A Project Report On Ratio Analysis at Gadag Textile Mill Project Report Mba Finance Bec Bagalkot Mba
A Project Report On Ratio Analysis at Gadag Textile Mill Project Report Mba Finance Bec Bagalkot Mba
A Project Report On Ratio Analysis at Gadag Textile Mill Project Report Mba Finance Bec Bagalkot Mba
LIST OF TABLES
LIST OF CHARTS
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A STUDY OF ANALYSIS AND INTERPRETATION OF FINANCIAL
STATEMENTS OF THE GADAG CO-OPERATIVE TEXTILE MILL LTD
I Chapter 1
Executive summary
Purpose of the Study
Objectives of the Study
Methodology
Limitations of the study
II Chapter 2
Introduction to the company
History of the company
Introduction
Profile of the company
Organization structure
III Chapter 3
Introduction to the topic
Techniques of analysis and Interpretation
Findings
Suggestions
Conclusion
SWOT Analysis of the company
IV Chapter 4
Appendix
Bibliography
Annexure
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CHAPTER-1
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EXECUTIVE SUMMARY:
In this report I made an effort to know the financial position of the GCTM
Company .My topic is “A study of financial Analysis and Interpretation” which
means that a process to identify the financial performance of a firm by properly
establishing the relationship between the items of balance sheet and profit or loss
account. Thus, we can say that, Financial Analysis is a starting point for making plans
before using any sophisticated forecasting and planning.
A company‟s balance sheet and profit & loss accounts are valuable
information sources for identifying risk taking and assessing risk management
effectiveness. Although amounts found on these statements does not provide valuable
insights of performance so Financial analysis and Interpretation is required for
determining good or bad performance of company and also for determining its causes.
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The study includes the calculation of different financial ratios, Trend analysis,
comparative income and Balance sheet, common size cash flow and fund flow
statements. It compares five years financial statements of the company to know its
performance in these different years.
This report includes the profile of the G.C.T.M.Hulkoti. It contains brief
introduction ,nature of the business, product profile and process and organization
structure.
This report includes the findings and suggestions, conclusions of the study
done in order to give better suggestions.
This study has done by taking the past five years financial statements of the
company.
For the analysis of data the simple percentage method is used and the data is
shown by using the some graphs.
Finally the study has helped to me in many ways to acquire the knowledge
about the company performance and its profitability.
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DATA COLLECTION METHOD: There are two types of data collection methods.
1. Primary data collection method
2. Secondary data collection method
PRIMARY SOURCES:
The primary data are collected by the thorough and detailed discussion was conducted
with the financial controller and Accounts officer and also discussion with college
internal guide.
SECONDARY SOURCES:
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The secondary data includes sales reports, purchase reports and financial statements
of the company.
And also information from the text sources.
SAMPLING DESIGN:
Sampling unit : Financial Statements
Sampling Size :Last five years financial statements
Sampling procedure : Direct
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CHAPTER-2
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The Gadag Co-operative Textile Mill is established in the year 1972 by late
shri K.H.Patil .It is started with project cost of Rs.220 Lakhs.
INTRODUCTION
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The Gadag co-operative textile mill is started in the year 1972 with a project
cost of Rs.220 Lakhs. The G.C.T.M commenced is production in the year 1973. The
project cost is met with the following manner.
Total - Rs.220.00lakhs
INFRUSTRUCTURE FACILITY:
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220 lakhs
Total
Project cost of Rs.220Lakhs is met for all these facilities i.e. to establishment
of the company.
CUSTMORS:
The first step the company purchases the raw material i.e. cotton from
the farmers. Then it mixes it with different quality cotton according to the
quality of yarn needed.
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The next step is cleaning the minor part and spraying the water to it.
Then it kept 1 day in the cool place. Next step it goes to major cleaning part it
goes to all cleaning of the cotton.
The next process is carding process. Here the cotton will become
smoothly and white. Next goes to the simplex method. In this cotton becomes
big layers and it makes the group of layers.
The next procedure is rolling and grilling. Here the big layers are
rolled and it is separated from the group and comes in the form of loose thread
and next process is drafting and twisting and the thread becomes strong and it
comes layer by layer in the form of thin yearn. The next step is noting here if
thread goes into two parts the machine will join it. It is called noting process.
