Introduction of the organization. In 1962 the late Mr. D.

Samson Rajapaksa, the founder of DSI (made up by the first letters of the name D Samson Industries) took his first steps to realizing a vision in making DSI Sri Lankas No.01 footwear company. This mission was based on firm principals, business integrity and offering his customers quality and good value above all else. His journey through uncharted terrain took a relatively unknown name from village of Bataduwa in the Southern capital town of Galle in Sri Lanka and carefully nurtured it into a brand leader with national & international recognition. The task was without the pitfalls and obstacles, reward and successes associated with the building of a strong brand that had to stand the rest of the time. Time that put to test his courage and determination to succeed against all odds and convert his vision in to a reality. He cleverly identified the various opportunities that came his way and set the foundation for a strong brand and a diverse group of companies. He loved his country, the people and revered and practiced traditional family values, particularly those of the south that have now been enshrined into the DSI corporate culture at every level. His special relationship with his employees was that of a father to a son that extended beyond the realm of his own family. Today DSI has a share in the quality driven markets around the world while touching the hearts of 18 million citizens in Sri Lanka. D. Samson Industries Ltd is a subsidiary company of DSI Holdings Limited. D. Samson Industries Ltd manufactures footwear for Gents, Ladies and Children which can be described as footwear for the whole family. Mentioned below is the product categories that is been manufactured at the company. 1. 2. 3. 4. 5. 6. 7. 8. Rubber and EVA slippers Gents slippers and sandals Ladies slippers and sandals Infant shoes and sandals Children and Teenage slippers and sandals Boys & Girls School Uniform Shoes Sports and Party shoes Gents Leather & PVC shoes

Started with a work force of 16 members in back yard, today this company has a skilled work force of 870 employees while indirect employment through subcontracting is more than 1000 individuals.

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The production plant includes a cutting, sewing, and assembling section with modern shoe machinery and technologies. Administration sections control both demand and supply chain activities. Supplies, accounts, Planning, Exports, Information Technology, Human Resource and Marketing section provide their services to manage the production activities. In 1970s with controlled economic conditions the company enjoyed a considerable market share but in late 80s with open economic conditions it was a race against time and productivity. With a mix of creativity, productivity, efficiency and innovation in 1999 DSI footwear became the market leader in Sri Lanka. With increasing competitiveness in the national as well as international markets, productivity was not new word. We have identified that unless the company does not agree to change and concentrate on productivity, the survival in such competitive markets will be utmost difficult. D. Samson Industries Ltd is the only footwear company in Sri Lanka to have an IFS ERP system and all Production, Distribution and Finance areas are handled through this system. At every production level the progress is been entered to the system. With productivity improvements and innovation D. Samson Industries will continue its journey towards excellence and maintain the position of SRI LANKAS NO 1 FOOTWEAR.

Vision, Mission and Values of the Organization. Vision To be a regionally recognized manufacturer of footwear and components. Mission We will be the manufacturer of footwear & components to the whole family, while optimizing returns to stakeholders. Values To visualize our business through the eyes of our customers, towards constantly performing beyond their expectations.

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01. Project. Company is planning to purchase a sewing machine for Rs.610,000. The lifetime of the machine is 07 years and scrap value at the beginning of 7th year is estimated to 10,000 working capital requirement for the project is 100,000 and it is fully recovered at the end of the project time. Following are cash flows generated from the project. Year Cash flows 1 130,000 2 130,000 3 170,000 4 160,000 5 190,000 6 150,000 7 130,000 The cost of capital of the company is 15% and the company face tax of 50% on the profit after one year this machine is entitle a capital allowance is 25%. (Tax should be adjusted.)

Calculations
Year Cash flow Estimated Working capital (10,000) (10,000) (10,000) (10,000) (10,000) (10,000) (10,000) Saving on capital allowance 76,250 76,250 76,250 76,250 76,250 76,250 76,250 Tax Discount factor Present value (610,000) 170,639 99,238 112,596 80,752 87,613 52,416 45,577 Cumulative PV (610,000) (439,361) (340,123) (227,527) (146,775) ( 59,162) ( 6,746) 38,831

0 1 2 3 4 5 6 7

(610,000) 130,000 130,000 170,000 160,000 190,000 150,000 130,000

(65,000) (65,000) (85,000) (80,000) (95,000) (75,000)

0.8695 0.7561 0.6575 0.5717 0.4971 0.4323 0.3759

II.

