consumer behavior with refrence to big bazaar

8/9/2019 consumer behavior with refrence to big bazaar

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PROJECT REPORTON

COMPARATIVE STUDY TEXTILEINDUSTRIES IN VARANASI

SUBMITTED TO THE DEPARTMENT OF BUSINESS

MANAGEMENT INTEGRAL UNIVERSITY IN PARTIAL

FULLFILLMENT FOR THE AWARD OF THE MASTER IN

BUSINESS ADMINISTATION

Submitted By: Under theGuidance of:

Divya Prakash Prof. Atu!a"sa

M!A #$i"a"%&' $a%uty of!usi"&ss

Ist Y&ar R&s&ar%h (M)*t.

Ro No. +,--+-/


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Project ReportON

“ OMPARATIVE STUDY OF TEXTILE

INDUSTRIES IN VARANASI

”

Submitted in p!ti" #u"#i"ment #$! t%e !e&ui!ement #$! t%e'!d $# M(te!( $# Bu(ine(( Admini(t!ti$n

Under Guidance:

Prof. ATUL BANSAL

Faculty of bu!"# r##arc$

I"t#%ral u"!r!ty' Luc("o)

Submitted By:

DIVYA PRA*AS+ PANDEY

M.B.A ,II SEM-

SESSION /012314

Roll No 12001//0/4

FA)ULTY OF BUSINESS MANAGEMENT *RESER)H

INTEGRAL UNIVERSITY


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D(u"i+ ,u!(i R$d+ Lu-.n$'/ 001201

A),NOWLEDGEMENT

I EXPRESS MY THANKS TO PROF. ATUL BANSAL SIR IU,

LUCKNOW FOR GRANTING ME THE PERMISSION TO

WORK ON THE “ COMPARATIVE STUDY OF TEXTILE

INDUSTRIES IN VARANASI”.

WHO GUIDED AND HELPED ME IN ALL POSSIBLE

WAYS THEY COULD, AT EVERY STAGE OF THE PROJECT.

I WOULD ALSO LIKE TO THANK ALL THE TEAM

MEMBERS, WHO PROVIDED ALL THE RELEVANT

INFORMATION AND THEIR KIND SUPPORT, ON THE BASIS

OF WHICH THIS REPORT HAS BEEN PREPARED.

LASTLY HE WOULD LIKE TO PAY OUR SPECIAL REGARDS

TO OUR PARENTS FOR THEIR ENCOURAGEMENT ANDFULL SUPPORT FOR COMPLETION OF THIS PROJECT

WORK.

DIVYA PRAKASH

M.B.A 2ND SEMESTER,

ROLL .NO.1!!122!2"


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STUDENT DECLARATION

I D!&ya Pra(a$ A tu5#"t of M.B.A at I .U LU *N O6'

$#r#by 5#clar# t$at t$# Pro7#ct )or( #"t!tl#5

“ o89arat ! Stu5y of T#:t ! l# I"5utr !# I"

Vara"a! 3 ! co89!l#5 a"5 ub8!tt#5 u"5#r t$# %u!5a"c# of

PROF.ATUL BANSAL T$! ! 8y or!%!"al )or(.

6$at#r !"for8at!o" fur"!$#5 !" t$! 9ro7#ct r#9ort !

tru# to t$# b#t of 8y ("o)l#5%#.

Submitted by:

DIVYA PRAKAS H PANDEY R$"" N$/ 4522400206

MBA 7 0nd Sem8

INTEGRAL UNIVERSITY

LU),NOW


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PREFACE

I AM VERY GLAD TO COMPLETE THIS SHORT TERM

RESEARCH REPORT WITHIN PRESCRIBED TIME WHICH IFEEL AS A RESPONSIBILITY AND DUTY BECAUSE THIS

PROJECT IS A PART OF MY MANAGEMENT CORSE. THIS

SHORT TERM RESEARCH REPORT IS RESULT OF A STUDY

CONDUCTED TOURISM EXTENSIVE STUDY ON

“)OMPARATIVE STUDY OF TE9TILE INDUSTRIES IN

VARANASI ” IS ATTEMPT TO KNOW WHAT THE REALLY

TOURISM IS.

THE EXPERIENCE THAT I HAVE GATHERED WHILEPREPARING THIS REPORT PROVIDE ME WITH IN

ORIENTATION WHICH, I BELIEVE, WILL HELP ME TO

SHOULDER AN ASSIGNMENT SUCCESSFULLY IN NEAR

FUTURE THIS PERIOD, I HAVE COLLECTED ALL

PERTINENT INFORMATION “STUDY OF CUSTOMER

RELATIONSHIP MANAGEMENT IN BANKING INDUSTRY

IN LUCKNOW” THROUGH #UESTIONNAIRE AS WELL AS

THOUGH INTERNET, NEWSPAPER AND REST OF REPORTWAS COMPILED AFTER GOING THROUGH A

COMPREHENSIVE STUDY AND GIVEN A DEEP THOUGH

ON THE PROBLEM ON THE BASIS OF FIELD SURVEY

PROGRAM. I HAVE TRIED MY BEST TO ARRANGE MY

WORK IN A SYSTEMATIC MANNER. DESPITE THE

INHERENT SHORT COMING OF THE STUDY A GENUINE

ATTEMPT WAS MADE ON PART TO SEE THAT THE STUDY

WAS CARRY OUT IN RIGHT PROSPECTIVE.


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)ERTIFI)ATE

T$% &'()* +%( -(/%0* *$% *-'0 “)OMPARATIVE STUDY OF

TE9TILE INDUSTRIES IN VARANASI 3 ) 3'4% ' 5+ )6-%(4')'.T$') ') ('**% *%)*'5+ & *$% %70%88%* -(%)%**' 9+ DIVYA

PRA,ASH &( *$% -(*'8 &68&'85%* & MASTERS DEGREE IN

MANAGEMENT & INTEGRAL UNIVERSITY8 W% 03(*68*% $'5

&( $') :%(&68 (; : ')$ )600%)) ' &6*6(%.

P(&. A*68 B)8


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TABLE OF CONTENTS


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ACKNOWLEDGMENT

TABLE OF CONTENTS >

EXECUTIVE SUMMARY ?

INTRODUCTION 11

1.1- TEXTILE INDUSTRY IN VARANASI..................................................................5

1.2- INANCIAL STATE!ENT AND RATIO ANALYSIS........................................."

1.#- RESEARC$ %UESTIONS.....................................................................................&1.'- O()ECTIVES.......................................................................................................11

1.5- SI*NIICANCE O T$E STUDY.....................................................................12

1.+- SCO,E AND LI!ITATIONS...............................................................................1#

1."- DEINITION O T$E TER!S.........................................................................1'

LITERATURE REVIEW 1"

RESEARCH METHODOLOGY AND DESIGN 22

#.1- !ET$OD O T$E STUDY................................................................................22

#.2- DATA.....................................................................................................................22

#.#- SA!,LIN* ,ROCEDURE..................................................................................2##.'- RESEARC$ INSTRU!ENT...............................................................................2#

#.5- INANCIAL TOOLS............................................................................................2#

#.+-TREAT!ENT O T$E DATA.............................................................................2#

ANALYSIS AND INTERPRETATION OF DATA 2@

'.1 CO!!ON-SIE INCO!E STATE!ENT...........................................................2'

'.2 CO!!ON-SIE (ALANCE S$EET...................................................................#

'.# INTER,RETATION O ,ROITA(ILITY RATIOS..........................................#+

'.' INTER,RETATION O LI%UIDITY RATIOS...................................................'#

'.5 INTER,RETATION O EICIENCY RATIOS................................................'+

'.+ INTER,RETATION O ASSET UTILIATION RATIOS.................................'&'." CAS$ LO/ ANALYSIS......................................................................................52

CONCLUSION AND RECOMMENDATION ""

5.1 S$ORT-TER! LI%UIDITY..................................................................................55

5.2 CAS$ LO/ ANALYSIS......................................................................................5+

5.# RETURN ON INVESTED CA,ITAL...................................................................5"

5.' ASSET UTILIATION..........................................................................................5"

5.5 O,ERATIN* ,EROR!ANCE AND ,ROITA(ILITY..................................50


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EXECUTIVE SUMMARY

VARANASI's garment and textile are two principal industries contributing more

than 60 per cent to total export earnings, accounting for 6 percent of total

manufacturing and emplo!ing "# percent of the manufacturing labor$force%

&xports According to official data, textile manufactures exports increased b!

