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PROJECT REPORT ON
FINANCIAL ANALYSIS OF
ARVIND MILLS LIMITED
Submitted by:
Parth Shah- P1645;
&
Ravi Shah- P1646
PGDM
Term-1
Under the Guidance of:
Prof. Hiteksha Joshi
Acknowledgement:
We take this opportunity to express our profound gratitude and deep regards to
our mentor- Prof. Hiteksha Joshi for her exemplary guidance, monitoring and
constant encouragement throughout the course of this project. The blessings,
help and guidance given by her time to time shall carry us a long way in the
journey of life on which we are about to embark.
We also take this opportunity to express a deep sense of gratitude to N.R.
Institute of Business Management for giving us this opportunity to do this
project and providing us with the information and guidance, which helped us in
completing this task through various stages.
Lastly, we thank our group members and friends for their constant
encouragement and help without which this project would not be possible.
Executive Summary:
Our project is basically on financial analysis and a brief study on
Arvind mills Ltd. So firstly, we need to understand what Financial Analysis
is?
Financial analysis is an aspect of the overall business finance function
that involves examining historical data to gain information about the current and
future financial health of a company. The financial function in business
organizations involves evaluating economic trends, setting financial policy and
creating long range plans for business activities. There is ratio analysis,
common Size Statement, trend analysis which gives detailed analytical
information of the financial position of the company. It also helps to forecast the
future trend.
Ratio analysis is a widely used tool of financial analysis it is defined
as a systematic use of ratio to interpret the financial statement so that the strength
and the weakness of the firm as well as its historical performance and its current
financial condition can be determined. The term ratio refers to the numerical or
quantitative relationship between to variables or items. The ratio analysis helps
managers in making critical decisions. We studied the balance sheet and have
given recommendation as well. With the help of Ratios, we have tried to analyze
companies performance compared to previous year.
Industrial Production
28%
Excise Collections
13%
25%
28%
GDP
6%
6%
Industrial Production
28%
Excise Collections
28%
13%
GDP
25%
The Indian textile industry is set for strong growth, buoyed by both strong
domestic consumption as well as export demand. Abundant availability of raw
materials such as cotton, wool, silk and jute and skilled workforce has made
India a sourcing hub. According to Ministry of Textiles, the current size of
Indias textile and apparel industry is estimated at Rs. 4,41,800 crores in 2012.
By 2020, Indian textile and apparel industry is expected to reach Rs. 1,034,000
crores with CAGR of 11%.
Arvind Mills, now Arvind Limited, is one of the largest manufacturer of textile
products. Headquartered in Naroda, Ahmedabad, Gujrat, Arvind Limited was
founded in 1931.Arvind Mills is one of the largest manufacturer and exporter
of denim in India and fourth in the world. The companys product portfolio
includes:
Denim
Knits
Woven
Engineering
Retail
Telecom
Agri Business
2. BOMBAY DYEING:
Grasim Industries Limited is another big name in the textile industry of India,
established in the year 1947. Grasim Industries Limited is the flagship company
6
of the Aditya Birla Group and involved in the production of Textile, Fibre and
pulp, chemicals and cement.
4. RAYMOND:
Raymond is the 90 years old (as in 2015) Indian textile manufacturing company
established in 1925. Headquartered in Thane, Mumbai, Maharashtra, Raymond
Industries is the largest producer of worsted fabric in India. It is the largest
woolen fabric and one of the largest textile exporter of India, with exports to
countries like Japan, USA, Canada and many other countries. Apart from
manufacturing, the company also makes readymade suiting & shirting and sells
it them under its various brands. Some of the popular brands that the group
owns are:
Raymond
Park Avenue
ColorPlus
Parx
5. RELIANCE TEXTILES:
Next they looked around for state-of-the-art machinery that could produce such
high quality fabric. The best technology of that time was acquired at a most
attractive price. And a company called Arvind Limited was born. Arvind
Limited started with a share capital of Rs 2,525,000 ($55,000) in the year 1931.
With the aim of manufacturing the high-end superfine fabrics Arvind invested
in very sophisticated technology. With 52,560 ring spindles, 2552 doubling
spindles and 1122 looms it was one of the few companies in those days to start
along with spinning and weaving facilities in addition to full-fledged facilities
for dyeing, bleaching, finishing and mercerizing. Steadily producing high
quality fabrics, year after year, Arvind took its place amongst the foremost
textile units in the country.
