A STUDY ON FINANCIAL PERFORMANCE ANALYSIS IN DSM

TEXTILES AT KARUR
 CHAPTER-I

A STUDY ON FINANCIAL PERFORMANCE ANALYSIS IN DSM

TEXTILES AT KARUR

MEANING:

Financial performance analysis is the process of identifying the financial

strengths and weaknesses of the firm by properly establishing the
relationship between the items of balance sheet and profit and loss
account. It also helps in short-term and long term forecasting and growth
can be identified with the help of financial
performance analysis.The dictionary meaning of analysis is to resolve
or separate a thing in to its element or components parts for tracing their
relation to the things as whole and to each other. The analysis of financial
statement is a process of evaluating the relationship between the
component parts of financial statement to obtain a better understanding of
the firms position and performance. This analysis can be undertaken by
management of the firm or by parties outside the namely, owners,
creditors,investors.

The word Performance is derived from the word parfourmen, which

means to do, to carry out or to render. It refers the act of performing;
execution, accomplishment, fulfillment, etc. In border sense, performance
refers to the accomplishment of a given task measured against preset
standards of accuracy, completeness, cost, and speed. In other words, it
refers to the degree to which an achievement is being or has been
accomplished. In the words of FrichKohlar The performance is a general
term applied to a part or to all the conducts of activities of an organization
over a period of time often with reference to past or projected cost
efficiency, management responsibility or accountability or the like. Thus,
not just the presentation, but the quality of results achieved refers to the
performance. Performance is used to indicate firms success, conditions,
and compliance. Financial performance refers to the act of performing
financial activity. In broader sense, financial performance refers to the
degree to which financial objectives being or has been accomplished. It is
the process of measuring the results of a firm's policies and operations in
monetary terms. It is used to measure firm's overall financial health over
a given period of time and can also be used to compare similar firms
across the same industry or to compare industries or sectors in
aggregation.

INTRODUCTION:

Financial is regarded as the life blood of a business enterprise. In

the modern oriented economy, finance is one of the basic foundations of
all kinds of economics activities .Finance statements are prepared primary
for decision -making .They play a dominant role in setting the frame
work and managerial conclusion and can be drawn from these statements
is of immense use in decision- making through analysis and interpretation
of financial statements .As said earlier finance is said to be life blood of
any business Every business under taking needs finance for its smooth
working .it has to raise funds from the cheapest and risky source to utilize
this in most effective manner . So every company will be interested in
knowing its financial performance.
 The project entitled Financial performance analysis of DSM
TEXTILES'' throw light on overall financial performance of the
company.

Finance is a life blood of business it is required from the

establishment of the business to liquidity or winding up of a business, so
financial institutions played a very important role on the operation of the
business.

In the early days banking business was been confined to receiving

of deposits and lending of money. But now a modern banker under take
wide variety of functions to assist their customers. They provide various
facilities to customers which makes the transaction easy and comfortable.

Financial institutions such as banks, financial service companies,

insurance companies, securities firms and credit unions have very
different ways of reporting financial information. Running a bank is just
difficult as analyzing it for investment purposes.

Finance is that business activity which is concerned with the

organization and conversation of capital funds in meeting financial needs
and overall objectives of a business enterprise.- Wheeler

Financial management is that managerial activity which is

concerned with the planning and controlling of a firm financial reserve.
Financial management as an academic discipline has undergone
fundamental changes as regards its scope and coverage. In the early years
of its evolution it was treated synonymously with the raising of funds.
In the current literature pertaining to this growing academic
discipline, a broader scope so as to include in addition to procurement of
funds, efficient use of resources is universally recognized. Financial
analysis can be defined as a study of relationship between many factors as
disclosed by the statement and the study of the trend of these factors.
The objective of financial analysis is the pinpointing of strength
and weakness of a business undertaking by regrouping and analyzing of
figures obtained from financial statement and balance sheet by the tools
and techniques of management accounting. Financial analysis is as the
final step of accounting that result in the presentation of final and the
exact data that helps the business managers, creditors and investors.
Financial performance is an important aspect which influences the
long term stability, profitability and liquidity of an organization. The
Evaluation of financial performance using Comparative Balance Sheet
Analysis, Common Size Balance Sheet Analysis, Trend Analysis and
Ratio Analysis had been taken up for the study with DSM TEXTILES
as the project.
Analysis of Financial performance is of greater assistance in
locating the weak spots at the DSM TEXTILE Seven though the overall
performance may be satisfactory.

It is the process of identifying the financial strength and weakness

of a firm from the available accounting data and financial statement.

The analysis is done by properly establishing the relationship

between the items of balance sheet and profit and loss account the first
take of financial analyst is to determine the information relevant to the
decision under consideration form the total information contained in the
financial statement.

The second step is to arrange information in a way to highlight

significant relationship. The final step is interpretation and drawing of
inferences and conclusion.
 Thus financial analysis is the process of selection relating and
evaluation of the accounting data information. This studying contain
following analysis:

o Ratio analysis,
o Liquid ratios,
o Solvency ratios.

Financial performance of a company, being one of the major

characteristics, defines competitiveness, potentials of the business,
economic interests of the companys management and reliability of
present or future contractors.

Therefore, financial performance analysis and identification of

their weaknesses and strengths using financial performance indicators has
its contribution to the management, shareholders, the public (customers
of the bank), the regulator (the government), the financial sector, 6 and
the economy as a whole. In a competitive financial market, bank
performance provides signal to depositors and investors whether to
withdraw or invest funds respectively from the bank.

Similarly, it flashes direction to bank managers whether to improve

its deposit service or loan service or both. Regulators are also interested
in the financial health of banks for regulation purposes. The objective of
financial statements is to provide information about the financial position,
performance and changes in financial position of an enterprise that is
useful to a wide range of users in making economic decisions. Owners
and managers require financial statements to make important business
decisions that affect its continued operations.

Financial analysis which measure financial performance is then

performed on these statements to provide management with a more
detailed understanding of the figures. Furthermore, the rationale of
financial analysis is to diagnose the information contained in financial
statement so as to judge the future earning, ability to pay interest, debt
maturities, profitability and sound dividend policy.

PURPOSE OF THE STUDY

A financial services sector plays a critical role in fulfilling the

needs of growing and increasingly diverse economy, offering high quality
services to business and individual alike. Though Indian banking system
registered commendable progress in terms of geographical and functional
coverage, its performance in terms of operational efficiency and viability
still leaves considerable room for improvement

A banks balance sheet and income statement 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 ratio analysis is
required for determining good or bad performance of bank and also for
determining its causes. The study includes the calculation of different
financial ratios. It compares three years financial statements of the
company to know its performance in these different years.
OBJECTIVES OF THE STUDY:

To understand the financial Performance analysis of the company.

To study the change in assets and liabilities of the company.
To study the liquidity position of the firm.
To study the financial health of the company using ratio analysis.
To study the profitability of the company.
To offer suggestions to the company.
SCOPE OF THE STUDY
The scope of the study is to find out financial performance analysis
of the DSM TEXTILES IN KARUR manufacturing industries for
the past five years.
A sincere attempt has been made to include all the aspect relating
to the Study.
For this purpose analysis of financial performance of the company
has done from the last five years published financial statement and
all aspects the researcher should be included in the report.

RESEARCH METHODOLOGY

RESEARCH QUESTION

The study addressed the following specific research questions:

1. What does look like the financial trend of various elements of the
financial statements of the DSM TEXTILES?

2. Does the bank face difficulties in financing its loan and future
investment expansions?

3. Is the profitability of DSM TEXTILES IN KARUR strong enough to

exist in the competitive financial industry?

4. How is the company utilizing its assets?

5. What is the companys financial position to meet its current obligation?

 RESEARCH METHODOLOGY:

RESEARCH:

Research can be defined as A Scientific and Systemic Search for

pertinent information on a specific topic. Therefore, research could be
understood as an organized activity with specific objectives on a problem
or issues supported by compilation of related data and facts, involving
application of relevant tools of analysis and deriving logically on
originality.

METHODOLOGY:

The research method used is analytical research. In this type of

research the researcher uses the facts and information already available
and analyses them to make a critical of the material.

RESEARCH DESIGN:

Research Design is the arrangement of condition for collection and

analysis of data in manner that aims to combine relevance to the research
purpose with the economy in procedure.

Research Design is important primarily because of the increased

complexity in the market as well as marketing approaches available to the
researchers. A research design specifies the methods and procedures for
conducting a particular study.

SAMPLING METHOD

Convenience sampling is method under non-probability sampling

selected at the convenience of the researcher who is to select a sample.
This type of sampling is also called accidental sampling, as the
respondents in the sample are included in it merely on account of their
being available, where the survey is in progress. Convenience sampling
method was adopted to select 5 years from the live time of the company
since its inception.

METHODS OF DATA ANALYSIS

The collected data through the above tools was analyzed using the
techniques of ratio analysis to find out the true picture of the financial
performance of awash international bank over the recent seven years.
Finally, trend analysis (or time series analysis) and comparison against
the industry average was made. The analyzed data was presented using
tables and diagrams that are appropriate to explain the facts

METHOD OF DATA COLLECTION:

PRIMARY DATA

In the research the researcher used primary data. The primary data
is of essence in that it measures variables and ensures current and correct
information. The primary data was collected through use of
questionnaires.

Data Analysis Descriptive statistics was used for quantitative data

analysis and content analysis was used for qualitative data analysis. The
data analysis attempted to show that an increase in financial Performance
activities resulted in an increase on financial performance of the firm.

SECONDARY DATA

The source of information was secondary. Most of the financial

information was made available through the annual reports of the
company. The company profile was made available by the officials
through several documents.

Additional information was given by the officials wherever

required. Much support was extended in analyzing the data and making
meaningful conclusions.

ANALYSIS AND INTERPRETATION OF DATA

Analysis and Interpretation of data are the creative aspect of research in

financial performance decision is considered as one of the important
decision to be made by any firm. The contents of financial performance
comprise of a mix of long term funds like equity, preference shares,
debentures and bonds. The following ratios are studied to judge the long
term financial position of the firm. These ratios indicate the mix of funds
provide by the owners and the lenders in financing the assets.

Current Ratio
Debt-Equity Ratio
Proprietary Ratio

These ratios are studied to achieve the objective of analyzing the

efficiency with which funds of the organization has been used during the
period of study.

Nature of data:

The data required for the study has been collected from secondary
sources and the relevant information were taken from annual reports,
journals and internet etc.,

Tools applied:
 To have a meaningful analysis and interpretation of various data
collected, the following tools were made for this study. Ratio analysis
,Common -size statement , Comparative statement, Trend analysis

LIMITATION OF THE STUDY

The study is restricted for a period of five years

Assumed that 5 years are a responsible period to get fault accurate
picture policies and practices of management of the company.
Due to the inadequate time it is not possible to analyze all respects
relevant to the study.
The analysis is based on annual reports of the company.
Authorities were reluctant to reveal full information about the
working of the Company.

