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A STUDY OF FINANCIAL STATEMENT ANALYSIS FOR K.M.

B
TEXTILE KARUR
CHAPTER- 1
1. INTRODUCTION

1.1. INTRODUCTION ABOUT THE STUDY


In our present day economy, finance is the provision of money at the time when it is required.
Every enterprise whenever big, medium or small needs finance to carry on its operations and to
achieve its target. In fact, finance is so indispensable today that it is rightly said that, it is the life
hood of an enterprise without adequate finance, no enterprise can possible accomplish.

Finance guides and regulates investments decisions may be pertaining to capital


expenditure and revenue expenditure. To get the best out of the available funds is the major task
of financial management. The finance manager should perform his task most effectively.

“Finance is the lifeblood of business. It is rightly termed as the science of money. We


hold finance for the production of goods and services as their distribution”. The term business
finance indicates an activity or a process, which is concerned with acquisition of funds,
allocation of funds and finance controls.

The finance requirements of a company can be broadly classified into a long term,
medium term and short-term finance. Long term finance is needed for buying machinery and
equipment or for the provision of land, factory building and other fixed assets. Medium term
finance is needed for small tools, implements and major repairs. Short term finance is required
for new months for the purchase of raw materials for processing and meeting expenses like
wages, salaries etc. in order words to meet its working capital requirements.

Accounting and other business functions. The wastage of funds can be avoided. The
finance functions is not just a service function through it is generally viewed as one of the most
productions marketing, personal. important decisions on the basic of availability of funds. In the
finance function bended with productions marketing, personal.
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1.1.1 IMPORTANCE OF FINANCE

Finance is regarding as the lifeblood of a business enterprise. This is because in the


modern money-oriented economy. Finance is one of the basic foundation of all the sources for
being employed in manufacturing and merchandising activities. It has rightly been said that
business needs money to make more money. However, it is also true that money begets more
money only when it is properly managed. Hence, efficient management of every business
enterprise is closely linked with efficient management of its finances.

1.1.2 FINANCIAL STATEMENT

A financial statement is an organized collection of data according to logical and


consistent accounting procedures. Its purpose is convey an understanding of some financial
aspects of a business firm. It may show position at a moment in time, as in the case of a balance
sheet or may reveal a series of activities over a given period of time, as in the case of income
statements. Thus the term financial statement generally refers to the two statements.

 The position statement (or) the balance sheet.


 The income statement (or) the profit & loss account.

1.1.3 FINANCIAL PERFORMANCE

INTRODUCTION

Analysis is the process of critically examining in detail accounting information given in


the financial statements. For the purpose of analysis individual items are studied, their
interrelationship with other related figures established, the data is sometimes rearranged ton have
a better understanding of the information with the help of different techniques of tools for the
purpose. Interpretation means explaining the meaning and significance of the data so simplified.
However both analysis and interpretation are interlinked.

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MEANINNG

Financial performance is the process of identifying the financial strengths and weakness
of the firm by properly establishing relationship between the items of the balance sheet and the
profit and loss account analysis and interpretation of financial statements refers to such a
treatment of data found in the financial statements so as to provide a full diagnosis of the
profitability and financial position of an enterprise.

Finance is a pre-requisite for mobilizing real resources to organize production and


marketing. Finance is rightly described as the life blood of any industry.

DEFINITION

Financial analysis is the starting point for making plans before using any sophisticated
forecasting and budgetary procedures. It is their overall responsibility to see that the resources of
enterprise are used more efficiently and effectively.

According to John .N.MYER, the balance sheet reflect the assets, liabilities and capital as
on a certain data and the income statement should the results of operation during a certain period.
Financial analysis is helpful in assessing the financial position and profitability of a concern.
This is done through comparison by ratios for the same concern. This is done through
comparison by ratios for the same concern over a period of years. For one concern against of
financial statements helps in assessing.

 The present and future earning capacity or profitability of the concern.


 The operation efficiency of the concern a sa whole.
 The financial stability of a business concern.
 Then real meaning and significance of financial data.
 The long term liquidity of its funds etc.,

RATIO ANALYSIS

Ratio analysis is powerful tool of financial analysis. A ratio is a statistical yard stick that
provides a measures of relationship between two accounting figures. The term “ratio” refers to a
simple arithmetic expression of one number to another.
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DEFINITION

According to Kennedy, ratio may be defined as “the indicated quotient of two


mathematical expressions and as the relationship between two or more things”.

According to wixon, kell and Bedford, a ratio is defined as “an expression of the
quantitative relationship between two numbers”.

1.1.4 FINANCIAL STATEMENT

There are number ratios, which can be calculated from the information given in the profit
and loss account and balance sheet. The selection of particular ratio dependents upon the purpose
of firm which it is calculated by the analyst.

1.1.5 RATIO ANALYSIS INVOLVES THE FOLLOWING STEPS

 Selection of relevant data from the financial statement depending upon the
analysis.
 Calculation of calculated ratio with the standard ratio or with the past ratio of the
same Concern or projected ratio.
 Interpretation based on comparison.

1.1.6 IMPORTANCE OF RATIOS

Importance of ratio analysis lies in the fact that it present facts on a comparative basic
and enables the sawing of inferences regarding the performance off a firm.

 Difficulty in comparison
 Impact of inflation
 Conceptual diversity

1.1.7 TO TEST THE ASSOCIATION OF OVERHEADS AND TURNOVER


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To the association of overheads and turnover with the help of correlation table, which
shows both are in positive manner. The result of analyzing the overheads and turnover with Karl
Pearson’s correlation model is given in the table.

1.1.8 BALANCE SHEET

Balance sheet has been defined by kholer as a statement of financial position and an
economic unity disclosing as at a given movement of time its assets, at cost depreciated cost, on
their incited value; its liabilities; and its ownership equities usually, the balance sheet is
prospered by a firm to present a summary of financial position at the end of financial year. It
balances the assets of a firm against its financing.

CURRENT ASSESTS

Current assets which are changed to liquid assets of the firm are convertible into cash
within an accounting period. Cash in hand, cash at bank and other short term investments
constitute these assets.

FIXED ASSESTS

Assets acquired for utilization and not for resale are termed as fixed or permanent assets,
are those assets, which are intended to be held for a long period.

CURRENT LIABILITIES

The current liabilities are those liabilities, which are expected to be discharged within a
period of one year.

LIABILITIES

A liability is a amount which a business is legally bound to pay. It is a claim by an


outsider on the assets of a business.

STATEMENT OF THE PROBLEM


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For every organization it is essential to assess the operating performance and financial
position of the firm. Because of improper recording of day to day transactions it is very difficult
to assess the overall financial position of the company. It guides the investigator to understand
the financial performance and workings of the company and also the quantitative and qualitative
performance of the company. The company is not able to meet its long term publications because
of its operational inefficiency.

2.3 SCOPE OF THE STUDY

 To study the financial position at the company


 To analyze and interpret the trends revised by several at the company in particular
 To analyze the profitability and solvency position of the unit with the existing tools of
financial analysis
 To study the changes in the assets, liabilities structure if the company during the period at
the study
 To analysis the financial stability and over all performance at the rajkamal International
Export

2.4 OBJECTIVES OF THE STUDY

 To study about the existing position of textile industry


 To identify the financial strength and weakness of textile industry
 To interpret the financial statements with statistical tools.
 To evaluate the solvency position of the sample industry
 To measure the profitability and efficiency position of the sample
industry
 To provide suggestions for improving financial efficiency of the textile

2.5 LIMITATION OF THE STUDY


 The Analysis and interpretation are based on secondary data contained in the published
balance sheet of the k.m.b Textileexport for the study period
 For these companies it is difficult to find a meaningful set of industry
 Ratio itself will not completely show the company’s good or bad financial position

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 Thus a Ratio Analysis of one company over time or a comparative analysis of companies
of different ages must be interpreted with judgments.
 Due to the limits time for my project period. So I can’t touch the Major points for my
study of project.

2.6 RESEARCH METHODOLOGY

TOOLS Analysis
For every comprehensive research a proper research methodology is indispensable it has to be
properly conceived.

RESEARCH DESIGN

The research design refers to preplanning of what a researcher dose in his study. The design
adopted in the study comes under analytical research .since the data collected from the financial
statements of the company is analyzed under various financial and tactical tools.

SOURCES OF DATA
The data require for the study have been collected from the secondary sources

ANALYTICAL TOOLS
 Profit/loss A/c statement
 Balance sheet
 Ratio analysis

PERIOD OF THE STUDY


The study covers a period of five year starting from 2014-2018. Accounting year ends on
31st march. The present study was conducted at Rose fabrics. This study depends mainly on the
secondary.