Pay back period Pay back period = 6 years and 6,746 X 12 months 38,831 = 6 yrs and 2.08 months = 6 years and 3 months

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III.

Accounting Rate of Return ARR = Average Annual Profit x 100 Net investment in the project

IV.

Net Present Value NPV = PV of cash inflows PV of cash outflows = (170,639+99,238+112,596+80,752+87,613+52,416+ 45,577) - 610,000 = 648,831 610,000 = 38,831

V.
Year

Internal Rate of Return

Cash flow after the adjustments (610,000) 196,250 131,250 171,250 141,250 176,250 121,250 121,250 Discount factor 15% 0.8695 0.7561 0.6575 0.5717 0.4971 0.4323 0.3759 Present value (610,000) 170,639 99,238 112,596 80,752 87,613 52,416 45,577 Discount factor 20% 0.8333 0.6944 0.5787 0.4822 0.4018 0.3348 0.2790 Present value

0 1 2 3 4 5 6 7

(610,000) 163,535 91,140 99,102 68,110 70,817 40,594 33,828

IRR

= 15 %+( 38,831 ) (20%-15%) 38,831+42874 = 0.15+ (0.4752) (0.05) = 0.15+0.0237 = 17%

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D. Samson Industries (Pvt) Ltd Income Statement For the year ended 31 March 2010 and 2009 2010 Sales Cost of sales Gross profit Other operating income Distribution costs Administration expenses Operating profit / (loss) Non operating income Finance costs Profit / (loss) before tax Income tax expenses Profit Attributable to Shareholders
176,764,289 (154,058,629) 22,705,660 2,270,560 (3,405,849) (12,507,680) 9,062,691 7,431,406 (7,975,168) 8,518,929 (724,109) 7,794,820

2009
170,431,642 (168,501,210) 1,930,432 1,820,450 (289,565) 1,520,310 4,981,627 4,084,934 (4,383,834) 4,682,727 (383,924) 4,298,803

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Balance Sheet as at 31st March 2010 and 2009 2010 (Rs.) 2009(Rs.)
Assets Employed Non-Current Assets Property, Plant & Equipment Intangible Assets 30,915,269 2,576,272 33,491,541 Current Assets Inventories Trade and Other Receivables Income Tax Refund Due Cash and Cash Equivalents Total Assets Equity And Liabilities Capital and Reserves Stated Capital General Reserve Retained Earnings Shareholders Funds Non-Current Liabilities Interest Bearing Borrowings Deferred Tax Retirement Benefit Obligation 135,436 2,785,072 149,662 3,070,170 Current Liabilities Trade and Other Payable Short-Term Borrowings Current Portion of Interest Bearing Borrowings Bank Overdraft 23,187,433 956,434 629,768 22,217,561 46,991,196 Total Equity and Liabilities 128,813,621 2,650,381 349,576 953,497 7,229,235 11,182,689 91,839,945 115,389 141,653 105,028 362,070 23,433,128 4,000,000 51,319,127 78,752,255 23,433,128 4,000,000 52,862,058 80,295,186 19,322,043 23,186,452 1,288,136 51,525,449 128,813,621 10,102,394 20,204,788 2,755,198 34,899,179 91,839,945 23,878,386 23,878,386

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I.

Activity ratios a) Average Collection period Average collection period = Accounts receivables Average Daily Credit sales
In 2010 ACP

23,186,452 (176,764,289/365) = 48 days = 20,204,788 (170,431,642/365) = 43 days

In 2009 ACP

b) Inventory turnover ratio Inventory turnover ratio

= Sales Inventory
= 176,764,289 19,322,043 = 9.15 = 170,431,642 10,102,394 = 16.87

In 2010 ITR

In 2009 ITR

c) Fixed asset turnover ratio Fixed asset turnover ratio =

Sales Net fixed Assets

In 2010 FATR

= 176,764,289 30,915,269 = 5.72 = 170,431,642 23,878,386 = 7.14

In 2009 FATR

d) Total asset turnover ratio Total asset turnover ratio = Sales Total Assets
In 2010 TATR = 176,764,289 128,813,621 = 170,431,642 91,839,945 = 1.37

In 2009 TATR

= 1.86

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e) Accounts Receivable Turnover ratio Accounts Receivable Turnover ratio = Annual credit sales Accounts receivable
In 2010 ARTR = 176,764,289 23,186,452 = 170,431,642 20,204,788 = 7.62

In 2009 ARTR

= 8.44

II.