AREA OF THE STUDY:

The Area of the study was conducted by the DSM

TEXTILESINDUSTRY AT KARUR.

CHAPTERIZATION OF THE STUDY:

CHAPTERIZATION I: Deals with Introduction
CHAPTERIZATION II: Deals with Review of literature
CHAPTERIZATION III: Deals with Company profile
CHAPTERIZATION IV: Deals with Data Analysis and
Interpretation
CHAPTERIZATION V: Deals with Finding Suggestion and
Conclusion
 CHAPTER-II

INDUSTRY PROFILE

INTRODUCTION OF ORGANIZATION

Etymology

The word 'textile' is from Latin, from the adjective textiles,

meaning 'woven', from textiles, the past participle of the verb textiles, 'to

weave'.

The word 'fabric' also derives from Latin, most recently from the Middle

Frenchfabrique, or 'building, thing made', and earlier as the Latin fabrica

'workshop; an art, trade; a skillful production, structure, fabric', which is

from the Latin faber, or 'artisan who works in hard materials', from

PIEdhabh-, meaning 'to fit together'.

Yarn is produced by spinning raw fibres of wool, flax, cotton, or other

material to produce long strands. Textiles are formed by weaving,

knitting, crocheting, knotting, or pressing fibres together (felt).A textiles

clothis a flexible woven material consisting of a network of natural or

artificial fibers often referred to as thread or yarn. The words fabric and

cloth are used in textile assembly trades (such as tailoring and

dressmaking) as synonyms for textile. However, there are subtle

differences in these terms in specialized usage.

Textile refers to any material made of interlacing fibres. Fabric refers to

any material made through weaving, knitting, spreading, crocheting, or

bonding that may be used in production of further goods (garments, etc.).

Cloth may be used synonymously with fabric but often refers to a

finished piece of fabric used for a specific purpose (e.g., table cloth).The

word 'cloth' derives from the Old Englishcla, meaning a cloth, woven or

felted material to wrap around one, from Proto-Germanic kalithaz

(compare O.Frisian 'klath', Middle Dutch 'cleet', Dutch 'kleed', Middle

High German 'kleit', and German 'kleid', all meaning "garment").

There are several different types of fabric from two main sources:

manmade and natural. Inside natural, there are two others, plant and

animal. Some examples of animal textiles are silk and wool. An example

of a plant textile is cotton.

The past

Incas have been crafting quipus (or khipus) made of fibres either from a

protein, such as spun and plied thread like wool or hair from camelids
such as alpacas, llamas, and camels, or from a cellulose like cotton for

thousands of years. Khipus are a series of knots along pieces of string.

Until recently, they were thought to have been only a method of

accounting, but new evidence discovered by Harvard professor Gary

Urton indicates there may be more to the khipu than just numbers.

Preservation of khipus found in museum and archive collections follow

general textile preservation principles and practice.

The discovery of dyed flax fibres in a cave in the Republic of Georgia

dated to 34,000 BCE suggests textile-like materials were made even in

prehistoric times.

The production of textiles is a craft whose speed and scale of production

has been altered almost beyond recognition by industrialization and the

introduction of modern manufacturing techniques. However, for the main

types of textiles, plain weave, twill, or satin weave, there is little

difference between the ancient and modern methods.

During the 15th century, textiles were the largest single industry. Before

the 15th century textiles were produced only in a few towns but during,

they shifted into districts like East Anglia, and the Cots wolds.
Use

In the workplace they are used in industrial and scientific processes such

as filtering. Miscellaneous uses include flags, backpacks, tents, nets,

handkerchiefs, cleaning rags, transportation devices such as balloons,

kites, sails, and parachutes; textiles are also used to provide strengthening

in composite materials such as fibre glass and industrial geotextiles.

Using textiles, children can learn to sew and quilt and to make collages

and toys. Textiles have an assortment of uses, the most common of which

are for clothing and for containers such as bags and baskets. In the

household they are used in carpeting, upholstered furnishings, window

shades, towels, coverings for tables, beds, and other flat surfaces, and in

art.

Textiles used for industrial purposes, and chosen for characteristics other

than their appearance, are commonly referred to as technical textiles.

Technical textiles include textile structures for automotive applications,

medical textiles (e.g. implants), geotextiles (reinforcement of

embankments), agro textiles (textiles for crop protection), protective

clothing (e.g. against heat and radiation for fire fighter clothing, against

molten metals for welders, stab protection, and bullet proof vests). In all

these applications stringent performance requirements must be met.

Woven of threads coated with zinc oxidenanowires, laboratory fabric has

been shown capable of "self-powering nano systems" using vibrations

created by everyday actions like wind or body movements.

Fashion and textile designers

Fashion designers commonly rely on textile designs to set their

fashion collections apart from others. Armani, the late Gianni Versace,

and Emilio Pucci can be easily recognized by their signature print driven

designs.

Sources and types

Textiles can be made from many materials. These materials come

from four main sources: animal (wool, silk), plant (cotton, flax, jute),

mineral (asbestos, glass fiber), and synthetic (nylon, polyester, acrylic). In

the past, all textiles were made from natural fibers, including plant,

animal, and mineral sources. In the 20th century, these were

supplemented by artificial fibres made from petroleum.

Textiles are made in various strengths and degrees of durability, from the

finest gossamer to the sturdiest canvas. The relative thickness of fibres in

cloth is measured in deniers. Microfibre refers to fibres made of strands

thinner than one denier.

Mineral textiles

Asbestos and basalt fibre are used for vinyl tiles, sheeting, and adhesives,

"transite" panels and siding, acoustical ceilings, stage curtains, and fire

blankets.

Glass fibre is used in the production of spacesuits, ironing board and

mattress covers, ropes and cables, reinforcement fibre for composite

materials, insect netting, flame-retardant and protective fabric,

soundproof, fireproof, and insulating fibres.

Metal fibre, metal foil, and metal wire have a variety of uses, including

the production of cloth-of-gold and jewellery. Hardware cloth (US term

only) is a coarse woven mesh of steel wire, used in construction. It is

much like standard window screening, but heavier and with a more open

weave. It is sometimes used together with screening on the lower part of

screen doors, to resist scratching by dogs. It serves similar purposes as

chicken wire, such as fences for poultry and traps for animal control.

Synthetic textiles

All synthetic textiles are used primarily in the production of clothing.

Polyester fibre is used in all types of clothing, either alone or blended

with fibres such as cotton.

Aramid fibre (e.g. Twaron) is used for flame-retardant clothing, cut-

protection, and armor.

Acrylic is a fibre used to imitate wools, including cashmere, and is often

used in replacement of them.

Nylon is a fibre used to imitate silk; it is used in the production of

pantyhose. Thicker nylon fibres are used in rope and outdoor clothing.

Spandex (trade name Lycra) is a polyurethane product that can be made

tight-fitting without impeding movement. It is used to make active wear,

bras, and swimsuits.

Olefin fibre is a fibre used in activewear, linings, and warm clothing.

Olefins are hydrophobic, allowing them to dry quickly. A sintered felt of

olefin fibres is sold under the trade name Tyvek.

Ingeo is a polylactide fibre blended with other fibres such as cotton and

used in clothing. It is more hydrophilic than most other synthetics,

allowing it to wick away perspiration.

Milk proteins have also been used to create synthetic fabric. Milk or

casein fibre cloth was developed during World War I in Germany, and

further developed in Italy and America during the 1930s. Milk fibre

fabric is not very durable and wrinkles easily, but has a pH similar to
human skin and possesses anti-bacterial properties. It is marketed as a

biodegradable, renewable synthetic fibre.

Carbon fibre is mostly used in composite materials, together with resin,

such as carbon fibre reinforced plastic. The fibres are made from polymer

fibres through carbonization.

Production methods

Weaving is a textile production method which involves interlacing a set

of longer threads (called the warp) with a set of crossing threads (called

the weft). This is done on a frame or machine known as a loom, of which

there are a number of types. Some weaving is still done by hand, but the

vast majority is mechanised.

Knitting and crocheting involve interlacing loops of yarn, which are

formed either on a knitting needle or on a crochet hook, together in a line.

The two processes are different in that knitting has several active loops at

one time, on the knitting needle waiting to interlock with another loop,

while crocheting never has more than one active loop on the needle.
Spread Tow is a production method where the yarn are spread into thin

tapes, and then the tapes are woven as warp and weft. This method is

mostly used for composite materials; Spread Tow Fabrics can be made in

carbon, aramide, etc.

Braiding or plaiting involves twisting threads together into cloth.

Knotting involves tying threads together and is used in making macrame.

Lace is made by interlocking threads together independently, using a

backing and any of the methods described above, to create a fine fabric

with open holes in the work. Lace can be made by either hand or

machine.

Carpets, rugs, velvet, velour, and velveteen are made by interlacing a

secondary yarn through woven cloth, creating a tufted layer known as a

nap or pile.

Felting involves pressing a mat of fibres together, and working them

together until they become tangled. A liquid, such as soapy water, is

usually added to lubricate the fibres, and to open up the microscopic

scales on strands of wool.

Nonwoven textiles are manufactured by the bonding of fibres to make

fabric. Bonding may be thermal or mechanical, or adhesives can be used.

Bark cloth is made by pounding bark until it is soft and flat.

Treatments

Textiles are often dyed, with fabrics available in almost every colour. The

dying process often requires several dozen gallons of water for each

pound of clothing.17Coloured designs in textiles can be created by

weaving together fibres of different colours (tartan or Uzbek Ikat), adding

coloured stitches to finished fabric (embroidery), creating patterns by

resist dyeing methods, tying off areas of cloth and dyeing the rest (tie-

dyeing), or drawing wax designs on cloth and dyeing in between them

(batik), or using various printing processes on finished fabric. Woodblock

printing, still used in India and elsewhere today, is the oldest of these

dating back to at least 220 CE in China. Textiles are also sometimes

bleached, making the textile pale or white.

Textiles are sometimes finished by chemical processes to change their

characteristics. In the 19th century and early 20th century starching was

commonly used to make clothing more resistant to stains and wrinkles.

Since the 1990s, with advances in technologies such as permanent press

process, finishing agents have been used to strengthen fabrics and make

them wrinkle free.18 More recently, nanomaterials research has led to

additional advancements, with companies such as Nano-Tex and

NanoHorizons developing permanent treatments based on metallic

nanoparticles for making textiles more resistant to things such as water,

stains, wrinkles, and pathogens such as bacteria and fungi.

More so today than ever before, textiles receive a range of treatments

before they reach the end-user. From formaldehyde finishes (to improve

crease-resistance) to biocidic finishes and from flame retardants to dyeing

of many types of fabric, the possibilities are almost endless. However,

many of these finishes may also have detrimental effects on the end user.