"%"( percent to )S*6,(+%#" million during the period ul!$-a! 00$0" as

compared to the corresponding period of pre.ious !ear% /heir share in o.erall

exports stood at 6%## percent as against 6"%+0 per cent during ul!$-a! 00($

0, thus further reducing the contribution of other categories to exports% So

looing to the increasing trend researcher is doing financial statement anal!sis of

selected textile companies in VARANASI% As financial statement anal!sis pro.ide

deep insight to the financial position of a compan!, which is fa.orable for present

and its future of its existence% 1inancial ratios are widel! used to de.elop insights

into the financial performance of companies b! both the e.aluators and

researchers% /he firm in.ol.es man! interested parties, lie the owners,

management, personnel, customers, suppliers, competitors, regulator! agencies,

and academics, each ha.ing their .iews in appl!ing financial statement anal!sis

in their e.aluations%

/his stud! is about the financial statements anal!sis of the selected companies in

the textile industr! in VARANASI% /he stud! is descripti.e in nature% /he

researcher has utili2ed the descripti.e method in ac3uiring information for

e.aluating the financial performance of the selected textile companies% /he

research data is secondar! in nature as for this particular research% /he data is


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collected for the consecuti.e fi.e !ears i%e% from (44# to 00, in the form of

annual reports from the registrar office, containing5 balance sheet, income

statement and profit loss account% /he sample for this particular research is

three different companies5 Shri Sarhad /extile -ills 7/8, 8%-% /extile -ills 7/8,

Al$ 9adir /extile -ills 7/8% /his research is based on secondar! source of data

and consists of annual reports, articles, web sites, and boos%

:! anal!2ing financial statements the findings are reall! interesting that Al$9adir

/extile ;ompan! is performing much better than the industr! norms, where it has

faced se.eral problems in (44# and (444% Al$9adir has the highest R


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reporting of economic e.ents as well as non$comparable accounting methods

and estimates, financial statements are onl! an approximation of realit!% In

addition, because of the tendenc! to dela! accounting recognition, financial

statements also tend to lag realit!%

A primar! ob?ecti.e of financial anal!sis is to determine comparable ris and

return of companies and their securities% 1inancial statements include the

• :alance Sheet

• Income Statement

• ;ash 1low Statement

/he financial statements are interrelated and should be used and anal!2ed

together% -ethods of financial statement anal!sis ma! be di.ided into two general

categories, internal anal!sis and comparati.e or external anal!sis%

Internal anal!sis uses figures from the financial statements of an! one date or

period to gain an understanding of the customer% ;omparati.e anal!sis ma! be

used to determine trends when two or more successi.e sets of figures are

re.iewed, or ma! be used to e.aluate a gi.en compan!'s financial statement

against industr! standards%

/hese methods ma! be used separatel! or in combination% /he! are part of the

tools that enable experienced credit professionals to reach a credit decision%

1inancial statements should be spread and anal!2ed, with appropriate ratios and

flows calculated as an aid in the customer e.aluation% As an important first step in

internal anal!sis, the financial statement should be examined for .alidit! and

general correctness% After the statement has been accepted as .alid and

reasonabl! accurate, ratios should be calculated and the figures anal!2ed%

Internal anal!sis calls for an examination of items within a single financial


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statement for the purpose of ?udging their significance in relation to the capital of

the compan!, its method of operation and conditions pre.ailing within the

industr!% /he ma?or tools for internal anal!sis are balance sheet ratios and a

woring nowledge of the line of business including the method of operation and

seasonal influences%

Ratios are mathematical aids for appraisal and comparison of financial

statements% /he! are used to supplement currenc! amount inspection, to

examine inter$item relationships and to compare a specific compan!'s

performance against its industr! standard%

/he use of ratios reduces the influence of currenc! si2e on anal!sis since these

comparisons are expressed as a percentage, fraction, decimal, or rates of

turno.er% = of the total exports to the national econom!, 6= of its totalmanufacturing, and "#= of its total emplo!ment%

/he /extile Industr! will continue to pla! an important role in the econom! of

VARANASI as the countr! is one of the four largest cotton growers in the world

and a.ailabilit! of large 3uantit! Baround (0 million bales per annumC of

reasonable 3ualit! is the basis of the de.elopment and sustenance of the local

/extile Industr!% /he VARANASI /extile Industr! is also .er! labor intensi.e with

low costs of manufacturing and raw materials%


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/extile products are a basic human re3uirement next onl! to food% In spite of the

go.ernmentDs efforts to di.ersif! export as well as industrial base, the textile

remains the bacbone of industrial acti.it! in the countr!% Its share in the

econom!, in terms of E8F, exports, emplo!ment, foreign exchange earnings,

in.estment and contribution to the .alue added in industr!5 mae it the single

largest determinant of the growth in manufacturing sector with 6 percent share

in o.erall manufacturing acti.it!% /he demand for textiles in the world is around

*(# trillion% VARANASI has emerged as one of the ma?or cotton textile product

supplier in the world maret and its share in world !arn trade is about "0 percent

while its share in cotton cloth trade is about # percent% owe.er, o.erall share of

textile exports from VARANASI is around one percent% /he share of textile in

VARANASIDs exports earnings is 6# percent at its present worth of exports is

around * + billion% /he .alue addition in the sector account for 4 percent of E8F

and it emplo! "# percent of industrial worers% 8uring the last three !ears,

VARANASIDs textile sector is preparing itself to face the challenges of the post$

3uota regime in 00>%

/he Eo.ernment of VARANASI has adopted special steps to boost the countr!'s

cotton industr! and maret through a series of amendments% A standard

committee has been appointed to loo into wa!s to increase 3ualit! cotton

production, to pro.ide better crop nowledge to growers and to upgrade grading,

ginning, and pressing s!stems to international standards%

VARANASI's cotton production in 00($0 was (0%6 million bales% ;otton

production in 00$0", declined to (0 million bales% /he industr! was not a ma?or

pla!er in the global arena and fiber textile producers from India were large

producers% /he ;entral :oard of Re.enue B;:RC has extended the

compensator! dut! drawbac on the export of blended fabrics, garments, and

blended !arn from une "0, 00" to une "0, 00% /extile industr! is nowpreparing itself to sur.i.e the challenges of new textile maret in 00>% /he focus

is on .alue addition, 3ualit!, and pricing% A huge in.estment of )S * billion has

been made on balancing, moderni2ation, and replacement, which would help the

textile sector to position it in order to sur.i.e after 00>% /he industr! exports one

billion dollars worth of bed wear, nitwear, and read!made garments% In addition,

steps are underwa! to increase the exports of s!nthetic textiles%

VARANASI's textile industr! will ha.e to face tough competition, both in the


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domestic and international marets% ;hina will be the biggest competitor, which

after its accession to the @/0 per cent of the global textile maret%

9ualit!, deli.er! schedules, and price will be the high mars for all textile goods

in the global marets% Increase in producti.it! will be .ital for our textile industr!%

