ANANDAM MANUFACTURING

COMPANY CASE ANALYSIS

 Textile Industries
• India textile industry
Second largest in the world
24% of world’s spindle capacity
8% of global rotor capacity
4% to the GDP of india
27% of forex from Indian textile sector
Indian textile mill segment 6% increases
Production of Man-made fibre increases 4%
 Challenges
• Challenges faced by the industry
A dearth of trained employees
A shortage of energy and simultaneously
increasing costs of energy
High transportation costs
Ambiguous and obsolete labour laws
A lack of economies of scale
Outdated technology and reluctance by
industries to implement new technologies
 ANANDAM MANUFACTURING
Co.
• Established in 2012
• Agarwal,a qualified textile engineer
• Specialization in formal party dresses for girls
upto 12 yrs of age.
• With limited capital of Rs. 1.2 million
• Ragini Iyer appointed as fashion designer
• Business started to grow
 Issues faced by company
• The issues faced by the company
are
Delayed delivery
Not dispatched
Stock piling Up
Smaller space
Financial status
 Financial Situation
• Company faced funding problems
The working capital required regular
purchases of raw materials.
Excessive credit periods granted to
customers.
A shortage of funds for purchasing
new machines required for
manufacturing and
Insufficient factory space.
 Project proposal
• Larger location
• Buying new machines
• Expanding the business and smooth
operations
• Skilled labours and additional staffs
 INCOME STATEMENT(IN RS. THOUSAND)
PARTICULARS 2012-13 2013-14 2014-15
SALES
CASH 200 480 800
CREDIT 1800 4320 7200
TOTAL SALES 2000 4800 8000
COST OF GOODS SOLD 1240 2832 4800
GROSS PROFIT 760 1968 3200
OPERATING EXPENSES
GENERAL,ADMINISTRATION,
SELLING EXPENSES 80 450 1000
DEPRECIATION 100 400 660
INTEREST EXPENSES 60 158 340
PROFIT BEFORE TAX(PBT) 520 960 1200
TAX@30% 156 288 360
PROFIT AFTER TAX(PAT) 364 672 840
 INCOME STATEMENT ANALYSIS(IN %)
PARTICULARS 2013-14 2014-15
SALES
CASH 140.00 66.67
CREDIT 140.00 66.67
TOTAL SALES 140.00 66.67
COST OF GOODS SOLD 128.39 69.49
GROSS PROFIT 158.95 62.60
OPERATING EXPENSES
GENERAL,ADMINISTRATION,
SELLING EXPENSES 462.50 122.22
DEPRECIATION 300.00 65.00
INTEREST EXPENSES 163.33 115.19
PROFIT BEFORE TAX(PBT) 84.62 25.00
TAX@30% 84.62 25.00
PROFIT AFTER TAX(PAT) 84.62 25.00
INCOME STATEMENT ANALYSIS
• There has been profit in the company
during the year 2013-14
• The profit in the year 2014-15 is less
when compared to 2013-14
• Gross profit for 13-14 is 158.95%
• Gross profit for 14-15 is 62.60%
 BALANCE SHEET(IN RS. THOUSANDS)
PARTICULARS 2012-13 2013-14 2014-15
ASSETS
FIXED ASSETS 1900 2500 4700
CURRENT ASSETS
CASH AND CASH EQUIVALENTS 40 100 106
ACCOUNTS RECEIVABLE 300 1500 2100
INVENTORIES 320 1500 2250
TOTAL 2560 5600 9156
EQUITY AND LIABILITIES
EQUITY SHARE CAPITAL 1200 1600 2000
RESERVE AND SURPLUS 364 1036 1876
LONG TERM BORROWINGS 736 1236 2500
ACCOUNT RECEIVABLES 260 1728 2780
TOTAL 2560 5600 9156
 BALANCE SHEET ANALYSIS(IN %)
PARTICULARS 2013-14 2014-15
ASSETS
FIXED ASSETS 31.58 88.00
CURRENT ASSETS
CASH AND CASH EQUIVALENTS 150.00 6.00
ACCOUNTS RECEIVABLE 400.00 40.00
INVENTORIES 368.75 50.00
TOTAL 118.75 63.50
EQUITY AND LIABILITIES
EQUITY SHARE CAPITAL 33.33 25.00
RESERVE AND SURPLUS 184.62 81.08
LONG TERM BORROWINGS 67.93 102.27
ACCOUNT RECEIVABLES 564.62 60.88
TOTAL 118.75 63.50
 BALANCE SHEET ANALYSIS
• The cash and cash equivalents decreases
abruptly in the year 2014-15.
• There is 6% increase in cash
• There is an huge increase of long term
borrowings of about 102.27% during the
year 2014-15
 CASH FLOW USING DIRECT METHOD
PARTICULARS 2012-13 2013-14 2014-15
OPERATING ACTIVITY
CASH RECEIVED FROM CUSTOMERS 1700 3600 7400
LESS:CASH PAID -1300 -2544 -4498
OPERATING EXPENSES -80 -450 -1000
INCOME TAX PAID -156 -288 -360
CASH FLOW FROM OPERATING ACTIVITIES 164 318 1542
INVESTING ACTIVITY
PURCHASE OF FIXED ASSETS -2000 -1000 -2860
CASH FLOW FROM INVESTING ACTIVITIES -2000 -1000 -2860
FINANCING ACTIVITY
ISSUE OF SHARES 1200 400 400
LONGTERM BORROWINGS 736 500 1264
INTEREST PAID -60 -158 -340
CASH FLOW FROM FINANCING ACTIVITIES 1876 742 1324
NET CASH FLOW 40 60 6
OPENING CASH AND CASH EQUIVALENTS 0 40 100
NET CASH AT THE END OF THE YEAR 40 100 106
 CASH FLOW USING INDIRECT METHOD
PARTICULARS 2012-13 2013-14 2014-15
OPERATING ACTIVITY
NET INCOME 364 672 840
ADJUSTMENTS
DEPRECIATION 100 400 660
INTREST EXPENSE 60 158 340
INCREASE IN ACCOUNTS RECEIVABLE -300 -1200 -600
INCREASE IN INVENTORIES -320 -1180 -750
INCREASE IN CURRENT LIABILITIES 264 1468 1052
CASH FLOW FROM OPERATING ACTIVITIES 164 318 1542
INVESTING ACTIVITY
PURCHASE OF FIXED ASSETS -2000 -1000 -2860
CASH FLOW FROM INVESTING ACTIVITIES -2000 -1000 -2860
FINANCING ACTIVITY
ISSUE OF SHARES 1200 400 400
LONGTERM BORROWINGS 736 500 1264
INTEREST PAID -60 -158 -340
CASH FLOW FROM FINANCING ACTIVITIES 1876 742 1324
NET CASH FLOW 40 60 6
OPENING CASH AND CASH EQUIVALENTS 0 40 100
NET CASH AT THE END OF THE YEAR 40 100 106
 DECISION
• The loan amout is 50m.
• The total value of the company is less
than 50m.
• Already there is an huge amount of long
term borrowings and his assets are in
mortage.
• There is an slight profit.
• The final decision is that the loan for the
project proposal has to be rejected.