CHAPTER III

FINANCIAL PERFORMANCE OF RAJAPALAYAM MILLS LIMITED

3.1 INTRODUCTION
The focus of financial analysis is on key figures contained in the financial statements
and high lights the significant relationship that exists between them. Analyzing financial
statements is a process of evaluating relationship between parts of Financial Statements to obtain
a better understanding of a firm position and performance. The purpose of evaluation of financial
statement differs among various groups interested in the result and relationships, reported in the
financial statements.
For example, short term creditors are primarily interested in judging the firms ability to
pay its currently maturity obligation. The relevant information for this is the composition of
short term current Assets and short term current liabilities. The debenture shareholder of
financial institutions granting long term loans would be concerned with examining the capital
structure past and project well as potential investors would naturally be interested in the earnings
per share and dividend payout ratio, which are likely to have a significant bearing on market
price of the shares.
3.2 MEANING OF RATIO
A ratio is defined as `the indicated quotient of two mathematical expressions and as the
relationship but two or more things. In financial analysis, a ratio is used as an index or yardstick
for evaluation the financial analysis, a ratio is used as an index or firm. The absolute accounting
figures reported in the financial statements do not provide meaningful understanding of the
performance and financial position of a firm. An accounting figure conveys meaning when it is
related to some other relevant information. The relationship between two accounting figures
expressed mathematically, is known as a financial ratio. A ratio helps to make qualitative
judgment about the firms financial it is calculated by dividing current assets by current
liabilities. This relationship is an index or yardstick which permits a qualitative judgment to be
formed about the firms liquidity and vice versa. The point to note is that this ration indicates a
quantitative relationship, which can be, in turn used to make a qualitative judgment to be formed
about the firms liquidity. The greater the ratio, the greater the firms liquidity and vice versa.
The point to note is that this ration indicates a quantitative relationship which can be, in turn,
used to make a qualitative judgment. Such is the nature of financial ratios.
3.3 TYPES OF RATIOS
Several Ratios, calculated from the accounting data, can be grouped on the basis
financial analysis are short term and long term creditors, owners and management. Short term
solvency of the firm. Long term creditors, on the other hand are more interest in the long term
solvency and profitability of the firm. Similarly, owners concentrate on firms profitability and
the analysis evaluating every aspect of the performance. They have to protect the interests of all
parties and see that the firm grows profitability. In view of requirements of the various users of
ratios, we may classify them into the following four important categories.

1. Liquidity ratios 2. Leverage ratios

3. Profitability ratios 4. Activity ratios

3.3.1 LIQUIDITY RATIOS:

It is extremely essential for a firm to be able to its obligations as they become due.
Liquidity ratios measure the ability of the firm to meet its current obligations. Infect, analysis of
liquidity needs the preparation of cash and other current assets to current obligations provide a
quick measure of liquidity. A firm should ensure that it does not too much high in liquid. The
failure of a company to meet its obligations, due to lack of sufficient liquidity, will result in bad
credit image, loss of creditors confidence. A very high degree of liquidity is also bad; idle assets
earn nothing. The firms funds will be unnecessarily tied up in current assets.Current ratio and
Quick ratio are the most popular ratios used to analyses the liquidity.
1. Current ratio

2. Quick ratio

3.3.1.1CURRENT RATIO
 The Current Ratio represents a margin of safety that is a caution of protection
creditors. However, the current ratio is a test of quantity only, not quality, liabilities are not
subject to any fail in value because of the presence of slow paying debtors.
It indicates the availability of current assets in rupee for every one rupee current
liability. A ratio of greater than one rupee means that the firm has more current assets than
current claims against them, as a conventional rule, a ratio of 2 to 1 or more is considered to be
satisfactory.
Current asset
Current Ratio = ------------------------------------------
Current liabilities
Table 3.1
CURRENT RATIO
Year Current asset Current liability Ratio
2008-2009 84068.49 22552.75 3.727638
2009-2010 10640.99 27168.8 0.391662
2010-2011 16582.76 27570.71 0.601463
2011-2012 11721.04 14046.98 0.834417
2012-2013 15307.59 15248.22 1.003894
2013-2014 21115.56 25764.49 0.819561
2014-2015 16988.77 23479.05 0.723571
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
From the above table 3.1, clearly depicts that the financial year from 2008-2009 to
2014-2015.As per rule of financial statement analysis that the current ratio should be at least
2:1.The current ratio has increased during the financial year 2008 -2009,2012-2013 is 3.7:1, 1:1,
Because the stock value is increase in the year and cash balance were increase in the year, and
the current ratio has decreased during the financial year 2009 -2011,2012-2015 that long term
debt were increased so the current ratio is decreased
 current asset
current liability
ratio

