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1.

COMPANY PROFILE

1.1 Introduction of the Company

Garden Vareli group of companies, one of the leading industrial


groups in India, plays a leading role in the field of fashion fabrics. With
annual sales exceeding U.S $ 90 million, they sell their products under a
single banner of quality ‘Garden’.
Garden Silk Mills Ltd. is one of the leading & oldest manufactures
of synthetic in India. Garden Silk Mills Ltd. has been exporting their
products to European markets since late 1970s. The company has made
vertical & horizontal integration from its establishment.
The company has three production plants: one at Village Vareli,
near Kadodara junction, N.H.No.8, the second at Village Jolva, near
Bardoli, and another at Garden Mill’s Complex, Sahara Gate, Surat.
Today the company has total 293 its own retail and authorized outlets all
over India.
The company has achieved a very good brand name in Indian &
International Market of Sarees & Dress Materials.
The company has achieved sales during financial year 1997-1998
of Rs.58,871.04 lacs & Rs.46,044.16 lacs during 1998-1999.

1
1.2 History of the Company

The origins of the business go back to 1920 when Mr.Amichand


Shah installed the first Hattersley looms in Surat. Since 1920 the
company expanded not only by increasing the production capacity and
workforce of the business but also by pioneering new material and
processes.
The present Chairman and Managing Director of Garden Silk
Mills Ltd., Mr.Praful Shah is the youngest son of Mr. Amichand Shah.
Mr.Praful Shah taken qualification in USA in 1965 after which he joined
the company, up to that date Garden Silk Mills Ltd. had activities of the
Company to include processing cloth by introducing dying, printing and
finishing processes. As a result of this, the company was able to supply
finished textiles for the first time.

In the 1970s, the company recruited fine arts graduates from


leading institutions. An art studio was set up. The company started
introducing its own design and supplying these designs to the market.
Prior to this, the designs produced had been a function of customer
demand and from this manufacturer. This was the first step in building a
vertically integrated synthetic textile manufacturer and designer.

This move in the early 1970s coincided with the opening of


the first retail shop in Surat. The extension of the policy of vertical
integration into the retailing sector had advantages of uniform pricing,
close market monitoring, improving communication between
manufacturer and consumer, and above all exerting downward pressure
on the final selling price. The dedicated retail network now extends to
some 293 authorized outlets.

2
In the late 1970s, the company started exporting its product
to European Markets, Given the size of the domestic market; the
proportion of products that are exported remains low at approximately
two percent. The company is in the process of further developing markets
in Africa, Central and Eastern Asia.

In 1980, the company developed a new site, Vareli, some 12


kilometers away from Surat. This has become the main manufacturing
plant and investment of more than Rs.2.0 billion has been made. Most of
this expenditure has been targeted at the expansion and modernization of
plant and equipment, particularly in the weaving and yarn preparatory
sections. As a result, the Company today has one of the most modern and
sophisticated textile plants in India.

In 1995 the company had decided to further its policy of


vertical integration by setting up a new plant, also near Surat, from
which, manufacturing of polyester filament yarn, one of its principal raw-
materials, from polyester chips, is going on. This plant had become on
stream at a cost of approximately 655 million rupees.

1.3 Activities of the Company


The company is primarily engaged in the manufacture of
synthetic textile, sarees and dress materials mainly made of polyester
yarns and certain intermediate products. Garden Silk Mills Ltd. has been,
and continues to be, the initiator of the majority of new textile varieties
woven and processed in Surat, is at present, the consumer of
approximately 50 percent of polyester yarn in India. The company

3
believes that designs are a key factor in its market and used to produce
some 200 different printed designs each month.

The company’s lead in different and improved fabric


construction and the emphasis it places on design together with its
modern and efficient plant is key to its future success. The company
operates in a highly fragmented market where no individual manufacturer
has a material market share. It is also the leading integrated textile
manufacturer house, which undertakes all processes from yarn
manufacture to the retailing of dress materials and sarees.

The company, and its wholly owned subsidiary, Garden


Finance are also engaged in providing to the Indian corporate sector trade
and asset finance including the discounting of Bills of exchange.

The company also has a small engineering division, which


assembles a limited range of textile manufacturing machines.

1.4 Achievements of the Company

The company was first to setup a polyester filaments yarn


project in South Gujarat. The project is capable of producing multi-
filament & micro-filament yarn having a capacity of 5,000 Tones per
annum in collaboration with NON-VAL LEASINA AG of Switzerland.
This project has a special significance for the company, as polyester
filament yarn is the basic raw material for the product manufactured by
the company. The company was also first in producing of two-for-one
Twister in India.