Woven Fabrics: Arvind expertise in new age shirting fabric and bottom
weights is unparalleled. Our shirting fabrics have consistently fetched a
premium in the local and international markets. Our state of the art
facility is capable of producing a total of 65 million meters per annum of
Shirting and bottom weight fabrics. This capacity is set to increase
reaching a total of 84 million meters by the next financial year.
10
Own Brands:
Mainstream
Excalibur Gant
Flying Machine
Popular:
Ruf & Tuf
New Port University
Licensened Brands:
Bridge to Luxury
U.S.A. 1949
Energie
Premium:
USPA
Arrow
Izod
Popular:
Cherokee
Mega Mart Retail: Arvind runs India's largest Value Retail Chain Megamart. The Megamart format offers a unique and differentiated
proposition to the consumers. It offers mega brands at amazingly low
prices and provides a retail experience of a high-end department store.
The Megamart stores range in size from 2000 sq ft. to 65000 sq ft. The
larger stores are called Big Megamart and there are 6 such stores across
Bangalore, Chennai, Pune and Mumbai. The smaller formats spread
across the country are 205 in number. Megamart is expanding rapidly and
is expected to be a Rs. 1000 cr chain within the next two years.
The brands sold exclusively in Megamart include:
RUGGERS - SKINN - ELITUS - DONUTS - KARIGARI - MEA CASA
- AUBURN HILL - BAY ISLAND - COLT - LEISHA- EDGE
The Arvind Store: The Arvind Store bring together, under one roof, the
best that Arvind has to offer. It is a convergence of three of Arvinds
strongest capabilities, the best of fabrics from Arvinds textiles division,
leading apparel brands from Arvind Brands and bespoke styling solutions
11
based on the latest garment styles from Arvind Studios. In a world where
bespoke tailoring meets cutting edge fashion, The Arvind Store will
create a shopping experience to rival the best in the Indian Marketplace.
Over a 1000 different fabric styles across shirting, suiting and denim
Leading apparel brands such as Arrow, US Polo & Flying Machine
Arvind Denim Labs (ADL), a bespoke denim concept offering customized
washed denim - a first of its kind in India and perhaps the world
Arvind Studio A styling and tailoring solution to rival the best brands in the
world
Engineering:
1. ANUP EngineeringThe Anup Engineering Limited (established in 1963), is the flagship
Engineering Company of the Lalbhai Group, and is a subsidiary of
Arvind Limited. It is an accredited ASME U & NB stamp and ISO9001: 2008 certified company, conforming to specified standards. Anup
has extensive experience in working with critical metallurgies like low
temperature CS, NACE/HIC, low alloy, stainless steel, duplex, super
duplex, monel, cupro nickel, etc. Anup is approved by IBR, CCOE &
TDC certifications, and works closely with and under the surveillance of
renowned national and international inspection agencies like Lloyds,
BVI, DNV, EIL, Toyo Engineering, UHDE, and TUV etc.
12
14
15
percentage of a base figure selected from the same statement. Commonsize statements and accounting ratios are two important tools used for
vertical analysis. This analysis is very much useful for understanding the
structural relationship of various items in a financial statement.
Financial Ratio:
Ratio analysis means the proportionate comparisons of any two variables of
Trading Account, Profit and loss account, Balance sheet. Ratio analysis is a
widely used tool of financial analysis it is defined as a systematic use of ratio
to interpret the financial statement so that the strength and the weakness of the
firm as well as its historical performance and its current financial condition can
be determined.
17
Accounting Analysis:
Comparative and Common Size Financial Statement:
Financial statements reveal the financial credibility of a company. A financial
statement, which expresses the different values in form of percentage, is called a
Common size financial statement. A common size financial statement helps in
comparing two companies, which differ in size. Two components of the common
size financial statement are:
Balance sheet
Income statement
When both these components are clubbed together, a comparative and common
size financial statement is obtained.
18
Particulars
Sources of Funds:
Equity Share Capital
Reserve & Surplus
Net Worth
Secured Loan
Unsecured Loan
Total Debt
C.L. & Provisions
Total Liabilities
Application of Funds:
Gross Block
(-) Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash & Bank Balance
Total Current Assets
Loans & Advances
Fixed Deposits
Total CA, Loans &
Advances
Total Assets
Values in Rs.