VARANASI along with ;hina and India will ha.e ad.antages, because all these

countries ha.e a plentiful suppl! of the .ital raw material i%e% cotton% BThe NEWS,

14th,July 2003)

1.2- FINANCIAL STATEMENT AND RATIO ANALYSIS

1inancial ratios are a popular wa! for users of financial statements to de.elop

insights into the financial performance of companies% :! controlling for the effect

of firm si2e on the le.el of performance, ratios enable financial statement users to

examine how a firm has performed relati.e to its peers and relati.e to its own

historical performance%

A firmDs ratios can differ from its peers or its own historical performance because

it has selected a different product maret strateg!, because its management

team has become more effecti.e at implementing its strateg!, or because it has

selected a different financial strateg!% Sometimes firms can appear to perform

differentl! because the! ha.e selected different accounting methods for reporting

the same underl!ing economic e.ents% 1or this reason, a pioneer to effecti.e

financial ratio anal!sis is the de.elopment of a clear understanding of how a

firmDs accounting decisions compare with those of its competitors, or with its own

decisions in prior !ears%

In assessing the significance of .arious financial data, managers often engage in

ratio anal!sis, the process of determining and e.aluating financial ratios% A

financial ratio is a relationship that indicates something about a compan!'s

acti.ities, such as the ratio between the compan!'s current assets and current

liabilities or between its accounts recei.able and its annual sales% /he basic

source for these ratios is the compan!'s financial statements that contain figures

on assets, liabilities, profits, and losses% Ratios are onl! meaningful when

compared with other information% Since the! are often compared with industr!


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data, ratios help managers understand their compan!'s performance relati.e to

that of competitors and are often used to trace performance o.er time%

Ratio anal!sis can re.eal much about a compan! and its operations% owe.er,

there are se.eral points to eep in mind about ratios% 1irst, a ratio is ?ust one

number di.ided b! another% 1inancial ratios are onl! GflagsG indicating areas of

strength or weaness%


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1.3- RESEARCH QUESTIONS

($ @hat are the profitabilit! ratios of the textile companies with respect toH

aC Return on Assets

bC Return on e3uit!

cC Net profit margin

dC Eross profit margin

eC


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$@hat are the efficienc! ratios of textile companies with respect toH

aC /otal asset turno.er

bC 1ixed asset turno.er

cC In.entor! turno.er

dC Recei.able turno.er

eC Fa!able turno.er

>$@hat is the performance of the textile companies in term ofH

aC ;ommon$si2e anal!sis

6$@hat are the cash flows generated from different acti.ities

aC


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/he following are the ob?ecti.es of this researchH

(% /o anal!2e and interpret the financial reports of selected textile companies%

% /o appraise the financial position using the ratio anal!sis%

"% /o accomplish the common si2e anal!sis%

% Interpret post$retirement obligations and funding implications for future

performance%

>% /o determine the le.el of profit generated%

6% /o determine the expense and in.estments of the compan!%

1.5- SIGNIFICANCE OF THE STUDY

1inancial statement anal!sis is of interest to shareholders, creditors, and the

firmDs own management% :oth present and prospecti.e shareholders are

interested in the firmDs current and future le.el of ris and return% /hese two


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dimensions directl! affect share price% /he firmDs creditors are primaril! interested

in the short$term li3uidit! of the compan! and in its abilit! to mae interest and

principal pa!ments% A secondar! concern of creditors is the firmDs profitabilit!5

the! want assurance that the business is health! and will continue to be

successful% -anagement, lie stocholders, must be concerned with all aspects

of the firmDs financial situation% /hus, this stud! attempts to operate in a manner

that will be fa.orable to both owners and creditors%

In addition, management uses ratios to monitor the firmDs financial performance

from period to period% It will also help management to mae decisions regarding

di.idend policies, in.estments, lending, borrowings etc%

Sofie Vander Meulen in his stud! in 00" states that, in.estors as well as other

staeholders hea.il! rel! on a compan!Ds financial statements% It is an important

source of information that is readil! a.ailable to them at a relati.el! low cost% /he3ualit! of those statements howe.er is highl! .ariable Baggressi.e reporting or

not, disclosure or notC% /herefore, this research would also be obliging for the

compan!Ds in.estors and staeholders%

/hrough this research man! of the societ! members will be benefited and it will

be ad.antageous for the econom!% 7ie in.estors, researchers, creditors,

management, emplo!ees, lenders, suppliers, customers, auditors, and anal!sts

will e3uall! be able to tae assistance from this research%

1.6- SCOE AND LIMITATIONS

/he sample of this research is basicall! three textile companies in VARANASI

and fi.e !ear data has been taen for the anal!sis% /he selected textile

companies areH

(% Shri Sarhad /extile -ills 7/8%

% 8%-% /extile -ills 7/8%

"% Al$ 9adir /extile -ills 7/8%


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LIMITATIONS:

(% /here is a limitation related to the anal!sis of the result, as researcher

doesnDt ha.e modern software a.ailable to anal!2e the findings so the result is

based on manual wor%

% /he a.ailabilit! of funds is the one of the limitations while doing this

research as a student it is difficult for the researcher to manage the funds%

"% /he time period for the research is .er! short because it is difficult to

conduct a full time research for a student%

1.!- DEFINITION OF THE TERMS

1. Income Statement: 1inancial statement that shows the re.enues, expenses,

and net income of a firm o.er a period of time%

2. Balance Seet: 1inancial statement that shows the .alue of the firmDs assets

and liabilities at a particular time%

!. L"#$"%"t&: Abilit! of an asset to be con.erted to cash 9uicl! at low cost%

'. Sa(eol%e(): An! one with a financial interest in the firm%

*.Ca) Flo+ Statement: 1inancial statement that shows the firmDs cash receipts

and cash pa!ments o.er a period of time%


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,. Rat"o Anal&)"): In.ol.es the methods of calculating and interpreting financial

ratios to assess the firmDs performance and status%

-. C$((ent a))et): /he sum of a firmDs cash, account recei.able, in.entor!,

prepaid expenses and maretable securities which can be con.erted to cash with

in a single operating c!cle%

. C$((ent L"a/"l"t"e): -easurable debt owned within one !ear, including

accounts pa!able, accrued liabilities, taxes due, and notes pa!able%

LITERATURE REVIE0

Ratios are a .aluable anal!tical tool when used as part of a thorough financial

anal!sis% /he! can show the standing of a particular compan!, within a particular

industr!% owe.er, ratios alone can sometimes be misleading% Ratios are ?ust one

piece of the financial ?igsaw pu22le that maes up a complete anal!sis% B7eslie

Rogers, (44+C

1inancial ratios are widel! used to de.elop insights into the financial performance

of companiesD b! both the e.aluatorsD and researchersD% /he firm in.ol.es man!

interested parties, lie the owners, management, personnel, customers,

suppliers, competitors, regulator! agencies, and academics, each ha.ing their

.iews in appl!ing financial statement anal!sis in their e.aluations% &.aluatorsD

use financial ratios, for instance, to forecast the future success of companies,while the researchers' main interest has been to de.elop models exploiting these

ratios% -an! distinct areas of research in.ol.ing financial ratios can be

differentiated% ( :arne, (4#6C

1inancial ratios can be di.ided into se.eral, sometimes o.erlapping categories%

A financial ratio is of the form JK, where and K are figures deri.ed from the

financial statements or other sources of financial information%


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financial ratio anal!sis both the and the K are based on financial statements%