Finally after all these process the raw material is converted into the
finished goods which are in the form of yarn.
MISSION:
“To Purchase the creation of values for all its Customers,
Employees, members (shareholders) and society at large”
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VISION:
COMPITATORS:.
Modern days are the competitive days wherever you go, in which ever field
you enter there is competition; one must know how competition in the market
makes it absolutely necessary for manufacturers to think of advertising. For
new product, strategies and by doing all these to in areas the sales.
COMPANY PROFILE:
THE GADAG CO-OPERATIVE TEXTILE MILL LTD.
Name HULKOTI – 582 205.
This Co-operative Society registered under the Co-operatives
Status Societies Act of 1959
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Area of
operation Gadag Haveri
New-Delhi, South Korea, China and Couple of European
Export places countries(through agents& Govt institutes)
Nature of
Business Production and sale of YARN
Membership
and Share
capital 3021 Co-operative societies and 817.71 Lakhs
No of
departments 8 [Eight] Departments
Number of
employees 450
Elected members – 18
No of Board of Ex – office members – 1
Directors Nominated by Govt – 3
Production
capacity 8,500 kgs of yarn per day as per the 2008-09 report.
Storage
capacity 7500 Million TON.
ORGANIZATION STRUCTURE:
Share Holders
Board of Directors
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Chairman
Managing Director
Workers
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Functions
.
1. Staffing & Employment
2. Welfare Amenities
3. Training & Development.
4. Compensation, Wage & Salary Administration.
5. Motivation & Incentives.
6. Employee records.
7. Labour on Industrial Relation.
8. Organizational planning, development & task specification
The Personnel Manager also says that Material may be purchased at the most
competitive prices and machines was worked to their full capacity but the output
cannot be maximized without the co-operation of the workers.
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The company works 24 hours a daily. The work is divided into 3 shifts i.e.
1) Permanent
2) Badli
3) Trainee or apprentice
1) Canteen:
The personnel department administers the canteen . the main
responsibilities are to prepare and distribute the food stuff as per the
scheduled timings the different counters and to maintain hygienic
condition printed and supplied by the company.
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2) Medical Facilities :
Workmen covered under the ESI scheme and their family members will
receive medical facility under the employees state insurance as in force
from time to time.And also one hospital is their in the organization
premises for general and first aid treatments.
3) Quarter’s Facilities :
The quarters are provided for the permanent employees who are
working in the GCTM. There are A,B,C,D and E type of quarter are
being provided to the employees on the seniority basis .
4) Transport Facilities;
The employees are provided with bus facilities.There are one bus and
one maxi cab is there which pickups the people scattered in the Gadag
city and after the duty hours they are dropped back at the same fixed
points
5) School and College :
ATTENDANCE:
1) Every employee shall be at this place or work at the time fixed and
notified under clause and of these standing orders from time to time.
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3) After the siren bell every employee should present at the place of
work.
4) The attendance register shall be entered from time to time cards and
any employees failing to record or get marked the time on the card is
liable to be treated as absent.
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3. Unpaid Salaries and Wages : Any salaries and wages due to the
employee
Not paid on the usual pay day on account of the salaries and wages
remaining unclaimed or for any other reason will be paid 3 days after
the specified date of payment or when claim has been substantiated by
the employee or on his behalf of his legal representative provided such
claim is made and substantiated within one year from the date on
which the salary or wages become due to the employee.
ADMINISTRATION DEPARTMENT
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Administrative department play very important role in the organization for its
smooth running of the business and success of this company is mainly depending on
the efficient administration of the G.C.T.M.
MODERNIZATION PROGRAMME
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To meet the standards of the quality yarn in demand, both in domestic as well
as in International markets, the Management of the Mills thought it inevitable to
launch another Modernization Programme covering Machinery from blow room to
Spinning was planned. This programme, with an estimated cost of Rs. 920 Lakhs was
approved by the national Co-operative Development Corporation (N.C.D.C.) and the
Government of Karnataka.
PURCHASE DEPARTMENT:
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COTTON PURHASES:
The mill purchase its cotton at the open auction held by co-operative namely
Gadag cotton sale society and T.A.P.C.S.M. society of the Annigeri , Gokak
and also mill has purchases cotton from other states like Maharashtra
Federation Punjab Federation, Tamilnadu, and from CCI(cotton co-operation
of India).