3.3.1.2 QUICK RATIO

 Quick or acid test ratio is a more refined the measure of the firms liquidity. This ratio
establishes a relationship between quick or liquid assets and current liabilities. Stock and prepaid
expenses are considered to be less liquid.
The other assets which are considered to be relatively liquid and included in the quick
assets are book debts and marketable securities Temporary investments, stock (inventory) and
prepaid expenses are considered to be less liquid.Generally, a quick ratio of to 1 is considered to
represent a satisfactory current financial condition.
However, this ratio also has got its own limitations. Quick ratio of 1 to 1 needed not
necessarily imply sound liquidity. Similarly, a quick ratio does not necessarily imply sound
liquidity and bad liquidity position. It should be remembered that all the book debts may not be
liquid and cash be immediately required to operating expenses and that the inventories are not
absolutely non-liquid. Thus a company with high quick ratio can be found it has slow paying
doubtful debts on the other hand. The liquid ratio both current and quick ratios have got their
utility, if used properly in the financial analysis keeping in view their limitations, that they are
only tests of quantity not to quality etc.

Quick Ratio can be measured by:

Quick Assets
QUICK RATIO = _________________
Quick Liabilities

Quick Assets = Current assets (stock + prepaid expenses)

Quick liabilities = current liabilities

TABLE 3.2
 QUICK RATIO
Year Quick asset Quick liability Ratio
2008-2009 23086.5 22552.75 1.02
2009-2010 -66375.9 27168.8 -2.44
2010-2011 4693.47 27738.39 0.16
2011-2012 5719.02 14046.98 0.40
2012-2013 7298.01 15248.72 0.47
2013-2014 8066.21 25764.49 0.31
2014-2015 6817.24 23479.05 0.29
Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
From the above table 3.2, clearly depicts that the financial year from 2008-2009 to 2014-
2015.As per rule of financial statement analysis that the quick ratio should be at least 1:1.The
quick ratio has increased during the financial year 2008-2009is 1:1 Because at the time sales
were increased so the cash also increased, and the quick ratio has decreased during the financial
year 2009-2010 that is -2.44:1 , Because the wind mill power is low so unsound financial
position of this year.2010-2015 were also decrease the quick ratio, Because short term
borrowing were increased .

6% 2008-2009
7% 19%
6% 2009-2010
5% 2010-2011
4% 2011-2012
2012-2013
2013-2014
54% 2014-2015

3.3.2. LONG TERM SOLVENCY RATIO (or) LEVERAGE RATIO

 Solvency Ratios are indicating the long term financial position of a firm. There are two
aspects of the long term solvency of the firm
The important Solvency ratios are
1. Debt - Equity Ratio
2. Debt - Assets Ratio
3. Proprietary Ratio
4. Debt to capital employed

3.3.2.1 DEBT EQUITY RATIO

This ratio is ascertained to determine long- term solvency position of a company. Debt
equity ratio is also called external internal equity ratio. The ratio is calculated to measure the
relative portion of outsiders funds and shareholders funds invested in the company. The best
equity ratio shows the long- term financial position of an organization. A lower debt equity ratio
implies that a company as a better capacity to meet in commitments.
Debt
DEBT EQUITY RATIO = ---------------
Equity
Debt = debenture + Current liabilities
Equity =shareholders fund (Equity capital, Reserve and surplus)