DATA COLLECTION METHOD

Data may be classification into two types. There are primary data and secondary data.

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Secondary data which are already collected for the same or other uses. Annual reports, financial
statement, prospects of the company, and information collected from journals, magazine and
articles comes under secondary data. For this study my project is used for secondary data.

2.6 LIMITATIONS OF THE STUDY

 This study is based on the secondary data basis.


 The period of study is 5 years from 2019-2015to 2018-2019.

DATA ANALYSIS & INTERPERTATION


RATIO ANALYSIS
The primary uses of financial statement are evaluating past performance and predicting
future performance and both of these are facilitated by comparison. Therefore the focus of
financial analysis is always on the crucial information contained in the financial statements. This
depends on the objectives and performance of such analysis. The purpose of evaluating such
financial statement is different from person to person depending on its relationship. In other
words, even though the business unit itself and shareholders, debentures holders, investors, etc.
all undertake the financial analysis, the purpose, means and extent of such analysis differs. For
example, trade creditors may be interested primarily in the liquidity of the firm because the
ability of the business unit to the business unit to pay their claims are best judged by means of
through analysis of its liquidity.

The shareholder and the potential investors may be interested in the present and the
further earnings per share, the stability of such earnings and comparison of these earnings with
other units in the industry. Similarly the debenture holders and the financial institution lending

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long term loans term may be concerned with the cash flow ability of the business unit to pay
pack the debt in the long run. The management of the business unit, in contrast, looks to the
financial statement from various angles. These statement are required not only for the
management own evaluation and decision making but also for internal control and overall
performance of the firm. Thus the scope, extent and means of any financial analysis are a part of
the larger information processing system which from the very basic of any “decision making”
process.

The financial analysts always need certain yardstick to evaluate the efficiency and
performance of any business unit. The one of the most frequently used yardstick is ratio analysis.
Ratio analysis involves the use of various methods for calculating and interpreting financial
ratios of assess the performance and status of the business unit. It is a tool of financial analysis,
which studies the numerical or quantitative relationship between two variables and item. A ratio
can be worked out by dividing one of the variables of the relationship with other variable and
such ratio value is compared with standards/ norms.

In other words, ratio are relative figures reflection the relationship between variables and
enable the analysis to draw conclusion regarding the financial operations.

It is very important that the base(or denominator) selected for each ratio is relevant with
the numerator. The two must be such that one is closely connected with and is influenced by the
other.

This is the measure of inter relationship between different sections of the financial
statement which then is compared with the budgeted or forecasted results, prior year results and
or the industrial results. To be most important ratios must include a study of underlying data.
Ratios should be taken as guides that are useful in evaluating a company’s financial position and
operations and making comparison with results in previous year of with other companies. The
primary purpose of ratios is to point out areas needing further investigations. A part from the
ratios other information which should be looked at includes.

TYPES OF RATIO

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Several ratios calculated from the accounting data, can be grouped into various classes
according to financial activity or function to be evaluated, as stared earlier, the parties interested
in financial analysis are short-term and long-term creditors. Owners and management interest is
in liquidity position or the short-term solvency of the firm. Long-term creditors, on the other
hand, more interested in the long- term solvency and profitability of the firm.

Similarly owners concentrate on the firm profitability and financial condition.


Management is interested in evaluating every aspect of the firm’s performance. In view of the
requirements of the various users of ratios, classifying into following four important categories.

 Current ratio

 Proprietary ratio

 Debt equity ratio

 Return on total resources ratio


 Return on capital employee

 Reserve to equity share capital ratio

 Equity ratio

 Net working capital ratio

COMPARATIVE BALANCE SHEET

The single balance sheet shows assets and liabilities as on a particular data. The comparative
balance sheet shows the value of assets and liabilities on two different data if helps in
comparison a comparative balance sheet has two columns to record the record the figures of the
current year and the previous year. A third column is used to show the increase or decrease in
figures. A fourth column may be added for giving percentage of increase or decrease.

Thus while in the balance sheet the emphasis is on status in the comparative balance sheet it is on
change comparative balance sheet indicates whether the business is moving in a favorable or
unfavorable direction. It is very useful for studying the trends in an enterprise.

COMMON-SIZE STATEMENT
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Financial statement present absolutes figure. A comparisons of absolutes figure could be
misleading the statement which report the figure as a percentage of some common base are
called common size statement.

In the common-size balance sheet total of assets liabilities is taken as total common size
statements are useful to a financial analysis. They make comparison easy and meaningful.

ANALYSIS AND INTERPRETATION OF FINANCIAL PERFORMANCE

Analysis and interpretation of financial statement is the most important step in accounting. To
have a very clear understanding of profitability and financial position of a company. The
financial statements have to be analyzed and interpreted. Analysis refers to the methodological
classification of the data given in the financial statement.

The term interpretation means explaining the meanings and significance of the data so arranged.
It is the study of the relationship between various functional factors. The relationship between
profit and capital employed, current asset and current liabilities and gross profit have to be
explained further to make interpretation more meaningful comparisons have to be made.
Comparison of relationship between various financial factors of the same company over a period
of time can be made.

CURRENT RATIO
Current ratio may be defined as the relationship between current assets an current
liabilities. This ratio also known as working capital ratio is a measure of general liquidity and is
most widely used to make the analysis of short-term financial position or liquidity of a firm. It is
calculated by dividing by the total of current assets by total of the current liabilities.

CURRENT ASSETS
CURRENT RATIO = --------------------------------------

CURRENT LIABILITIES

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THE TABLE SHOWING CURRENT RATIO

TABLE NO - 3:1:1
Rupees in lacks

YEAR CURRENT CURRENT RATIO


ASSETS LIABILITIES
2014-15 25555.09 21466.85 1.19
2015-16 19216.09 18261.97 1.05

2016-17 14569.45 16344.23 0.89

2017-18 16782.00 22403.06 0.74

2018-19 18755.29 23047.57 0.81

Sources: Annual report of the raajkamal international

INTERPRETATION
The table shows the current assets position of the company. The current ratio was not
fluctuation trend during the study period. The current ratios in all years satisfy the standard
norms of 2:1. Hence the position indicates that the current ratio not satisfactory during the study
from 2014 to 2015.

THE TABLE SHOWING CURRENT RATIO


TABLE NO - 3:1:1

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CURRENT LIABILITIES

2014-15
2015-16
2016-17
2017-18
2018-19

INTERPRETATION
The table shows the current assets position of the company. The current ratio was not
fluctuation trend during the study period. The current ratios in all years satisfy the standard
norms of 2:1. Hence the position indicates that the current ratio not satisfactory during the study
from 2014 to 2015.

QUICK RATIO
Quick ratio also known as acid test or liquid then the current ratio, term ‘liquidity’ refers
to the ability of a firm to pay its short-term obligations as and when they become due. Two
determines of current ratio as, a measure of liquidity, are current assets and current liability.

CURRENT ASSET - INVENTORY

QUICK RATIO = -----------------------------------------------

CURRENT LIABILITIES

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THE TABLE SHOWING QUICK RATIO
TABLE NO - 3:1:2
Rupees in lacks

YEAR CURRENT CURRENT RATIO


ASSETS- LIABILITIES
INVENTORY
2014-15 12278.87 21466.85 0.71

2015-16 11541.61 18261.97 0.61

2016-17 5076.92 16344.23 0.46

2017-18 10586.4 22403.06 0.43

2018-19 9181.47 23047.57 0.15

Sources: Annual report of the k.m.b Textile

INTERPRETATION
The liquid ratio does not satisfy the standard norms of 1: 1. So the short term financial
position not satisfactory during the period 2014 - 2019. It is stands at 0.71 in the year of 2014-
2015 and decrease in the next all years.

THE CHART SHOWING QUICK RATIO


CHART NO - 3:1:2

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CURRENT ASSETS- INVENTORY

2014-15
2015-16
2016-17
2017-18
2018-19

INTERPRETATION
The liquid ratio does not satisfy the standard norms of 1: 1. So the short term financial
position not satisfactory during the period 2014 - 2019. It is stands at 0.71 in the year of 2014-
2015 and decrease in the next all years.

PROPRIETARY RATIO
A variant to the debt-equity ratio is the proprietary ratio which is also known as equity ratio
or share holders to total equities ratio or net worth to total assets ratio. The ratio of proprietors

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funds (proprietors share holders fund) to total assets is an important ratio for determining long-
term solvency of a firm.