4
The company's production facilities boast of one of India's
most sophisticated textile plants at Vareli, Surat (Western India). Its
weaving plant comprising Nissan and Tsudakoma water jet looms - the
highest number of water jet looms under one roof in India - and rapier
looms, automatic shuttle change looms etc, high-tech yarn preparatory
machines viz, ziro-twist-sizing, draw-warping, texturising and twisting
machines, have a capacity of over 42 Lac meters/month of greige fabric.
The plant has an ISO 9002 certification by BVQI. The company also
markets high quality dyed and printed fabrics that it gets manufactured
from associated firms.

1.5 General Information of the Company


Board of Director
Praful A. Shah Chairman & Managing Director
Soly J. Bhesania Wholetime Director
Harshad F. Shah Wholetime Director
Shilpa P. Shah Wholetime Director
Sanjay S. Shah Wholetime Director
Rajen P. Shah
Arunchandra N. Jariwala
J.P.Shah
Alok P. Shah
Yatish Parekh
Sunil Sheth
Smita Shah
Madanlal Lankapati
Ravinder Singh Nominee of IFCI Limited

5
Company Secretary
Kamlesh Vyas

Auditors
Natvarlal Vepari & Co.
Charted Accountants
Bankers

Bank of Baroda
Allahabad Bank
State Bank of Saurashtra
Bank of India

Registered Office
Garden Mills Compound,
Sahara Gate,
Surat-395010.

Corporate Office

Manek Mahal,
90, Veer Nariman Road,
Mumbai-400020.
Plants

i) Garden Mills Compound, Sahara Gate, Surat


ii) Village Vareli, Tal.Palsana, Dist.Surat
iii) Village Jolva, Tal.Palsana, Dist.Surat

6
Registrars & Transfer Agents

MCS Limited,
Neelam Apartment,
88, Sampatrao Colony,
Behind Federation Building, Alkapuri,
Baroda 390005.
Categories of Shareholders

No. of Holding
Category
Shares Held Strength
Promoters 19423891 50.73
Mutual Funds & UTI 3186803 8.32
Bank Financial Ins. & Insurance
639757 1.67
Co.
FIIs (including foreign bank &
275682 0.72
GDR) Chairman &
Private Bodies Corporate Managing 2141945 5.59
NRI’s/OCB’s Director910433 2.38
Indian Public 10248256 26.76
GDR 1360925 3.55
Others General 102868 0.27
Financ
Manage
Total Import
38290560& Producti
100.00
e
r (Table 1) Export on
Direct
Marketi Director Director
or
ng
1.6 Organization Structure
Head of
the
Departme
nt
7
Staff
2. RATIO ANALYSIS

8
2.1 INTRODUCTION OF RATIO ANALYSIS: -

The relationship of these two figure expressed mathematically is


called a ratio. The ratio reefers to the numerical or quantities relationship
between two variables or times. A ratio is calculated by dividing one item
of the relationship with the other. The ratio analysis is one of the most
useful and common methods of analyzing financial statement. Ratio
enables the mass of data to be summarized and simplified. Ratio analysis
is an instrument for diagnosis of the financial health of an enterprise.

2.2 MEANING OF RATIO:-

A ratio is only a comparison of the numerator with the


denominator. The tern ratio reefers to the numerical or quantitative
relationship between two figures and obtained by dividing the former by
the latter.
Ratio analysis is an important and age old technique of financial
analysis. The data given in financial statements ratio are relative form of
financial data and very useful techniques to cheek upon the efficiency of
a firm. Some ratio indicates the trend or progress or downfall of the firm.

2.3 Importance of ratio:

Ratio analysis of firm’s financial statement is of interest to a


number of parties mainly. Shareholders, creditor, financial executives etc.
shareholders are interested with earning capacity of the firm: creditors are
interested in knowing the ability of firm to meet financial obligation and
financial executives are concerned with evolving analytical tools that will
measures and compare costs, efficiency liquidity and profitability with a
view to making intelligent decisions.

9
• Aid to measure general efficiency: Ratios enable the
mass of accounting data to be summarized and simplified
• Aid to measure financial solvency: They point out
firm’s liquidity position to meet its short-tern obligation and
long-tern solvency.
• Aid in forecasting and planning: ratio help to prepare
the future plan of action etc.
• Facilitate decision-making: it throws light on the
degree of efficiency of the management and utilization of the
assets that is why it is called surveyor of efficiency.
• Aid in corrective action: the highlight the factors
associated with successful and unsuccessful firms.
• Aids in intrude firm comparison: inter firm
comparison are facilities. It is an instrument for diagnosis of
financial health of enterprise.
• Evaluation of efficiency: ratio analysis is an effective
instrument which, when properly used is useful to assess
important characteristics of business liquidity, solvency,
profitability etc.
• Effective tool: ratio analysis helps in making effective
control of the business measuring performance; control of cost
etc. ratio ensures secrecy.

