTTON
INDUSTRY AT KARUR it is clear that the company’s financial performance is
satisfactory. The company has stable growth and it shows a greater efficiency in all the areas
it works.
If the company utilizes its working capital then the company can go heights which it
wanted to achieve. The comparative income statement shows increase in the current year of
net profit and it depict the company’s current profit position. To improve the efficiency the
company will strive for better performance and increase the market share the company.
The suggestions provided through the study will help the company to improve the
operational performance efficiently. The suggestions provided through the study will help the
company to improve the operational performance efficiently. The company’s overall position
is at a very good position. The company achieves sufficient profit in past four years. The long
term solvency position of the company is very good. The company maintains low liquidity to
achieve the high profitability. The company distributes dividends every year to its share
holders. The profit of the company decreased in the last year due to maintaining the
comparatively high liquidity. The net working capital of the company is maximum in the last
year shows the maximum liquidity

BIBLIOGRAPHY
 Financial management (ninth edition), author I m pandey published by vikas
publishing house pvt ltd.
 Financial management (second edition), author p periasamy published by mc graw
hill publishing.
 Financial service, author M Y KHAN, Fifth edition Mc Graw Hill Publishing.
 M Y Khan and P K Jain, Financial Management Fourth Edition 2006,Tata
McGraw-Hill Publishing Company Limited, New Delhi.
 Robert C Higgins, Analysis for Financial Management Eighth Edition 2009Tata
McGraw-Hill Publishing Company Limited, New Delhi.
 Prasanna Chandra Financial Management Sixth Edition 2004, Tata McGraw-Hill
Publishing Company Limited, New Delhi
 www.Articlebase.com
 www.wikepedia.com
 www.scribd.com
 www.FeeOnlyFinancial.net

ANNEXURE

BALANCE SHEET OF COMPANY

BALANCE SHEET OF SRI KARPAGAM ORGANIC COTTON INDUSTRY AT KARUR


2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

Sources Of Funds
Total Share Capital 638.07 634.75 634.65 570.6 514.05
Equity Share Capital 638.07 634.75 634.65 570.6 514.05
Share Application Money 0 0 3.06 0 0
Preference Share Capital 0 0 0 0 0
Reserves 18,496.77 18,709.16 19,351.40 14,208.55 11,855.15
Revaluation Reserves 0 23.75 24.19 24.63 25.07
Net worth 19,134.84 19,367.66 20,013.30 14,803.78 12,394.27
Secured Loans 5,877.72 6,915.77 7,766.05 7,742.60 5,251.65
Unsecured Loans 8,390.97 4,095.86 8,132.70 8,883.31 7,913.91
Total Debt 14,268.69 11,011.63 15,898.75 16,625.91 13,165.56
Total Liabilities 33,403.53 30,379.29 35,912.05 31,429.69 25,559.83
Application Of Funds
Gross Block 30,312.14 27,111.76 21,883.32 18,416.81 13,905.17
Less: Accum. 11,611.44 9,965.87 8,466.25 7,212.92 6,259.90
Depreciation
Net Block 18,700.70 17,145.89 13,417.07 11,203.89 7,645.27
Capital Work in Progress 1,507.84 2,073.96 4,058.56 5,232.15 6,954.04
Investments 19,934.39 20,493.55 22,624.21 22,336.90 12,968.13
Inventories 4,455.03 4,588.23 3,891.39 2,935.59 2,229.81
Sundry Debtors 1,818.04 2,708.32 2,602.88 2,391.92 1,555.20
Cash and Bank Balance 462.86 1,115.08 638.79 612.16 638.17
Total Current Assets 6,735.93 8,411.63 7,133.06 5,939.67 4,423.18
Loans and Advances 5,305.91 6,400.65 5,852.42 5,248.71 5,909.75
Fixed Deposits 0 725.88 1,790.13 1,141.10 503.65
Total CA, Loans & 12,041.84 15,538.16 14,775.61 12,329.48 10,836.58
Advances
Differed Credit 0 0 0 0 0
Current Liabilities 16,580.47 21,271.45 15,740.69 16,909.30 10,968.95
Provisions 2,200.77 3,600.82 3,222.71 2,763.43 1,877.26
Total CL & Provisions 18,781.24 24,872.27 18,963.40 19,672.73 12,846.21
Net Current Assets -6,739.40 -9,334.11 -4,187.79 -7,343.25 -2,009.63
Miscellaneous Expenses 0 0 0 0 2.02
Total Assets 33,403.53 30,379.29 35,912.05 31,429.69 25,559.83