SHARE HOLDERS FUND

PROPRIETARY RATIO = ------------------------------------

TOTAL TANGIBLE ASSET

THE TABLE SHOWING PROPRIETARY RATIO

TABLE NO - 3:1:3

Rupees in lacks

YEAR SHARE HOLDERS TOTAL TANGIBLE RATIO


FUND ASSET

2014-15 17654.63 51364.07 0.34

2015-16 17449.04 43378.22 0.40

2016-17 17346.65 37357.96 0.46

2017-18 17244.38 38039.42 0.45

2018-19 8856.73 42047.67 0.21

Sources: Annual report of the k.m.b Textile

INTERPRETATION

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The above table indicates proprietor’s ratio of the study period was at fluctuating ratio.
But in the period of2016-2017 only satisfy in the profit ratio. Then another four years profit ratio
unsatisfactory during the study period.

THE CHART SHOWING PROPRIETARY RATIO:

CHART NO - 3:1:3

RATIO

2014-15
2015-16
2016-17
2017-18
2018-19

INTERPRETATION
The above table indicates proprietor’s ratio of the study period was at fluctuating ratio.
But in the period of2016-2017 only satisfy in the profit ratio. Then another four years profit ratio
unsatisfactory during the study period.

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DEBT – EQUITY RATIO
Debt-equity ratio, also known as external-internal equity ratio is calculated to measure
the relative claims of outsider and the owners (I, e,;) shareholders against the firm’s assets. This
ratio indicates the relationship between the external equities or the outsider’s funds and the
internal equities or the shareholders funds.

OUTSIDERS FUND

DEBT – EQUITY RATIO = ----------------------------------

SHARE HOLDERS FUND

THE TABLE SHOWING DEBT – EQUITY RATIO

TABLE NO - 3:1:4
Rupees in lacks

YEAR OUTSIDER FUND SHARE HOLDERS RATIO


FUND

2014-15 21466.85 17654.63 1.22

2015-16 18261.97 17449.04 1.05

2016-17 16344.23 17346.65 0.94

2017-18 22403.06 17244.38 1.30

2018-19 23047.57 8856.73 2.60

Sources: Annual report of the k.m.b Textile

INTERPRETATION
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The above table identifies the dept- equity ratio of the company was fluctuating during
the study period is lowest in the year 2016-2017of 0.94 and highest in the year 2018-2019of
2.60 in least two years the company debt- equity ratio was not to the standard norms of the
2 : 1.

THE CHART SHOWING DEBT – EQUITY RATIO

CHART NO - 3:1:4

EQUITY RATIO

2014-15
2015-16
2016-17
2017-18
2018-19

INTERPRETATION
The above table identifies the dept- equity ratio of the company was fluctuating during
the study period is lowest in the year 2016-2017of 0.94 and highest in the year 2018-2019of

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2.60 in least two years the company debt- equity ratio was not to the standard norms of the
2 : 1.

FIXED ASSET TURN OVER RATIO

This ratio measures sale per rupee of is fixed assets. This ratio is supported to measure
the efficiency with fixed are employed a high ratio indicates a high degree of efficiency in asset
utilization and low ratio efficient use of assets.

NET SALES

FIXED ASSET TURN OVER RATIO = -----------------------------

FIXED ASSET

THE TABLE SHOWING FIXED ASSET TURNOVER RATIO

TABLE NO - 3:1:5
Rupees in lacks

YEAR NET SALES FIXED ASSET RATIO

2014-15 62705.83 18747.61 3.34

2015-16 66211.45 16982.41 3.89

2016-17 59118.21 15771.88 3.74

2017-18 57404.00 14313.90 4.01

2018-19 66152.71 13031.30 5.07

Sources: Annual report of the k.m.b Textile

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INTERPRETATION

The above table shows the fixed assets turnover ratio during the study period the ratio is
decline from 2018-2019 of 5.07% to 2014-2015 of 3.34% the ratio is unsatisfactory.

THE CHART SHOWING FIXED ASSET TURNOVER RATIO

CHART NO - 3:1:5

FIXED ASSET TURNOVER RATIO

2014-15
2015-16
2016-17
2017-18
2018-19

INTERPRETATION

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The above table shows the fixed assets turnover ratio during the study period the ratio is
decline from 2018-2019 of 5.07% to 2014-2015 of 3.34% the ratio is unsatisfactory.

BALANCE SHEET AS ON 31ST MARCH 2019

31ST MARCH 2019

TABLE NO – 3:2:1
31st march 2019 31st march2019 Increase /
Particulars (Rupees (Rupees decrease
in lacks) In lacks)

[a]sources of funds
Share capital 16125.68 16125.68 -
Reserve & surplus 1643.91 1528.95 - 114.96
[b] loans
Secured 11602.42 12320.77 + 718.35
unsecured 4498.10 6601.80 +2103.07

Total current assets 33870.11 36577.20 2707.09

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Application of fund:
[a]Fixed assets
Net block 19957.69 18747.61 -1210.08
[b]Investments 7024.87 7061.37 + 36.05
-1173.58
[c]Current assets loans & advances:
Inventories 8586.78 10276.20 +1689.42
Sundry debtors 5132.64 3866.47 - 1266.17
Cash & bank balance 887.36 6326.36 +5439.00
Other current assets 573.98 485.73 - 88.02
Loans & advances 4497.31 4600.33 + 103.02
+5877.02
[d] less: current liabilities:
+ 531.59
Current liabilities 19966.23 20497.82
314.39
Deferred payment liabilities 970.23 655.84
+ 234.94
Provisions 734.10 969.10
- 452.14
[e] net current assets
Miscellaneous Expenditure 234.41 19.83 - 214.58
Profit & loss account balance 8645.06 7315.99 - 1329.64
- 1544.22

Total current liabilities 33870.11 36577.20 2707.09

INTREPRETATION

There is a negative change in the fixed asset in the year 2014-2015. The inventories
showed a normal positive changing compared to last year. The sundry debtors showed a big
negative change in the year of 2014-2015 .the cash and bank balance showed a big positive
changing compare to last year. The percentage of loans has been increase. The liabilities showed
a positive change. The negative change the provisions increased.

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COMPARATIVE BALANCE SHEET AS ON 31ST MARCH 2015 &

31ST MARCH2016

TABLE NO – 3:2:2
31st march 2015 31st march2011 Increase /
Particulars (Rupees (Rupees decrease
in lacks) in lacks)

[a]sources of funds
Share capital 16125.68 16125.68 -
Reserve & surplus 1528.95 1323.36 - 205.59
[b] loans
Secured 12320.77 6307.48 -6013.29
Unsecured 6601.80 4925.26 -1676.54
[c] deferred payment liabilities 655.84 1587.35 + 931.51

Total current assets 37233.04 30269.13 6963.91

Application of fund:
[a]Fixed assets
Net block 18747.61 16982.41 -1765.02
[b]Investments 7061.37 7179.72 + 118.35
-1646.85
[c]Current assets loans & advances:
Inventories 10276.20 8204.76 -2071.44
Sundry debtors 3866.47 4562.04 + 695.57
Cash & bank balance 6326.36 1377.52 -4948.84
Other current assets 485.73 475.48 - 10.25
Loans & advances 4600.33 4596.29 - 3.71
-6338.67
[d] less: current liabilities:
+3104.28
Current liabilities 20497.82 17393.54
+ 100.06
Provisions 969.03 868.43
-3204.88
[e] net current assets
Miscellaneous Expenditure 19.83 921.04 + 901.21
Profit & loss account balance 7315.99 4231.84 -3084.15
-2182.94

Total current liabilities 37233.04 30269.13 6963.91

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INTREPRETATION

There is a negative change in the fixed asset in the year 2015-2011. The inventories
showed a big negative change in the year of 2015-2011. The sundry debtors showed a negative
changing compared to last year. The cash and bank balance showed a big negative changing. The
percentage of loans and advances has been decreased. The liabilities showed a negative change.
The provision is also showed negative change.

COMPARATIVE BALANCE SHEET AS ON 31ST MARCH 2015 &

31ST MARCH2016

TABLE NO – 3:2:2
31st march 2015 31st march2011 Increase /
Particulars (Rupees (Rupees decrease
in lacks) in lacks)

[a]sources of funds
Share capital 16125.68 16125.68 -
Reserve & surplus 1528.95 1323.36 - 205.59
[b] loans
Secured 12320.77 6307.48 -6013.29
Unsecured 6601.80 4925.26 -1676.54
[c] deferred payment liabilities 655.84 1587.35 + 931.51

Total current assets 37233.04 30269.13 6963.91

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Application of fund:
[a]Fixed assets
Net block 18747.61 16982.41 -1765.02
[b]Investments 7061.37 7179.72 + 118.35
-1646.85
[c]Current assets loans & advances:
Inventories 10276.20 8204.76 -2071.44
Sundry debtors 3866.47 4562.04 + 695.57
Cash & bank balance 6326.36 1377.52 -4948.84
Other current assets 485.73 475.48 - 10.25
Loans & advances 4600.33 4596.29 - 3.71
-6338.67
[d] less: current liabilities:
+3104.28
Current liabilities 20497.82 17393.54
+ 100.06
Provisions 969.03 868.43
-3204.88
[e] net current assets
Miscellaneous Expenditure 19.83 921.04 + 901.21
Profit & loss account balance 7315.99 4231.84 -3084.15
-2182.94

Total current liabilities 37233.04 30269.13 6963.91

INTREPRETATION

There is a negative change in the fixed asset in the year 2015-2011. The inventories
showed a big negative change in the year of 2015-2011. The sundry debtors showed a negative
changing compared to last year. The cash and bank balance showed a big negative changing. The
percentage of loans and advances has been decreased. The liabilities showed a negative change.
The provision is also showed negative change.