2.4 Limitation of ratio analysis

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Ratio analysis is as already mentioned, a widely used tool of
financial analysis. It is because ratios are simple and easy to understand.
But they must be used very carefully. They suffer from various
limitations.

Some of the limitations of ratio analysis are given below:


• Difference in definition: comparisons are made
difficult due to difference in definitions of various financial
terms.
• Limitations of according records ratio: Ratio analysis
is based on financial statement, which are themselves subject to
limitations.
• Lack of proper standards: it is very difficult to
ascertain the standard ratio in order to make proper comparison.
Because it differs from firm to firm, industry to industry.
• Changes in accounting procedure: it different firms
for their valuation follow methods then comparison will
practically be of no use.
• Limited use of single ratio: a single ratio would not be
able to convey anything. It too many ratio are calculated they
are likely to confuse instead of revealing meaningful
conclusions
• Personal bias: Ratios have to be interpreted and different

people may interpret the same ratio in efferent ways. The


analyst has to carry further investigation and exercise. His
judgment in arriving at a correct diagnosis.

11
2.5 Types of Ratio

 LIQUIDITY RATIO:

Liquidity and short term solvency ratios are used to judge the
firm’s ability to meet such current obligations as its accounts payable and
the current position of its long term debt. Liquidity is defined as the
ability to realize value in money, the most liquid of assets. It refers to the
ability to pay in cash, the obligations that are due. The important ratios in
measuring about short term solvency are as under.

 Current Ratio:
Current Ratio: Current Assets, Loans and Advances
Current Liabilities & provisions

The current ratio is the traditional ratio used to measure a


company’s liquidity & is calculated by dividing the total current assets by
the total current liabilities. This ratio is designed to assist the decision
maker in determining a firm’s ability to pay its current Liabilities. The
higher the ratio, the greater the ability or the company to meet its
immediate financial obligations. A current ratio of 2:1 indicates a highly
solved position.

 Quick Ratio or Liquid Ratio:


Quick Ratio = Current assets, Loans & advances – Inventories
Current Liabilities & provision – Bank overdraft
Quick ratio is used as a measure of the company’s ability to meet
its current obligations. Since Bank O.D. is secured by the inventories, the
other current assets must be sufficient to meet other current liabilities. A

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quick ratio of 1:1 indicates highly solved position. This ratio is also called
acid test ratio.

 PROFITABILITY RATIO:
The purpose of study & analysis of profitability ratios are to help
assessing the adequacy of profits earned by the company & also to
discover whether, profitability is increasing or declining. The profitability
of the firm is the net result of a large number of policies and decisions.
The firm profitability ratios are as under:

 Gross Profit Margin:


GPM = Sales – cost of goods sold x 100
Sales
The ratio measures the GPN on the total net sales made by the
company. The GP represents the excess of sales proceeds during the
period under observation over their cost, before taking into account
administration, selling & distribution & financing charges. The ratio
measures the efficiency of the company’s operation & this can also be
compare with the previous year’s results to ascertain the efficiency
pastiness with respect to the previous years.

 Net Profit Margin:


NPM = Net profit before Interest & Tax x 100
Sales
The ratio is designed to focus attention on the NP margin arising
from business operations before interest & tax is deducted. The
convention is to express profit after tax & interest as a percentage of
sales. This ratio measures the efficiency of operation of the company. The
ratio could be compared with that of the previous years & with that of

13
competitions to determine the trend in NP margins of the co & its
performance in the industry.

 Return on Capital Employed:


ROCE = Net Profit x 100
Capital Employed

The strategic aim of a business enterprise is to earn a return on


capital. Ti in any particular case the return in the long run is no
satisfactory then the deficiency should be corrected on the activity be
abandoned for a more favorable one. Measuring the historical
performance of an investment centre calls for a comparison of the profit
that has been earned with capital employed. The rate of return on
investment is determined by dividing NP or income by the capital
employed on investment made to achieve that profit.

 Earnings per Share (EPS):


EPS = Net profit after tax & preference dividend
No. of equity shares
The performance of a corporation is better judged in terms of its
earnings per share. The EPS is one of the importance measures of
economic performance of a corporation entity. The flow of capital to the
companies under the present imperfect capital market conditions would
be made on the evaluation of EPS. Investors lacking inside & detailed
information would look upon the EPS as the best base to take their
investment decisions. A higher EPS means better capital productivity.