A number of disperse, acid and reactive dyes (for example) have been

shown to be allergenic to sensitive individuals. Further to this, specific

dyes within this group have also been shown to induce purpuric contact

dermatitis.

Although formaldehyde levels in clothing are unlikely to be at levels high

enough to cause an allergic reaction, due to the presence of such a

chemical, quality control and testing are of utmost importance. Flame

retardants (mainly in the brominates form) are also of concern where the

environment, and their potential toxicity, is concerned. Testing for these

additives is possible at a number of commercial laboratories; it is also

possible to have textiles tested for according to the Oeko-tex certification

standard which contains limits levels for the use of certain chemicals in

textiles products.
TEXTILE INDUSTRY IN INDIA

The Textile industry in India traditionally, after agriculture, is the

only industry that has generated huge employment for both skilled and

unskilled labor in textiles. The textile industry continues to be the second

largest employment generating sector in India. It offers direct

employment to over 35 million in the country. The share of textiles in

total exports was 11.04% during AprilJuly 2010, as per the Ministry of

Textiles. During 2009-2010, Indian textiles industry was pegged at

US$55 billion, 64% of which services domestic demand.1 In 2010, there

were 2,500 textile weaving factories and 4,135 textile finishing factories

in all of India.

Narration

Large quantity of north Indian silk was traded through the silk

route in China to the western countries. The Indian silk was often

exchanged with the western countries for their spices in the barter system.

During the late 17th and 18th century there were large export of the

Indian cotton to the western countries to meet the need of the European

industries during industrial revolution. The archaeological surveys and

studies have found that the people of Hardpan Civilization3 knew

weaving and the spinning of cotton four thousand years ago. Reference to

weaving and spinning materials is found in the Vedic Literature also.

There was textile trade in India during the early centuries. A block

printed and resist-dyed fabrics, whose origin is from Gujarat is found in

tombs of Foster, Egypt.3 This proves that Indian export of cotton textiles

to the Egypt or the Nile Civilization in medieval times were to a large

extent. Consequently there was development of nationalist movement like

the famous Swadeshi movement which was headed by the

EurobondGhost.

There was also export of Indian silk, Muslin cloth of Bengal, Bihar

and Orissa to other countries by the East Indian company. Bhilwara is

known as textile city.

Production

India is the second largest producer of fibre in the world and the major

fibre produced is cotton. Other fibres produced in India include silk, jute,

wool, and man-made fibers. 60% of the Indian textile Industry is cotton

based.

The strong domestic demand and the revival of the Economic markets by

2009 has led to huge growth of the Indian textile industry. In December
2010, the domestic cotton price was up by 50% as compared to the

December 2009 prices. The causes behind high cotton price are due to the

floods in Pakistan and China.India projected a high production of textile

(325 lakh bales for 2010 -11). There has been increase in India's share of

global textile trading to seven percent in five years.5 The rising prices are

the major concern of the domestic producers of the country.

Man Made Fibers: These includes manufacturing of clothes using

fiber or filament synthetic yarns. It is produced in the large power

loom factories. They account for the largest sector of the textile

production in India.This sector has a share of 62% of the India's

total production and provides employment to about 4.8 million

people.6

The Cotton Sector: It is the second most developed sector in the

Indian Textile industries. It provides employment to huge amount

of people but its productions and employment is seasonal

depending upon the seasonal nature of the production.

The Handloom Sector: It is well developed and is mainly

dependent on the SHGs for their funds. Its market share is 13%. of

the total cloth produced in India.

The Woolen Sector: India is the 7th largest producer. of the wool in

the world. India also produces 1.8% of the world's total wool.
 The Jute Sector: The jute or the golden fiber in India is mainly

produced in the Eastern states of India like Assam and West

Bengal. India is the largest producer of jute in the world.

The Sericulture and Silk Sector: India is the 2nd largest producer of

silk in the world. India produces 18% of the world's total silk.

Mulberry, Eri, Tasar, and Muga are the main types of silk produced

in the country. It is a labor-intensive sector.

Indian Textile Policy

Government of India passed the National Textile Policy in 2000

Textile Organization

The Indian Textile industries is mainly dominated by some

government, semi government and private institutions.

The major functions of the ministry of Textile are:

Bhilwara Textiles Industry

Textile Policy & Coordination

Man-made Fiber Industry

Cotton Textile Industry

Jute Industry
 Silk and sericulture Industry

Wool Industry

Decentralized Powerloom Sector

Export Promotion

Planning & Economic Analysis

Finance Matters

Information Technology(IT)

The advisory boards include:

All India Handlooms Board

All India Handicrafts Board

All India Power looms Board

Advisory Committee under Handlooms Reservation of Articles for

Production

Co-ordination Council of Textiles Research Association

MM cotton industry

The major export promoting councils include:

Apparel Export Promotion Council, New Delhi

Carpet Export Promotion Council, New Delhi

Cotton Textiles Export Promotion Council, Mumbai

The major PSU or Public Sector Undertaking are:

National Textile Corporation Ltd. (NTC)

British India Corporation Ltd. (BIC)

Cotton Corporation of India Ltd. (CCI)

Jute Corporation of India Ltd. (JCI)

National Jute Manufacturers Corporation (NJMC)

Handicrafts and Handlooms Export Corporation (HHEC)

National Handloom Development Corporation (NHDC)

Export Promotion Council for Handicrafts, New Delhi

Handloom Export Promotion Council, Chennai

Indian Silk Export Promotion Council, Mumbai

Power loom Development & Export Promotion Council, Mumbai

Synthetic & Rayon Textiles Export Promotion Council, Mumbai

Wool & Woolen Export Promotion Council, New Delhi

Other autonomous bodies in this industry are:

Central Wool Development Board, Jodhpur

National Institute of Fashion Technology, New Delhi

National Centre for Jute Diversification

The textile Research Associations are:

South India Textiles Research Association (SITRA), Coimbatore

Ahmedabad Textiles Industrys Research Association

Bombay Textiles Research Association, Mumbai

Indian Jute Industries Research association, Kolkata

Man-made Textiles Research Association, Surat

Synthetic and art silk Mills Research Association, Mumbai

Wool Research Association, Thane

Northern India Textiles Research Association, Ghaziabad

Organized sector

According to Kearneys Retail Apparel Index India ranked as the fourth

most promising market for apparel retailers in 2009.

There is large scope of improvement in the textile industry of India as

there is a huge increase in personal disposable income among the Indians

after the 1991 liberalization. There is also a large growth of the organized

sector in the Indian textile industries. The foreign brands along with the

collaboration of the Indian companies established business in India. Some

of these are Puma, Armani, Benetton, Esprit, Levi Strauss, Hugo Boss,

Liz Claiborne, Crocs etc.

The major Indian Industries include Bombay Dyeing, Cabinda, Grasim

Industries, JCT Limited, Lakshmi Machine Works, Lakshmi Mills and

Mysore Silk Factory.

COMPANY PROFILE

Incorporated in the year 2001 as a Public Limited Company, DSM

TEXTILES IN KARUR and Industries Limited had only one industrial
unit Cotton Textile Mills till 1951. Since then the company has made
rapid progress in widely diverse fields. At present, the company is a
trendsetter in cotton textiles and also has a remarkable presence in the
yarn, denim, viscose filament rayon yarn, tyre cords, caustic soda,
sulphuric acid, salt, cement, and pulp and paper industries.

. This is a fully composite cotton textile plant from blow room to made-
ups, stretching over an area of 100 acres with an abundant supply of
water.

The company's 100-per cent cotton yarn unit is situated in Tamilnadu ,

with a capacity of 24,960 spindles. Its denim unit is also situated in karur
, with a capacity of 21 million metres of denim fabric per year. The
company has five cement plants and one grinding unit at different
locations, with a total cement manufacturing capacity of 12.8 million
tonnes per annum.

The company's pulp and paper plant has a rayon grade pulp capacity of
31,320 tonnes per annum, writing and printing paper capacity of 1,97,800
tonnes per annum and capacity of 36,000 tonnes per annum for tissue
paper. Century Pulp & Paper has recently set up a 500-tonnes per day
multilayer packaging board plant adjacent to its existing pulp and paper
plant at Lalkua, Uttarakhand.
The company is managed by a Board of Directors comprising eminent
industrialists, businessmen and dedicated professionals. The Chairman of
the Board is V.K.Sabapathi, Founder.

VISION, MISSION AND VALUES

OUR VISION

To manufacture products comparable to international standards, to

be customer-focused and globally competitive through better
quality, latest technology and continuous innovation.

OUR MISSION

To manufacture world-class products of outstanding quality that

give our customers a competitive advantage through superior
products and value, so we can make every customer smile.
To encourage people's ownership, empowerment and working
under team structure.
To attain highest level of efficiency, integrity and honesty.

OUR VALUES

Customer's satisfaction and delight.

Superior quality of performance.
Concern for the environment and the community.
Passionate about excellence.
Fair to all.
To provide a safe workplace and promote healthy work habits.
ORGANIZATIOANL STRUCTURE

Founder (V.K.Sabapathi, Founder)

CEO (Mr. Vadivel KanagaSabapathi)

HR Manager

Technical Marketing Finance Administration

Department Department Department Department

(Mr.Rangarajan) (Mr.Raja) (Mr. (Mr.Prabakar)

Arulmolidevan)
(20) (155) (30)
(15)

Production
Department

(Mr.Mariyappan)