2006-07 2007-08 2008-09
2009-10
2010-11
209.38
1106.9
1316.3
1772.7
161.57
1934.3
466.15
3716.8
218.98
1172.5
1391.5
1774.9
97.52
1872.5
395.17
3659.1
218.98
919.82
1138.8
1920.9
103.04
2023.9
608.77
3771.5
231.98
1107.3
1339.3
1728.7
141.85
1870.6
453.62
3663.5
254.4
1236
1490.4
1763.2
48.89
1812.1
651.33
3953.9
2817.2
-772.3
2044.9
71.45
46.05
645.01
204.85
20.86
870.72
752.93
1.45
2943
-906.78
2036.2
116.14
104.99
575.34
261.77
14.79
851.9
617.71
1.53
3056.8
-1015
2042.3
81.58
100.06
581.47
350.84
20.15
952.46
633.37
6.68
3002.5
-1084
1918.1
46.86
300.29
432
424.16
33.35
889.51
579.64
9.79
3172.2
-1170
2002
142.28
309.4
699.16
563.63
14.2
1277
514.19
14.89
1742.6
3787.5
1692.3
3728.5
1774.2
3816.4
1826.1
3744.2
2257.8
4259.7
19
Particulars
Sources of Funds:
Equity Share Capital
Reserve & Surplus
Net Worth
Secured Loan
Unsecured Loan
Total Debt
C.L. & Provisions
Total Liabilities
Application of Funds:
Gross Block
(-) Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash & Bank Balance
Total Current Assets
Loans & Advances
Fixed Deposits
Total CA, Loans &
Advances
Total Assets
Common Size%
2006-07
2007-08
2008-09
2009-10
2010-11
5.63
29.78
35.41
47.7
4.35
52.05
12.54
100
5.98
32.04
38.02
48.51
2.67
51.18
10.8
100
5.81
24.39
30.2
50.93
2.73
53.66
16.14
100
6.33
30.23
36.56
47.19
3.87
51.06
12.38
100
6.43
31.26
37.69
44.6
1.24
45.84
16.47
100
74.38
-20.39
53.99
1.89
1.22
17.03
5.41
0.55
22.99
19.88
0.04
78.93
-24.32
54.61
3.11
2.82
15.43
7.02
0.4
22.85
15.58
0.04
80.1
-26.58
53.51
2.14
2.62
15.24
9.19
0.53
24.96
16.6
0.18
80.19
-28.96
51.23
1.25
8.02
11.54
11.34
0.89
23.76
15.48
0.26
74.47
-27.47
47
3.34
7.26
16.41
13.23
0.33
29.98
12.07
0.35
46.01
45.39
46.49
48.77
53
100
100
100
100
100
20
Interpretation:
For the analysis of Balance sheet, we have taken the total of the
liabilities side as base.
The total capital of the company has increased compared to last year because
of increase in reserves & surplus by 6.87 % compared to 2008-09 year.
The secured loan amount has decreased by 2.59 % this means that company
has paid off some its loan amount and so its liability is less.
The fixed assets of the company have increased by 2.09 % which is good
for company.
Total Current assets of the company has increased by 6.22 % as there is a
decrease in the cash balance which is not good for the company because
now it cannot pay off its liability easily.
The current liability of the company has increased by 4.09 % which is not
good because now it has to pay more amounts.
21
Particulars
Sources of Funds:
Equity Share Capital
Reserve & Surplus
Net Worth
Secured Loan
Unsecured Loan
Total Debt
C.L. & Provisions
Total Liabilities
Application of Funds:
Gross Block
(-) Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash & Bank Balance
Total Current Assets
Loans & Advances
Fixed Deposits
Total CA, Loans &
Advances
Total Assets
200607
200708
200809
200910
201011
1
1
1
1
1
1
1
1
1.05
1.05
1.05
1
0.6
0.97
0.85
0.98
1.05
0.83
0.86
1.08
0.64
1.05
1.3
1.01
1.11
1
1.01
0.97
0.88
0.97
0.97
0.99
1.22
1.11
1.13
0.99
0.3
0.94
1.4
1.06
1
1
1
1
1
1
1
1
1
1
1
1.04
1.17
1
1.62
2.28
0.89
1.28
0.7
0.98
0.82
1.05
1.08
1.31
1
1.14
2.17
0.9
1.71
0.97
1.09
0.84
4.6
1.06
1.4
0.94
0.66
6.52
0.67
2.07
1.6
1.02
0.77
6.75
1.12
1.51
0.98
1.08
6.72
1.08
2.75
0.68
1.46
0.68
10.26
1
1
0.97
0.98
1.02
1
1.05
0.99
1.3
1.12
22
Explanation:
Trend analysis is an extension of horizontal analysis. Their methodology
is very simple. The utility of this tool of analysis lies in the fact that while
two years comparisons may provide indication of growth.