14
 Return on Shareholders fund or Return on Net Worth:
Return on Net worth = NP after Interest & Tax x 100
Net Worth
Where, Net worth = Equity + Reserves & surplus
This ratio expresses the NP in terms of the equity shareholders
funds. This ratio is an important yardstick of performance for equity
shareholders since it indicates the return on the funds employed by them.
This ratio is useful in measuring the rate of return as a percentage of the
book value of shareholders equity.

 LONG TERM SOLVENCY RATIOS

The long term financial stability of the firm may be considered as


dependent upon its ability to meet all its liabilities, including those not
currently payable. The ratios which are important in measuring the long
term solvency is as follows:

 Debt Equity Ratio:


Debt Ratio = Long term debt
Shareholders Funds

This ratio indicates the relationship between loan funds and net
worth of the company. This is known as gearing. It the proportion of debt
to equity is low, a company is said to be low and vice versa. A debt
equity ratio of 2:1 is the boom accepted by financial institutions for
financing of projects. A debt equity ratio which shows a declining trend
over the years is usually taken as a positive sign reflecting on increasing
cash accrual and debt repayment.

15
 Proprietary Ratio:
It expresses the relationship between net worth & total asset.
PR = Net worth
Total Assets
Net worth = Equity share capital + preference share capital +
Reserve – Fictitious Assets
Total Assets = Fixed Asset + Current Assets
Reserves earmarked specifically for a particular purpose should not
be included in calculation of Net worth. A high proprietary ratio is
indicative of strong financial position of the business. The higher the
ratio, the better it is.

 Interest Cover:
Interest Cover = Profit before Interest, depreciation & Tax
Interest
The interest coverage ratio shows how many times interest charges
are covered by funds that are available for payment of interest. AN
interest cover of 2:1 considered reasonable by financial institutions. A
very high ratio indicates that the firm is conservative in using debt and a
very low ratio indicates excessive use of debt.

 TURNOVER RATIO:

An activity ratio measures how effectively the firm employs its


resources. These ratios are also called turn over ratios which involve
comparison between the level of sales and investment in various
accounts. Activity ratios are used to measure the speed with which
various accounts are converted into sales or cash.

16
 Fixed Assets Turnover Ratio:
F. A. T. Ratio = sales
Fixed Assets

This ratio will be analyzed further with ratios for each main
category of asset. This is a difficult set of ratios to interpret as asset
values are based on historic cost. An increase in the fixed assets figure
may result from the replacement of an asset at an increased price on the
purchase of an additional asset intended to increase production capacity.

17
3. CALCULATION OF RATIO ANALYSIS

Classification of Ratio
Classification of
Ratio

1. Gross Profit
Ratio
2. Net Profit
Ratio
Profit & Loss A/c Ratio 3. Operating
Ratio
4. Stock
Turnover Ratio
1. Current Ratio
2. Liquid Ratio
3. Debt Equity
Balance Sheet Ratio
Ratio 4. Propritory Ratio
5. Capital Gearing
Ratio
1. Return on Investment
Ratio
2. Return on Propritory
Fund
Inter-Statement Ratio Ratio
3. Net Profit to Total
Assets Ratio
4. Creditors Turn Over
Ratio
5. Debtor Turnover Ratio

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3.1 PROFIT & LOSS A/C RATIO

1. Gross profit ratio :-


This ratio establishes the relationship between gross profit on sales
and net sales i terms of percentage indicating the percentage of gross
profit earned on sales.
Gross Profit
Gross Profit Ratio = ------------------- * 100
Net Sales

Years Gross profit Net sales Ratio (%)


(a) (b) (a/b)
98-99 3908.31 46044.16 8.49
99-00 3451.06 40347.01 8.55
00-01 4481.98 44459.79 10.08
01-02 6948.76 45167.17 15.38
02-03 8376.6. 52431.08 15.98
(Table 2)
Gross Profit Ratio
16 153
. 8 159
. 8
14
P
12 100
. 8
e 10 84
. 9 85
. 5
r 8
. 6
4
2
0
1998- 1999- 2000- 2001- 2002-
99 00 01 02 03
Year

(Graph 1)

Interpretation :

19
The gross profit of the company is incresing day by day. It is
increase to 15.98 % in 2002-03 as comapre to 2001-02 i.e 13.38 %.

2. Net profit ratio :-


This ratio establishes the relationship between the amount of net
profit or net income and the amount of sales revenue.