Liquidity ratios a) Current ratio Current ratio

= Current Assets Current Liabilities

= 95,322,080 = 2.03
46,991,196

In 2010 Current ratio In 2009 Current ratio

= 67,961,559 = 6.08
11,182,689

b) Acid-Test ratio Acid-Test ratio = Current Assets-Inventory Current liabilities

In 2010 Acid-Test ratio = 95,322,080-19,322,043 = 1.62
46,991,196

In 2009 Acid-Test ratio

= 67,961,559-10,102,394 = 5.17
11,182,689

III.

Leverage ratios a) Debt Total Asset Ratio Debt Total Asset Ratio

= Total Debt Total Assets

= = NCL + CL Total Assets NCL + CL Total Assets = 50,061,366 = 0.39 128,813,621 = 11,544,759 = 0.13 91,839,945

In 2010 Debt Total Asset Ratio In 2009 Debt Total Asset Ratio

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b) Debt Equity Ratio Debt Equity Ratio

= Total Debt Total stockholders equity

= 50,061,366 23,433,128 = 11,544,759 23,433,128 = 2.14

In 2010 Debt Equity ratio

In 2009 Debt Equity ratio

= 0.49

c) Long Term Ratio Long Term Ratio

= Long Term Debt Total stockholders equity

= 3,070,170 23,433,128 362,070 23,433,128 = 0.13

In 2010 Long Term Ratio

In 2009 Long Term Ratio

= 0.02

d) Times Interest Earned Ratio

Times Interest Earned Ratio = Profit before interest and taxes Total Interest Changes In 2010 T-I-E Ratio In 2009 T-I-E Ratio = 8,518,929 = 4,682,727

IV.

Profitability ratios a) Gross Profit Margin Gross Profit margin

= Gross profit Sales

= 22,705,660 X 100 = 12.85% 176,764,289 = 1,930,432 X 100 = 1.13% 170,431,642

In 2010 Gross Profit Margin In 2009 Gross Profit Margin

b) Operating profit margin Operating profit margin = Operating Income Sales

In 2010 Operating Profit Margin = 9,062,691 X 100 = 5.13% 176,764,289

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In 2009 Operating Profit Margin = 4,981,627 X 100 = 2.92% 170,431,642

c) Net profit margin Net profit margin

= Net Income Sales

In 2010 Net Profit Margin = 7,794,820 X 100 = 4.41% 176,764,289 In 2009 Net Profit Margin = 4,298,803 X 100 = 2.52% 170,431,642

d) Return On Assets (ROA) Return on assets = Net Income Total Assets

In 2010 ROA = 7,794,820 X 100 = 6.05% 128,813,621 = 4,298,803 X 100 = 4.68% 91,839,945

In 2009 ROA

e) Return On Equity (ROE) Return on equity = Net Income Common Equity

In 2010 ROE = 7,794,820 X 100 = 9.9% 78,752,255

In 2009 ROE

4,298,803 X 100 = 5.35% 80,295,186

f) Earnings per share Earnings per share

Net Income Number of shares of common Stock outstanding

= 14.2

In 2010 EPS

= 7,794,820 548,758

In 2009 EPS

= 4,298,803 548,758

= 7.83

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g) Price Earnings ratio Price earnings ratio = Market price per share Earnings per share
In 2010 PE ratio = 86 14.2 50
= 6.05

In 2009 PE ratio

= 6.38

7.83 V. Solvency ratios.

a) Solvency Ratio After Tax Net Profit + Depreciation Long Term Liabilities + Short Term Liabilities In 2010 Solvency ratio = 7,794,820 + 16,681,537 = 7.97 3,070,170 + 46,991,196 In 2009 Solvency ratio = 4,298,803 + 12,884,513 = 47 362,070 + 11,182,689 =

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