If both or one of them comes from the income statement the ratio can be called

d!namic while if both come from the balance sheet it can be called static% /he

concept of financial ratios can be extended b! using other than financial

statement information as or K in the JK ratio% 1or example, financial

statement items and maret$based figures can be combined to constitute the

ratio% BSalmi, Vitanen, and


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Se.eral accounting and finance textboos present a sub?ecti.e classification of

financial ratios based on the practical experience or .iews of the authors% It is

common that the classifications and the ratios in the different categories differ

between the authors% In .er! general terms three categories of financial ratios are

more or less commonH profitabilit!, long$term sol.enc! Bcapital structureC and

short$term sol.enc! Bli3uidit!C% B;ourtis, (4+# )

1inancial ratios can be di.ided for con.enience into four basic groups or

categoriesH li3uidit! ratios, acti.it! ratios, debt ratios, and profitabilit! ratios%

7i3uidit!, acti.it!, and debt ratios primaril! measure ris5 profitabilit! ratios

measure return% BC

/he following is a listing of some of the ratios to be aware of in anal!2ing a

compan!'s balance sheet and income statement% /hese ratios fall into four

categories L li3uidit!, profitabilit!, asset management Befficienc!C, and debt

management Ble.erageC% BFerttunen and -artiainen, (440C

@hen a firm borrows mone!, it promises to mae a series of interest pa!ments

and then to repa! the amount that it has borrowed% If profits rise, the debt holders

continue to recei.e a fixed interest pa!ment, so that all the gains go to the

shareholders%


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nown as benchmaring or cross$sectional anal!sis in which the firmDs ratio

.alues are compared to those of a e! competitor or a group of competitors,

primaril! to isolate areas of opportunit! for impro.ement% BEitman, (44+C

1ollowing are the cautions while doing financial anal!sis% 1irst, a single ratio does

not generall! pro.ide sufficient information from which to ?udge the o.erall

performance and status of the firm%


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1inancial statement anal!sis applies anal!tical tools and techni3ues to general$

purpose financial statements and relates data to deri.e estimates and inferences

useful in business decisions% It is a screening tool in selecting in.estment or

merger candidates, and is a forecasting tool of future financial conditions and

conse3uences% It is a diagnostic tool in assessing financing, in.esting, and

operating acti.ities, and is an e.aluation tool for managerial and other business

decisions% 1inancial statement anal!sis reduces our reliance on hunches,

guesses, and intuition, and in turn it diminishes our uncertaint! in decision$

maing% It does not lessen the need for expert ?udgment but rather establishes an

effecti.e and s!stematic basis for maing business decisions% B:ernstein and

@ild, (440C

/he accounting e3uation is the basis of the financial reporting s!stemH

Assets 7iabilities O shareholderDs e3uit!

/he left$hand side of this e3uation relates to the economic resources controlled

b! a compan!, or assets% /hese resources are .aluable in representing potential

sources of future re.enues through operating acti.ities% /o engage in operating

acti.ities, a compan! obtains funding to in.est in assets% /he right$hand side of

this e3uation identifies funding sources% 7iabilities are funding from creditors andrepresent obligations of a compan! or, alternati.el!, claims of creditors on assets%

ShareholderDs e3uit! is a total of B(C funding in.ested or contributed b!

shareholders Bcontributed capitalC and BC accumulated earnings since inception

in excess of distributions to shareholders Bretained earningsC% 1rom the

shareholders point of .iew, these amounts represent their claim on compan!

assets%

A balance sheet summari2es the financial position of a compan! at a gi.en point

in time% -ost companies are re3uired under accepted accounting practices to

present a classified balance sheet% In which assets and liabilities are separated

into current and non$current accounts% ;urrents assets are expected to be

con.erted to cash and used in operations within one !ear or the operating c!cle,

which e.er is longer% ;urrent liabilities are obligations that the compan! must

settle in the same time period% /he difference between current assets and current

liabilities is woring capital% BEitman, (44+C


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Income statement measures a compan!Ds financial performance between

balance sheet dates and hence, reflects a period of time% It lists re.enues,

expenses, gains, and losses of a compan! o.er a time period% Net income,

shows the increase Bor decreaseC in net worth of a compan! before considering

distributions to and contributions from shareholders% B:righam and &hrhardt,

00(C

;ross$sectional anal!sis in.ol.es the comparison of different firmsD financial

ratios at the sane point in time% /he t!pical business is interested in how well it

has performed in relation to other firms in the industr!% 1re3uentl!, a firm will

compare its ratio .alues to those of a e! competitor or group of competitors that

it wishes to follow% Bud! @ard, (44>C

1inancial statement users are broadl! classified into two groups% I"#$%"&' ()$%),

primaril! the managers of a compan!, are in.ol.ed in maing operating andstrategic decisions for the business% As emplo!ees, the! t!picall! ha.e complete

access to a compan!Ds information s!stem% Internall! generated financial reports

are, therefore, specificall! tailored to the uni3ue information needs of an internal

decision maer, such as ;&


27/60

A(+,#%) use financial anal!sis techni3ues in determining areas warranting

special attention during their examination of a clientDs financial statements% A

compan!Ds &%+ +,%$#%), in their role as appointees of shareholders,

monitors managementDs actions% R$('%/ &$",$) utili2e financial

statements in the exercise of their super.isor! functions, including the Securities

and &xchange ;ommission, which watchfull! o.ersees published financial

statements for compliance with federal rites law%


28/60

• Income statement

• Frofit 7oss account

3.3- SAMLING ROCEDURE

/he research, which has been done on the financial anal!sis of the selected

textile companies, the sample procedure for this particular research is three

different companiesH

• Shri Sarhad /extile -ills 7/8%

• 8%-% /extile -ills 7/8%

• Al$ 9adir /extile -ills 7/8%

3.4- RESEARCH INSTRUMENT

/his research is based on secondar! source of data and consists of annual

reports, articles, web sites, and boos%

3.5- FINANCIAL TOOLS

/o now the desired results and to get the desired information the researcher has

applied man! financial tools lie trend$ anal!sis, cross$sectional anal!sis,

common$si2e anal!sis, ratio anal!sis etc%

3.6-TREATMENT OF THE DATA

/he data and information that was gathered was interpreted and anal!2ed b!

using different financial tools%


29/60

ANALYSIS AND INTER3RETATION OF DATA

'.1 COMMON4SI5E INCOME STATEMENT

In common$si2e income statement, each item is expressed as a percentage of sales, thus enabling the relationship between sales and specific re.enues and

expenses to be easil! e.aluated% /hree fre3uentl! cited ratios of profitabilit! that

can be read directl! from the common$si2e income statement are gross$profit

margin, operating$profit margin, and the net$profit margin%

Al4 6a%"( Te7t"le M"ll) L"m"te%;ommon$si2e Income Statement

1or Kear (44# P 00

TABLE @. 1

2882 2881 2888 1999 199

Net Sale) (00= (00= (00= (00= (00=

Co)t o Sale) 4%4" #6%+0 +#%#4 #+%( ##%#4(o)) 3(o"t +%0+ ("%"0 (%(0 (%#6 ((%(O;e(at"n< E7;en)e "% %6" %+( %>0 %4

O;e(at"n< 3(o"t "%#> (0%+> (6%0 #%"6 6%6Ote( Income 0%(4 0%(( 0%0 0%(( 0%(0

%0 (0%#6 (6% #%6 6%+F"nanc"al Ca() 3a(t"c";at"on F$n% B0%0(C B0%"0C B0%#C QQQ$ QQ QQQ$QQ 3(o"t?Lo)) Beo(e Ta7at"on %# >%++ 4%06 B0%#C B(%>(CT&*,"7