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COMPARATIVE BALANCE SHEET AS ON 31ST MARCH 2017 &

31ST MARCH 2018

TABLE NO – 3:2:4
Rupees in lacks

31st march 2017 31st march2018 Increase /


Particulars (Rupees (Rupees decrease
in lacks) in lacks)

[a]sources of funds
Share capital 16125.68 16125.68 -
Reserve & surplus 1220.97 1118.70 - 102.27
[b] loans
Secured 4043.18 3069.27 - 973.91
Unsecured 7324.47 5933.25 -1391.22
[c] deferred payment liabilities 1225.47 837.61 - 387.86
[d] deferred tax liability - 1779.37 +1779.37

Total current assets 29939.77 28863.88 1075.89

Application of fund:
[a]Fixed assets
Net block 15771.88 14313.90 - 1457.98
[b]Investments 7016.63 6943.52 - 73.11
[c]Current assets loans & advances:
Inventories 7492.53 7195.60 - 296.93
Sundry debtors 1603.52 1293.63 - 309.89
Cash & bank balance 761.51 4041.78 +3280.27
Other current assets 46.91 36.56 - 10.35
Loans & advances 4664.98 4214.43 - 450.55
[d] less: current liabilities:
Current liabilities 15917.21 21762.06 -5844.85
Provisions 921.28 641.00 + 280.28
[e] net current assets
Miscellaneous Expenditure 1302.80 - - 1302.80
Profit & loss account balance 8117.50 13227.52 +5110.02

Total current liabilities 29939.77 28863.88 1075.89

27
INTREPRETATION

There is a change in the fixed asset in the year 2017-2018.The inventories show that a big
negative change in the year of 2017-2018. The sundry debtors show that positive change in
compared with last year. The cash and bank balance show that a big positive change. The
percentage of loans and advance has been decrease.

COMPARATIVE BALANCE SHEET AS ON 31ST MARCH 2018 &

31ST MARCH 2019

TABLE NO – 3:2:5
Rupees in lacks

31st march 2018 31st march2019 Increase /


Particulars (Rupees (Rupees decrease
in lacks) in lacks)

[a]sources of funds
Share capital 16125.68 8067.08 -8058.6
Reserve & surplus 1118.70 789.65 -329.05
[b] loans
Secured 3069.27 4052.84 +983. 57
Unsecured 5933.25 9063.89 +3130.64
[c] deferred payment liabilities 837.61 563.05 -274.56
[d] deferred tax liability 1779.37 1222.00 -557.37
28
Total current assets 28863.88 23758.51 5105.37

Application of fund:
[a]Fixed assets
Net block 14313.90 13013.30 -1300.6
[b]Investments 6943.52 10261.08 +3317.56
[c]Current assets loans & advances:
Inventories 7195.60 9573.82 +2378.22
Sundry debtors 1293.63 2164.85 +871.22
Cash & bank balance 4041.78 2890.57 -1151.21
Other current assets 36.56 1.68 -34.88
Loans & advances 4214.43 4124.37 -90.06
[d] less: current liabilities:
Current liabilities 21762.06 2228.56 -466.5
Provisions 641.00 819.01 -178.1
[e] net current assets
Profit & loss account balance 13277.52 4776.41 -8501.11

Total current liabilities 28863.88 23758.51 5105.37

INTREPRETATION

The investments shows that a big negative change in the year of 2018-2019. The
inventory shows that increasing to compare with last year. The sundry debtors shows that
negative changing to compared with last year. The cash and bank balance shows that big
negative change. The percentage of loans and advances has been decrease. The liabilities show
that negative change.

COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2014 &

29
31MARCH 2015

TABLE NO – 3:3:1Rupees in lacks


31stmarch2014 31stmarch2015 2014 2015
Particulars (Rupees (Rupees % %
in lacks) in lacks)

[a]sources of funds 16125.68 16125.68 47.61 44.08


Share capital 16.43.91 1528.95 4.85 4.18
Reserve & surplus
[b] loans 11602.42 12320.77 34.25 33.68
Secured 4498.10 6601.80 13.28 18.04
Unsecured

33870.11 36577.02 100 100

Application of fund:
[a]Fixed assets
Net block 19957.69 18747.61 58.92 51.25
[b]Investments 7042.87 7061.37 20.74 19.30
[c]Current assets loans &
advances:

Inventories 8586.78 10276.20 25.35 28.09


Sundry debtors 5132.78 3866.47 15.16 10.57
Cash & bank balance 887.36 6326.36 2.61 17.29
Other current assets 573.98 485.73 1.69 1.32
Loans & advances 4497.31 4600.33 13.27 12.57
[d] less: current liabilities:
Current liabilities
Deferred payment liabilities 19966.23 20497.82 58.94 56.03
Provisions 970.23 655.84 2.86 1.79
[e] net current assets 734.10 969.03 2.16 2.64
Miscellaneous Expenditure
Profit & loss account balance 234.41 19.83 0.69 0.05
8645.63 7315.99 25.52 20.00

33870.11 36577.02 100 100

30
INTERPRETATION

The percentage contribution of fixed assets has decreasing in the year of 2015 to compare
with 2014.the contribution of the inventories to the current assets has been increasing. The
contribution of the sundry debtors has been decreasing. The contribution the cash and bank
balance has been increasing. The percentage of the loans and advances lent has been increased.

COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2015 &

31MARCH2016

TABLE NO – 3:3:2
Rupees in lacks

31stmarch2015 31stmarch2011 2015 20011


Particulars (Rupees (Rupees % %
in lacks) in lacks)

[a]sources of funds 16125.68 16125.68 43.31 53.22


Share capital 1528.95 1323.36 4.10 4.36
Reserve & surplus
[b] loans 12320.77 6307.48 33.09 20.81
Secured 6601.80 4925.26 17.73 16.25
Unsecured 655.84 1587.35 1.76 5.23
[c] deferred payment liabilities

37233.04 30269.13 100 100

31
Application of fund:
[a]Fixed assets
Net block 18747..61 16982.41 50.35 56.05
[b]Investments 7061.37 7179.72 18.96 23.69
[c]Current assets loans &
advances:
Inventories 10276.20 8204.76 27.59 27.08
Sundry debtors 3866.47 4562.04 10.38 15.05
Cash & bank balance 6326.36 1377.52 16.99 4.54
Other current assets 485.73 475.48 1.30 1.56
Loans & advances 4600.33 4596.29 12.35 15.17
[d] less: current liabilities:
Current liabilities
Deferred payment liabilities 20497.82 17393.54 55.05 57.4
[e] net current assets 969.03 868.43 2.60 2.86
Miscellaneous Expenditure
Profit & loss account balance 19.83 921.04 0.05 3.04
7315.99 4231.84 19.64 13.96

37233.04 30269.13 100 100

INTREPRETATION

The percentage contribution of fixed assets has decreasing. The contribution of the
inventories to the current assets has been decreasing to compare with last year. The contribution
of inventories to the current assets has been increasing it went down in 2015. The contribution of
sundry debtors has been increasing. The contribution of the cash and bank balance has been
increasing. The percentage of the loans and advances lent has been decreasing.