(530)
 CHAPTER-III

REVIEW OF LITERATURE

Yimin Zhang and Tianmu Wang (2010) have considered the cost
structure, profitability and productivity of the Chinese textile
industry and estimated the impacts of RMB appreciation on this
industry for 19992006. It was found that the industry had suffered
from very low profit margins and returns on capital. Because the
input prices have been increasing, particularly since 2001,
generating profits had become more difficult task for the industry.
Nevertheless, the industry achieved substantial productivity growth
during the period examined. Although at an inadequate level, the
 profitability of the industry did show some signs of improvement.
As long as this trend continued, the industry could have obtained a
decent level of profitability. Since 2005, the industry has faced a
new challenge; the appreciation of the RMB. Based on 2006 data,
it estimated the maximum rate of RMB appreciation Neha Mittal
(2011) has studied the determination of the capital structure choice
of the selected Indian companies.
The main objective was to investigate whether and to what extent
the main structure theories could explain the capital structure
choice of Indian firms. It has applied multiple regression models on
the selected industries by taking data for the period 2010-2015. The
study concluded that the main variables determining capital
structure of industries in India were agency cost, assets structure,
non-debt tax shield and size. The coefficients of these variables
were significant at one per cent and five per cent levels.
Merger and acquisition for long have been an important
phenomenon in the US and UK economics. In India also, they have
now become a matter of everyday occurrence. They are the subject
of counting interest to different persons such as the business
executives who are looking for potential merger partners,
investment bankers who manage the mergers, lawyers who advice
the parties, regulatory authorities concern with the operations of
security market and growing corporate concentration in the
economy and academic researchers who want to understand these
phenomenon better.
Gallet C.A (1996), Merger and Market Power in the US Steel
industry He examine the relationship between mergers in the U.S.
steel industry and the market power. The study employed New
Empirical Industrial Organization (NEIO) approach which
 estimates the degree of market power from a system of demand and
supply equations. The study analyzed yearly observations over the
period between 1950 and 1988 and results have revealed that in the
period of1968 to 1971 merges did not have a significant effect on
market power in the steel industry; whereas mergers in 1978 and
1983 did slightly boost market power in the steel industry.
AnupAgraval Jeffrey F. Jaffe (1999), The Post-merger
Performance Puzzle they examines the literature on long-run
abnormal returns following mergers. The paper also examines
explanations for any findings of underperformance following
mergers. We conclude that the evidence does not support the
conjecture that underperformance is specifically due to a slow
adjustment to merger news. We convincingly reject the EPS
myopia hypothesis, i.e. the hypothesis that the market initially
overvalues acquirers if the acquisition increases EPS, ultimately
leading to long-run under-performance.
Saple V. (2000), Diversification, Mergers and their Effect on
Firm Performance: A Study of the Indian Corporate Sector he
finds that the target firms were better than industry averages while
the acquiring firm shad lower than industry average profitability.
Overall, acquirers were high growth firms which had improved the
performance over the years prior to the merger and had a higher
liquidity.
Beena P.L (2000), An analysis of merger in the private corporate
sector in India she attempts to analyze the significance of merger
and their characteristics. The paper establishes that acceleration of
the merger movement in the early 1990s was accompanied by the
dominance of merger between firms belonging to the same
business group of houses with similar product line.
 VardhanaPawaskar (2001), Effect of Mergers on Corporate
Performance in India he studied the impact of mergers on
corporate performance. It compared the pre- and postmerger
operating performance of the corporations involved in merger
between 1992 and 1995 to identify their financial characteristics.
The study identified the profile of the profits. The regression
analysis explained that there was no increase in the post- merger
profits. The study of a sample of firms, restructured through
mergers, showed that the merging firms were at the lower end in
terms of growth, tax and liquidity of the industry. The merged
firms performed better than industry in terms of profitability.
Paul (2003) The merger of Bank of Madura with ICICI Bank.
The researcher evaluated the valuation of the swap ratio, the
announcement of the swap ratio, share price fluctuations of the
banks before the merger decision announcement and the impact of
the merger decision on the share prices. He also attempted the
suitability of the merger between the 57 year old Bank of Madura
with its traditional focus on mass banking strategies based on
social objectives, and ICICI Bank, a six year old new age
organisation, which had been emphasizing parameters like
profitability in the interests of shareholders. It was concluded that
synergies generated by the merger would include increased
financial capability, branch network, customer base, rural reach,
and better technology. However, managing human resources and
rural branches may be a challenge given the differing work cultures
in the two organizations.
Joydeep Biswas (2004) Recent trend of merger in the Indian
private corporate sector. They research about Corporate
restructuring in the form M&A has become a natural and perhaps a
 desirable phenomenon in the current economic environment. In the
tune with the worldwide trend, M&A have become an important
conduit for FDI inflows in India in recent years. In this paper it is
argued that the Greenfiled FDI and cross-border M&As are not
alternatives in developing countries like India.
Vanitha. S (2007) Mergers and Acquisition in Manufacturing
Industry she analyzed the financial performance of the merged
companies, share price reaction to the announcement of merger and
acquisition and the impact of financial variables on the share price
of merged companies. The author found that the merged company
reacted positively to the merger announcement and also, few
financial variables only influenced the share price of the merged
companies.
Vanitha. S and Selvam. M (2007) Financial Performance of
Indian Manufacturing Companies during Pre and Post Merger
they analyzed the pre and post merger performance of Indian
manufacturing sector during 2000-2002 by using a sample of 17
companies out of 58 (thirty percent of the total population). For
financial performance analysis, they used ratio analysis, mean,
standard deviation and t test. They found that the overall financial
performance of merged companies in respect of 13 variables were
not significantly different from the expectations.
Kumar (2009), "Post-Merger Corporate Performance: an Indian
Perspective" examined the post-merger operating performance of a
sample of 30 acquiring companies involved in merger activities
during the period 1999-2002 in India. The study attempts to
identify synergies, if any, resulting from mergers. The study uses
accounting data to examine merger related gains to the acquiring
firms.
CHAPTER-IV
 DATA ANALYSIS AND INTERPRETATIONS

In this part of the project, detail discussions and analysis of the study
findings are presented. The financial performance analysis obtained by
thoroughly analyzing the companys financial statements. Each financial
performance indicator (financial ratio) is presented independently in a
graph or a table. The analysis is presented in the following sequence; first
the Financial Highlights of the companys followed by the ratios analysis.

Types of Analysis

Financial performance can be subjected to two types of analysis. They

are:

1) Trend analysis or dynamic analysis, which is made by analyzing the

financial statements over a period of years. This indicates the trend of
such variables, as sales, cost of production (or operation) profits, assets,
and liabilities. For this purpose, comparative financial statements are
prepared horizontally.

2) Structural analysis or static analysis, which is made by analyzing a

single set of financial statements as are prepared on a particular date. It is
called structural analysis, because the relationship between different
accounting variables is studied as, for example, the ratio of net profit to
sale s or the ratio of liquid assets to current liabilities.

Tools for Financial Analysis

The end products of the accounting process are balance sheet,

income statement, and statement of cash flows. These are supplemented
by detailed explanation in the Directors Report, annexure, and schedules.
The information contained in the financial statements are arranged in
such a manner that enables analyst to make inferences about the working
and financial health of the enterprise.

The numbers given in the financial performance are not of much use to
the decision maker. These numbers are to be analyzed over a period of
time or in relation to other numbers so that significant conclusions could
be drawn regarding the strengths and weaknesses of a business enterprise.
The tools of financial analysis help in this regard. A number of methods
can be used for the purpose of analysis of financial statements. These are
also termed as techniques or tools of financial analysis. Out of these, and
enterprise can choose those techniques, which are suitable to its
requirements. The principal techniques of financial analysis are (Gitman,
2004):

Trend Analysis

cash flow analysis and

ratio analysis

Trend Analysis

It is a technique of studying the operational results and financial

position over a series of years. Using the previous years data of a
business enterprise, trend analysis can be done to observe the percentage
changes over time in the selected data. The trend percentage is the
percentage relationship, which each item of different years bear to the
same item in the base year. Trend analysis is important because, with its
long run view, it may point to basic changes in the nature of the business.
By looking at a trend in a particular ratio, one may find whether the ratio
is falling, rising, or remaining relatively constant. From this observation,
a problem is detected or the sign of good management is found. For
calculating trend percentages, the base year may be any one of the
periods involved in the analysis but the earliest period is mostly taken as
the base year. Each item of base year is assumed to be equal to 100 and
on that basis, the percentage of item of each year calculated

Cash Flow Analysis

It refers to the analysis of actual movement of cash into and out of

an organization. The flow of cash into the business is called cash inflow
or positive cash flow and the flow of cash out of the firm is called as cash
outflow or a negative cash flow. The difference between the inflow and
outflow of cash is the net cash flow. Cash flow statement is prepared to
project the manner in which the cash has been received and has been
utilized during an accounting year as it shows the sources of cash receipts
and also the purposes for which payments are made. Thus, it summarizes
the causes for the changes in cash position of a business enterprise
between dates of two balance sheets.

Ratio Analysis

Financial ratios are useful indicators of a firm's performance and

financial situation. This is so because accounting numbers do not explain
any phenomenon on their own. However, when a relationship is
established between two numbers figuring in the three financial
statements, i.e., balance sheet, income statement, and cash flow
statement, one can make an assessment regarding the phenomenon. Ratio
analysis involves calculation and interpretation of financial numbers by
relating them in a logical manner in order to assess the strengths and
weaknesses underlying the performance of an enterprise. We calculate
ratios because in this way that we get a comparison that may prove more
useful. In order to comment on the quality of a ratio one has to make a
comparison with some standard or benchmark (Fabozzi, et al., 2003).
These benchmarks could be:

Cross-Sectional Analysis:

Involves comparison of different firms financial ratios over the

same period in time. It usually concerns two or more companies in
similar lines of business. The typical business is interested in how well it
has performed in relation to other firms in its industry. One of the most
popular forms of cross-sectional analysis compares a company's ratios to
industry averages published by statistical agencies.

Trend Analysis (or Time-Series Analysis):

In trend analysis, ratios are compared over periods, typically years.

Year-to-year comparisons can highlight trends and point up possible need
for action. Trend analysis works best with three to five years of ratios.
The theory behind time-series analysis is that the company must be
evaluated in relation to its past performance ,developing trends must be
isolated ,and appropriate action must be taken to direct the firm towards
immediate long term goals .Time-series analysis is often helpful in
checking the reasonableness of a firms projected financial performance.

4.1 Liquidity Ratios

Liquidity ratios indicate the ability of the firm to meet recurring

financial obligations. Liquidity is important for the firm to avoid
defaulting on its financial obligations and, thus, to avoid experiencing
financial distress (Ross, Westerfield, Jaffe 2005). These ratios measure
ability of the firm to meet its short-term obligations, maintain cash
position, and collect receivables. In general, sense, the higher liquidity
ratios mean bank has larger margin of safety and ability to cover its short-
term obligations. Because saving accounts and transaction deposits can be
withdrawn at any time, there is high liquidity risk for both the banks and
other depository institutions.

Liquidity Ratios:

Current Ratio = Current Assets

Current Liabilities

Table No: 4.1

Year Current Assets Current Ratio

Liabilities

2015-2016 120627.29 63342.50 1.904

2014-2015 86811.49 36253.41 2.395

2013-2014 60981.33 23745.25 2.568

2012-2013 63063.52 23072.27 2.733

2011-2012 53951.48 21480.90 2.512

INTERPRETATIONS

The above table reveals the current ratio of the firm for five
succeeding years. The higher the current ratio, higher is the liquidity of
the firm, which also means lower profitability but by maintaining a
consistent ratio the firm has managed a trade-off between liquidity and
profitability. However the ratio has declined in the year 2015-2016.
When seen for the five years from 2011-2012 which showed a
considerably high ratio of 2.5:1 to 2015-2016 which reduced its current
ratio to 1.9:1. In the years 2012-2013 and 2013-2014 the current ratios
were the highest.

The industry ratio is 2:1,that is, for every rupee of current liability the
firm must have two rupees as its current assets to pay them off. The
company complies with the industry average.