C$((ent4 &ea( 0%+4 0%>0 $ 0%6" 0%"3("o(4&ea( 0%0# 0%0( (%0+ QQQ$QQ 0%+3(o"t Ate( Ta7 (%4> %( +%44 B(%6C B0%4+C

Starting with the cost of sales the compan!Ds a.erage cost of sales for fi.e !ears

are #6%4(= for fi.e !ears, moreo.er which has changed each !ear as it depends

on man! other factors lie raw$material consumed, salaries and wages, electricit!

used etc% Eross$profit has graduall! decreased for the first four !ears but for thelast !ear it is maximum with respect to pre.ious !ears% Similar is the case with

operating expense5 the compan! has reduced its operating expense, in 00(

these expenses are minimum the attracti.e thing to note here is compan!Ds sales

are highest for this !ear and that is Rs% +0+,0>0,044%

;ompan! has also concentrated its financial obligations b! the end of 00% 1or

the !ear (44# and (444 profit before taxation is negati.e additionall! that maes


30/60

the compan! to bear loss and for three !ears reduction can be seen in the profit

both before and after taxation%

Al4 6a%"( Te7t"le M"ll) L"m"te%;ommon$si2e Income Statement

1or Kear (44# P 00

FIGURE :8 4

AL46ADIR TEXTILE MILL LTD.

0

'0

0

60

#0

(00

('0

(44# (444 '000 '00( '00'

YEARS

3 E R

C E N T A 2 E

Net Sales

;ost of Sales

Eross Frofit

"%6 "%" "% %+


31/60

O;e(at"n< 3(o"t 4%# (0%+ (0%" %0 %(+

Ote( Income 0% 0%"6 0%(0 0%( 0%(6

(0%00 ((%0# (0% %> %""

F"nanc"al Ca( >%#+ +%#4 #%"6 (%("

Lo)) on )ale o "7e% a))et) 0%0( $ $ $ $

0o(=e(>) 3a(t"c";at"on F$n% 0%(4 0%6 0%(" QQQ$QQ QQQ$QQQ

3(o"t?Lo)) Beo(e Ta7at"on "%+> %4> %6 B"%#C B4%+4C

T&*,"7

C$((ent4 &ea( 0%>0 0%>0 0%>0 0%>0 0%>0

3("o(4&ea( 0%0> 0%0" 0% 0%00( $

Dee((e% QQQ$QQ QQQ$QQ QQQ$QQ (%6" QQ$QQQ

3(o"t? Lo)) Ate( Ta7at"on "%( % (%>0 B%+(C B(0%4C

As it can be seen from the profit loss account of 8%- textile in the appendix

section that its sales has alwa!s increased but the compan! has speciali2ed toreduce its cost of sales, it shows lie the! are properl! utili2ing the economies of

scale, b! lowering the cost of production, which is also pro.ed b! the gross profit

from 6%#+= in (44# it increased to (%"= in 00( and ("%= in 00% @e can

see that there is a reduction in operating expense of a compan!, which further

pro.ides high operating profit% 1inancial charges are reduced but due to short$

term borrowing it has increased for the last !ear 00% ;ompan! has incurred

loss for two !ears that is for (44# and (444 and for other !ears is also not

maing profit after tax of more than %= in 00(%

D.M Te7t"le M"ll) L"m"te%;ommon$si2e Income Statement

1or Kear (44# P 00FIGURE :8 0


32/60

D.M TEXTILE MILL LTD.

0

'0

0

60

#0

(00

('0

(44# (444 '000 '00( '00' YEARS

3 E R C E N T A 2 E

Net Sales

;ost of Sales

Eross Frofit


33/60

Co)t o Sale) (0%+( (00%>" ((%4" ((>%+> (0>%+>

(o)) 3(o"t? Lo)) B%+(C B0%>"C B(%4"C B(>%+>C B>%+>C

O;e(at"n< E7;en)e >%> >%>4 (0%6 ((%" %"4

O;e(at"n< 3(o"t? Lo)) B#%>C B6%(C B"%>+C B+%(#C B(0%(C

Ote( Income %## 0%4 (% 0%44 0%(6

B>%"+C B>%6"C B4%">C B6%(4C B4%4#C

F"nanc"al Ca( $

Ote( ca( "%+4 (+%+6 0%#( %+

3(o"t?Lo)) Beo(e Ta7at"on B((%6C B(%((C B"+%+0C B6%+C B(>%#>C

T&*,"7

C$((ent4 &ea( 0%>0 0%>0 0%>0 0%>0 0%>0

3(o"t Ate( Ta7 B(%(C B(%6(C B"#%0C B6>%C B(6%">C

;ompan!Ds common$si2e income statement depicts its poor performance% /he

sales of the compan! are not e.en the >0= of the sales of other companies

included in the research% -oreo.er its cost of sales is higher than its sales, which

on the .er! first step taes the compan! into loss% As gross profit of the compan!

shows on a.erage its cost of sales are +%>= more than its sales% /he compan! is

also incurring high operating expenses that further more adds to the loss incurred

b! the compan!% 1or the !ear (444 itDs loss after taxation is 6>%= of the sales%

S(" Sa(a% Te7t"le M"ll) L"m"te%;ommon$si2e Income Statement

1or Kear (44# P 00

FIGURE :8 5


34/60

$0

$'0

0

'0

0

60

#0

(00

('0

(0

(44# (444 '000 '00( '00'

3E

RCENTA2E

YEARS

S1RI SAR1AD TEXTILE MILL LTD.

Net Sales

;ost of Sales

Eross FrofitJ 7oss


35/60

!ear with that for current !ear% 1ollowing are the results of the anal!sis of the

companiesD common$si2e balance sheet%

Al4 6a%"( Te7t"le M"ll) L"m"te%;ommon$si2e :alance Sheet

1or Kear (44# P 00

TABLE @. @

2882 2881 2888 1999 199C(%%$"# A))$#)7

In@ento(& %#6= "%(= %+#= 6%0#= >%6+=

Stoc= "n t(a%e +%6+ >0%(6 >#%6 6>%# >"%>

T(a%e De/t) (%0> +%4+ (%>4 >%+ 4%64

A%@ance) De;o)"t) ;(e;a&ment)an% ote( (ece"@a/le)

(0%" %6 4%"# (4%#4 %>#

Ca) Ban= Balance) 6%40 "%04 >%60 "%# 6%>

Total c$((ent a))et) (00= (00= (00= (00= (00=

C(%%$"# L,&,',#,$)7

C$((ent ;o(t"on o Lon%(6 >%#> (%+ 4%>#

So(t4te(m /o((o+"n+%04 "%"0

C(e%"to() acc($e% ote( l"a/"l"t"e) #%4> +4%6 6>%6# #% ">%(>

3(o@")"on o( Ta7 %" (%+6 0%# %0 (%((

3(o;o)e% D"@"%en%) $ (%46 +%44 $ $

Uncla"me% D"@"%en% 0%0 (%66 QQ$QQ QQ$QQ QQ$QQ

Total c$((ent l"a/"l"t"e) (00= (00= (00= (00= (00=

Al$9adir textiles current assets ha.e increased o.er the !ears as can be seen

from the balance sheet in the appendix% /he compan! has reduced its in.entor!