PURCHASE PROCEDURE:
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5. Then they bargain with the suppliers relating to the price. If suppliers if a
farmer or any of the private cotton trader then the bargaining is necessary.
If they purchase the cotton form CCI or MSCF the prices are fixed.
6. The payment period is usually 30 days to all suppliers.
7. Before bargaining with suppliers the company collecting the daily cotton
market reports which helps them to determining the price.
MAIN SUPPLIERS:
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2003-04 37.37
2004-05 33.37
2005-06 30.67
2006-07 29.40
2007-08 33.83
MARKETING DEPARTMENT
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Marketing of Yarn :
The mill manufactures 10s, 20s, 30s, 40s, 60s, 80s, 100s, 2/20s, 2/40s, 2/60s
etc. In the form of hanks as well as cones as per the prevailing market demand
sale of hank yarn and cone yarn from 50:50 respectively we have been
fulfilling the hank yarn obligation stipulated by the textile commissioner ,
government of India at the end of every quarter . The daily production of yarn
is about 8,500 kgs and mill is working round the clock for all the seven days
of the week.
Packing of Yarn:
1) By phone
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Sales promotion:
The company not adopted any Aggressive measures for the promotion of its
sales such as advertising lotteries etc. But some basic measures which are
adopted normally by every concern such as discounts.
STORES DEPARTMENT
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In G.C.T.M there is Stores Department is one which stores all the materials,
equipments and spare parts etc. Which are needed in the signalization for its
smooth running .The main function of this department is to provide the needs
of the organization i.e. machines spares parts, packaging materials, tools, oils
ect. To run business continuasally this department plays very important rolein
the organization. In this department they provide materials according to order
made by the different departments in the organization. The orderslip must be
sing by the M.Director department head.
a) Materials stores
b) General Stores.
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These all materials are stored under bin system. In this department each
material or item will be assigned a number to it which is called as Bin number.
There are about 11,000 items are maintained in this department and all have
been assigned in No‟s. Bin number is a 9 digit number, which will help in
The first three numbers in Bin card will giving the information about which
section . and the second 3 digit will gives information about which equipment
and the last 3 digit will gives information of which item it is.
At he time of each entry in the ledger they are quoting the date, item number
quantity price / piece, total price.
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PRODUCTION DEPARTMENT:
In mill they set the machines sequentially as per work flow i.e. plant layout
system is applied very systematically. In production to control the wastages, to save
the time, to increase work efficiency and to increase the productivity the plant layout
play a vital role. We study about plant layout in theoretically but this project helps me
to know it in practically .
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MIXING: Bales of different counts are mixed along with usable wastes,
on different percentage in the mixing bins, cotton bales of different quality are opened
and stacked, called stock mixing, 24 Hours for conditioning before it is process
further.
CARDING: Lap form Blow room feed to Cards where the cotton is
converted from Lap form to slive form. During this process trash, short fibers and
other impurities are extracted the different cleaning points, like licker in, Flats section
Units. The sliver is produced of different Hank depending on the counts.
SPINNING: The bobbins from the Preparatory process are feed to the
drafting rollers as final treatment to the material and further increasing the length and
reduction the cross section of the material. This process the material process through
Ring and Traveler and would on the bobbin to form a suitable package the giving
optimum of the twist depending on count of the yarn.
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DOUBLING: Here two yarn of the same count are doubled by giving
necessary twist in the form of package called bobbins.
REELING: Here single yarn or doubled yarn are wound on the swifting of
the machine called Reel in the form of Hank and are make in the form of Knots. There
are two types, a Plain or Cross Reel.
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o Cleaning efficiency
o Wrapping checking
o Naps study
o Uniformity checking
o Idle spindle
o Rewinding study
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o Knot inspection
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seeds
Spinning : The process of drawing out and twisting the fiber of cotton,
Wool etc. Into thread or yarn either by hand or machine.
Spindles : The rods or pins of spinning machine known as the ring frame holding
the bobbins on the which yarn wound as it is spun . Such spinning is
expressed in terms of the number or spindles or rotors.
Rotors : In the modern of spinning known as the open end spinning instead of
spindles rollers are used.
Hank & cones: Yarn is supplied to the market in to different forms hank yarn and
cone yarn . Hank yarn is convenient form of bleaching, ,
and transport but needs winding before placing on the loom .