CHART:

LIQUIDITY RATIOS
120627.29

Current Assets Current Liabilities Ratio

86811.49

63063.52
60981.33
63342.5

53951.48
36253.41

23745.25

23072.27

21480.9
1.904

2.395

2.568

2.733

2.512

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.2 Quick Asset Ratio:

Quick Ratio = Quick Assets

Current Liabilities

Table: 2

Year Quick Assets Current Quick Ratio

Liabilities

2015-2016 76410.28 63342.50 1.21

2014-2015 49123.21 36253.41 1.35

2013-2014 35462.81 23745.25 1.49

2012-2013 40039.45 23072.27 1.74

2011-2012 33644.86 21480.90 1.57

INTERPRETATIONS

The table above gives an idea about the quick assets held by
the company as against their current liabilities. It can be interpreted as for
every one rupee of current assets the company holds Re.1.24 in the year
2015-2016. Investing more in the liquid assets would affect the
profitability. Therefore the company has been cautious enough to reduce
the amount of quick assets to current liabilities ratio. The company has
thus been reducing the investment in the liquid assets. The quick ratio
was nearly Rs. 2 in the year 2012-2013 which came down to Rs.1.50 in
the year 2013-2014. Since then the quick ratio has been on the declining
trend. The industry average for the quick ratio is 1:1. This means that the
company has been able to comply with the standards with ease.

CHART

Quick Asset Ratio

80000 76410.28
63342.5
60000 49123.21
36253.41 35462.81 40039.45
40000 33644.86
23745.25 23072.27 21480.9
20000
1.21 1.35 1.49 1.74 1.57
0
2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

Quick Assets Current Liabilities Quick Ratio

4.3 Net working capital ratio:

Net Working Capital Ratio =Net Working Capital

Net Assets

Table: 3

Year Net Working Net Assets NWCR

Capital

2015-2016 57284.79 233950.91 0.245

2014-2015 50558.08 163964.37 0.308

 2013-2014 37236.08 103740.45 0.359

2012-2013 39991.25 99958.87 0.400

2011-2012 32470.58 91962.70 0.353

INTERPRETATIONS

In the above table one can see that the net working capital has
been increasing but at a declining rate which is why the ratio has been on
the decreasing over the five financial year period. One can observe that
the ratio in the year 2012-2013 was the highest which gradually reduced
to the level of 0.359 in the year 2013-2014, then to 0.308 in the year
2014-2015, finally to 0.245 in the year 2015-2016.

This means that if the capital employed(net assets) is Rs.100 then the net
working capital was Rs. 40 in the year 2012-2013, Rs. 30.8 in the year
2014-2015 and Rs.24.5 in the year 2015-2016.

CHART

NET WORKING CAPITAL

2011-2012
15% 2015-2016
26%
2012-2013
19%

2014-2015
2013-2014 23%
17%
4.4 Activity Ratios:

Inventory Turnover Ratio =(Sales-Gross profit margin)

(Average inventory)

Average inventory = (opening inventory + closing inventory)

Inventory Holding Period = Months in a year

ITR

Table: 4

Year Sales-G/P Average ITR (in Inventory

Margin Inventory times) Holding
Period (in
months)

2015-2016 234328.97 40952.65 5.72 2.10

2014-2015 180399.96 31603.40 5.71 2.10

2013-2014 148161.46 24271.29 6.10 1.97

2012-2013 130694.99 21665.34 6.03 1.99

2011-2012 115534.31 19955.06 5.79 2.07

INTERPRETATIONS:

This table clearly shows the time taken by the inventory to

turn into cash. In the year 2015-2016 it can be observed that inventory
turns almost every 2 months. In the sense that the inventory runs fast i.e.,
it runs for almost 6 times in the same year. Whereas in the other years
that is the four preceding years one can see that the inventory took almost
the same time. However it had been nominally high in the years 2012-
2013 and 2013-2014 through efficient management and sudden rise in the
demand for cement. This means that the firm has been managing
inventory well to make sure that the inventory is not shelved up.

A low inventory turnover implies excessive inventory levels

than warranted by the production and sales activities. An excessively high
inventory turnover ratio is also unfavorable which leads to stock-outs.

CHART
 ACTIVITY RATIOS
2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

1000000
800000
600000
400000
200000
0
Sales-G/P Average ITR (in times) Inventory
Margin Inventory Holding Period
(in months)

4.5 Debtors Turnover Ratio

Debtors Turnover Ratio = Sales

Debtors*

Average Collection Period = Months (Days) in a year

DTR

Table: 5

Year Sales Debtors DTR (in ACP (in

times) months)

2015-2016 298509.07 27307.35 10.93 1.10

2014-2015 220408.93 24594.53 8.96 1.34

 2013-2014 161411.55 18437.25 8.75 1.37

2012-2013 140395.47 20142.28 6.97 1.72

2011-2012 129193.06 20079.44 6.43 1.87

INTERPRETATIONS

Thetable reveals that the debtor turnover ratio is considerably

high, which means the firm has a very good debtor management system.
The ratio has been increasing which is a healthy trend. The average
collection period is 1.10 months i.e. almost 33 days. This means that the
debtors in the year 2014-2015 have been liquidated within 33 days. When
compared with the previous years it can be observed that the ratio was
lowest and the collection period the highest in the year 2011-2012, the
collection period being 56 days.

The ratio saw an increase in the year 2012-2013 from 6.97

times to 8.75 times. The later years also mention an increase in the
debtors turnover and thus implying a lower average collection period
from debtors.

CHART
 Debtors Turnover Ratio

300000

200000 2011-2012
2012-2013
100000 2013-2014
2014-2015
2015-2016
0
Sales Debtors DTR (in ACP (in
times) months)

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.6 Assets Turnover Ratio:

Fixed Assets Turnover Ratio:

FATR = Cost of Goods Sold/Average Fixed Assets

Table: 6

Year Cost of goods sold

Average fixed assets FATR

2015-2016 234328.97 141201.23 1.66

2014-2015 180399.96 92420.49 1.96

2013-2014 148161.46 65735.17 2.25

2012-2013 130694.99 57070.73 2.29

2011-2012 115534.31 58000.80 1.99

INTERPRETATIONS

The table represents the ratios assessing the efficiency of the

firm in utilizing their fixed as well as their current asset. The table reveals
that the ratios have been deteriorating year after year which means the
firm has ample chance to expand its operations and make full utilization
of the available resources.

Here one can see that the cost of goods sold to fixed assets
ratio in the year 2014-2015 was the highest. In the year 2015-2016 the
ratio was 1.66, in the sense, that the firm utilizes its fixed assets 1.66
times. The ratios in the years 2012-2013 and 2013-2014 are quite high
comparatively.

CHART
 Assets Turnover Ratio

FATR

Average fixed assets

Cost of goods sold

0 50000 100000 150000 200000 250000

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

4.7 Current Assets Turnover Ratio:

CATR = Cost of Goods Sold

Average Current Assets

Table: 7
 Year Cost of goods sold
Average current assets CATR

2015-2016 234328.97 103719.39 2.26

2014-2015 180399.96 73896.41 2.44

2013-2014 148161.46 62022.43 2.39

2012-2013 130694.99 58507.50 2.23

2011-2012 115534.31 51832.40 2.23

INTERPRETATIONS

The table depicts the current assets turnover ratio of the

company wherein one can observe that the current assets turnover is
faster than the fixed assets turnover of the company. If taken in
comparison, we can observe that the current assets are well managed than
the fixed assets. The CATRwas the highest in the year 2014-2015 and it
is comparatively lower in the year 2015-2016. We can compare the fixed
assets turnover ratio and current assets turnover ratio of the company in
the years 2012-2013 and 2013-2014 and say that both the ratios were
almost equal.

These ratios infer by reciprocating them. Considering the ratios of 2015-

2016, for one rupee of cost of goods sold the fixed asset investment
would be Rs.0.60 (1/1.66) and Rs.0.44 (1/2.26) in the current assets
should be invested. Thus this is the explanation of the above ratios.

CHART
 CURRENT ASSETS TURNOVER RATIO
2011-2012
14%
2015-2016
29%
2012-2013
16%

2013-2014 2014-2015
19% 22%

4.8Total AssetsTurnoverRatio:

TATR = Cost of Goods Sold

Average total assets

Table: 8

Year Cost of goods sold Average total TATR

assets

2015-2016 234328.97 248755.60 0.942

2014-2015 180399.96 169211.30 1.066

2013-2014 148161.46 130617.98 1.134

2012-2013 130694.99 118237.37 1.105

2011-2012 115534.31 113040.34 1.022

INTERPRETATIONS

The table gives a clear picture of total assets turnover of the

company for the period of 5 years. The total assets turnover has been
declining since the year 2013-2014 when it was the highest. The falling
rate is not a very healthy trend. It implies that Rs.0.94 is the investment
in total assets that is in both current and fixed assets in order to incur Re.1
on the cost of goods sold.

Similarly the amount for different years can be interpreted as above,

stating that for the cost of goods sold of Re. 1 the total asset investment in
the year 2011-2012 was Rs. 1.02 and for the year 2012-2013 the
investment was Rs. 1.10, which meant that the asset handling had been
improved. In the year 2013-2014, the total asset investment was Rs. 1.13
as against the cost of Re. 1 which gradually deteriorated to Rs. 1.06 and
Re.0.94. This however clarifies the total asset turnover ratio was never
high in the span of five years for the company.

CHART

Total Assets Turnover Ratio

300000

250000

200000

150000

100000

50000

0
Cost of goods sold Average total assets TATR

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.9Capital Turnover Ratio:

CTR = Cost of goods sold

Average capital employed.

Table: 9

Year Cost of goods sold Average capital CTR

employed.

2015-2016 234328.97 185698.465 1.26

2014-2015 180399.96 127731.945 1.41

2013-2014 148161.46 95955.14 1.54

2012-2013 130694.99 83840.915 1.56

2011-2012 115534.31 79512 1.45

INTERFERENCES

The table reveals the ratios which can be interpreted as

follows- the capital turnover ratio had been the highest in the years
2013-2014 and 2013-2012 mainly because of the lower profits in
those two years. The ratio can be interpreted as the capital
employed to be at Re.1 against Rs. 1.26 of the cost of goods sold in
the year 2015-2016. The ratio has been declining since the year
2013-2014. The capital employed against the cost of goods sold by
reciprocating the ratio, one can find that Re. 0.79 has to be the
 capital employed against the cost of goods sold in the financial
year 2014-2015.

The ratios of the other years can also be interpreted in the same
manner.

CHART:

Capital Turnover Ratio

100%

80%

60%

40%

20%

0%
Cost of goods sold Average capital CTR
employed.