COMMON SIZE BALANCE SHEET AS ON 31ST MARCH2016&

31MARCH 2017

TABLE NO – 3:3:3
32
Rupees in lacks

31stmarch2011 31stmarch2017 2011 2017


Particulars (Rupees (Rupees % %
in lacks) in lacks)

[a]sources of funds 15125.68 16125.68 53.27 52.98


Share capital 1323.36 1220.97 4.37 4.01
Reserve & surplus
[b] loans 6307.48 4537.44 20.83 14.90
Secured 4925.26 7324.47 16.27 24.06
Unsecured 1587.35 1225.47 5.24 4.02
[c] deferred payment liabilities

30269.13 30434.03 100 100

Application of fund:
[a]Fixed assets
Net block 16982.41 15771.88 56.10 51.82
[b]Investments 7179.72 7016.63 23.71 23.05
[c]Current assets loans &
advances:
Inventories 8204.76 7492.53 27.10 24.61
Sundry debtors 4562.04 1603.52 15.07 5.26
Cash & bank balance 1377.52 761.51 4.55 2.50
Other current assets 475.48 84.21 1.57 0.27
Loans & advances 4636.57 4627.68 15.31 15.20
[d] less: current liabilities:
Current liabilities 17433.82 15871.33 57.59 52.14
Deferred payment liabilities 868.43 492.90 2.86 1.55
[e] net current assets
Miscellaneous Expenditure 921.04 1302.80 3.04 4.29
Profit & loss account balance 4231.84 8117.50 13.98 26.67

30269.13 30434.03 100 100

INTREPRETATION

The percentage contribution of fixed assets has decreasing. The contribution of the
inventories to the current assets has been decreasing. The contribution of the sundry debtors has
33
been decreasing. The contribution of the cash and bank balances to current assets is fluctuating.
The percentage of the loans and advances lent has been decreasing.

COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2017 &

31MARCH 2018

TABLE NO – 3:3:4
Rupees in lacks

31stmarch2017 31stmarch2018 2017 2018


Particulars (Rupees (Rupees % %
in lacks) in lacks)

[a]sources of funds 16125.68 16125.68 53.86 55.86


Share capital 1220.97 1118.70 4.07 3.87
Reserve & surplus
[b] loans 4043.18 3069.27 13.50 10.63
Secured 7324.47 5933.25 24.46 20.55
Unsecured 1225.47 837.61 4.09 2.90
[c] deferred payment liabilities - 1779.37 - 6.16

29939.77 28863.88 100 100

34
Application of fund:
[a]Fixed assets
Net block 15771.88 14313.90 52.67 49.59
[b]Investments 7016.63 6943.52 23.43 24.05
[c]Current assets loans &
advances:
Inventories 7492.53 7195.60 25.02 24.92
Sundry debtors 1603.52 1293.63 5.35 4.48
Cash & bank balance 761.51 4041.78 2.54 14.0
Other current assets 46.91 36.56 0.15 0.12
Loans & advances 4664.98 4214.43 15.58 14.60
[d] less: current liabilities:
Current liabilities 15917.21 21762.06 53.16 75.39
Deferred payment liabilities 921.28 641.00 3.07 2.22
[e] net current assets
Miscellaneous Expenditure 1302.80 - 4.35 -
Profit & loss account balance 8117.50 13227.52 27.11 46.00

29939.77 28863.88 100 100

INTREPRETATION

The percentage contribution of fixed assets has decreasing. The contribution of the
inventories to the current assets has been increasing it went down in 2018. The contribution of
the sundry debtors has been decreasing. The cash and bank balance has been increasing to
compare with last year. The percentage of the loans and advances has been decreasing.

COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2018 &

31MARCH 2019

TABLE NO – 3:3:5
Rupees in lacks

35
31stmarch2018 31stmarch2019 2018 2019
Particulars (Rupees (Rupees % %
in lacks) in lacks)

[a]sources of funds 16125.68 8067.08 55.86 33.95


Share capital 1118.70 789.65 3.87 3.32
Reserve & surplus
[b] loans 3069.27 4025.84 10.63 17.05
Secured 5933.25 9063.89 20.55 38.15
Unsecured 837.61 563.65 2.90 2.36
[c] deferred payment liabilities 1779.37 1222.00 6.16 5.14

28863.88 23758.51 100 100

Application of fund:
[a]Fixed assets
Net block 14313.90 13031.30 49.59 54.77
[b]Investments 6943.52 10261.08 24.05 43.18
[c]Current assets loans &
advances:
Inventories 7195.60 9573.82 24.92 40.29
Sundry debtors 1293.63 2164.85 4.48 9.11
Cash & bank balance 4041.78 2890.57 14.00 12.16
Other current assets 36.56 1.68 0.12 0.00
Loans & advances 4214.43 4124.37 14.60 17.35
[d] less: current liabilities:
Current liabilities 21762.06 22228.56 75.39 93.56
Deferred payment liabilities 641.00 819.01 2.22 3.44
[e] net current assets
Profit & loss account balance 13227.52 4776.41 45.82 20.10

28863.88 23758.51 100 100

INTREPRETATION

The percentage of fixed assets has decreasing. The investment has been increasing in the
year of 2018. The contribution of the inventories to the current assets has been increasing in the
year of 2018. The contribution of sundry debtors has been increasing. The contribution of the

36
1.2. INTRODUCTION ABOUT THE INDUSTRY

1.2.1 INDUSTRY HISTORY

The Indian textile industry is one of the largest in the world with a massive raw material
and textiles manufacturing bases. Our economy is largely dependent on the textile manufacturing
and trade in addition to other major industries. About27% of the foreign exchange earnings is on
account of export of textiles and clothing alone.

The textile and clothing sector contributes about 14% to the industrial production and 3
% to the gross domestic product of the country. Around 8 % of the total revenue excise collection
is contributed by the textile industry. So much so, the textile industry accounts for as large as 21
% of the total employment generated in the economy. Around 35 million people are directly
employed in the textile manufacturing activities. Indirect employment including the manpower
engaged in agricultural based raw material production like cotton and related trade and handling
could be stated to be around another 60 million.

This industry is poised to meet the increased global competition in the post 2005 trade
regime under WTO. The consequent effects of unleashing a flood of imported textiles into India
and also making the export markets far more competitive are being felt from now onwards. The
textile industry in India has a strong multi-fiber raw material production base vast pool of skilled
personnel, entrepreneurial talent, and good export potential and low import content. Protection
systems are flexible, dynamic and vibrant.

The Indian Textile Industry counts among the leading textile industries in the world.
Apart from providing the basic necessities of life, its role in the country’s economic growth is
significant. India’s textile industry contributes about 14 per cent to industrial production; 4 per
cent to the country’s gross domestic product (GDP); 17 per cent to its export earnings; and is a
source of direct employment for over 35 million people, which makes it the second largest

37
provider of employment after agriculture. Abundant raw materials, healthy foreign direct
investments (FDI) and a government willing to invest ensures a bright future for India’s textile
sector.

India has the advantage of abundant resources of raw materials. It is one of the largest
producers of cotton yarn in the world and there are good resources of fibres such as polyester,
silk, viscose, etc. The country is also home to a wide range of cotton fibre and has a rapidly
developing synthetic fibre industry. The most significant change in the Indian textile industry has
been the advent of man-made fibres (MMF). India’s innovative range of MMF textiles finds
presence in almost all the countries across the globe.

1.2.2 PRODUCTION OF TEXTILE

India is the second largest producer of fibre in the world and the major fibre produced is cotton.
Other fibres produced in India include silk, jute, wool, and man-made fibers. 60% of the Indian
textile Industry is cotton based.

 Man Made Fibers: These includes manufacturing of clothes using fiber or filament
synthetic yarns. It is produced in the large power loom factories. They account for the largest
sector of the textile production in India.This sector has a share of 62% of the India's total
production and provides employment to about 4.8 million people.[7]

 The Cotton Sector: It is the second most developed sector in the Indian Textile
industries. It provides employment to huge amount of people but its productions and
employment is seasonal depending upon the seasonal nature of the production.

 The Handloom Sector: It is well developed and is mainly dependent on the SHGs for
their funds. Its market share is 13%.[7] of the total cloth produced in India.

38
 The Woolen Sector: India is the 7th largest producer.[7] of the wool in the world. India
also produces 1.8% of the world's total wool.

 The Jute Sector: The jute or the golden fiber in India is mainly produced in the Eastern
states of India like Assam and West Bengal. India is the largest producer of jute in the world.

INDIAN TEXTILE INDUSTRY:

The textile industry is the largest industry of modern India. It accounts for over 20 percent of
industrial production and is closely linked with the agricultural and rural economy. It is the
single largest employer in the industrial sector employing about 38 million people. If
employment in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added
then the total employment is estimated at 93 million. The net foreign exchange earnings in this
sector are one of the highest and, together with carpet and handicrafts, account for over 37
percent of total export earnings at over US $ 10 billion. Textiles, 1 alone, account for about 25
percent of India’s total forex earnings.

India’s textile industry since its beginning continues to be predominantly cotton based with about
65 percent of fabric consumption in the country being accounted for by cotton. The industry is
highly localised in Ahmedabad and Bombay in the western part of the country though other
centres exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern, sophisticated and
highly mechanised mill sector on the one hand and the handspinning and handweaving
(handloom) sector on the other. Between the two falls the small-scale powerloom sector. The
latter two are together known as the decentralised sector. Over the years, the government has
granted a whole range of concessions to the non-mill sector as a result of which the share of the
decentralised sector has increased considerably in the total production. Of the two sub-sectors of
1
39
the decentralised sector, the powerloom sector has shown the faster rate of growth. In the
production of fabrics the decentralised sector accounts for roughly 94 percent while the mill
sector has a share of only 6 percent.