Table 3.3
DEBT EQUITY RATIO
Year Debt Shareholders equity Ratio
2008-2009 39691.79 11816.46 3.35
2009-2010 35865.19 12747.51 2.81
2010-2011 40963.41 14822.18 2.76
2011-2012 18983.05 15689.39 1.20
2012-2013 16545.03 17551.58 0.94
2013-2014 13673.79 18681.98 0.73
2014-2015 10466.29 19584.05 0.53
Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
From the above table 3.3 clearly reveals that debt and equity show 2008-2009
to 2004-2015. As per rule of financial statement analysis that the debt equity ratio should be at
least 1:1.Debt equity ratio is increased the year of 2008-2009 to 2011-2012, Because at the time
share price is low so share holders were increased. AndDebt equity ratio is decreased during the
financial year 2012-2013 to 2014-2015.Because the long term provisions were increased.

2014-2015; 6%
2008-2009; 23% 2008-2009
2013-2014; 8%
2009-2010
2012-2013; 9%
2010-2011
2011-2012
2011-2012; 11% 2012-2013
2009-2010; 20% 2013-2014
2014-2015
2010-2011; 23%

3.3.2.2 DEBT ASSETS RATIO

 The debt asset ratio measure the extent to which borrowers finds supper the firms assets.
The numerator of the ratio includes all debt short term as well as long term and the
denominator of this ratio is the all assets.
Total Debt
Debt Assets Ratio = -------------------------
Total Assets

Table 3.4
DEBT ASSETS RATIO
Year Debt Fixed asset Ratio
2008-2009 39691.79 32372.63 1.22
2009-2010 35865.19 30147.04 1.18
2010-2011 40963.41 32943.62 1.24
2011-2012 18983.05 31236.3 0.60
2012-2013 16545.03 28718.93 0.57
2013-2014 13673.79 32321.23 0.42
2014-2015 10466.29 30991.3 0.33
Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
The table 3.5 clearly shows in this deptasset ratio is standard for less than 1. This
indicates ratio 2008-2009 to 2010-2011 is more than 1. Because the insufficient of power supply
so the debt were increased, and 2011-2012 to 2014-2015 ratio is lower than 1, because the
company has merge the sick industries so the fixed asset were increased
 80000

70000

60000

50000

40000 Ratio
FIXED ASSET
30000
debt

20000

10000

3.3.2.3PROPRIETARY RATIO
 Proprietary ratio is a variant of debt-equity ratio. It expresses the relationship between
shareholders fund and total tangible assets.
Shareholders funds
Proprietary Ratio =
Total tangible assets

The shareholders funds include equity share capital, reserves and surplus. The total tangible
assets include the fixed assets and current assets.
Table 3.5
PROPRIETARY RATIO
Year Shareholders fund Total tangible asset Ratio
2008-2009 11816.46 32372.63 0.36
2009-2010 12747.51 30147.04 0.42
2010-2011 14822.18 32943.62 0.44
2011-2012 15689.39 31196.06 0.50
2012-2013 17551.58 28431.25 0.61
2013-2014 18681.98 32260.25 0.57
2014-2015 19584.05 30698.13 0.63
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
From the above table 3.6 clearly show that proprietary ratio of the Rajapalayam mills
limited. In general the proprietary ratio of the firm is below the standard norms of 0.5:1.
TheProprietary Ratio is sound position of the financial year 2008-2009 to 2011-2012, because
the company usage of fixed asset properly so the ratio is sound position. The unsound position of
financial year 2012-2013 to 2014-2015.Because thecompany issue of bonus shares.
 PROPRIETARY RATIO
35000

30000

25000

20000

15000

10000

5000

0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

Shareholders fund Total tangible asset Ratio

3.3.2.4 DEBT TO CAPITAL EMPLOYED RATIO
This ratio analyses the long term solvency debt include long term loans, public debt and
capital employed means share holders fund plus long term debt.

