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TEXTILES AT KARUR
CHAPTER-I
MEANING:
INTRODUCTION:
o Ratio analysis,
o Liquid ratios,
o Solvency ratios.
RESEARCH METHODOLOGY
RESEARCH QUESTION
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?
RESEARCH:
METHODOLOGY:
RESEARCH DESIGN:
SAMPLING METHOD
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
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.
SECONDARY DATA
Current Ratio
Debt-Equity Ratio
Proprietary Ratio
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
INDUSTRY PROFILE
INTRODUCTION OF ORGANIZATION
Etymology
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
from the Latin faber, or 'artisan who works in hard materials', from
artificial fibers often referred to as thread or yarn. The words fabric and
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
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
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
Urton indicates there may be more to the khipu than just numbers.
prehistoric times.
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
kites, sails, and parachutes; textiles are also used to provide strengthening
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
shades, towels, coverings for tables, beds, and other flat surfaces, and in
art.
Textiles used for industrial purposes, and chosen for characteristics other
clothing (e.g. against heat and radiation for fire fighter clothing, against
molten metals for welders, stab protection, and bullet proof vests). In all
fashion collections apart from others. Armani, the late Gianni Versace,
and Emilio Pucci can be easily recognized by their signature print driven
designs.
from four main sources: animal (wool, silk), plant (cotton, flax, jute),
the past, all textiles were made from natural fibers, including plant,
Textiles are made in various strengths and degrees of durability, from the
Asbestos and basalt fibre are used for vinyl tiles, sheeting, and adhesives,
"transite" panels and siding, acoustical ceilings, stage curtains, and fire
blankets.
Metal fibre, metal foil, and metal wire have a variety of uses, including
much like standard window screening, but heavier and with a more open
chicken wire, such as fences for poultry and traps for animal control.
Synthetic textiles
pantyhose. Thicker nylon fibres are used in rope and outdoor clothing.
Ingeo is a polylactide fibre blended with other fibres such as cotton and
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
such as carbon fibre reinforced plastic. The fibres are made from polymer
Production methods
of longer threads (called the warp) with a set of crossing threads (called
there are a number of types. Some weaving is still done by hand, but the
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
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.
nap or pile.
Treatments
Textiles are often dyed, with fabrics available in almost every colour. The
dying process often requires several dozen gallons of water for each
resist dyeing methods, tying off areas of cloth and dyeing the rest (tie-
printing, still used in India and elsewhere today, is the oldest of these
characteristics. In the 19th century and early 20th century starching was
process, finishing agents have been used to strengthen fabrics and make
before they reach the end-user. From formaldehyde finishes (to improve
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
dyes within this group have also been shown to induce purpuric contact
dermatitis.
retardants (mainly in the brominates form) are also of concern where the
standard which contains limits levels for the use of certain chemicals in
textiles products.
TEXTILE INDUSTRY IN INDIA
only industry that has generated huge employment for both skilled and
total exports was 11.04% during AprilJuly 2010, as per the Ministry of
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
There was textile trade in India during the early centuries. A block
tombs of Foster, Egypt.3 This proves that Indian export of cotton textiles
EurobondGhost.
There was also export of Indian silk, Muslin cloth of Bengal, Bihar
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
(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
loom factories. They account for the largest sector of the textile
people.6
dependent on the SHGs for their funds. Its market share is 13%. of
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
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
Textile Organization
Jute Industry
Silk and sericulture Industry
Wool Industry
Export Promotion
Finance Matters
Information Technology(IT)
Production
MM cotton industry
Organized sector
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
of these are Puma, Armani, Benetton, Esprit, Levi Strauss, Hugo Boss,
COMPANY PROFILE
. 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 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.
OUR VISION
OUR MISSION
OUR VALUES
HR Manager
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
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
ratio analysis
Trend Analysis
Ratio Analysis
Cross-Sectional Analysis:
Liquidity Ratios:
Current Liabilities
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
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
Current Liabilities
Table: 2
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
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
Net Assets
Table: 3
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
2011-2012
15% 2015-2016
26%
2012-2013
19%
2014-2015
2013-2014 23%
17%
4.4 Activity Ratios:
(Average inventory)
ITR
Table: 4
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)
Debtors*
DTR
Table: 5
INTERPRETATIONS
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)
Table: 6
INTERPRETATIONS
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
Table: 7
Year Cost of goods sold
Average current assets CATR
INTERPRETATIONS
CHART
CURRENT ASSETS TURNOVER RATIO
2011-2012
14%
2015-2016
29%
2012-2013
16%
2013-2014 2014-2015
19% 22%
4.8Total AssetsTurnoverRatio:
Table: 8
CHART
250000
200000
150000
100000
50000
0
Cost of goods sold Average total assets TATR
Table: 9
INTERFERENCES
The ratios of the other years can also be interpreted in the same
manner.
CHART:
100%
80%
60%
40%
20%
0%
Cost of goods sold Average capital CTR
employed.
4.10WorkingcapitalTurnoverRatio:
WCTR = Cost of Goods Sold
Table: 10
INTREFERENCE
200000
150000
100000
50000
0
Cost of goods sold Net Working Capital WCTR
Leverage Ratio:
Equity
Table: 11
INTERFERENCES
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
Total Assets
Table: 12
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
Interest
Table: 13
Year EBIT Interest ICR
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
Sales
Table: 14
CHART
Profitability Ratio
300000
250000
200000
150000
100000
50000
0
Gross profit Sales GPM (%)
Sales
Table: 15
INTERFERENCES
300000
200000
2011-2012
2012-2013
100000 2013-2014
2014-2015
2015-2016
0
Sales EBIT OPR (%)
Sales
Table: 16
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
1000000
800000
600000
400000
200000
0
Sales EAT NPR (%)
Net Sales
Table: 17
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.
CHART
Expenses Ratio
14%
29% 2015-2016
16% 2014-2015
2013-2014
19% 22% 2012-2013
2011-2012
4.18OperatingExpenses Ratio:
NetSales
Table: 18
CHART
Net Sales
Table: 19
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
Operating Ratio Sales Cost of goods sold+ Administrative & Selling Expenses
4.20 Return on Investments:
Return on Assets:
Table: 20
INTERFERENCE
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
Table: 21
INTERFERENCE
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:
Table: 22
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
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
Table: 23
INTERFERENCE
CHART
Table: 24
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
EPS
NPAT
Total Assets
Table: 25
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.
CHART
Overall Profitability
300000
250000
200000
150000
100000
50000
0
NPAT TOTAL ASSETS EARNING POWER (%)
CHAPTER-V
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 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
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:
BIBLIOGRAGPHY
Financial Management
Financial Management
Author: I M Pandey
Reference Books
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of a Conference Held in October 1987. Boston: Federal Reserve Bank of Boston,
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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.
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.
Moyer, Stephen. Distressed Debt Analysis: Strategies for Speculative Investors. Ft.
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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
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
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
Total
Receipts 349944.82 257698.36 189566.77 175905.78 163529.49
EXPENDITURE
Total
Expenses 285764.72 217689.39 176316.68 166205.3 149870.74
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