Being an agro-based industry the production of raw material varies from year to year depending
on weather and rainfall conditions. Accordingly the price fluctuates too.

India's trade in textiles and its share in world trade can be categorized as follows:

India’s Trade in Textiles

(1998)
Type India's Share in
World Trade
Compound Annual Growth Rate
Yarn 22% (CAGR) of different segments
Fabrics 3.2%
Apparel 2%
Made-ups 9% Type CAGR (1993-98)

Yarn 31.79%
Over-all 2.8%
Fabric 9.04%

Made-ups 15.18%

Global Scenario Garment 6.795%

The textile and clothing trade is governed by the Multi-Fibre Agreement (MFA) which came
into force on January 1, 1974 replacing short-term and long-term arrangements of the 1960’s
which protected US textile producers from booming Japanese textiles exports. Later, it was
extended to other developing countries like India, Korea, Hong Kong, etc. which had acquired a
comparative advantage in textiles. Currently, India has bilateral arrangements under MFA with
USA, Canada, Australia, countries of the European Commission, etc. Under MFA, foreign trade
40
is subject to relatively high tariffs and export quotas restricting India’s penetration into these
markets. India was interested in the early phasing out of these quotas in the Uruguay Round of
Negotiations but this did not happen due to the reluctance of the developed countries like the US
and EC to open up their textile markets to Third World imports because of high labour costs.
With the removal of quotas, exports of textiles have now to cope with new challenges in the
form of growing non-tariff / non-trade barriers such as growing regionalisation of trade between
blocks of nations, child labour, anti-dumping duties, etc.

Nevertheless, it must be realised that the picture is not all rosy. It is now being admitted
universally and even officially that the year 2005 AD is likely to present more of a challenge
than opportunity. If the industry does not pay attention to the very vital needs of modernisation,
quality control, technology upgradation, etc. it is likely to be left behind. Already, its
comparative advantage of cheap labour is being nullified by the use of outmoded machinery.

With the dismantling of the MFA, it becomes imperative for the textile industry to take on
competitors like China, Pakistan, etc., which enjoy lower labour costs. In fact the seriousness of
the situation becomes even more apparent when it is realised that the non-quota exports have not
really risen dramatically over the past few years. The continued dominance of yarn in exports of
cotton, synthetics, and blends, is another cause for worry while exports of fabrics is not growing.
The lack of value added products in textile exports do not augur well for India in a non-MFA
world.

Textile exports alone earn almost 25 percent of foreign exchange for India yet its share in global
trade is dismal, having declined from 10.9 percent in 1955 to 3.23 percent in 1996. More
significantly, the share of China in world trade in textiles, in 1994, was 13.24 percent, up from
4.36 percent in 1980. Hong Kong, too, improved its share from 7.06 percent to 12.65 percent
over the same period. Growth rate, in US$ terms, of exports of textiles, including apparel, was
over 17 percent between 1993-94 to 1995-96. It declined to 10.5 percent in 1996-97 and to 5
percent in 1997-98. Another disconcerting aspect that reflects the declining international
competitiveness of Indian textile industry is the surge in imports in the last two years. Imports
41
grew by 12 percent in dollar terms in 1997-98, against an average of 5.8 percent for all imports
into India. Imports from China went up by 50 percent while those from Hong Kong jumped by
23 percent.

Global factors influencing textile industry

The history of the textile and clothing industry has been replete with the use of various bilateral
quotas, protectionist policies, discriminatory tariffs, etc. by the developed world against the
developing countries. The result was a highly distorted structure, which imposed hidden costs on
the export sectors of the Third World. Despite the fact that GATT was established way back in
1947, the textile industry, till 1994, remained largely out of its liberalisation agreements. In fact,
trade in this sector, until the Uruguay Round, evolved in the opposite direction. Consequently,
since 1974 global trade in the textiles and clothing sector had been governed by the Multi-fibre
agreement, which was the sequel to an increasingly pervasive quota regime that began with the
Short-term arrangement on cotton products in 1962 and followed by the Long-Term
arrangement. After the successful conclusion of the Uruguay Round in 1994, the MFA was
replaced by the Agreement on Textiles and Clothing (ATC), which had the same MFA framework
in the context of an agreed, ten year phasing out of all quotas by the year 2005. The section that
follows takes a brief look at the history of these protectionist regimes as also a more detailed
look at the MFA and the ATC.

42
Multi–Fibre Agreement (MFA)

On January 1st, 1974, the Arrangement Regarding the International Trade in Textiles, otherwise
known as the MFA came into force. It superseded all existing arrangements that had been
governing trade in cotton textiles since 1961. The MFA sought to achieve the expansion of trade,
the reduction of barriers to trade and the progressive liberalisation of world trade in textile
products, while at the same time ensuring the orderly and equitable development of this trade and
avoidance of disruptive effects in individual markets and on individual lines of production in
both importing and exporting countries. Though it was supposed to be a short-term arrangement
to enable the adjustment of the industry to a free trade regime, the MFA was extended in 1974,
1982, 1986, 1991, and 1992. Because of the quotas allotted, the MFA resulted in a regular shift
of production from quota restricted countries to less restricted ones as soon as the quotas began
to cause problems for the traders in importing countries. The first three extensions of the MFA,
instead of liberalising the trade in textiles and clothing, further intensified restrictions on imports,
specifically affecting the developing country exporters of the textile and clothing products.
Increased usage of several MFA measures tended to further erode the trust which developing
countries had originally placed in the MFA.

The MFA set the terms and conditions for governing quantitative restrictions on textile and
clothing exports of developing countries either through negotiations or bilateral agreements or on
a unilateral basis. The bilateral agreements negotiated between importing and exporting
country’s contained provisions relating to the products traded but they differed in the details.
The restraints under the MFA were often negotiated, or unilaterally imposed at relatively short
intervals, practically annually. The quotas could be either by function or fibre

Under the MFA, product coverage was extended to include textiles and clothing made of wool
and man-made fibres (MMF), as well as cotton and blends thereof. With regard to applications
of safeguard measures, import restrictions could be imposed unilaterally in a situation of actual
market disruption in the absence of a mutually agreed situation. However, in situations
involving a real risk of market disruption only bilateral restraint agreements were possible. The
Textile Surveillance Body (TSB) was set up to monitor disputes regarding actions taken in
response to market disruptions.

43
The MFA permitted certain flexibility in quota restrictions for the exporters so that they could
adjust to changing market conditions, export demands and their own capabilities. The MFA also
provided for higher quotas and liberal growth for developing countries whose exports were
already restrained. The MFA asked the participants to refrain from restraining the trade of small
suppliers under normal circumstances. In general, developed countries, under MFA, chose not to
impose restrictions on imports from other developed countries

The TSB ensured compliance by all parties to the obligations of bilateral agreements or unilateral
agreements. It called for notification of all restrictive measures. A Textiles Committee –
established as a management body consisting of all member countries – was the final arbiter
under the MFA and worked as a court of appeal for disputes that could not be resolved under
TSB.

Unsatisfactory experience with several extension protocols of the MFA, retention clauses, such
as “good will”, “exceptional cases”, and “anti-surge” and other trade related factors led the
developing countries to press for the inclusion of the textile issue in the agenda of the GATT
Ministerial meeting.

The eventual outcome of prolonged negotiations was the Agreement on Textiles and Clothing.

Agreement on Textiles and Clothing (ATC)

The ATC calls for a progressive phasing out of all the MFA restrictions and other discriminatory
measures in a period of 10 years. In contrast to the MFA, the ATC is applicable to all members
of the WTO.

Four Steps over 10 Years

44
Steps Percentage of products How fast remaining
to be brought under quota should open up,
GATT (including if 1994 rate was 6%
removal of quotas)

Step 1 16 percent (minimum 6.96 percent


taking 1990 imports as annually
1st Jan 1995 – 31st Dec 1997
base)

Step 2 17 percent 8.70 percent


annually
1st Jan 1998 – 31st Dec 2002

Step 3 18 percent 11.05 percent


annually
1st Jan 2002 – 31st Dec 2004

Step 4 49 percent (maximum) No quotas left

1st Jan 2005

Full integration into GATT and


final elimination of quotas , ATC
terminates

Recent studies indicate that India is beginning to lose out to its rivals. In one survey of US textile
and apparel imports, China and Hong Kong had higher market shares than India. In certain
categories, other Asian low cost producers like Pakistan and Indonesia had higher market shares
and had emerged as close competitors to India. Because many of these countries depend on
imports, however, India can take advantage of home production.