Total Debt
Debt to capital employed ratio = -------------------------------
Capital employed

Total Debt = Debenture + Current liabilities

Capital employed = Fixed assets + Current assets - Current liabilities

Table 3.6
DEBT TO CAPITAL EMPLOYED RATIO
Year Debt Capital employed Ratio
2008-2009 39691.79 93888.35 0.42
2009-2010 35865.19 13619.23 2.63
2010-2011 40963.41 21955.67 1.86
2011-2012 18983.05 28610.36 0.66
2012-2013 16545.03 28778.3 0.57
2013-2014 13673.79 27672.3 0.49
2014-2015 10466.29 24501.02 0.42
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
From the above table 3.6 clearly show that the debt to capital employed ratio fluctuating
trend during the study period. The results of the debt to capital employed ratio Rajaplayam mills
limited is above the ideal ratio 1:1. The year of 2009-2010 to 2010-2011 is sound position of in
this ratio. Because fixed assetwere increased so the sound position of the company. And the
2008-2009, 2011-2012 to 2014-2015 is unsound position of this ratio. Because the current asset
is fluctuation of this years. So the firm meet debt to capital employed problem.
DEBT TO CAPITAL EMPLOYED RATIO

2008-2009
2014-2015; 6%
2009-2010
2013-2014; 8% 2008-2009; 23% 2010-2011
2012-2013; 9%
2011-2012
2011-2012; 11%
2009-2010; 20% 2012-2013
2013-2014
2010-2011; 23%
2014-2015
 3.3.3 PROFITABILITY RATIOS
A company should earn profits to service and grow over a long period of time. Profits are
essential, but it would be wrong to assure that every action initiated by management of a
company should be aimed at maximizing profits irrespective of social consequences. It is
unfortunate that the word profit is looked upon as a term of abuse since some firms always
want to maximize profits at the cost of employees, customers and society.
Profit is the difference between revenues and expenses over a period of time. The
profitability ratios are calculated to measure the operating efficiency of the company. Besides
management of the company, creditors and owners are also interest and repayment of principal
regularly. Owners want to get a reasonable return on their investment. This is possible when the
company earn enough profits.

Generally, two major types of profitability ratios are calculated.

1. Profitability in relation to sales.

2. Profitability in relation to investment.

3.3.3.1MEASURE OF PROFIT

Profit can be measure in various ways. Gross Profit is the difference between sales and
the manufacturing cost of goods sold. The most common measure of profit is profit after taxes
or net income which is result of the impact of all factors on the firms earnings. Taxes are not
controllable by management.
NET PROFIT MARGIN
Net profit margin ratio establishes a relationship between the net profit and sales. It is
indicates management efficiency in manufacturing administrating and selling the products. This
ratio is the overall measure of the firms to turn each rupee sales into net profit. If the net profit is
inadequate, the firm will fail to achieve satisfactory return on owners equity.
The ratio also indicates the firms capacity to withstand adverse economic conditions. Net
profit is obtained when operating expenses, interest and taxes are subtracted from the gross
profit.
Profit after tax
Net Profit Margin = -----------------------------100
Sales

Table 3.7
NET PROFIT MARGIN
Year Profit after tax Sales Ratio
2008-2009 644.11 26186.32 0.024
2009-2010 1176.8 28438.72 0.041
2010-2011 2687.03 32601.31 0.082
2011-2012 131.59 32723.09 0.004
2012-2013 2377.13 34465.89 0.068
2013-2014 2658.55 43388.62 0.061
2014-2015 1204.31 38864.54 0.030
Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
From the above table 3.7 clearly shows that the financial year from 2008-2009 to 2014-2015.
The net profit margin ratio has financial year 2011-2012 is decrease of 0.004. Because the
expenses is high so the net profit is low and the ratio also low. The financial year 2010-2011 is
increase the ratio of 0.082. Because the sales were increase and also increase the ratio. The
remaining financial years the ratio has been fluctuation also profit after tax to be fluctuated.

RETURN ON INVESTMENT RATIO

 This ratio is also called as ROL This ratio measures a return on the owner's or
shareholders' investment. This ratio establishes the relationship between net profit after interest
and taxes and the owner's investment. Usually this is calculated in percentage.