Net Profit
Net Profit Ratio = ------------------- * 100
Net Sales
Years Net profit Net sales Ratio(%)
(a) (b) (a/b)
98-99 837.40 46044.16 1.82
99-00 593.50 40347.01 1.47
00-01 2061.84 44459.79 4.63
01-02 2926.51 45167.17 6.48
02-03 3858.95 52431.08 7.36
(Table 3)
Net Profit Ratio
8
73
. 6
7 64
. 8
6
P
5 46
. 3
e
r 4
. 3
18
. 2
2 14
. 7
1
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 2)

Interpretation :

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The net profit of the company is incresing day by day. In 1999-00
it was decrease to 1.47% but company take corrective action so that it
continuously increase from that time.

3. Operating ratio :-

This ratio takes into account the aggrerate of manufacturing cost of


goods sold and other operating expenses on the one hand, and the net
sales revenue on the other.

cost of good sold + Operating Expenses


Operating Ratio = ---------------------------------------------------- * 100
sales revenue

Years C O G S + O E Sales revenue Ratio (%)


(a) (b) (a/b)
98-99 45457.99 46044.16 90.49
99-00 40386.36 40347.01 83.57
00-01 42945.68 44459.79 82.43
01-02 41528.41 45167.17 76.11
02-03 48091.61 52431.08 91.72
(Table 4)

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Operating Ratio

100 904
. 9
835
. 7 917
. 2
824
. 3
80 761
. 1
P
e 60
r
40
.
20

0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 3)
Interpretation:
Sales revenue is increasing in 2002-03, lower operating ratio shows
the higher operating profit and vice versa. For manufacturing concerned
an operating ratio between 75% & 80% is expected.

4 Stock turnover ratio :-

Inventory turnover ratio which is also called stock turnover ratio or


stock velocity establishes the relationship between the cost of goods sold
during a given period and the average of the costs of openaing and
closing stocks.

Cost of goods sold


Stock Turnover Ratio = --------------------------
average inventory

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Years Cost of Goods Sold Avg. Inventory Ratio
(a) (b) (a/b)
98-99 42387.08 7186.88 5.90
99-00 37528.80 6546.48 5.73
00-01 40525.54 5530.16 7.33
01-02 37506.16 5653.43 6.63
02-03 43573.96 5500.88 7.92
(Table 5)
Stock Turnover Ratio

8 73
. 3 79
. 2
7 66
. 3
59
. 57
. 3
T
i
6
m 5
e 4
s 3
. 2
1
0
1998- 1999- 2000- 2001- 2002-
99 00 01 02 03
Year

(Graph 4)
Interpretation:
A higher inventory turnover ratio is better than a lower inventory
turnover ratio. A higher ratio implies good inventory management and an
indication of under investment lower inventory turnover ratio indication
of excessive inventory and over investment in inventory.

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3.2 BALANCE SHEET RATIO

1. Current ratio :-

The ability of a company to meet its short-term commitment is


normally assessed by comparing current assets with current liabilities.
The current ratio establishes the relationship between the current assets
and the current liabilities. The ideal ratio is 2:1.

current assets
Current Ratio = --------------------------
curent liabilities

Years Current Assets Current Liabilities Ratio


(a) (b) (a/b)
98-99 14916.44 3630.93 4.11
99-00 13495.96 4008.77 3.37
00-01 10101.54 3178.01 3.18
01-02 13759.64 4093.50 3.37
02-03 9921.08 5721.94 1.73
(Table 6)

Current Ratio
5
41
. 1
T 4 33
. 7 33
. 7
31
. 8
i
3
m
e 2 17
. 3
s 1
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 5)

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Interpretation :
In last five years the current ratio is between 3.18 to 4.11 which
was very good for the company. But in the last year it was 3.37 while it
was highest in the 1998-99 i.e. 4.11 so compnay should take corrective
action for increase the ratio.

2. Liquidity ratio :-

A liquidity ratio is also known as acid-test ratio, therefore, used as


a complementary ratio to the current ratio. The ratio is concerned with the
establishment of relaionship between the liquid assets and the liquid
liabilities. The ideal ratio is 1:1

Liquidity Assets
Liquidity Ratio = ------------------------
Curent Liabilities

Years Liquidity Ratio Current Liabilities Ratio


(a) (b) (a/b)
98-99 7455.46 3630.93 2.05
99-00 7863.99 4008.77 1.96
00-01 4673.20 3178.01 1.47
01-02 7881.12 4093.50 1.93
02-03 4797.84 5721.94 0.84
(Table 7)

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Liquidity Ratio

25
.
20
. 5 19
. 6 19
. 3
T
2
i 15 14
. 7
.
m
e 1 08
. 4
s
05
.
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 6)

Interpretation :

Liquidity ratio from 1998-99 to 2001-02 it is satisfied because it is


greater than 1:1 but last year i.e. 2002-03 there is 0.84 it was less than
satisfactory level. So company should take corrective action for the
improve this ratio.