45
+ Garmenting and Knitting de-reserved to allow the units to grow bigger to be

able to service large orders and large clients

+ Labor laws in India become industry friendly

+ Garment parks come up in key regions giving a boost to exports

+ Successful Quota Phase-out without exports getting restricted by QRs

46
Fig in US $ Mn

1994 1998 2002 2005* 2015*

Yarn 590 1780 2333 2701 3131

Made-ups 851 1498 2620 4527 11266

Fabric 1214 1716 2512 3530 7100

Garments 3713 4829 6510 10794 21711

Total 6368 9823 14035 21552 43208

* Projections

Implications on Indian Exports (Pessimistic Scenario)

Yarn

- Change works to the advantage for S. Korea/ASEAN/Far-East

- Demand for packages increases

- EEC other garment supply countries invest in back-end processes

Fabric/Made-ups

- Environmental Clause impacts

- Investment in processing does not happen

- Blends and synthetic fabrics dominate reducing advantage of Indian cotton

47
Garments

- Social clause impact leading to ban on some categories, etc.

- SSA is a reality impacting exports of garments from India to USA and EU

- FTA becomes a reality

- Other projectionist measures come up

As opposed to the optimistic scenario, the pessimistic scenario shows a shortfall of nearly US
$4000 mn of exports in year 2005 and the exports are not likely to be much higher than the
present figures. It would also lead to development of textile and clothing industry in the other
nations and India would lose out as a significant player in the industry. This would also stifle the
domestic textile industry which would be in a very weak position to compete with imports.
(These are expected to become cheaper with import duty rationalization as per international
treaties and cost competitiveness of overseas players). Some of the subsidies currently extended
by the Indian government to promote exports which are sector specific (TUF, 80 HHC) or region
specific (EPZS, EOUS) may also need to be withdrawn.

Fig in US $ Mn

1994 1998 2002 2005* 2015*

Yarn 590 1780 2003 2126 2022

Made-ups 851 1498 2038 2427 3098

Fabric 1214 1716 1931 2050 2154

Garments 3713 4829 5435 5939 6885

Total 6368 9823 11408 12542 14159

* Projections

48
To effectively tackle the situation India needs to invest in research and development to develop
new products, reduce transaction costs, reduce per unit costs, and finally, improve its raw
material base. India needs to move from the lower-end markets to middle level value-for-money
markets and export high value-added products of international standard. Thus the industry
should diversify in design to ensure quality output and technological advancement.

The weakest links in the entire chain are the powerlooms and the processing houses. The
latter especially are very important because they are responsible for the highest value addition in
the manufacturing line. A powerloom co-operative structure could be evolved for pooling of
common services and functions such as quality testing, marketing, short-term financing, etc.
Further, because of the geographical proximity enjoyed, a cluster approach can be adopted.

The government also needs to make policy changes like dereserving the small-scale
sector so that it can achieve economies of scale and adopt a synergistic approach.

Handlooms by their very nature can adopt a strategy of "niche” marketing. In this
respect, export promotion, common credit and marketing facilities and more significantly
publicity are important areas for co-operation. Here too, a co-operative structure would be useful
though government agencies should be involved because of their outreach. Newer and more
innovative forms of involvement are required where decentralisation should be a key element.

India has made little attempt to forge partnerships – in equity, technology and distribution
in overseas markets. The newer nuances of global apparel trade demand joint control of brand
positioning, distributing and quality assurance systems.

The Indian textile industry has recognised the need for a cradle-to-grave approach when
tackling environmental issues i.e. eco prescription should be applied right from the stage of

49
cultivation to spinning to weaving to chemical processing to packaging. Here especially there is
great scope for private -public partnerships.

A great deal of work has been done by Indian trade and industry to comply with
ecological and environmental regulations, and so Indian garments can adopt an appropriate label
signifying a distinct quality.

Efficiency and output of handloom and powerloom sectors also needs to be increased.
The clothing sector needs the support of high quality and cost-effective cloth processing
facilities. Modernisation of mills is a must.

Human resource is another area of focus. The workforce must be trained and oriented towards
high productivity.

The business environment of the future will be intensely competitive. Countries will want their
own interests to be safeguarded. As tariffs tumble, non-tariff barriers will be adopted. New
consumer demands and expectations coupled with new techniques in the market will add a new
dimension. E-commerce will unleash new possibilities. This will demand a new mindset to
eliminate wastes, delays, and avoidable transaction costs. Effective entrepreneur-friendly
institutional support will need to be extended by the Government, business and umbrella
organisations.

NATIONAL ECONOMIC POLICY

Industrial Policy / Textile Policy

Planning Financin Investme Export Manpowe R&D Infrastru

50
g nt r cture

Competiti Credits Promotion Bilateral Education Quality Ports


ve agreement control
positionin s
g

Evaluatin Aid Informatio Export Training Productivi Container


g through n promotion ty s
domestic multi- technolog
and lateral y
foreign agencies
needs

Export Sector Developm Skills and Standardis Airports


strategy specific ent of developm ation
support ent
industries

Export Machiner Welfare ISO 9000 Roads


financing y / spares

51
Synthetic Literacy Packaging Rail
raw
materials

Language R&D Telecom

Entrepren Ecology
eur standards
developm
ent

Power

Water

Gas

52
PROCESS FLOW CHART OF TEXTILE MANUFACTURING

Spinning

Weaving

Dyeing +Printing+ Finishing

Garments Manufacturing

Flow Chart of Spinning

Blowroom

Carding

Drawing

Combing

Drawing

Roving Manufacturing

Ring Spinning

Flow Chart of Weaving

Yarn from spinning section


53

Doubling and Twisting

Winding

Creeling

Warping

Sizing

Winding on weavers beam

Weaving

Flow Chart of Dyeing

Inspection of grey cloth



Stitching

Cropping

Brushing

Singeing

Desizing

Scouring
54

Bleaching

Souring

Washing

Drying

Mercerizing

Dyeing

Aftertreatment

Finishing

Inspection

Packing

Baling

FLOW CHART OF PRINTING

Inspection of grey cloth



Stitching

Cropping
55

Brushing

Singeing

Desizing

Scouring

Bleaching

Souring

Washing

Drying

Mercerizing

Printing

Aftertreatment

Finishing

Inspection

Packing

Baling

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FLOW CHART OF GARMENT MANUFACTURING

Design / Sketch

Pattern Design

Sample Making

Production Pattern

Grading

Marker Making

Spreading

Cutting

Sorting/Bundling

Sewing/Assembling

Inspection

Pressing/ Finishing

Final Inspection

Packing

Despatch
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Possible Indo-German Co-operation in Textiles

Areas of Co-operation

Provision of co-operative structures for quality testing, marketing, brand-building

Technological upgradation (egs. Effluent treatment plants, energy saving devices, and
other machinery related directly to the production process like spreading, cutting,
finishing, etc.)

Adoption of environment-friendly technology to pre-empt the adverse impact of non-


tariff barriers. This includes environmental monitoring / testing equipment and services,
combating air pollution (package scrubber, special air pollutant treatment for H 2S, CS2),
solid waste removal, wastewater disposal

Development of textile-specific software for India, Computer-Aided Textile Designing,


aiding IT integration

Working out alternative techniques / frame conditions such that sanitary and phyto-
58
sanitary measures are not a problem

Managerial training to encourage adoption of techniques like JIT, Quick Response


Systems

Usage of EPS (Electronic Point of Sale) software

Promoting labels like RUGMARK (carpets) in textiles so that consumers are satisfied
that child labour has not been employed, to counter negative publicity generated by the
"Clean Clothes" movement, etc.

Promoting hand-made articles by improving quality of raw materials and introducing


machinery where possible in the process so as to maintain standards of quality and
design

Development of new products

Adoption and adaptation of state-of-the-art information technology in enterprise resource

59
planning so as to pre-empt non-tariff barriers which curtail markets for the Indian textile
industry

Helping firms build close relationships with customers

Training centres

Short-term credit

Improvement of synthetic fibre-base to reap economies of scale, use of genetic


engineering, bio-technology, and cellular biology in both natural and synthetic fibre-base

CHAPTER- 2

REVIEW OF LITERATURE

60
2.1 Meaning and Importance of Financial Statement Analysis

Author: Rashid Javed


All financial documents are essentially historical documents. Financial statement
involves careful selection of the data for the primary purpose of forecasting the financial health
of the company. This is accomplished by examining trends in key financial data, comparing
financial data across companies and analyzing key financial ratios.