Profit after tax

Return on shareholders equity= ------------------------------- 100
Share equity

Table - 3.8
RETURN ON INVESTMENT RATIO
Year Profit after tax Shareholders equity Ratio
2008-2009 644.11 11816.46 5.45
2009-2010 1176.8 12747.51 9.23
2010-2011 2687.03 14822.18 18.12
2011-2012 131.59 15689.39 0.83
2012-2013 2377.13 17551.58 13.54
2013-2014 2658.55 18681.98 14.23
2014-2015 1204.31 19584.05 6.14
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
From the above table 3.8 clearly depicts that the financial year from 2008-2009 to 2014-2015.
The Return on investment ratio hasincrease the year 2010-2011 is18.12.Because the sales were
increase so the ratio has been increase. And the ratio is decrease in the year 2011-2012 is 0.83 net
loss is increased so the profit after tax is low.

RETURN ON TOTAL ASSETS

The return on total assets compares the earnings of a business to the total assets
invested in it. The measure is intended to discern whether management can effectively utilize
assets to generate a reasonable return. The common rule is that the higher return on assets is, the
better, because the company is earning more money on its assets. A low return on
assets compared with the industry average indicates inefficient use of company's assets.

Profit after tax

Return on total assets= ------------------------------- 100
Total assets
Table-3.9
RETURN ON TOTAL ASSETS
Year Profit after tax Total assets Ratio
2008-2009 644.11 116441.1 0.55
2009-2010 1176.8 40788.03 2.88
2010-2011 2687.03 49526.38 5.42
2011-2012 131.59 42657.34 0.30
2012-2013 2377.13 44026.52 5.39
2013-2014 2658.55 53436.79 4.97
2014-2015 1204.31 47980.07 2.51
Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
From the above table 3.9 clearly depicts that Return on total assets ratio the financial year 2010-
2011 and 2012-2013is sound position of the company Because export were increased so the
profit after tax were increased. The other financial year was fluctuation of the ratio. Because
inefficient use of company's assets.

RETURN ON CAPITAL EMPLOYED RATIO

Return on Capital Employed Ratio Return on Capital Employed Ratio measures
a relationship between profit and capital employed. The term return means Profits or Net Profits.
The term Capital Employed refers to total investments made in the business.
 Profit after tax
Return on Capital Employed Ratio = --------------------- 100
Capital Employed

Table-3.10
RETURN ON CAPITAL EMPLOYED RATIO
Year Profit after tax Capital employed Ratio
2008-2009 644.11 93888.35 0.68
2009-2010 1176.8 13619.23 8.64
2010-2011 2687.03 21955.67 12.23
2011-2012 131.59 28610.36 0.45
2012-2013 2377.13 28778.3 8.26
2013-2014 2658.55 27672.3 9.60
2014-2015 1204.31 24501.02 4.91
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
From the above table 3.10 clearly depicts that the financial year from 2008-2009 to
2014-2015. The Return on Capital Employed Ratio has to increase in the 2010-2011 is 12.23%.
Because the sales were increased. And ratio decreaseon 2011-2012 in 0.45% at the time shortage
of power. The remaining years were fluctuation of ratio has been insufficient of profit after tax

RETURN ON FIXED ASSET RATIO

The return on fixed assets compares the earnings of a business to the fixed assets invested
in it. The common rule is that the higher return on fixed assets ratio is the better, because the
company is earning more money on its fixed assets. A low return on fixed assets compared with
the industry average indicates inefficient use of companys fixedassets.
 Profit after tax
Return on fixed assets= ------------------------------- 100
Average fixed assets
Table 3.11
RETURN ON FIXED ASSET RATIO
Year Profit after tax Average fixed asset Ratio
2008-2009 644.11 45320.41 1.42
2009-2010 1176.8 47446.15 2.48
2010-2011 2687.03 46618.85 5.76
2011-2012 131.59 48561.77 0.27
2012-2013 2377.13 45595.77 5.21
2013-2014 2658.55 44878.55 5.92
2014-2015 1204.31 47816.88 2.51
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
From the above table 3.11clearly depicts that the financial year from 2008-2009 to
2014-2015. The Return on fixed asset Ratio has to increase in the 2013-2014 is 5.92%. Because
the tax were low so the ratio has been increased. And ratio decrease on 2011-2012 in 0.27%.
Becausesales were decreased so profit after tax were decreased.