It is used by hand loom weavers .Cone yarn however eliminates the
Need form winding and can be directly used in power looms .
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Lower counts indicates coarse yarn and higher counts indicates fine
Yarn
FINANCE DEPARTMENT
The mill has membership and paid up share capital as on 31st march 2007
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1) By issue of Shares
3) By raising loans
4) By entrance fees
6) By commercial institutions.
Deduction can be made from the sale of proceeds of the cotton brought by members
at rate not exceeding 7% of the sale products.
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The mill may raise loans discount on the bill and overdrafts as and when necessary
from the industrial finance corporation of India.
Introduction :
Funds available for a period of one year or less are called short term finance. The
short term funds are used to finance working capital. The main source of short term
working capital are as follows:
1) Trade Credit:
Trade credit refers to the credit that a customer gets from supplier of goods in
the normal course of business. In practice , the buying firm do not have to pay cash
immediately for the purchase made . This deferral of payments is a short term
financing called trade credit .It contributes to about one third of the short term
financing .Open account trade credit appears as sundry creditors on the buyers
balance sheet . Trade credit may also take the form of bills payable.
Banks are the main institutional source of working capital finance. After trade
credit, bank credit is the most important source of financing working capital
requirements of firms. A bank considers a firm‟s sales and production plan and
desirable levels of current assets in the determining its working capital requirements.
The amount approved by the bank for the firms working capital is called credit limit.
Bank do not lend 100% of the credit limit. A firm can draw funds from its bank within
the maximum credit limit sanctioned. It can draw funds in the following forms.
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b) Cash Credit: A borrower is allowed to withdraw funds form the bank up to the
sanctioned credit limit. He is not required to borrow the entire sanction credit, rather,
he can draw periodically.
3) Commercial Paper :
4) Installment Credit :
This is another method by which the asset are purchased and the possession of
goods is taken immediately but the payment is made in installment over a
predetermined period of time Generally interest is charged on the unpaid price or it
may be adjusted in the price. It is used as source of short term working capital.
5) Accrued Expenses :
Accrued Expenses are the expenses which have been incurred but not yet due and
hence not yet paid also. The most important item of accruals are wages and salaries,
interest and taxes. Wages and Salaries are usually paid on monthly, fortnightly or
weekly basis for the service already rendered by employees. In the same manner,
accrued interest and taxes also constitute a short term source of finance
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The GCTM have raised different variety of Finance for working capital purpose.
Which are as follows :
1) Trade Credit: We already set the trade credit is the credit that a customer gets
from the suppliers. GCTM purchased the cotton from different organization like
Cotton sale society of Gadag and Cotton Society of Annigeri . We can know the
percentage of trade credit in the balance sheet of GCTM.
2) The GCTM make the sale of different areas like Bangalore ,Solapur and also other
states .It also sells the yarn to Karnataka Handloom Development Corporation etc.,
from these some percentage of Advance they get.
2) N.C.D.C. Loan
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Rate fixing
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CHAPTER- 3
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Items includes Balance sheet, Profit and loss account, Reports and Explanatory
notes.
Here for the project the profit and loss a/cs, balance sheet are used for
comparative analysis and interpretation of the study.
1) Balance sheet:
ASSETS = EQUITIES
(A) = (E)
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Comparison.
The relationship can also be established from one item of statement to the
other item of statement. E.g.Net profit or gross profit to sales, current assets to current
liabilities, cost of sales to inventory, fixed assets to capital etc.
INTERPRETATION:
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Comparative statements
Comparative financial statements are those statements which summaries and present
related accounting data for number of years. It is an arrangement of the financial
statements in such a manner that each element of the financial statement is
comparable with same element of the financial statement of another period. Generally
the financial statements of two periods are used for comparable study. While pre-
paring comparative statements one should keep in mind that the accounting principles,
policies should be same. Any material change in such principles policies etc.
comparative statements useless.
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For the purpose of comparative analysis the financial statements are classified into
2 types namely,
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Under this technique the balance sheet of two different dates or balance
sheets of one firm to another firm may be used for comparative study. an
item or group of item of one balance sheet is compared with the same item
or group of item of another balance sheet. The comparative balance sheet
is helpful to study the liquidity position, financial status, long term
financial position etc. following are the steps for pre-pare comparative
balance sheet. I) Redraft the balance sheet in vertical form.