Managers are widely concerned with financial ratios. The specific ratios selected depend
on the company’s strategy. Since managers must report to shareholders and may wish to raise
funds from external sources, managers must pay attention to the financial ratios by external
inventories to evaluate the company’s investment potential and creditworthiness.

Although financial statements analysis is a highly useful tool, it has two limitations.

These two limitations involve the comparability of financial data between companies and
the need to look beyond ratios. Comparison of one company with another can provide valuable
clues about the financial health of organization. Unfortunately, differences in accounting
methods between companies sometime make it difficult to compare the companies financial data.

Ratios should not be viewed as an end, but rather they should be viewed as a starting
point, as indicators of what to pursue in greater depth. They raise many questions, but they
rarely answer any questions by themselves. The analyst should look at industry trends,
technology changes, changes in consumer tastes changes in broad economic factors and changes
within the firm itself. A recent change in a key management position might provide a basis of
optimism about the future, even though the past performance of the firm may have been
mediocre.

2.1.2 The importance of Business Financial Analysis and Management

Author: Frank Goley


Planning and control are the two most important ingredients to a successful business. A
business plan takes most of the guess work out of business strategy and control through solid
financial analysis. Financial data provides a way to gauge where you are in your strategic plan,
61
telling you where changes in your plan are necessary. Because of this, financial data analysis
and management are vitally important to run a successful business.

2.1.3 Understanding Financial Statements

Author: Matt Bacak


The value of the accurate financial statements generated is undisputed. This is as
financial statements are like windows into the health of a company. Just by viewing financial
statements, adept business owners will be able to determine the strengths and weaknesses at the
time that the statement was generated. With this, the owner can then chart the way into the
future for the company has.

A person can call himself a full or part-time stock trader/investor while maintaining other
professions. When a stock trader/investor has clients, and acts as a money manager or advisor
with the intention of adding value to his clients finances, he is also called I financial advisor or
manager.

2.1.4 Financial Statement Analysis

Author: Shubhra
The financial statement analysis provides a systematic approach for extracting and
evaluating the accounting information needed for a specific business purpose. Although every
analysis is different, the process used is likely to be similar.

The financial statement analysis process includes establishing a goal or goals that the
analysis is supported to achieve which helps draw the analyst’s attention to the most relevant
information. The selection of techniques to generate the information required depends on the
goal of the analysis. As ratios, common techniques include common-size statements, vertical
analysis and horizontal analysis. Finally, interpretation of the results requires putting the results
in context, for example, by comparing results with industry benchmarks.

62
Kothari C.R., “Quantitative Techniques”, Pg10-20, “I have taken knowledge about
research design, sample design & sampling. In this I got what type of sample can be chosen and
more about sample design”

Berry G.C., “Marketing Research10”, “Some theoretical knowledge about the type of
data”

Pandey, I.M “Financial Management” Pg-143-145 “How to prepare comparative


balance sheet and how can we evaluate”.

CHAPTER 3

63
COMPANY PROFILE
K.m.b TextileTextile Ltd. was established in the year 1995 in the South Indian town,
Karur and it is one of the first 35 companies emerged for home textile products in this part of
South India. Raajkamal products are known for their innovative designs, which are a unique
blend of traditional and modern trends and our products are made out of finest cotton and also
hand woven to perfection in profusion of delightful colors and designs.

Raajkamal, over the years, has been a quintessence of the demanding virtues of the
international market by its commitment for Absolute quality in every transaction, time-bound
delivery, irrespective of the volumes, Lasting Impressions in terms of work ethics, Affordable yet
competitive pricing & Stunning display of world-class designs.

Manufacturer and Exporter of mainly cotton Home Textiles and Furnishing Products
K.m.b Textilewas established way back in 1995 under the visionary par excellence of Mr. M
Raajkamal, who can only be commended for all his efforts in making K.m.b TextileTextile what
it is stands to be today.

However the industries’ above strengths get substantially diluted on account of


production process disadvantages in certain areas in terms of technology and supply chain
management deficiencies. It is high time the adequate corrective measures were taken to prepare
a technology to meet the challenges ahead.

1.3.1 PRODUCTS

Manufacturer and exporter of home textiles

 Kitchen & culture


 Table linen
 Table cloths
 Woven
 Kitchen linen

64
CHAPTER- 4

Findings, Suggestions & Conclusion

4.1 FINDINGS

65
 Only in the year 2014-10, the current ratio of the company was 1.19 which 1.1 closed to
the standard and ratio 2:1.
 The quick asset ratio has been increasing to 0.71 in the year of 2014-10
 The preparatory ratio of the company is to fluctuated.
 The debt equity ratio has decrease from 2.60 to 0.94 it is a good indicate from solvency
of the company.
 The fixed asset turnover ratio has been increasing from 1.20 to 1.38 from 2015-11 to
2018-14.
 The debtors collection period has been increasing to 46 time from 2017-13
 The creditors turnover ratio has been increasing to 0.49 from 2014-10
 In the year of 2014-10, an inventory has been decreased to compare with last year
2014-10
 The liabilities shows that a negative change in the year 2014-10. So to improving the
profitability of the company.
 The sundry debtors shows that decrease to compared with last year.
 The liability shows that positive change. So the company decreasing the unwanted
expenditure.
 The cash and bank balance shows that a positive change. So improving the profitability.
 The percentage of loans and advances has been decrease. So increasing the profit.
 The contribution of the inventories to the current assets has been increasing.

4.2 SUGGESTIONS

 The growth rate in the net profit must be increased by reducing the non-operating
expenses.
 The liquidity assets of the company are to be increased to improve the liquidity position.
 The current level of debt equity ratio shall be maintained in the future.
 Steps must be taken the current ratio of the company to the standard norms 2:1.
 The gross profit of the company can be increased by reducing operating expenses.

4.3 CONCLUSION

The present studies aim to new financial position of the company using ratio analysis.
The research used secondary data were collected from the company annual reports. Ratio
analysis was processed from the year 2014-10 using the data. The research analyzed the data by
the method of the ratio analysis the provide that the company position was good.

66
Therefore the companies try to retain the position and also to improve it is financial
position further. The results show that inventory to current asset level and inventory turnover
ratio is good.

The firm must take steps to the cash in hand by the value of cash in hand at maintained
and the avoid fluctuation. Also the management is advised to the increasing the turnover ratio to
maintaining the financial trend of the company.

67
REFERENCES
1. KHAN.M.Y.JAIN P.K. Financial Management Text & Probs Tata Mc- Graw Hill
Publishing Company 2008.
2. PANDEY.I.M. Financial Management, New Delhi, Vikas Publishing House Pvt., Ltd.,
1995 ANNUAL & AUDITED REPORTS The India cements Ltd., 2005-2014. .
Sreenivasan N.P “Management Accounting”.
3. . Dr. R.Ramachandran & Dr. R. Srinivasan “Management Accounting “
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5. Financial Management, Shashi K. Gupta, R.K.Sharma.
6. Cost Accounting - M.Y Khan, P.Y.Jain Tata Mc Graw Hill
7. Research Methodology - C.R.Kothari Wishwa Prakashan 2 nd Edition, New Delhi,
1990
8. Management accounting, T.S.Reddy, Y.Hari Prasad Reddy
9. Textile India Progress (World textile News Leader)

Websites:

1. http://www.docstoc.com/docs/7956270/Financial-Statement-Analysis
2. http://www.scribd.com/doc/13242036/Financial-Planning-and-Analysis
3. http://www.focus.com/briefs/finance/what-are-different-methods-financial-

statement-analysis/.
4. http://www.cfainstitute.org/learning/topics/Pages/finstatementanalysis.aspx
5. http://www.bankersacademy.com/financial-statement-analysis-training.php
6. http://www.investopedia.com/terms/f/financial-analysis.asp
7. www.answers.com/topic/financial-performance
8. www.googlebooks.com/Management Accounting
9. www.sdccb.com
10. http://www.financialstatementanalysis.org/financial-statement-analysis/

Books

1. Dr. S.N. MAHESWARI (2000) Tenth edition “Principles of Management


a. Accounting” Sultan Chand & Sons, Delhi-53.
2. M.Y.KHAN & P K JAIN (2002) Third edition “Management Accounting”
a. Tata McGraw-Hill Publishing Company Limited, New Delhi.
b. Accounting for Managers-2nd Edition –Mohammed Arif Pasha
3. L.M.Pandy (2004) fourth edition “Financial Management”, New Delhi, Vokash
Publishing House Pvt.

68
4. Prasanna Chandra (2005) third edition “Financial Management” Theory and

Practice, Tata McGraw Hill.


5. T.S.Reddy and Y.Hari Prasad Reddy (2002) second edition “Management

Accounting”, Margham Publications, Chennai.

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APPENDIX

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