ACTIVITY RATIOS
Activity ratios also referred as turnover ratios or assets management ratios, measure how
efficiently the assets are employed by the firm. These ratios are based on the relationship
between the level of activity, represented by sales or cost of goods sold, and levels of various
assets. The important turnover ratios are as follows:
1. Inventory turnover Ratio
2. Fixed Assets turnover Ratio
 3. Total Assets Turnover Ratio
4. Working Capital Turnover Ratio
5. Working Capital to Total Assets Ratio
6. Capital Turnover Ratio

1.INVENTORY TURNOVER
Inventory means stock of raw materials, working in progress and finished goods. This
ratio is used to measure whether the investment in stock in trade is effectively utilized or not. It
reveals the relationship between sales and cost of goods sold or average inventory at cost price or
average inventory at selling price. Stock Turnover Ratio indicates the number of times the stock
has been turned over in business during a particular period. While using this ratio, care must be
taken regarding season and condition. Price trend. Supply condition etc.

Sales
Inventory turnover Ratio = --------------------------X 100
Average inventory

Table 3.12
INVENTORY TURNOVER RATIO
 Year Sales Average inventory Ratio
2008-2009 26186.32 6172.93 4.24
2009-2010 28438.72 6889.64 4.12
2010-2011 32601.31 9747.63 3.34
2011-2012 32723.09 8857.19 3.69
2012-2013 34465.89 6904.09 4.99
2013-2014 43388.62 10368.62 4.18
2014-2015 38864.54 17831.2 2.17
Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
The table 3.12 show that Inventory turnover Ratio is indicates the market sales of the
product. In general, a higher inventory turnover ratio is better. The Inventory turnover Ratio
increase on 2008-2009 to 2013-2014. Because the better utilization of inventory so the ratio has
been increased. The decrease in this ratio 2014-2015 is 2.71%.Because at the time the low level
of export.

2.FIXED ASSETS TURNOVER RATIO

The fixed assets turnover ratio measure the efficiency with which the firm is utilizing its
investment in fixed assets.This ratio indicates the extent to which the investment in fixed assets
contributes towards sales. If compared with a previous period, it indicates whether it investment
in fixed assets has been judicious or not
Sales
Fixed Assets Turnover Ratio = -----------------------X 100
Fixed Assets
Table-3.13
FIXED ASSETS TURNOVER RATIO

Year Sales Fixed asset Ratio

2008-2009 26186.32 32372.63 80.89
2009-2010 28438.72 30147.04 94.33
2010-2011 32601.31 32943.62 98.96
2011-2012 32723.09 31236.3 104.75
2012-2013 34465.89 28718.93 120.01
2013-2014 43388.62 32321.23 134.24
 2014-2015 38864.54 30991.3 125.40
INTERPERTATION:
From the table 3.13 shows that the fixed assets turnover ratio is increasing trend of 2008-
2009 to 2014-2015. This ratio decrease in the year of 2008-2009 is 80.89. Because the sales were
low so the ratio also decrease. To increase the ratio 2013-2014 is 134.24. Because the higher
efficiency in utilization of fixed assets so the ratio has been increase.