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.10WorkingcapitalTurnoverRatio:
WCTR = Cost of Goods Sold

Net Working Capital

Table: 10

Year Cost of goods Net Working WCTR

sold Capital

2015-2016 234328.97 57284.79 4.091

2014-2015 180399.96 50558.08 3.568

2013-2014 148161.46 37236.08 3.979

2012-2013 130694.99 39991.25 3.268

2011-2012 115534.31 32470.58 3.558

INTREFERENCE

The ratios calculated in the above table reveals the level of

working capital employed to expend the cost on the goods sold. In the
year 2014-2015, the cost of goods sold is 4 times the working capital. The
working capital required is 4 times to generate the sales. Similarly in the
year 2013-2014 the working capital to cost of goods sold is 3.5. The
turnover ratio is 4 times and 3.2 times in the years 2012-2013 and 2011-
2012.
CHART

Working capital Turnover Ratio

250000

200000

150000

100000

50000

0
Cost of goods sold Net Working Capital WCTR

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

Leverage Ratio:

4.11 Debt-Equity Ratio:

Debt - Equity Ratio = Debt

Equity
Table: 11

Year Debt Equity Ratio

2015-2016 121481.39 98192.09 1.24

2014-2015 87280.00 65443.44 1.33

2013-2014 62135.45 41605.00 1.49

2012-2013 50455.24 37714.56 1.33

2011-2012 44663.73 34848.27 1.28

INTERFERENCES

The above table reveals that the firm maintains a mediocre

ratio of debt and equity. To explain it precisely with the data available, it
is clear that for every Rs.1.24 of debt there is owners equity of Re.1
which means that both the owners and creditors are almost equal level of
risk and gain. The lower ratio has helped the firm to raise more funds for
the expansion plan. The ratio was the highest in the year 2012-2013. It
was almost Rs.1.50 for Re.1. However, the debt-equity ratio of 2013-
2014 and 2014-2015 were Rs.1.33 and finally to Rs.1.24 against Re.1
respectively. The prescribed standard for debt-equity ratio is 2:1. The
company maintains a low level of debt-equity ratio compared to the
standard.

CHART
 Debt-Equity Ratio
250000
1.24
200000
98192.09
150000 1.33
65443.44
100000 1.49
41605 1.33
1.28
37714.56 34848.27
121481.39
50000 87280
62135.45 50455.24 44663.73
0
2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

Debt Equity Ratio

4.12Debt to Total Capital Ratio:

Debt to Total Capital Ratio = Total Debt

Total Assets
Table: 12

Year Total Debt Total Assets DTCR

2015-2016 121481.39 297293.42 0.4086

2014-2015 87280.00 200217.78 0.4359

2013-2014 62135.45 138204.81 0.4496

2012-2013 50455.24 123031.14 0.4101

2011-2012 44663.73 113443.60 0.3937

INTERFERENCES

The total debt to total assets ratio reveals the proportion of debt to total
assets. It is another way of interpreting the debt to equity ratio. One can
see that the proportion of the debt to total assets is Re. 0.40 if the total
assets are Re. 1 in the year. The company has constantly been
maintaining the same level of debt to total assets ratio. In the year 2011-
2012 it was Re. 0.39 in the total assets of Re.1. The total debt has not
been varying too much in fraction out of total assets. In the year 2013-
2014 the proportion was the highest, it was almost Re.0.45 of Re.1. In the
year 2012-2013 it was Re.0.41 against Re.1, similarly it was Re.0.43 and
0.41 in the years 2014-2015 and 2015-2016.

CHART:
 Debt to Total Capital Ratio
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
Total Debt Total Assets DTCR

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.13 Coverage Ratios:

Interest coverage ratio:

Interest Coverage Ratio = Earnings Before Interest & Taxes

Interest

Table: 13
 Year EBIT Interest ICR

2015-2016 60463.93 5210.72 11.60

2014-2015 37169.62 2991.29 12.43

2013-2014 10371.89 2278.97 4.55

2012-2013 6392.38 2041.10 3.13

2011-2012 11449.3 3149.73 3.64

INTERFERENCE

This ratio shows the number of times the interest charges are
covered by funds that are ordinarily available for their payments. In the
above table one can see that the interest coverage ratio in the year 2013-
2014 was the highest; it was 12.43 times. This means that the firm is able
to service its interest almost 12.5 times with the same earnings. In the
year 2014-2015, it reduced to 11.6 but this reduction is not detrimental.
The ratio is high, despite reduction. The other years have low interest
coverage ratios.

From the above calculation one can infer that a high ICR is a favorable
sign for the company as it has got greater ability to service the interest on
debts.

CHART:
 Coverage Ratios
70000
60463.93
60000

50000

40000 37169.62

30000

20000
10371.89 11449.3
10000 5210.72 6392.38
2991.29 2278.97 2041.1 3149.73
11.6 12.43 4.55 3.13 3.64
0
2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

EBIT Interest ICR

4.14 Profitability Ratio:

Gross Profit Ratio = Gross Profit * 100

Sales

Table: 14

Year Gross profit Sales GPM (%)

2015-2016 64810.10 298509.07 21.71

2014-2015 40008.97 220408.93 18.15

2013-2014 13250.09 161411.55 8.20

2012-2013 9700.48 140395.47 6.91

2011-2012 13658.75 129193.06 10.57

INTERFERENCES

The ratios calculated for the five succeeding years in the

above table tell us the percentage of gross profit on sales. The table
indicates a very progressive growth in the gross profits. However one can
observe decline in the gross profit percentage level in the year 2011-2012
which is the lowest in the five year data followed by an increase in the
gross profits indicating a positive sign. But the data show a sharp increase
in the gross profits continuing the same trend.

CHART

Profitability Ratio

300000

250000

200000

150000

100000

50000

0
Gross profit Sales GPM (%)

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.15Net Profit Margin:

Operating profit ratio = Earnings before interest & taxes (EBIT)

Sales

Table: 15

Year Sales EBIT OPR (%)

2015-2016 298509.07 60463.93 20.26%

2014-2015 220408.93 37169.62 16.86%

2013-2014 161411.55 10371.89 6.43%

2012-2013 140395.47 6392.38 4.55%

2011-2012 129193.06 11449.3 8.86%

INTERFERENCES

This table shows operating profitability margin calculated

using sales as a measure. These margins indicate the level of operating
profit, that is, the profit available before interest and taxes but after
deducting the necessary operating expenses. One can see that the
operating profit margin in the year 2011-2012 was almost 9% owing to
the high expenses which can be seen in the expenses ratio. The margin is
highest in the year 2014-2015, due to reduction in the expenses over the
years and improvement in sales. This improvement in the margin
commenced from 2012-2013 which saw an increased margin from 4.5%
in the year 2013-2014, to 6.4%. Since this rise in the margin, the
company saw a drastic rise in the margin in the year 2013-2014 of about
16%, due to the reduction in the expenses of the company and also better
sales.

Net Profit Margin

300000

200000
2011-2012
2012-2013
100000 2013-2014
2014-2015
2015-2016
0
Sales EBIT OPR (%)

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.16Net Profit Ratio

Net profit ratio = Earnings after taxes (EAT)

Sales
Table: 16

Year Sales EAT NPR (%)

2015-2016 298509.07 38335.05 12.84%

2014-2015 220408.93 26568.33 12.05%

2013-2014 161411.55 4750.92 2.83%

2012-2013 140395.47 3463.78 2.47%

2011-2012 129193.06 6491.25 5.02%

INTERFERENCE

The table here depicts the net profit margins calculated for the
company over the period of 5 years which sees a fluctuation over the
period. The company had a low margin in the year 2011-2012, which
further deteriorated in the year 2012-2013, leaving a meager amount as
earnings for the shareholders. Similar was the case in the year 2013-2014
which followed the same trend of lower profits. However, the company
saw a drastic change in the year 2014-2015, which had the profitability
margin of 12% and has led to an improvement in the margin from 12% to
13% in the year 2015-2016.

The above table clearly shows that the operating and the net profit
margins have been increasing ever since the decline in the year 2012-
2013. This means that the firm has been effective in managing the
business properly with due care so that it could provide margin of
reasonable compensation to the owners for providing their capital at risk.
CHART

Net Profit Ratio

1000000

800000

600000

400000

200000

0
Sales EAT NPR (%)

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.17 Expenses Ratio:

Cost of Goods Sold Ratio:

CGSR = Cost of Goods Sold

Net Sales
Table: 17

Year Cost of Goods Sold Sales CGSR (%)

2015-2016 234328.97 298509.07 78.5

2014-2015 180399.96 220408.93 81.85

2013-2014 148161.46 161411.55 91.79

2012-2013 130694.99 140395.47 93.09

2011-2012 115534.31 129193.06 89.43

INTERFERENCE

The table reveals that the cost of the goods sold in the five
years had been considerably high. In the year 2011-2012 it was
about 89% of sales, that is, Rs.114981.8, leaving only a small gross
profit margin of 11%. This margin increased in the next years
leaving a lean margin of profits for the shareholders. However the
cost of goods sold has been reduced indicating efficiency in the
cost management.

The cost of goods sold margin should be maintained at a lower

level so that a fairly good amount of earnings remain for the
shareholders. The margin shows the direct impact on the
profitability and earnings of the firm.

CHART
 Expenses Ratio

14%
29% 2015-2016
16% 2014-2015
2013-2014
19% 22% 2012-2013
2011-2012

4.18OperatingExpenses Ratio:

OER = (Administrative Expenses + Selling Expenses) * 100

NetSales

Table: 18

Year Administrative Sales OER

& Selling
Expenses

2015-2016 60343.68 298509.07 20.22

2014-2015 50112.51 220408.93 22.74

2013-2014 39086.08 161411.55 24.22

2012-2013 35730.37 140395.47 25.45

2011-2012 29556.53 129193.06 22.88

 INTERFERENCE

The above table reveals that the operating costs like

administrative and selling expenses to what extent occupy the
sales. The margins show the proportion of amount spent as
operating expenses. One can see that the operating expenses in the
year 2012-2013 was the highest amounting to Rs.35730 lacs, which
again has a bad impact on the profits of the company. However the
company has put in efforts to considerably reduce the expenses in
the year 2015-2016, which shows a margin of 20%. The company
has been able to decline the margin from 24% to 22% from the
year 2014-2015 to 2015-2016.

CHART

Operating Expenses Ratio

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Administrative & Selling Sales OER
Expenses

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

 4.19 Operating Ratio:

OR = (Cost of Goods Sold + Operating Expenses) * 100

Net Sales

Table: 19

Year Cost of goods Sales Operating

sold+ Ratio
Administrative &
Selling Expenses

2015-2016 294672.65 298509.07 98.71

2014-2015 230512.47 220408.93 104.58

2013-2014 187247.54 161411.55 116.01

2012-2013 166425.36 140395.47 118.54

2011-2012 145090.84 129193.06 112.31

INTERFERENCE

The table shows that the operating ratio, that is, both operating
costs and the cost of goods sold together account for almost 112%
of sales in the year 2011-2012, which however raised to 118% in
the year 2012-2013, the same got reduced however by 2%, that is,
 116% of the sales. This margin got reduced to 104% in the year
2014-2015, which showed the considerable control of the company
over the expenses. However, the company has now been able to
reduce the level of expenses in the overall sales by bringing down
the expenses to sales margin to 98% in 2015-2016 from 104% the
previous year.