Overall assessment:
The equity share capital is increasing year by year and the higher amount
of the base year value.
The net worth is increasing year by year but the total debt is decreasing
year by year.
The total of the balance sheet is higher than base year means increasing
year by year.
Gross block amount is increasing stage but in the net block is not much in
increasing stage. Because the reason behind that depreciation and the
working progress amount is calculated.
The bad thing is that the cash and bank balance is highly decreasing in 2011
year as compared to the Value of base year.
It is not good for the company, if they want to some fund which is required
that fulfilled the new technology.
23
Values in Rs.
20062007200807
08
09
Particulars
200910
201011
Income:
Sales Turnover
1845.01 2215.65 2347.5 2318.49 2665.81
(-) Excise Duty
-15.78
-2.33
-2.68
-1.74
-2.23
Net Sales
1829.23 2213.32 2344.82 2316.75 2663.58
Other Income
143.09
97.11
-54.05
69.5
80.71
Stock Adjustments
97.95
9.49
34.85
-18.78
93.63
Total Income
2070.27 2319.92 2325.62 2367.47 2837.92
Particulars
Income:
Sales Turnover
(-) Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
95.51
-0.1
95.41
4.19
0.41
100
24
100.94
-0.12
100.83
-2.32
1.5
100
200910
97.93
-0.07
97.86
2.94
-0.79
100
201011
93.94
-0.08
93.86
2.84
3.3
100
Interpretation:
The income statement or profit and loss account is considered as a very
useful statement of all financials statement. It depicts the expenses incurred
on production, sales and distribution and sales revenue and the net profit
or loss for a particular period. It shows whether the operations of the firm
resulted in profit or loss at the end of a particular period. In comparative
analysis for the income is that the income of the company is gradually
increase in every year.
25
Particulars
200607
200708
200809
200910
201011
Income:
Sales Turnover
(-) Excise Duty
Net Sales
Other Income
Stock
Adjustments
Total Income
1
-1
1
1
1.2
-0.15
1.21
0.68
1.27
-0.17
1.28
-0.38
1.25
-0.11
1.27
0.49
1.44
-0.14
1.45
0.56
0.1
0.36
-0.2
0.96
1.12
1.12
1.14
1.37
Interpretation:
Trend analysis is an extension of horizontal analysis. Their methodology
is very simple. The utility of this tool of analysis lies in the fact that while
two years comparisons may provide indication of growth.
The amount of sale is very variable. The amount of net sale is also very
variable. But it is good position.
Total income is increasing means the base year value is lower than other
years.The reason behind that, the stock adjustments are increasing good
stage.
26
Changes in Assets:
In Rs. Cr.
Particulars
2006-07
2007-08
2008-09
2009-10
2010-11
Assets
2044.89
2036.21
2042.29
1918.11
2001.96
Interpretation:
In comparative analysis for assets, it is showing that in 2010 the assets have
gradually decrease and in 2012 it is stable. No major assets increase in last
three years. It means there are not purchasing the assets in major quantity.
27
Change in Liabilities:
In Rs. Cr.
Particulars
Liabilities
2006-07
3716.77
2007-08
3659.14
2008-09
3771.51
2009-10
3663.49
2010-11
3953.85
Interpretation:
In comparative analysis for 2011 years is that liabilities of the company
are increasing highly which is not good for the company. The debtors
have not given money regularly.
28
Change in Profit:
In Rs. Cr.
Particulars
Profit
2006-07
11.34
2007-08
-21.55
2008-09
12.36
2009-10
20.27
2010-11
24.2
Interpretation:
In comparative analysis of profit, in 2010-11 profit of the company has
increase substantially but in 2008 it has decrease substantially.
29
Income:
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
(A)Total Income
Expenditure:
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing
Expenses
Raymond
------------------ in
Rs. Cr. -------------- Common
Size%
---Mar '16
8,581.26
-130.85
8,450.41
88.46
27.68
8,566.55
101.55
-1.55
100
1.05
0.33
101.37
4,170.96
494.89
927.75
49.36
5.86
10.98
28.98
Miscellaneous Expenses
1,790.37
(B)Total Expenses
7,412.95
PBDIT(A-B)
Interest
PBDT
Depreciation
Profit Before Tax
Tax
Reported Net Profit
1,153.60
-381.14
772.46
-255.94
516.52
-151.69
364.83
0.34
Income:
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
(A)Total Income
Expenditure:
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing
Expenses
PBDIT(A-B)
Interest
PBDT
Depreciation
Profit Before Tax
Tax
Reported Net Profit
30
------------------ in Rs.