3. Debt equity ratio :-

This ratio is calculated to measure the relative proportion of


outsiders’s funds invested in the company. This ratio determined to
ascertain the soundness of long term financial policies of that company
and is also known as external-internal equity ratio.

Long term debt


Debt Equity Ratio = --------------------------------
shareholder fund

Years Long term debt Shareholder fund Ratio

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(a) (b) (a/b)
98-99 5238.49 35284.66 0.15
99-00 7417.12 32682.88 0.23
00-01 8304.24 34053.66 0.24
01-02 8846.48 30482.55 0.29
02-03 9645.26 30908.01 0.31
(Table 8)

Debt Equity Ratio


03
. 5
02
. 9 03
. 1
03
.
02
. 5 02
. 3 02
. 4
T
i
02
.
m 01
. 5
e 01
. 5
s
01
.
00
. 5
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 7)
Interpretation :

In last five years the debt equity ratio is between 0.15 to 0.31
which shows that the claim of creditors are less than that of owners but
the claims of creditors is increases in last five years.

4. Propritory ratio :-
This ratio shows the relationship between shareholder’s fund and
total assets. The result clearly shows the share of owners in the total

27
assets of the company. When the proprietary ratio is substracted from
one, the resultant figure represents the share of outsider’s claim on the
assets of the company.
shareholder fund
Propritory Ratio = --------------------------
total assets
Years Shareholder fund Total assets Ratio
(a) (b) (a/b)
98-99 35284.66 50676.34 0.70
99-00 32682.88 46590.91 0.70
00-01 34053.66 46828.82 0.73
01-02 30482.55 52184.81 0.58
02-03 30908.01 58004.16 0.53
(Table 9)
Propritory Ratio

08
. 07 07
. 3
. 07
.
T 06 05
. 8
.
i 05
. 3
m 04
.
e
s 02
.

0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 8)
Interpretation :
In last five years the propritory ratio is between 0.58 to 0.73.
It was almost stable during last four years but in 2002-03 it was
0..53 which shows a greater risk to creditors.
5. Capital gearing ratio :-
The term capital gearing is used to describe the relationship
between fixed interest bearing securities, and the equity shareholder’s
funds. Therefore this ratio establishes a meaningful relationship between

28
the funds bearing fixed interest on the one hand, and the equity
shareholder’s funds on the other.
Fixed interest bearing fund
Capital Gearing Ratio = ---------------------------------------
equity share capital

Years Fixed int. Fund Equity capital Ratio


(a) (b) (a/b)
98-99 5238.49 3829.06 1.37
99-00 7417.12 3829.06 1.94
00-01 8304.24 3829.06 2.17
01-02 8846.48 3829.06 2.31
02-03 9645.26 3829.06 2.52
(Table 10)
Capital Gearing Ratio

3
T 25
. 23
. 1 25
. 2
21
. 7
i 2 19
. 4
m 15
. 13
. 7
e 1
s 05
.
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 9)
Interpretation :
The capital gearing ratio is between 1.37 to 2.52 during last five
years. In 2002-03 it was 2.52, the capital gearing is said to be high, this
position is under capitalisation.
3.3 INTER-STATEMENT RATIO
1 Return on investment ratio :-
This ratio is an indicator of the earnign capicity of the capital
employed in the business. This ratio reflects the overall efficiency with
which capital is used.

29
PATI
Return on Investment Ratio = -----------------------
capital employed

Years Profit after tax & interest Capital employed Ratio


(a) (b) (a/b)
98-99 837.40 33771.26 2.48
99-00 593.50 31193.36 1.90
00-01 2061.84 31445.76 6.56
01-02 2926.51 38007.83 7.70
02-03 3858.95 41543.08 9.29
(Table 11)
Return On Investment Ratio

8 77
.
7 65
. 6
T 6 54
. 1
i 5
m 4
e 3 24
. 8
19
.
s 2
1
0
19979
- 8 19989
- 9 19990
- 0 20000
- 1 20010
- 2
Year

(Graph 10)
Interpretation :
The return on investment is higher in last year i.e 7.70 times which
is good sign for the company but it was very low in 1999-00 which is
increase in couple of years.
2 Return on propritory fund ratio :-
This is an important ratio as it shows the amount of profit available
to the shareholders which determines the rate of dividend.