CHART

Operating Ratio
112.31
2011-2012 129193.06
145090.84
118.54
2012-2013 140395.47
166425.36
116.01
2013-2014 161411.55
187247.54
104.58
2014-2015 220408.93
230512.47
98.71
2015-2016 298509.07
294672.65

0 50000 100000 150000 200000 250000 300000 350000

Operating Ratio Sales Cost of goods sold+ Administrative & Selling Expenses
4.20 Return on Investments:

Return on Assets:

ROA = (Net profit after taxes + Interest) * 100

Average total assets

Table: 20

Year PAT+ Average Total

Interest Assets ROA (%)

2015-2016 43545.77 248755.60 17.51%

2014-2015 29559.62 169211.30 17.47%

2013-2014 6849.89 130617.98 5.24%

2012-2013 5504.88 118237.37 4.66%

2011-2012 9640.98 113040.34 8.53%

INTERFERENCE

Here through the table we can infer that the utilization of

assets have been effective and to a fairly good extent. The figures in the
table indicate that the assets have been earning a fairly good amount of
profits, though the year 2013-2014 had a decline in the ROA but in the
later year one can see that the ROA has been increasing. The profit before
interest but after taxes acts as a good measure in knowing the return on
assets. The return was the highest in the year 2015-2016, with 17.5%, but
this was only a nominal rise in the returns when compared the same with
the returns of 2014-2015 wherein the returns were 17.4%. Prior to this
year the returns on assets were low which can be examined from the
table. This implies that over the years; since the decline the firm has been
trying to manage and utilize its assets, so as to maximize the returns on
assets

CHART

Return on Investments
300000 20.00%
18.00%
250000 16.00%
200000 14.00%
12.00%
150000 10.00%
8.00%
100000 6.00%
50000 4.00%
2.00%
0 0.00%
2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

PAT+ Interest Average Total Assets ROA (%)

4.21 Return on Equity:

ROE = Profit after taxes

Net worth (Equity)

Table: 21

Year PAT Net Worth ROE

2015-2016 38335.05 98192.1 0.390

2014-2015 26568.33 64443.44 0.412

2013-2014 4750.92 41605 0.114

2012-2013 3463.78 37714.59 0.092

2011-2012 6491.25 34848.27 0.186

INTERFERENCE

One can observe the return on equity ratios calculated in the

above table, here the ratios depicts the earnings on the equity invested by
the owners in the firm. These ratios are an answer of the proper handling
or mishandling of the funds invested of the firm. The ratios here consider
the profit after interest and taxes, which has all the appropriations
deducted of it and is available for the distribution of the same to the
owners of the firm. The ratio can converted to % to have a better
understanding of them.

One can see that the returns in the year 2014-2015 were the highest
showing 41% of returns on equity; there is a slight reduction in the % of
returns in the year 2015-2016, showing 39% returns. The returns were
low in the years 2011-2012 and 2012-2013. The return in the year 2011-
2012 was also low but in comparison to the years 2012-2013 and 2013 -
2014, the returns were good.

CHART

Return on Equity

8%
4%
6% 2015-2016
48% 2014-2015
2013-2014
34%
2012-2013
2011-2012
4.22 Return on Capital Employed:

ROCE = Net Profit after taxes/ EBIT *100

Average total capital employed

Table: 22

Year EBIT Average total ROCE

capital employed

2015-2016 38335.05 185698.46 20.64

2014-2015 26568.33 127731.94 20.80

2013-2014 4750.92 95955.14 4.95

2012-2013 3463.78 83840.915 4.13

2011-2012 6491.25 79512 8.16

INTERFERENCE

These margins measure the returns that a firm has managed to generate
on the average capital employed. It takes into consideration the earnings
before interest and taxes with the average of the total capital employed in
the business.
One can see that the return on capital employed had been the lowest in
the years 2011-2012 and 2012-2013. However the company raised the
return on capital employed from almost 5% in the year 2012-2013 to 21%
in the year 2013-2014. The company is trying to keep up the same trend
in the years to come. The company has been successful in maintaining the
same level of return on capital in the year 2014-2015. The % of returns to
the capital employed is 20.6%

CHART

RETURN ON CAPITAL EMPLOYED

EBIT Average total capital employed ROCE

20.64

20.8
185698.46
4.95
127731.94 4.13 8.16
95955.14 83840.915 79512
38335.05 26568.33
4750.92 3463.78 6491.25

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.23 Return on Total Shareholders Equity:

Return on Total shareholders Equity = Net profit after tax *100

Average shareholders equity

Table: 23

Year NPAT Average Return on

shareholders shareholders
equity equity

2015-2016 38335.05 81317.77 47.14

2014-2015 26568.33 53024.22 50.11

2013-2014 4750.92 39659.795 11.98

2012-2013 3463.78 36281.43 9.55

2011-2012 6491.25 34848.27 18.63

INTERFERENCE

The table here represents the return on the total shareholders

equity which is offered to them after all the necessary appropriation like
interest and taxes from the profits earned are done. The table can be
understood in the manner that the earnings available to the shareholders
on the average of their capital invested in the year 2015-2016 is 47% of
their average capital invested. Similarly in the year 2014-2015 it is 50%
which is the highest. In the other years, one can see that the earnings on
the shareholders equity were less. It was 12% in the year 2013-2014 and
9.5% in 2012-2013. It had higher earnings in the year 2011-2012 when
the same is compared to the years 2013-2014 and 2012-2013.

CHART

Return on Total Shareholders Equity

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
NPAT Average shareholders Return on shareholders
equity equity

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.24 Earnings per Share:

EPS = Net profit available to equity holders

Number of ordinary shares outstanding

Table: 24

Year NPAT No. of ordinary EPS

shares (in lacs)

2015-2016 38335.05 457.43 83.80

2014-2015 26568.33 457.43 58.08

2013-2014 4750.92 457.43 10.38

2012-2013 3463.78 457.43 7.57

2011-2012 6491.25 457.43 14.19

INTERFERENCE

This table illustrates the earning per share held by the equity
shareholders of the firm. The main objective of the company is
maximization of the shareholders wealth which means to maximize
earnings per share of the ordinary shareholders who bear the risk and are
uncertain about the returns on their investment.
 The company has been able to increase the earnings per share
since the fall in the same in the year 2012-2013. The following years had
seen a boost in the earnings per share, there was a rise of Rs. 3 in the year
2013-2014 and later in the year 2014-2015 it enhanced to Rs 58, that is,
an improvement of Rs.48 since 2013-2014. The trend followed in the
year 2015-2016 which estimated earnings per share of Rs. 83.8 implying
the managements endevour to enhance the owners wealth.

CHART

Earnings per Share

EPS

No. of ordinary shares (in lacs)

NPAT

0% 20% 40% 60% 80% 100%

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

4.25 Overall Profitability:

Earning power = Net profit margin * Investment turnover

Earning power = Net profit after taxes * Sales

Sales Average total investment

Earning Power = Net Profit after Taxes * 100

Total Assets

Table: 25

Year NPAT Total Assets Earning Power

(%)

2015-2016 38335.05 297293.42 12.89

2014-2015 26568.33 200217.78 13.27

2013-2014 4750.92 138204.81 3.31

2012-2013 3463.78 123031.14 2.82

2011-2012 6491.25 113443.60 5.72

INTTERFERENCE
 The table reveals that the earning power has been satisfactory.
In the year 2012-2013 and 2013-2014 the overall profitability had a steep
plunge which however was recuperated by the company through their
intelligent management. Therefore the company has a satisfying overall
profitability at present.

The table gives us a picture of how the overall profitability of the

company been fluctuating all the way from 2011-2012 to 2015-2016. The
year 2011-2012 saw a low profitability which deteriorated in the
following years. There was a recovery of the same in the next years of the
abrupt fall of the profitability of the company.

CHART

Overall Profitability
300000

250000

200000

150000

100000

50000

0
NPAT TOTAL ASSETS EARNING POWER (%)

2015-2016 2014-2015 2013-2014 2012-2013 2011-2012

CHAPTER-V

FINDING, SUGGESTION AND CONCLUSION

FINDINGS

The following are the findings of the analysis done on calculation of

various ratios and percentages in order to study the financial health of the
company over a period of five years.

Liquidity of the company

The current ratio has been according to the standards prescribed by

the industry. The company maintained the current ratio above the
industry standards in the previous years. However the company
realized the excessive funds being invested in the current assets.

The quick ratio also was maintained high by the company. This
shows the inclination of the company towards liquidity. The liquid
assets held by the company were more. The company has constantly
been keeping up the quick ratio above the standards of 1:1
emphasizing on short-term liquidity.

The net working capital ratio has been on fall like the other two
ratios. The net working capital has been on decline from year to
year giving away the pattern of justified liquidity towards which the
company is slowly moving from excessive liquidity. Despite the
rise in the working capital year on year the ratio shows the
declining trend.

The ratios when combined enumerates that the company is in a favorable

short term liquidity position which is of utmost importance to the short
term creditors.
Capital Structure of the company

The debt to equity ratios have been below the industry standard of 2:1.
The company has been not utilizing the debts fully in its capital structure.
Though the company has been increasing the debt level in its capital
structure year after year the company has not been able to increase the
debt-equity mix in the total assets of the company.

The total debt to total assets ratio shows the extent of the hold of creditors
in the total assets (total capital). The ratio had been in the range of
Re.0.40 to Re.0.45 per Re.1 of the total assets whereas the standards
specify that the satisfactory level of debt to total assets is 2/3 rd or 66% of
the total assets.

Interest coverage ratio has been above satisfaction for the company. The
company in the recent years (2013-2014 & 2014-2015) has been
considerably good. This explains that company is in a position to service
its debts with ease by such higher coverage ratio.

The leverage ratios illustrate the long term liquidity of the company. The
companys long term liquidity is beyond satisfaction. The company on the
outset has a risk averting nature which is why full utilization of debts is not
done. The long term liquidity which is highly material to the creditors is
good. This high liquidity defines higher margin of safety for the creditors
and a better hold of owners of the business.
 Profitability of the company

The gross profit margin was fluctuating throughout the period of 5 years.
GPM was below satisfaction which gradually rose owing to the high
operating expenses and other costs. The operating profits and the net profits
were also struck by the high level of expenses which are at an adequate
level at present.

The expenses ratio was a good measure in estimating their effect on the
profits of the company. The assessment helped in analyzing that the
company previously had high expenses which left only a meager part of the
sales for the shareholders. This was an alarming situation for the company.
The total expenses had been 100% and more of the sales.

The cost of goods sold had been ranging from 75% to 90% of the total sales
deteriorating the profit position. The operating profits had been 25% which
currently has been controlled at the level of 20%. There have been efforts in
minimizing the higher ratios of expenses to sales.