3.TOTAL ASSET TURNOVER RATIO

This ratio measures how efficiently assets are employed, overall. This indicates the
relationship between net sales and total assets of the company. Although fixed assets are directly
concerned with the generation of operating income, but other assets also constitute to the
production and services (sales) activity of the firm. The firm must manage is total assets
efficiently and should generate maximum sales through their proper utilization.
Net Sales
Total assets turnover ratio = -------------------------- X 100
Total assets
Table-3.14
TOTAL ASSET TURNOVER RATIO
Year Sales Total assets Ratio

2008-2009 26186.32 116441.1 0.22

2009-2010 28438.72 40788.03 0.69

2010-2011 32601.31 49526.38 0.65

2011-2012 32723.09 42657.34 0.76

2012-2013 34465.89 44026.52 0.78

2013-2014 43388.62 53436.79 0.81

 2014-2015 38864.54 47980.07 0.81

Source: Annual report on Rajapalayam mills limited

INTERPERTATION:
From the above table 3.14 clearly show that ratio is current assets will also contribute
along with fixed assets for profitability of the company. The higher total assets turnover ratio is
the most efficient measure in terms of utilization of assets. In the case of Rajaplayam mills
limited ratio the financial year 2008-2009 to 2014-2015 has been improving steadily and it has
moved from 0.22 to 0.81.Because most efficient utilization of assets

4.WORKING CAPITAL TURNOVER RATIO

The working capital of a concern is directly related to sales the current assets like debtors,
bills receivables, cash, stock etc., current liabilities like creditors, bills payable, bank overdraft,
provisions of taxation etc., and change with the increase or decrease in sales.
Working Capital = Current Assets Current Liabilities
Working capital ratio indicates the proportion of cost sales and the working capital.
Working capital turnover ratio indicates the velocity of the utilization of net working capital.
This ratio measures the efficiency with which the working capital is being used by a firm. A high
ratio indicates efficiency utilization of working capital and a low ratio indicates a lesser
utilization of working capital by a firm.
Sales
Working Capital Turnover Ratio = --------------------------
Net Working Capital
Table 3.15
WORKING CAPITAL TURNOVER RATIO
Year Sales Working capital Ratio
2008-2009 26186.32 61515.74 0.42
2009-2010 28438.72 -16527.8 -1.72
2010-2011 32601.31 -10988 -2.96
2011-2012 32723.09 -2325.94 -14.06
 2012-2013 34465.89 59.37 580.52
2013-2014 43388.62 -4648.93 -9.33
2014-2015 38864.54 -6490.28 -5.98
Source: Annual report on Rajapalayam mills limited
INTERPERTATION
The table 3.15 show that working capital turnover ratio is 2008-2009, 2012 2013 is sound
position of this ratio because the better utilization of working capital. And remaining years is
unsound position of the ratio. Because the day to day expenses were increased example for
labour salary

5. WORKING CAPITAL TO TOTAL ASSETS

This ratio indicates the proportion of net current assets invested in total assets. In other
words, it indicates the amount of working capital and total assets. A high ratio is standard the
ratio. The ratio reveals the proportion of working capital in the total assets.
It is calculated as follows
Working Capital
Working Capital to Total Assets Ratio = ----------------------------- X 100
Total Assets
Table 3.16
WORKING CAPITAL TO TOTAL ASSETS
Year Working capital Total assets Ratio
2008-2009 61515.74 116441.1 52.82
2009-2010 -16527.8 40788.03 -40.52
2010-2011 -10988 49526.38 -22.18
2011-2012 -2325.94 42657.34 -5.45
2012-2013 59.37 44026.52 0.13
2013-2014 -4648.93 53436.79 -8.69
2014-2015 -6490.28 47980.07 -13.52
Source: Annual report on Rajapalayam mills limited
INTERPERTATION
The table 3.16 show that working capital to total assets ratio is satisfaction level of the
financial year 2008-2009 and 2012-2013 is 52.82% and 0.13%. Because the asset were
increased at the time take over the sick industries. And remaining financial year was
thedissatisfactionlevel in the rajapalayam mills limited it is an indication of the operating not
efficiency of the company.