EAT
Return on Propritory Fund Ratio = ------------------------x 100
shareholder fund

30
Years Earning after tax Shareholder fund Ratio
(a) (b) (a/b)x100
98-99 837.40 35284.66 2.37
99-00 593.50 32682.88 1.82
00-01 2061.84 34053.66 6.05
01-02 2926.51 30482.55 9.60
02-03 3858.95 30908.01 12.48
(Table 12)
Return on Propritory Fund Ratio

14
124
. 8
12
96
.
T 10
i
8
m 60
. 5
e 6
s 4 23
. 7 18
. 2
2
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 11)
Interpretation :
The return on propritory fund ratio of last five years shows that
sharholders gate 12.48 profit which is very good for company’s image.
But it was very low in 1999-00 i.e. 1.82.
3 Net profit to total assets ratio :-
This ratio establishes the relationship between the net profit and
otal assets. This ratio tries to findout how efficient the company was in
utilizing the funds to generate or earn profit.

Net profit
Net Profit to Total Assets Ratio = ------------------
total assets

31
Years Net profit Total assets Ratio
(a) (b) (a/b)
98-99 837.40 50676.34 0.02
99-00 593.50 46590.91 0.01
00-01 2061.84 46828.82 0.04
01-02 2926.51 52184.81 0.06
02-03 3858.95 58004.16 0.07
(Table 13)

Net Profit to Total Assets Ratio


00
. 7 00
. 7
00
. 6
00
. 6
T 00
. 5
00
. 4
i
00
. 4
m
e 00
. 3
s 00
. 2
00
. 2
00
. 1
00
. 1
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 12)

4 Creditors turnover ratio :-


This ratio, also known as payable turnover ratio establishes the
relationship between the net credit purchases and the average trade
creditors.
Creditors
Creditors Turnover Ratio = ------------------------- * 365
net credit purchase
Years Creditors Credit purchase Ratio
(a) (b) (a/b)

32
98-99 2322.75 26805.11 31.63
99-00 2631.58 19599.14 13.43
00-01 1696.07 24158.08 7.02
01-02 2575.36 23612.85 10.91
02-03 2473.88 29673.28 8.33
(Table 14)
Creditors Turnover Ratio
35 316
. 3
30
T 25
i
m
20
15 134
. 3
e 109
. 1
s 10 70
. 2 83
. 3
5
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 13)
Interpretation :
Creditor turnover ratio was 8.33 times in 2002-03 which shows that
the disbursment of money is faster in the company. It was very slow in
1998-99when ratio was 31.63 times.
5 Debtors turnover ratio :-
Debtor turnover ratio, also known as receivables turnover ratio or
debtors velocity establishes the relationship between the net credit sales
of the year and the average receivable.
Debtors
Debtors Turnover Ratio = ----------------------- * 365
Net credit sales

Years Debtors Credit sales Ratio


(a) (b) (a/b)x365
98-99 6673.30 46044.16 52.90

33
99-00 6532.28 40347.01 59.09
00-01 3120.00 44459.79 25.61
01-02 3423.73 45167.17 27.67
02-03 3797.57 52431.08 26.43
(Table 15)
Debtors Turnover Ratio

60 590
. 9
529
.
50
T
i 40
m 30 256
. 1 276
. 7
264
. 3
e
s
20
10
0
19989
- 9 19990
- 0 20000
- 1 20010
- 2 20020
- 3
Year

(Graph 14)
Interpretation :
Debtor turnover ratio was 26.43 times in 2002-03 which shows
speady collection of money. But it was lower in 2000-01 i.e. 25.6. so
company should take corrective measures.
FINDINGS

 In last five year the current ratio is between 1.73 to 3.37 which was
very good for company .

 In last five year, the claim of creditors are less than that of owner,
but the claims of creditors is decrease in last year.

 The propritory ratio was almost stable during last four year.

34
 The capital gearing ratio in 2002-03 was 2.52, the capital gearing is
said to be high, this position is under capitalisation.

 The return on propritory fund ratio of last five years shows that
sharholders get 12.48 profit which is very good for company’s
image.

 In last five years the net profit is between 1.47 to 7.36 which was
very good for the company.

 In last five year, the return on investment ratio is between 1.90 to


9.29, which was very good for the company.

 Debt equity ratio is determine to acertain the soundness of long


term financial policy of the company. In case the ratio is lower than
1.

SUGGESTIONS

 In last years, the current ratio was 1.73, while it was highest in
1998-99 i.e. 4.11, so company should take corrective action for
incease the ratio .

 In last, liquidity ratio was 0.84 while it was highest in 1998-99 i.e.
2.05 so company should take corrective action for increase the ratio

35
 The propritory ratio in 2002-03 was 0.53 which show a greater risk
to creditor. So company should take care to increase ratio.

 The capital gearing ratio shows that the position is under


capitalisation. Company should use its capital effectively.

 As for as cash managemant is concerned,cash inflow is efficiently


undertaken,but improvement in cash outflow i.e. payments and
disbursment of cash requires considurable attention .