The return on investments also estimates the profitability position and utilization of
the funds invested in the business

ROA has been brought up to a reasonable level with proper management of

assets. ROTSE & ROCE has been following a rising pattern in order to
provide the shareholders with the compensation for departing from their
capital.

EPS has been spectacular in the year 2007-08 assuring the shareholders a
growing tendency of the company. EPS has grown beyond expectation
within a span of two years exemplifying the efforts of management.
 The overall profitability of the company has also increased comparatively
but there is a reduction of the same in the year 2007-08, which can be of
concern if not taken care. However overall the company had been
profitable.

Activity Ratios determine the level of activities carried out to turn up more
sales:

Inventory turnover ratio had been quite good for the firm over the years. Even
in the years in which the firm had seen low profits, the ITR had been good
implying the efficient management of the inventory. The inventory to cash
cycle has been low of the firm.

Like inventory the debtors have also been good for the company. The debtor
to cash cycle has been low signifying the proper and efficient collection
system.

The fixed assets turnover ratio has been low providing scope for improvement
in the generation of sales with the use of the fixed assets. The fixed assets
turnover has been declining year after year. However the current assets have
been used efficiently in order to generate more sales.

The total assets turnover ratio is a combination of both fixed and current
assets. These turnover ratios explain that the company can further make the
most of the total assets available to them.

The working capital turnover ratios define how well the working capital is
able to produce the goods which in turn are sold to derive profits. The WCTR
are above satisfaction indicating that the working capital has been able to
 generate the goods 4 times more in the year 2007-08. This shows that firm is
properly utilizing its working capital.

The total capital employed turnover ratio is quite satisfactory over the years,
but the turnover has seen a decline with the passage of time.

These activity ratios show how far the company is able to properly manage its
assets irrespective of fixed or current. These show the level of reciprocation of the
funds in the form of assets or capital to enhance production in order to have higher
sales and thus profits.
SUGGESTIONS:

An endeavor has been done to circumspectly examine and analyze the various
financial statements of the company, spread over a period of five years. On careful
assessment and analysis the following suggestions have been put forth:

The liquidity ratios have been above the prescribed norm, so to suggest
one can say that the company can make better utilization of the
current liabilities. The company has scope to enhance the use of
current liabilities.

There can be some disinvestment in the quick assets as the quick assets
are maintained above the prescribed level. This will make the
company move towards profitability than to stick with liquidity.

The company has not been adequately using the leverage in its capital
structure effectively. There is lot of scope for the company to increase
the level of debt which currently is in the proportion of 40-45% which
can be raised 65% safely .The interest coverage ratios also suggest the
capacity of the company to enhance its debt structure in the capital of
the company.

The asset turnover ratios suggest that there can be better utilization of
fixed and current assets to turn up better sales by proper expansion
plans by all the units of the company.

The expenses are too high for the company; though they have been
reduced they must be maintained at a lower level, in order to see that
they do not eat away the profits of the company. The expenses must
be controlled by bringing a proper system of material and machine
 handling, etc. The alternative may be to increase sales in proportion
with the increase in expenses.

Financial system has to take care of the fluctuations in the trend ratios
of the company. The company must essentially be cautious about the
market trends and fashion so as to avoid such fluctuation in the key
ratios of the company

CONCLUSION:

The company has diverse business at various locations. The financial

strength depends on the operation of all the units of the company. From the
performance evaluation of the company for five years using the financial
information made available one can conclude that the company had been running
its business in a very safe mode by taking fewer risks. However, it is very essential
that the company uses the market opportunities of debt in order to have leverage in
its capital structure. This would help the company to maximize the owners wealth.

The financial statements of the company illustrates that the company

had been into lot of financial turbulences in the past five years. The company had
seen a great fall in the profitability in the years 2011-2012 & 2012-2013, owing
several reasons for such decline. Prior to these years also the company did not
present excellent results. Despite all the steep falls in the finances and the
profitability of the company especially in the financial years 2011-2012 and 2012-
2013, it has been able to come out of the crisis and rise to profitability. This is a
sign of proper management of the company as well as its overall finances.

BIBLIOGRAGPHY
 Financial Management

Authors : Khan & Jain

Publication : Tata Mc Graw Hill

Financial Management

Author: I M Pandey

Publication: Vikas Publication House

Reference Books

Browne, Lynn E., and Eric S. Rosengren (Eds.). The Merger Boom: Proceedings
of a Conference Held in October 1987. Boston: Federal Reserve Bank of Boston,
1988.

Fabozzi, Frank J., and T. DessaFabozzi (Eds.). The Handbook of Fixed Income
Securities, 4th ed. Burr Ridge, IL: Irwin, 1995.

Fridson, Martin S. High Yield Bonds: Identifying Value and Assessing Risk of
Speculative-Grade Securities. Chicago: Probus, 1989.

Gitman, Lawrence J. Principles of Managerial Finance, 7th ed. New York:

HarperCollins, 1994.

Hale, Roger H. Credit Analysis: A Complete Guide. New York: John Wiley &
Sons, 1983.
Levine, Sumner N. (Ed.). Handbook of Turnaround & Bankruptcy Investing. New
York: Harper & Row, 1991.

Maginn, John L., and Donald L. Tuttle (Eds.). Managing Investment Portfolios: A
Dynamic Process, 2nd ed. Boston: Warren, Gorham & Lamont, 1989.

Malonis, Jane A. (Ed.). Encyclopedia of Business, 2nd ed. Detroit: Gale, 1999.

McConnell, Campbell R. Economics: Principles, Problems and Policies, 10th ed.

New York: McGraw-Hill, 1987.

Mosteller, Frederick, Robert K. E. Rourke, and George B. Thomas Jr. Probability

with Statistical Applications, 2nd ed. Reading, MA: Addison-Wesley, 1970.

Moyer, Stephen. Distressed Debt Analysis: Strategies for Speculative Investors. Ft.
Lauderdale, FL: J. Ross Publishing, 2004.

Dr.Maheswari.S.N.,Principles Of Management Accounting ,Sultan &Sons

Eight Edition,.

Kothari.C.R, Research Methology, ViswaPrakashan Publications, New Delhi,

1998 Edition.

Pandey .I.M, Financial Management, Vikas Publishing House Pvt.Ltd,

Saravanavel P, Research Methodology, Kitch Mahal, Edition- 1998 Topic

Referred- Methods And Techniques Of Research Pg No.33-56

Sharma.R.K&ShasiK.Gupta, Management Accounting, Kalyani publishers,

Eight revised edition.

Vinod S.R, Management Accounting, revised edition 2003, Calicut University

publications) ch.III& IV, P. 54 to 203

Websites:
 www.csimarket.com
www.spinningindustry.com
www.financialdictionary.com
2015- 2014- 2013- 2012- 2011-
2016 2015 2014 2013 2012

www.indiainfoline.com
www.investmentguruindia.com
www.moneycontrol.com
www.onlinelibrarywiley.com
ASSETS OWNED BY THE
COMPANY
1. Net Fixed Assets
Gross fixed assets 253003.71 182712.44 142353.37 120437.89 115471.98
Less: depreciation 81120.26 72193.43 68031.4 63289.52 58478.89
171883.45 110519.01 74321.97 57148.37 56993.09

2. Investments 4782.67 2887.28 2901.51 2819.25 2499.03

3. Inventories 44217.02 37688.28 25518.52 23024.07 20306.62
4. Sundry Debtors 27307.35 24594.53 18437.25 20142.28 20079.44
5. All other Current Assets 49102.93 24528.68 17025.56 19897.17 13565.42

Total Assets 297293.42 200217.78 138204.81 123031.14 113443.6

1.LIABILITIES OF THE
COMPANY
1. Secured loans 97106.02 64319.7 41336.84 26051.36 30678.1
2.unsecured loans 24375.37 22960.3 20798.61 24403.88 13895.63
3. Other Liabilities 30303.24 22682.92 16123.31 18559.95 14537.6
4.Provisions 33039.27 13570.49 7621.94 4512.32 6943.3
5. Deferred Tax Liability
(Net) 14277.42 11240.93 19719.11 11789.04 12450.7
199101.32 134774.34 96599.81 85316.55 78595.33

COMPANY'S NET WORTH REPRESENTED

BY

1.Ordinary Share Capital 4574.16 4574.16 4574.16 4574.15 4574.15

2. Reserves and Surplus 93617.94 60869.28 37030.84 33140.44 30274.12
98192.1 65443.44 41605 37714.59 34848.27

Total
Liabilities 297293.42 200217.78 138204.81 123031.14 113443.6
BALANCE SHEET OF DSM TEXTILE INDUSTRY AT KARUR.
 Profit & loss Account for the Five Years
2012-
2015-2016 2014-2015 2013-2014 2013 2011-2012
RECIEPTS

1.Sales 344032.16 251645.89 187781.55 170901.53 156572.15

2.Income from
Operations 0 0 0 0 24.41
3. Miscellaneous
Receipts 3689.94 4505.05 4377.89 6410.87 6323.54
4. Increase/Decrease in
Stock 2222.72 1507.42 -2592.67 -1406.62 609.39

Total
Receipts 349944.82 257698.36 189566.77 175905.78 163529.49

EXPENDITURE

1. Raw Materials 112796.87 93605.78 73522.23 64488.2 57387.23

2.Stores and Power 47203.03 28862.82 26734.18 24688.69 23706.08
3. Salary, Wages & other
amenities 15324.34 12860.05 11578.69 11840.62 11362.06
4. Excise Duty 45523.09 31236.96 26370 30506.06 27379.09
5. Sales Expenses 45019.34 37252.46 27507.39 23899.75 18194.47
6. Manufacturing and
Other 14687.33 10880.03 8325.22 8740.88 8692.08
Miscellaneous
Expenses
7. Interest (Net) 5210.72 2991.29 2278.97 2041.1 3149.73

Total
Expenses 285764.72 217689.39 176316.68 166205.3 149870.74

GROSS PROFIT 64180.1 40008.97 13250.09 9700.48 13658.75

Reversal of Debenture
Redemption Ratio 0 0 0 112.5 187.5
Excess provision for previous year's proposed
Dividend written back 0 0 0 0 4.18

APPROPRIATIONS AND TRANSFERS

1. Depreciation (net) 8926.89 5830.64 5157.17 5349.2 5359.18

2. Provision for Taxation 16500 7500 3400 1000 2000
3.Provision for Deferred Taxation 281.16 0 0 0 0
4.Provision for Fringe Benefit 137 110 122 0 0
5.Proposed Dividend 2943.46 2086.35 1564.76 1303.97 1290.11
6. Share Buy Back Reserve 0 0 0 0 18.51
7. Reserves 4000 3000 500 350 630
8. Surplus / (Deficit) 31391.59 21481.98 2506.16 1809.81 4552.63

64180.1 40008.97 13250.09 9812.98 13850.43