Cr. --------Common
---------Size%
Mar '16
5,169.15
-37.79
5,131.36
535.3
102.3
5,768.96
100.74
-0.74
100
10.43
1.99
112.43
2,738.69
193.61
725.08
53.37
3.77
14.13
403.24
1,198.74
5,259.36
509.6
-183.45
326.15
-164.25
161.9
-72.13
89.78
7.86
23.36
102.1
9.93
-3.58
6.36
-3.2
3.16
-1.4
1.75
Raymond
------------------ in Rs. Cr.
------------------
Common
Size%
Mar '16
Common
Size%
Mar '16
Sources of Funds:
Sources of Funds:
258.24
61.38
1.79
258.24
61.38
1.79
Reserves
1,569.98
Net worth
1,631.36
Secured Loans
1,050.16
3,437.02
45.68
47.46
30.55
20.15
50.7
1.83
100
3,204.43
93.23
-1,897.95
-55.22
1,306.48
38.01
249.98
7.07
502.37
1,047.48
14.62
36.86
30.48
92.45
2.69
2,405.96
603.96
70
17.57
82.82 Advances
38.63 Current Liabilities
1.96 Provisions
3,009.92
87.57
1,575.37
56.37
45.84
1.64
Reserves
2,387.38
Net worth
2,645.62
Secured Loans
2,789.63
Unsecured Loans
Total Debt
Minority Interest
Total Liabilities
419.41
3,209.04
52.89
5,907.55
Application of Funds:
Gross Block
Less: Revaluation
Reserves
Less: Accum.
Depreciation
Net Block
5,584.70
-266.09
-2,125.17
3,193.44
146.9
Investments
72.64
Inventories
1,831.88
Sundry Debtors
1,417.25
65.08
3,314.21
1,578.57
4,892.78
Current Liabilities
2,282.20
Provisions
Unsecured Loans
Total Debt
Minority Interest
Total Liabilities
692.55
1,742.71
62.95
Application of Funds:
Capital Work in
Progress
40.41
44.78
47.22
7.1
54.32
0.9
100
116.01
1,266.03
(B)Total CL &
Provisions
2,398.21
1,631.74
47.48
2,494.57
1,378.18
40.1
Total Assets
5,907.55
3,437.02
100
31
Interpretation:
From the income point of view Arvind Ltd. is better than Raymond Ltd,
because if we compare total income of both companies with their profit
then Arvind Ltd.s ratio comes to approx. 4.26 as compared to Raymond
Ltd.s i.e. 1.56.
From the investment point of view Raymond Ltd. is better because of
following reasons:
1. Raymond Ltd. has 25times Reserves as compared to its Equity
Share Capital, while Arvind Ltd. has only 9 times Reserves as
compared to its Equity Share Capital. Raymond Ltd. Raymond Ltd.
can use these Reserves to give bonus shares, to declare share
premium, to declare dividends & to pay its debts in case of
bankruptcy.
2. Raymond Ltd. also has lesser amount to take from its debtors as
compared to Arvind Limited.
3. Raymond Ltd. also has lesser amount to give to its creditors as
compared to Arvind Limited.
4. Raymond Ltd. has taken lesser amount of loans & advances from
third parties. So we can say that Raymond Ltd. is able to manage
its funds very nicely.
5. Raymond Ltd. also has higher amount of liquidity compared to
Arvind Ltd. Raymond Ltd. also has higher investments in
comparison of cash balance. So, we can say that Raymond Ltd. has
not put all its cash balance in its business.
6. If Raymond Ltd. gets bankrupt then after utilization of Reserves, it
has to only bring Rs. 172.73 cr. to pay its debts, while Arvind Ltd.
has to bring Rs. 821.66 cr. in case of bankruptcy after utilization of
Reserves.
32
Ratio Analysis:
RETURN ON INVESTMENT (ROI) RATIOS:
Return on Capital Employed:
Ratio%:
ROCE
Years
2006-07
2007-08
2008-09
2009-10
2010-11
Formula:( EBIT/CE
*100)
Rs. Crores
(197.12/3787.49) *100
=5.20
(206.81/3737.98) *100
=5.53
(168.15/3826.51) *100
=4.39
(265.32/3290.58) *100
=8.06
(350.24/4259.71) *100
=8.22
Note: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus
+ Long Term Debt- Fictitious Assets
33
Interpretation:
A measure of the return that a company is realizing from its capital
employed. The ratio can also be seen as representing the efficiency with
which capital is being utilized to generate revenue. It is commonly used as
a measure for comparing the performance between businesses and for
assessing whether a business generates enough returns to pay for its cost
of capital. Of course the higher the ratio, the better will be the profitability
of the company.