Contingent Liabilities 2,838.67 3,284.12 4,798.83 3,708.33 5,433.07


Book Value (Rs) 59.98 60.95 314.93 259.03 240.64
PROFIT AND LOSS

PROFIT AND LOSS ACCOUNT SRI KARPAGAM ORGANIC COTTON


INDUSTRY AT KARUR
2016-2017 2015-2016 2014-2015 2013-2014 2012-2013

Income
Sales Turnover 49,319.73 59,220.94 52,067.87 38,173.39 28,538.20
Excise Duty 4,554.01 5,003.72 4,110.63 2,800.10 2,877.53
Net Sales 44,765.72 54,217.22 47,957.24 35,373.29 25,660.67
Other Income 1,662.33 -11.16 341.53 1,220.86 921.29
Stock Adjustments 143.6 623.84 354.22 606.63 -238.04
Total Income 46,571.65 54,829.90 48,652.99 37,200.78 26,343.92
Expenditure
Raw Materials 33,764.40 41,081.79 35,047.05 25,366.12 18,801.37
Power & Fuel Cost 484.66 550.89 471.28 362.62 304.94
Employee Cost 2,837.00 2,691.45 2,294.02 1,836.13 1,551.39
Other Manufacturing 95.61 2,386.91 1,753.46 1,289.60 866.65
Expenses
Selling and Admin 0 3,248.91 2,790.19 2,126.10 1,652.31
Expenses
Miscellaneous 6,963.47 1,610.69 2,067.42 1,707.06 1,438.89
Expenses
Preoperative Exp -953.8 -907.13 -817.68 -740.54 -916.02
Capitalized
Total Expenses 43,191.34 50,663.51 43,605.74 31,947.09 23,699.53
Operating Profit 1,717.98 4,177.55 4,705.72 4,032.83 1,723.10
PBDIT 3,380.31 4,166.39 5,047.25 5,253.69 2,644.39
Interest 1,387.76 1,218.62 1,383.79 1,246.25 704.92
PBDT 1,992.55 2,947.77 3,663.46 4,007.44 1,939.47
Depreciation 1,817.62 1,606.74 1,360.77 1,033.87 874.54
Other Written Off 0 0 106.17 144.03 51.17
Profit Before Tax 174.93 1,341.03 2,196.52 2,829.54 1,013.76
Extra-ordinary items 0 0 0 0 15.29
PBT (Post Extra-rod 174.93 1,341.03 2,196.52 2,829.54 1,029.05
Items)
Tax -126.88 98.8 384.7 589.46 12.5
Reported Net Profit 301.81 1,242.23 1,811.82 2,240.08 1,001.26
Total Value Addition 9,426.94 9,581.72 8,558.69 6,580.97 4,898.16
Preference Dividend 0 0 0 0 0
Equity Dividend 645.2 1,280.70 1,274.23 859.05 311.61
Corporate Dividend 77.55 181.54 192.8 132.89 34.09
Tax
Per share data
(annualized)
Shares in issue (lakhs) 31,901.16 31,735.47 6,346.14 5,705.58 5,140.08
Earnings Per Share 0.95 3.91 28.55 39.26 19.48
(Rs)
Equity Dividend (%) 100 200 200 150 60
Book Value (Rs) 59.98 60.95 314.93 259.03 240.64