6.CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost of
sales or sales with the amount of capital invested in the business. Capital turnover ratio is
calculated with the help of the following formula:

Sales
Capital turnover ratio = ----------------------------
Capital employed

Capital employed = Total assets Current liabilities

Table 3.17
CAPITAL TURNOVER RATIO
Year Sales Capital employed Ratio
2008-2009 26186.32 93888.35 0.27
2009-2010 28438.72 13619.23 2.08
2010-2011 32601.31 21955.67 1.48
2011-2012 32723.09 28610.36 1.14
2012-2013 34465.89 28778.3 1.19
2013-2014 43388.62 27672.3 1.56
2014-2015 38864.54 24501.02 1.58
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
 The table 3.17show that capital turnover ratio increased the year of 20092010 to 2014-
2015because the ratioindicates effective usage of capital. Except 2008 2009 Because the ratio
indicates ineffective usage of capital.

7. STOCK TO FIXED ASSET RATIO

This ratio indicates the proportion of stock invested in fixed assets. In other words, it
indicates the amount of stock and fixed assets. The ratio reveals the proportion of stock in the
fixed asset.
Stock
Stock to fixed asset Ratio = ----------------------------- X 100
Fixed Assets
Table 3.18
STOCK TO FIXED ASSET RATIO
Year Stock Fixed asset Ratio
2008-2009 60824.62 32372.63 1.87
2009-2010 76928.28 30147.04 2.55
2010-2011 11801.9 32943.62 0.35
2011-2012 5912.49 31236.3 0.18
2012-2013 7895.7 28718.93 0.27
2013-2014 12841.54 32321.23 0.39
2014-2015 9979.32 30991.3 0.32
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
The table 3.18 clearlydepicts thatstock to fixed asset ratio increased the year of 2009
2010 is 2.5%. Because the ratio indicates high production of cotton yarn. The ratio has been
decreased on 2011-2012 is 0.18%.becuase at the time the sale of old fixed asset. The remaining
financial year 2010-2011 to 2014-2015 ratio has been fluctuated so ineffective usage of fixed
asset

8.STOCK TO CURRENT ASSET RATIO

This ratio is relationship between stock and current asset. This ratio indicates the
company to usage of the current asset. The ratio is high to satisfaction level of the company.
The ratio is low is dissatisfaction of the company.
Stock
Stock to current asset Ratio = -----------------------------
Current Assets

Table 3.19
STOCK TO CURRENT ASSET
Year Stock Current asset Ratio
2008-2009 60824.62 84068.49 0.72
2009-2010 76928.28 10640.99 7.22
2010-2011 11801.9 16582.76 0.71
2011-2012 5912.49 11721.04 0.50
2012-2013 7895.7 15307.59 0.51
2013-2014 12841.54 21115.56 0.60
2014-2015 9979.32 16988.77 0.58
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
The table 3.19 clearly depicts that stock to current asset ratio increased the year of 2009
2010 is 7.2 becausestock were high at the time high production of cotton yarn. The ratio has been
decreased on 2011-2012 is 0.50.becuase at the ineffective usage of current asset so the ratio has
been decrease.

9.SHAREHOLDERS FUND TO FIXED ASSET RATIO

This ratio is relationship between shareholders fund and fixed asset. This ratio indicates
thecompany efficiency of return. The ratio is high to satisfaction level of the company.
The ratio is low is dissatisfaction of the company.
Shareholders fund
Shareholders fund to fixed asset ratio =-----------------------------X 100
Fixed Assets
Table 3.20
SHAREHOLDERS FUND TO FIXED ASSET RATIO
Year Shareholders fund Fixed asset Ratio
2008-2009 11816.46 32372.63 36.50
2009-2010 12747.51 30147.04 42.28
2010-2011 14822.18 32943.62 44.99
2011-2012 15689.39 31236.3 50.22
2012-2013 17551.58 28718.93 61.11
2013-2014 18681.98 32321.23 57.80
2014-2015 19584.05 30991.3 63.19
Source: Annual report on Rajapalayam mills limited
INTERPERTATION:
The table 3.20 clearly depicts that shareholders fund to fixed asset ratioincreased the
year of 2014-2015 is 63.19becauseshareholders fund were increasedthe company issue high
return The ratio has been decreased on 2008-2009 is 36.50%.becuase at the share price were low
so the investor do not invest the company.