Return on Net Worth:
Ratio%:
RONW
Years
2006-07
2007-08
2008-09
2009-10
2010-11
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Interpretation:
The amount of net income returned as a percentage of
shareholders equity. Return on net worth measures a
corporation's profitability by revealing how much profit a
company. This ratio indicates the productivity of the owned
funds employed in the firm. However, in judging the
profitability of a firm, it should not be overlooked that during
inflationary periods, the ratio may show an upward trend
because the numerator of the ratio represents current values
whereas denominator represents historical values. it concludes
the resources of the firm are being used, higher the ratio, better
are the results.
SOLVENCY RATIOS:
Net Asset Value:
Ratio: NAV
(Rs.)
Years
2006-07
2007-08
2008-09
2009-10
2010-11
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Interpretation:
This ratio measures the net worth or net asset value per equity share.
Its thus seeks to assess as to what extent the value of equity share
of a company contributed at par or at a premium has grown or the
value/wealth has been created for the shareholders. The higher the
ratio is, the better the financial position of the company. If, we
assume the no. of equity shares issued is no change in net worth of
the company. The book value per share decreased from 2008-09
and increased in 2011 indicating that the net worth of the company
decreased and then increased in 2011.
Debt Equity:
Ratio: Debt Equity
((Times)
Years
2006-07
2007-08
2008-09
2009-10
2010-11
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Interpretation:
This ratio indicates the ability to pay back the long term borrowings
so the lower the ratio, the better it is. As we see that the debt equity
ratio is increasing from 2008-09, this indicates that the company does
not have sufficient funds to pay back its debts. The ratio should be
ideally less than 1, but then as the ratio has slightly decreased from
2010-11, this indicates the companys position has improved to some
extent. But still company is facing crisis in terms of paying back the
long term borrowings.
DU PONT ANALYSIS:
Ratio
RONW (%)
Formula (PAT/ NW) *100
(25.27/1316.31) *100=
2006-07 1.92
(27.36/1391.51) *100=
2007-08 1.96
(-47.87/1138.80.31) *100=
2008-09 -4.20
(52.00/1339.29) *100=
2009-10 3.88
(134.80/1490.40) *100=
2010-11 9.06
:
:
:
:
:
:
:
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*
*
(1829.23/1316.31) =1.39
(2213.32/1391.51) =1.59
(2344.82/1138.80.31) =2.06
(2316.75/1339.29) =1.73
(2663.58/1490.40) =1.79
Interpretation:
This ratio analysis shows increase in RONW through which we can see
improvement in both net profit margin as well as net worth turnover. In
other word the overall ROI has improved due to higher resource efficiency
as well as higher operating margins. In year 2009 thus there is fall in both
net profit margin as well as net worth turnover. When it gradually increases
in year 2010 and 2011 thus we can see improvement in both ratios which
is good for company.
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Suggestions:
It is observed that Companys Net profit margin ratio has increase by 5.06%
in 2010-11 as compared to 2009-10; here company is doing excellence
work so no need to change it.
It has been seen that RONW in 2008-09 was -4.20% 2009-10 was 3.88 %
and finally in 2010-11 was only 9.06 %. Thus RONW is increase gradually.
So the Company should has made effort in optimizing the usage of the
funds invested by Equity share holder.
It is observed that Debt Equity has increased in 2008-09 was 1.77 times &
2010-11 it has decreased to 1.22 times. This indicates company has to do
more work to improve their condition.
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Conclusion:
The project report on the topic Financial statement analysis is a best
method to analyze the financial position of the company and helps in forecasting
the future trend.
It is observed that company has improved its standing by lowering the debts, but
it is not achieved satisfactory profit margin, it has gone low in 2008-09. Company
has to adopt various methods that improve sales i.e. paying incentives to staff,
advertisement in market, etc. if the sale will increase the Service provided will
increase which will indeed decrease the production cost (operating cost) which
will lead to maximization of profit and optimum utilization of resources available
to the company. Another thing, company has to maintain a cash flow to decide
cash required to be kept for speculation, operation and emergency purpose, as
excess cash is loss of interest. It is also seen that Return on investment is very
low. Company should properly analyze different option available for investment
and after considering the cost of investment, selection of a proper investment plan
should be done, so that more returns are possible.
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