II) Pre-pare two additional columns one for absolute change
and and another for percentage change.
III) Study the trend (increase or decrease) and form the
opinions.
IV) Interpret the same.
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(Op.stock+purch
ase-clo.stock) .
Less:
manufacturing
expenses(cost of .263436810. 252689320 -10747490 -4.07%
production)
Add : Non
operating 12776730 3012462 -17649513 128.44%
Incomes
-3520- -0.37%
Operating profit 13744848.97 -3904694 17614307
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receivables
,closing
stock.etc)
E) capital
employed 249789979 235406524 -14383455 -5.75
E) =(C+D)
81773300 81773300 - -
Less: loss
(previous year)
ANALYSIS:
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INTERPRETATION:
The company‟s financial performance is not appreciable because there is heavy loss
in the year 2008-09. There is need of control on manufacturing expenses and also
other expenses and liabilities.
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Less : cost of
goods sold 46274537 55889767 9615230 20.77
Opening stock 153536359 180187848 26651489 17.35
+ purchases 55889767 50785141 -5104626 -9.13
-closing stock
110734727.5 88960874.1 -21773853.4 -19.6
Material
consumed
Less :
operating 29619683.95 12776730.47 -16842953.48 -56.8
expenses
18857350.75 13744848.97 -5112501.78 -27.1
Administration
expenses
11436127.97 9295525.04 -2140602.93 -18.7
Operating
profit
Less: Interest
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Net Profit
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Less: loss
(previous year)
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ANALYSIS:
1) In the year 2007 increase in sales is amounted to Rs.19597481.60 that is 7.69%.
The opening stock and purchases has increased by 20.77%& 17.35% and The closing
manufacturing expenses is decreased in the 2008 to 5104626 & 5298532.1(9.13% &
6.34%). The cost of goods sold is increased to Rs. 36072802.9(15.86%). Due to
decrease in closing stock the Gross Profit is decreased to 16475331.3(60.36) in the
year 2008.
2) The operating expenses have reduced in the year 2008 by Rs. 1548083(13.58%).
This is because of control over administrative expenses.
INTERPRETATION:
The company „s Financial performance in the year 2008 is not appreciable because of
decrease in revenue and control over cost results into decrease in Gross Profit and the
Net Profit compare to 2007.
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The financial statements are prepared with the absolute figures. Reading of
absolute figures is not easy for quick grasping or understanding. Therefore they are
converted into simple figures such as percentages to their totals for easy
understandings. In case of balance sheet each item of the asset is expressed to the total
assets and each liability to the total liability. Similarly in case of income statement
each item of revenue or expenses are expressed to total sales.
When the financial statements of the same concern for several years are
converted into percentages and presented for the comparative study are called
comparative statements. The total size of the financial statement is fixed as 100 .
All the items of the statements are expressed as percentages to the total.
PROCEDURE:
1.Incase of Balance Sheet total assets and total liabilities are considered as 100.
2. Each item of asset is expressed interms of percentage to the total assets. Similarly
each liability to total liabilities.
3. Incase of Income statement total sales is treated as 100.
4. Each item of revenue and expense is expressed as a percentage to the total sales.
5. Study of these percentages to establish relationship
6. Interpretation of the relationship in simple terms.
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2008 2009
Particulars RS % RS %
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2008 2009
ANALYSIS:
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1.By seeing the above statement we come to know that there is slight changes in
long term liabilities, but in current liabilities is increased to 0.58% in the year
2009.
2. In the 2009 the current assets are less compare to the year 2008. It shows that
the company is not utilizing the working capital properly.
3.From the common size Income statement we can see that the operating
expenses are increased compare to previous year. It is because of not control over
on expenses
INTERPRETATION:
The above statement reveals that the company is not utilizing the funds properly. The
cost goods sold are increasing . This will results in the loss of the company.
3. TREND ANASLYSIS:
The trend analysis is another tool of financial analysis. Trend means a tendency.
Trend analysis is review and appraisal of tendency in accounting variables. This
analysis is more suitable for forecasting or budgeting. This analysis a series of trends
information. It discloses the direction of items in the financial statement either
upward , downward on constant over a period of time.