from >%6+= in (44# to %#6= in 00, which is good in a sense as in.entor! is

the most illi3uid form of current assets% Stoc in trade is almost >0= of the

current assets for all fi.e !ears% /rade debts are considerabl! low as compared

with the industr!, but ha.e graduall! increased in the !ear 00% Ad.ances,

deposits, prepa!ments, and other recei.ables show a .ariation in the data% 7ast

cash and ban balances ha.e increased for the last three !ears%

;urrent liabilities were low in the !ear 00( and 000 of Rs%4>, 0"4,# and

Rs%4, >6>,"#6 respecti.el! and for other !ears it has been abo.e Rs% (0 million%

Short$term borrowings are onl! for two !ears i%e% (44# and (444% ;reditors,

accrued, and other liabilities constitute the ma?or portion of current liabilities% /he

same data is depicted in the figure % BaC and figure % BbC%

Al4 6a%"( Te7t"le M"ll) L"m"te%;ommon$si2e :alance Sheet

1or Kear (44# P 00FIGURE :8 : ;


36/60

CURRENT ASSETS

0=

'0=

0=

60=

#0=

(00=

(44# (444 '000 '00( '00'

YEARS

3 E R C E N T A 2 E

;ash :an :alances

Ad.ances, 8eposits,

prepa!ments and other

recei.ables/rade 8ebts

Stoc in trade

In.entor!

FIGURE :8 : ;b<

CURRENT LIABILITIES

0=

'0=

0=

60=

#0=

(00=

(44# (444 '000 '00( '00'

E!RS

)nclaimed 8i.idend

Froposed 8i.idends

Fro.ision f or /ax

;reditors, accrued other

liabilities

Short$term borrow ings

;urrent portion of 7ong$term

7iabilities

D.M Te7t"le M"ll) L"m"te%

;ommon$si2e :alance Sheet1or Kear (44# P 00

TABLE @. "2882 2881 2888 1999 199

C(%%$"# A))$#)7

In@ento(& "%6#= 6%(= %"= 6%">= 4%4=

Stoc= "n t(a%e %>( "6%>+ >+%> >%4" "0%46

T(a%e De/t) +%> (0%0 6%( $ $

A%@ance) De;o)"t) ;(e;a&ment)an% ote( (ece"@a/le)

"4%6 (%(" %+0 "6%0# >>%

Ca) Ban= Balance) >%(0 6%0+ 4%( %6" %"

Total c$((ent a))et) (00= (00= (00= (00= (00=

C(%%$"# L,&,',#,$)7

C$((ent ;o(t"on o Lon


37/60

3(o;o)e% D"@"%en%) $ $ $ $ $

Uncla"me% D"@"%en% 0%( QQ$QQ QQ$QQ QQ$QQ QQ$QQ

Total c$((ent l"a/"l"t"e) (00= (00= (00= (00= (00=

8%- textile has also increased its current assets for fi.e !ears% In.entor! of the

compan! shows a decreasing trend as can be seen from the table %>, starting

from 4%4= in (44# it has reduced to "%6#= in 00, although high in !ear 00(%

Stoc in trade represent the ma?or portion of current assets and show

dissimilarit! o.er the !ears% /here are no trade debtors in (44# and (444%

;ompan! has reduced the ad.ances, deposits, prepa!ments, and other

recei.ables, which is also the ma?or component of current assets% A.erage

current liabilities are almost e3ual to Rs% #0 million for fi.e !ears and there is less

fluctuation in it%

D.M Te7t"le M"ll) L"m"te%;ommon$si2e :alance Sheet

1or Kear (44# P 00

FIGURE :8 6 ;<

CURRENT ASSETS

0=

>0=

(00=

(44# (444 '000 '00( '00'

YEARS

3 E R C E N

T A 2 E

;ash :an :alances

Ad.ances, 8eposits,

prepa!ments and other

recei.ables/rade 8ebts

Stoc in trade

In.entor!

/he abo.e figure shows the current assets for 8%- textile% @here ma?or portion

of current assets is in stoc in trade and in ad.ances, deposits, prepa!ments and

other recei.ables% In addition, in.entor! is almost less than (0= for fi.e !ears%

FIGURE :8 6 ;b


38/60

CURRENT LIABILITIES

0=

'0=

0=

60=

#0=

(00=

(44# (444 '000 '00( '00'

YEARS

3 E R C E N T A 2 E

)nclaimed 8i.idend

Froposed 8i.idends

Fro.ision for /ax

;reditors, accrued

other liabilities

Short$term

borrowings

;urrent portion of

7ong$term 7iabilities

/he current liabilities are more due to creditors, accrued and other liabilities% /he

compan! is also liable to pa! current portion of long term liabilities which has

reduced

S(" Sa(a% Te7t"le M"ll) L"m"te%;ommon$si2e :alance Sheet

1or Kear (44# P 00

TABLE @.

2882 2881 2888 1999 199

C(%%$"# A))$#)7

In@ento(& 4%(>= >0%0#= >0%0(= #%#= %+#=

T(a%e De/t) (%" 0%06 $ %6( 6%#"

A%@ance) De;o)"t);(e;a&ment) an% ote((ece"@a/le)

4%> 4%> 4%64 4%( "0%0+

Ca) Ban= Balance) 0%# 0%( 0%"0 0%(" 0%"

Total c$((ent a))et) (00= (00= (00= (00= (00=

C(%%$"# L,&,',#,$)7

C$((ent ;o(t"on o Lon >>%0+ >4%" %+ (>%4

C(e%"to() acc($e% ote(l"a/"l"t"e)

(%44 % "#%# >%#6 #"%0

3(o@")"on o( Ta7 %66 %4 %0 %0 QQ$QQ

Total c$((ent l"a/"l"t"e) (00= (00= (00= (00= (00=

Foor performance can be re.ealed through its common$si2e balance sheet

anal!sis, as the compan! has not made respectable sales to co.er its cost of

production so its in.entor! is almost >0= of its current assets, trade debts are

.er! low% Ad.ances, deposits, prepa!ments, and other recei.ables are 4= of


39/60

current assets% 1urther more the compan! cash and ban balances remains less

than (= for all the !ears%

/here are no current portions of long$term liabilities except for the !ear (44#% /he

compan! ha.e more of the short$term borrowings for all the fi.e !ears which are

almost of a.erage 6= of current liabilities and >(= of a.erage are creditors,

accrued, and other liabilities%

S(" Sa(a% Te7t"le M"ll) L"m"te%;ommon$si2e :alance Sheet

1or Kear (44# P 00

FIGURE :8 1 ;<

CURRENT ASSETS

0=

0=

0=

60=

#0=(00=

00 00( 000 (444 (44#

YEARS

3 E R C E N T A 2 E

;ash :an :alances

Ad.ances, 8eposits,prepa!ments and other recei.ables

/rade 8ebts

In.entor!

;urrent AssetsH

/he compan!Ds current assets can onl! be seen in two colors in the figure %6 BaC

reflecting in.entor! and ad.ances, deposits, prepa!ments and other recei.ables%

-oreo.er some portion of trade debt can be seen in (44# and (444%

FIGURE :81 ;b


40/60


41/60


42/60

/he abo.e figure shows the profitabilit! ratio of the compan! o.er the !ears% It

can be clearl! obser.ed that gross$profit, operating$profit and net$profit margin is

on the same trend% Return on e3uit! is at its pea in !ear 000%

-anagers often measure the performance of a firm b! the ratio of net$income to

total assets% owe.er, because net$income measures profit net of interest

expense, this practice maes the apparent profitabilit! of the firm a function of its

capital structure%

D.M Te7t"le M"ll) L"m"te%Frofitabilit! Ratios

1or Kear (44# P 00

TABLE @.