 Company should try to increase the debt equity ratio.

BIBLIOGRAPHY

Books
Management accounting
By J.made gowda
Management accounting
By Bhagavati & pillai (second edition)

36
 Financial management

By m.y.khan & p.k.jain

 Financial Management and Policy

By V. K. Bhalla

Annual report of garden silk mills limited

Websites

 www.gardenvareli.com
 www.corporateinformation.com

Annexure – A : Profit & Loss A/c

Particulars 1998-99 1999-00 2000-01 2001-02 2002-03


Income
Sales & Job Charges 52431.08
46044.16 40347.01 44459.79 45167.17
-Excise Duty 1285.80
-------- --------- 1930.04 1776.57
Income From 360.47
119.62 474.02 352.57 337.77
Financial Operation
Other Income 131.61 158.83 195.16 726.55 444.81

37
Total 46295.39 40979.86 43077.48 44454.92 51950.56
Expenditure
Consumption Of RM 26335.24 19543.91 24079.43 23611.85 296673.28
(Increase)/Decrease
(364.91) 1658.33 273.70 424.70 307.73
In Stock
Purchases 1327.39 3488.50 3698.66 3093.56 2216.49
Mfg.& Other
15089.36 12798.06 10543.71 11225.45 13376.46
Expenses
Total 42387.08 37528.80 40525.54 37506.16 43573.96
Profit Before 8376.80
Financial
Charges, 3908.31 3451.06 4481.98 6948.76
Depreciation &
Tax
- Financial Charges 1798.41 1446.27 906.26 787.05 1243.84
Profit before Dep. & 7132.76
2109.90 2004.79 3575.72 6161.71
Tax
- Depreciation 1263.44 1408.29 1511.38 2245.21 2707.81
Net Profit Before Tax 846.46 596.50 2064.34 3916.5 4724.95
- Provision For Tax
Current 9.06 3.00 2.50 3.00 163.00
Deferred 0.00 0.00 0.00 986.01 703.00
Earlier Years 0.00 0.00 0.00 0.98 0.00
Net Profit After Tax 837.40 593.50 2061.84 2926.51 3858.95
+ Balance B/F 3822.86 4129.29 4147.37 76.27 28.42
Balance For
Appropriation 4660.26 4722.79 6209.21 3002.78 3887.37

Annexure – B : Balance Sheet

Particulars 1998-99 1999-00 2000-01 2001-02 2002-03


Sources Of Fund
1. Shareholder Fund
Share Capital 3829.06 3829.06 3829.06 3829.06 3829.06
Reserve & Surplus 31455.80 28853.62 30224.60 26653.49 27078.95
35284.86 42682.68 34053.66 30482.55 30908.01

38
2. Loan Funds
Secured Loan 8772.48 9645.37 9512.75 9336.48 9939.26
Unsecured Loan 2988.07 254.09 84.40 4764.55 7224.22
11760.55 9899.46 9597.15 14101.03 17163.48
Total 47045.41 42582.14 43650.81 44583.58 48071.49
Application Of Fund
1. Fixed Assets
Gross Block 35272.73 37178.21 39640.88 43320.78 55686.81
Less : Depreciation 14580.72 15891.57 16594.55 18783.39 21000.06
Net Block 20692.01 21286.64 23046.33 24537.39 34686.12
Less : Lease Adjs. A/C 69.50 122.47 6.89 6.89 0.00
Capital Wip 1863.24 542.00 1482.79 3811.19 2657.82
22485.75 21706.17 24522.23 28341.69 37343.94
2. Investment 3049.86 3400.28 5760.96 4070.30 3284.61
3. Current Assets
Inventories 7460.98 5631.97 5428.34 5878.52 5123.24
Sundry Debtors 6673.30 6532.28 3120.00 3423.73 3797.57
Cash & Bank Balance 655.97 1248.23 1553.20 4457.39 1000.27
Loan & Advances 10169.44 7936.42 6390.40 5915.06 7352.98
Other Current Assets 126.19 83.48 0.00 0.00 00.00
25085.88 21432.38 16491.94 19674.70 17274.06
Less : Current Liabilities 2886.68 3214.35 2323.87 3325.99 4292.90
Provision 744.25 794.42 854.14 761.51 1429.04
3630.93 4008.77 3178.01 4093.50 5721.94
21454.95 17423.61 13313.93 15581.20 11552.12
4. Deferred Tax Liability 0.00 0.00 0.00 -3507.73 4210.73
5. Misleading Expenses 54.85 52.08 53.69 98.12 101.55
47045.41 42582.14 43650.81 44583.58 48071.49

39