For the purpose of calculating trend percentages number of years financial
statements are required. Trend ratio are calculated on the basis of base year
information .The trend ratios on popular is statistics and are similar to index numbers.
Which indicate the movement or fluctuation in various elements financial of
statements of the business.
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PROCEDURE:
1. Arrangement of years of the financial statements in ascending order.
2. Select a normal year as a base year usually first year may be considered as the
base year.
3. Consider all the figures of base year as 100
4. Conversion of other years figures on the basis of base year percentage.
5. Study the trend percentages by establishing some relationship among them.
6. Interpretation of the trend series in simple terms.
TREND ANALYSIS:
The following figures are extracted from the annual repots of the G.C.T.M
Particulars 2005 2006 2007 2008 2009
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ANALYSIS:
1. The sales is increased constantly except 2006.The cost of goods sold is
increasing as compare to sales. i.e. in the year 2007 the sales are 94.22, the
cost of goods sold is 84.81 but in the year 2006 the sales are 85.61 the cost of
goods sold is 80.42. by seeing this we come to know that the cost of sales are
increase.
2. The Trend Analysis shows that there is loss in the year 2006 and 2009.
3. The above statement reveals that the sales are decreased but the costs are same
compared to all years.
4. From the above Analysis we come to know that there is a profits in the year
2007 & 08. Except these years the company is under loss.
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5. The above statement reveals that the cost of goods are increased compare to
sales.
ITERPRETATION:
The above statements reveals that the company sales is less in the present year. It
indicates that the production is less compare to previous year.
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RATIO ANALYSIS:
INTRODUCTION:
Ratio Analysis is a very powerful analytical tool useful for measuring the
performance of an organization. The ratio analysis concentrates on the
interrelationship among the figures appearing in the mentioned financial statements.
The ratio analysis helps the management to analyze the past performance of the firm
and to make further projections
As the organization employs capital on fixed assets for the purpose of equipping itself
with the required manufacturing facilities to produce goods and services which are
saleable to the customers to earn revenue, it is necessary to measure the degree of
success achieved in this bearing. This ratio establishes the relationship between the
amount of sales revenue and the amount of capital employed on fixed assets.
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1) Collect all the data required for computing the necessary ratios which
in turn depends upon the purpose of calculating the ratios
2) With the help of above information, compute the necessary accounting
ratios.
3) Compare the ratios so computed either with the ratios of the same
company for the previous year/s.
4) Interpret the ratios in the light of the comparison, draw inferences, and
prepare reports.
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LIQUIDITY RATIOS:
A) Current Ratio
B) Quick/Acid Test Ratio
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over Current liabilities, this ratio is called Working Capital Ratio. This ratio
establishes the relationship between Current Assets and Current Liabilities
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current ratio
2.5
2004-2005
1.5 2005-2006
2006-2007
1 2007-2008
2008-2009
0.5
0
2004-2005
ANALYSIS:
1. The above chart shows that there is a slight fluctuations in the current assets
and current liabilities.
2. In present year the current ratio is less i.e. 1.74 compare to previous year.
3. The above chart reveals that the current ratio is increasing year by year except
2009
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Quick ratio:
Quick ratio is also known as liquid ratio or acid test ratio or near money ratio.
It is the ratio between quick or liquid assets and quick liabilities. As pointed out, the
current ratio in the study of solvency may be sometimes misleading due to high ratio
of stock to current assets.
Quick ratio= Quick assets
Quick liabilities
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Quick Ratio
1.4
1.2
1 2004-2005
0.8 2005-2006
2006-2007
0.6 2007-2008
0.4 2008-2009
0.2
0
Year
ANALYSIS:
1. The above chart shows that there is slight fluctuation in Quick assets and
Quick liabilities.
2. In the year 2009 the quick ratio is less i.e. 1.11 compare to 2008 quick ratio
i.e. 1.16. there is slight difference in quick ratio i.e. (0.05)
3. The quick ratio is highest in the year 2004-05 i.e.0.67 comparing to all next
years
4. The above chart reveals that there is not much difference in liquid ratios of
the company.
ITERPRETATION: In the present year the quick ratio is not satisfactory because
the quick assets is less than the quick liabilities.
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2004-2005
4
2005-2006
3 2006-2007
2007-2008
2
2008-2009
0
Year
year
ANALYSIS:
1. From the above chart we come to know that the stock is increased year by
year. The stock ratio is 5.62 in the year 2009 compare to previous year i.e.