2!!2

2881 2888 1999 199

(o)) 3(o"t Ma( >%"> (%+" B%4C B(0%6C

Ret$(n on e#$"t& "#%6 >0% (>%+ B%>C B4(%04C

8%- textile gross$profit margin is showing an escalating process and so is

operating$profit margin% owe.er the compan!Ds net$profit margin is negati.e anda compan! bears loss for the first two !ears% /he highest net$profit is recei.ed for

the !ear 00( of %=%


43/60

D.M Te7t"le M"ll) L"m"te%Frofitabilit! Ratios

1or Kear (44# P 00FIGURE :8 >

3ROFITABILITY RATIOS

$(00

$#0

$60

$0

$'0

0

'0

0

60

(44# (444 '000 '00( '00'

YEARS

3 E R C E N T A 2 E

Eross Frofit

-argin


44/60

2882 2881 2888 1999 199

(o)) 3(o"t Ma(C B6%(C B"%>+C B+%(#C B(0%(C

Net 3(o"t ma(%C B(6%">C

Ret$(n on A))et) B(%6"C B%#C B"%+0C B>%>#C B%++C

Ret$(n on E#$"t& B>%(C B">%+"C B>#%C B#4%"4C B+6%"0C

/he compan! starting from negati.e gross$profit margin continues its impact on

profitabilit! ratios% /he compan! is not at all profitable, thus the return on assets

and return on e3uit! are also negati.e for this reason%

S(" SARAD Te7t"le M"ll) L"m"te%Frofitabilit! Ratios

1or Kear (44# P 00FIGURE :8 ?


45/60

3ROFITABILITY RATIOS

$(00

$40

$#0

$+0

$60

$>0

$0

$"0

$'0

$(0

0

(0

(44# (444 '000 '00( '00'

YEARS

3 E R C E N T A 2 E

Eross Frofit -argin

S AVERAE 3ROFITABILITY RATIOS

TABLE @.1!


46/60

AL46ADIR D.M

S("

SARAD

INDUSTRY

AVE

RA

E

(o)) 3(o"t Ma(" >%>#

O;e(at"n< 3(o"t Ma(


47/60

Al4 6a%"( Te7t"le M"ll) L"m"te%7i3uidit! Ratios

1or Kear (44# P 00

TABLE @. 1"

2882 2881 2888 1999 199

C$((ent Rat"o (%"# (%4 0%46 0%#4 0%6

6$"c= Rat"o (%" (%> 0%+( 0%#6 0%>4

Ca) Rat"o 0%"+ 0% 0% 0%0" 0%0

Net 0o(="n< Ca;"tal ToA))et)

0%"# 0%4 $0%0> $0%(( $0%"6

Al$9adirDs current ratio has impro.ed each !ear showing for the last !ear Rs%(%"#

in current assets for e.er! Rs% (%00 in current liabilities% As some assets are

closer to cash than others, if there is a trouble in.entor! ma! not sell at an!thing

abo.e fire$sale price, thus 3uic or Acid$test ratio is useful to calculate% /he

compan!Ds 3uic ratio has also impro.ed, as there is no much difference after

extracting in.entor! from its current assets%

A compan!Ds most li3uid assets are its holdings of cash and maretable

securities, howe.er a low cash ratio ma! not matter if the firm can borrow on

short notice% Al$9adirDs cash ratio is low as its position is strong in the industr! it

can easil! handle emergenc! situations b! borrowing mone! on short notice%

D.M Te7t"le M"ll) L"m"te%7i3uidit! Ratios

1or Kear (44# P 00

TABLE @. 1

2882 2881 2888 1999 199

C$((ent Rat"o 0%>+ 0%> 0%>+ 0%"+ 0%"0

6$"c= Rat"o 0%>" 0%4 0%>( 0%"6 0%#

Ca) Rat"o 0%0" 0%0" 0%0> 0%0( 0%0(

Net 0o(="n< Ca;"tal ToA))et)

$0%" $0%# $0%" $0%6" $0%64


48/60

8%- textile current ratio on a.erage is 0%6, which means the compan! is

ha.ing Rs% 0%6 in current assets for e.er! Rs% (%00 in current liabilities%

;ompan!Ds current ratio and 3uic ratio are also not .aried, as its in.entor! is

low in current assets% Net woring capital to total assets is negati.e due to

large short$term borrowings%

S(" Sa(a% Te7t"le M"ll) L"m"te%

7i3uidit! Ratios1or Kear (44# P 00

TABLE @. 1>

2882 2881 2888 1999 199

C$((ent Rat"o %( %"" %> "%0 %>4

6$"c= Rat"o (%0+ (%(6 (%6 (%>+ (%>

Ca) Rat"o 0%0( 0%0( 0%0( 0%00 0%0"

Net 0o(="n< Ca;"talTo A))et)

(%( (%"" (%> %0 (%"6

/his compan!Ds current ratio illustrate that its currents assets are far more than

its current liabilities% /he decrease in current ratio signifies trouble, that

compan! has drag out its pa!ables b! dela!ing pa!ment of its bill that cause

increase in its current liabilities and decrease in current ratio% ;ash ratio is

.er! poor since compan! is not ha.ing enough mone! in its current assets%

FIVE4YEAR COM3ANY>S AVERAEFOR LI6UIDITY RATIOS

TABLE @. 1

/he abo.e table is about the industr! a.erage and a.erage of the companiesD

li3uidit! ratios for fi.e !ears%

FIGURE :840

AL46ADIR D.M

S("SARAD

INDUSTRYAVERAE

C$((ent Rat"o (%0" 0%66 %> (%""

6$"c= Rat"o 0%4> 0%" (%"0 0%#4

Ca) Rat"o 0% 0%06 0%0(# 0%0#

Net 0o(="n< Ca;"tal ToA))et) 0%0" $0%>" (%+ 0%"


49/60

FIVE YEARS AVERAE LI6UIDITY RATIOS

$(

$0%>

0

0%>

(

(%>

'

'%>

"

COM3ANIES

R A T I O S

A7$9A8IR

8%-

B;


50/60

/he asset turno.er ratio shows how hard the firmDs assets are being put to use%

Al$9adirDs asset turno.er has increased o.er time% 1or Al$9adir textile each

rupee of assets produce Rs% (%(> of sales, and each rupee of fixed assets

produce Rs% (%>4 of sales in !ear 00%

&fficient firms turn o.er their in.entor! rapidl! and donDt tie up more capital than

the! need in raw materials or finished goods% /hus this compan! is a better

performer in this aspect too%

D.M Te7t"le M"ll) L"m"te%&fficienc! Ratios

1or Kear (44# P 00

TABLE @. 2!2882 2881 2888 1999 199

Total a))et t$(no@e( 0%4> (%( (%(> (%0# (%0"

F"7e% a))et t$(no@e( (%(" (%6 (%" (%" (%("

In@ento(& t$(no@e( (%+ ((0%06 ((#%6 (6%"4 (>%"(

Rece"@a/le t$(no@e( (>%"4 (4%"4 6%64 %" %>+

3a&a/le t$(no@e( (%# (%" (%0 (%0 (%0

8%- textile asset turno.er was highest in the !ear 00( where each rupee of

assets produce Rs% (%( of sales, and each rupee of fixed assets produce Rs%

(%6 of sales% Its in.entor! turno.er is acceptable than the industr! norms%

@hereas recei.able turno.er are much better than an! other compan!%


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'., INTER3RETATION OF ASSET UTILI5ATION RATIOS

Asset utili2ation ratio measures asset intensit! in generating re.enues to reach a

sufficient profitabilit! le.el%

Al4 6a%"( Te7t"le M"ll) L"m"te% Asset )tili2ation Ratios

1or Kear (44# P 00

TABLE @. 2

2882 2881 2888 1999 199

Sale) to ca)

E#$"@alent)

(>%( (6%#6 4%+ (6%4# #(%#(

Sale) to Rece"@a/le) "4%(6 ("%## #0%( #4%06 >+%6

Sale) to In@ento("e) (%+# (#"%04 (>+%+" #+%4( 4%04

Sale) 0o(="n

Sale) to F"7e% A))et) (%>4 (%66 (%> (%(> (%0>

Sale) to Total A))et) (%(> (%4 (%+ 0%4> 0%#+

Sale) to So(t4te(mL"a/"l"t"e) 6%+# 4%"6 (0%4# #%"( 4%4(

As Al$9adirDs asset turno.er is escalating o.er pre.ious fi.e !ears% )p till now

this increase in asset earnings maes ma?or .ariation in turno.er for indi.idual

asset components% ;ash and e3ui.alents e.idence the most significant .ariabilit!

during this period, which is also e.idenced from common$si2e balance sheet%

;ompan!Ds account recei.ables shows a slight impro.ement in !ear 00(%

Regarding in.entor! turno.er, compan! expressed desire to decrease in.entories

at e.er! stage of its manufacturing process is re.ealing itself through an

impro.ed turno.er ratio% It is important to note that Al$9adirDs asset and asset

component turno.er ratios often compare fa.orable to industr! norms%

D.M Te7t"le M"ll) L"m"te% Asset )tili2ation Ratios

1or Kear (44# P 00


53/60

TABLE @. 2@

2882 2881 2888 1999 199

Sale) to ca) E#$"@alent)

((#%>+ ("(%" 6%"0 """%04 #4%6>

Sale) to Rece"@a/le) (>%"4 (4%"4 6%64 %"( %>+

Sale) to In@ento("e) (6%4 (#% ("6%#4 ("#%0 ("%>6

Sale) 0o(="n%4> >%"4

8%-Ds asset turno.er is fluctuating o.er the !ears as it has decreased for the last

!ear 00% ;ash and e3ui.alents also show a fluctuating trend% Account

recei.able turno.er has decreased for the last !ear but was better in the pre.ious

!ears% In.entor! turno.er ratio has impro.ed continuousl! for all the !ears%

S(" Sa(a% Te7t"le M"ll) L"m"te% Asset )tili2ation Ratios

1or Kear (44# P 00

TABLE @. 2"

2882 2881 2888 1999 199

Sale) to ca) E#$"@alent)

("6%4 ((#% 4%0# (#0%> 0"%4


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Sale) to Rece"@a/le) 0%++ (%0 0%>6 0%4 (%(

Sale) to In@ento("e) 0%++ (%0 0%>> 0%>0 (%>

Sale) 0o(="n4" >,#+,""" +,"+(,4( ,466,00 (,00+,0+


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Ca)Flo+) (omIn@e)t"n<Act"@"t"e)

B",#(,64#C B(,+4+,4>C B(4,4,(>>C B(,+40,+0#C B+,(+,##4C

Ca)Flo+) (omF"nanc"n<Act"@"t"e)

B(+,"#6,4"(C B",+",(66C B",>,+04C +,0>4,4" B6,#+6,>>4C

Inc(ea)e

Dec(ea)e"n Ca)

+0,46 (#,#0(, (4,40+,0>+ ",#,>> >,44",+4

Al$9adirDs operating cash flows is high for the !ear 000, reason being low cost

of sales, which ha.e resulted in high profit before taxation% /his anal!sis re.eals

cash flows are stead! source of cash, with a substantial increase in !ear 000%

/he cash down turn in !ear (444 is due primaril! to financial charges% In.esting

acti.ities were more in (444 and 000, due to ma?or out flow of fixed capital

expenditure% 1inancing out flows are more for the last three !ears, where

di.idends are paid in !ear 00( and 00%

D.M Te7t"le M"ll) L"m"te%;ash 1lows

1or Kear (44# P 00

TABLE @. 2>

2882 2881 2888 1999 199

Rupees Rupees Rupees Rupees Rupees

Ca)Flo+) (omO;e(at"n<Act"@"t"e)

#,+6#,>6> 0,">(,+ (+,"(>,6"4 ,#(>,0( (,#"6,


B(4,66>,>((C B(6,">,(#"C B(+,(>#,4(+C B,(+(,#0C B,4,>>"C


B#,6"+,(>"C B6,""",(64C ",4#6,>+" B0,+6,"(6C ",(4#,+#4


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Inc(ea)eDec(ea)e"n Ca)

6>,40( B,"">,60#C ,(",4> B(0,"4>C ((0,#0

8%- ha.e been able to maintain high cash flows from operations e.en after

incurring loss before taxation for the !ear (44# and (444% ;ash flow has

decreased for the !ear 00 because of more pa!ments made to creditors%

In.estment has increased for 00( and 00 b! ac3uiring fixed assets% @hereas

financing out flow is more for the !ear 00( as compan! made a repa!ment of

long$term loan%

Al4 6a%"( Te7t"le M"ll) L"m"te%;ash 1lows

1or Kear (44# P 00

TABLE @. 2

2882 2881 2888 1999 199

Rupees Rupees Rupees Rupees RupeesCa)Flo+) (omO;e(at"n<Act"@"t"e)

B6,04#,+0C "0,04" B(4,40#,+#0C B(,##(,(#0C B44",46C


B>,#4"C 6,0+ (0,>#4 (,#4",40 B60,0">C


>,+60,(+" (+ 0,>(,+0> (4,6",>06 B>">,">C

Inc(ea)eDec(ea)e"n Ca)

B",(40C 4,6+ ">#,>(> B">,+>C B(,+##,+66C

Shri Sarhad has incurred losses all the wa! through the !ears, which has

affected its operating acti.ities% /he! are not ha.ing enough sales e.en to co.er


57/60

their production costs% In spite of incurring losses the! ha.e an addition to fixed

asset in !ear (44# and 00, that shows an out flow%

CONCLUSION AND RECOMMENDATION

1inancial statement anal!sis focuses on one or more elements of a compan!Ds

financial condition or operating results% Researcher emphasi2es fi.e areas of

in3uir!, with .ar!ing degrees of importance%

• S8%#-T$% L,(,+,#/. Abilit! to meet short$term obligations%

• C&)8 F'9 A"&'/),). 1uture a.ailabilit! and disposition of cash%

• R$#(%" " I"0$)#$+ C&,#&'. Abilit! to pro.ide financial rewards sufficient to

attract and retain financing%

• A))$# (#,',:,". Asset intensit! in generating re.enues to reach a sufficient

profitabilit! le.el%

• O$%," $%%&"$ &"+ %,#&,',#/. Success at minimi2ing re.enues

and minimi2ing expenses from operating acti.ities o.er the long run%

*.1 SORT4TERM LI6UIDITY

Important measures of short$term li3uidit! for the last fi.e !ears ha.e been

anal!2ed b! the use of li3uidit! ratios% Al$9adirDs current assets ha.e increased

each !ear except for the !ear 000% 1rom (44# to 00 its assets ha.e increased

b! approximatel! 0=% /he compan!Ds current liabilities remained high up till


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*.* O3ERATIN 3ERFORMANCE AND 3ROFITABILITY

Al$9adirDs gross$profit margin has increased for the first three !ears and reduces

e.entuall! for the !ear 00( and 00, as cost of sales are highest for the !ear

00%

consumer behavior with refrence to big bazaar

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