4.93in the year 2008.
2. The increasing stock will be results in raise of cost of production.
3. when the cost of goods sold increases the profitability automatically decreases
i.e. the company face the problem of loss
4. The above chart shows that the Ratios are increasing year by year.
INTERPRETATION:
The above table realize that the company have a more stock. It is not favorable for the
company because it increases the costs.
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Profitability Ratios:
Gross profit ratio:
It is ratio of Gross profit to net sales expressed as percentage. It shows the
relationship between gross profit and sales.
Gross profit/ sales*100
12
10
8 2004-2005
2005-2006
6 2006-2007
2007-2008
4 2008-2009
0
Year
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ANALYSIS::
1 . The above table reveals that the Gross Profit is increased in the year
2006-07. But remaining years it is declining.
2. In the year 2006-07 the sales are good compare to all remaining years. So the gross
profit is increased to 10.71 in this year.
3. In the year 2004-05 the gross profit is less i.e. 0.93 compare to all next year
because of the purchasing costs are more compare to others years.
INTERPRETATION:
The above chart shows that the Gross Profit is declining year by year. It is decline
1.57 in the 2009. It is not favorable for the company.
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1
2004-2005
0
Year 2005-2006
-1 2006-2007
2007-2008
-2
2008-2009
-3
-4
-5
-6
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ANALYSIS:
1.The above chart shows that the company is facing heavy loss in the year
2009.beacuase the reasons behind this is one is the previous year losses and also the
expenses are increased year by year.
2. The above chart reveals that company financial statements it is recovering losses in
the year 2007-08 but it is not possible in the year 2009
3. The above statement reveals that the company is under a loss because of increase in
the costs but the sales are declining.
ITERPRETATION: The above chart shows that the company is under loss. Because
the expenses are more than the incomes.
FINDINGS:
1.From the Income statement i found that the operating expenses increased compare
to previous year. There is need of control on expenses.
2.From the comparative statement of 2008-09 we can find that there is decrease
.(21%) in working capital compare to the year 2008. The current assets less but the
current liabilities are more, so the company have to utilize funds properly i.e. there is
a need of control on expenses
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4.Liquidity ratios
Current ratios: The current assets ratio as per calculation it is observed
that, it has been increased by 1.62 to 1.73 to 1.79 to 1.99 to 1.74 from 2005 to
2009. It doesn’t reaches the standard ratio, so it is unfavorable to the company
6. From the above financial analysis I found that in the present year the
company is under loss.
7. The gross profit is found to be very low compare to previous year. The
gross profit is declining .It reveals that the companies position is not
appreciable
8. The trend analysis reveals that the sales declining year by year but there is
slight fluctuation in costs.
SUGGETIONS:
1. Ratio analysis indicates that the firm is not in good health none of the ratios are not
reaching the standard . It is necessary enhance the operating efficiency.. Hence the
firm should concentrate on enhancing the operating efficiency of the firm for
enhancement of share holders wealth
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2. From the study it is found that the funds are used for short term assets which should
be avoided. The long term sources of funds should be used for long term assets and
not for short term assets.
3. The Gross Profit ratio indicates that the gross profit is declining year by year, it is
not good for the company so it as to take measures to control the operating costs.
4. The company needs to maintain good inventory turnover ratio by increasing the
sales.
5. The current ratio of the company doesn‟t reach standard ratio, so company need to
\CONCLUSION:
This study helps to know that the companies financial position. The sales of
the company is decline in the year 2009. There is increases costs in some years so it is
needs to reduce its costs.
As the study helps to know that the changes in financial statements i.e.
increase or decrease in the liabilities and assets. By the ratio analysis we come to
know that the companies solvency. The company have to take some measures to
control the costs.
This study helps us to know that the companies financial position is not
appreciable because there is loss in the present year due to high expenses. so it has to
control the costs.
By the analysis of financial statements I conclude that, overall financial
performance of the company is not satisfactory. The company can try to take a some
measures to increase profit i.e. proper utilization of available resources.
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STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
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CHAPTER - 4
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Bibliography:
Management Accounting by
R.S.N.pillai and Bhagavathi
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ANNEXURE:
Expenditure
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BALANCE SHEET:
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411
400 646
584 544
910
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