For Raymond Ltd. the inventory turnover ratio has increased from 2.

84 times (2004)
to 3.43 times (2005), but showed a major decline in the year 2005-06.
In the year 2006 the inventory period has increased tremendously from 106 days in
2005 to 272 days in 2006. This is also supported by the decline in the inventory
turnover ratio to a meager of 1.34 times in 2006.

Since the company is a textile industry therefore the inventory varies according to
seasonal and festive demands. However, it is seen that as the inventory carrying cost
is reducing because of the falling interest rates, the company may stock more if
desired. There are no norms or standards followed by the company for the raw
material, in process and finished goods inventory due to quantity restrictions and
price fluctuations.

The current ratio is a reflection of financial strength. The current ratio measures the
ability of the firm to meets its current liabilities- current assets get converted into cash
and provide the funds needed to pay current liabilities. The current ratio has
decreased from 2.68:1 (2005) to 2.33:1 in the year 2006.This is the result of the changes
in current assets and current liabilities or changes in the working capital. Current
assets comprises of Inventory, Debtors, Cash & Bank balances, Other Current Assets
and Loans & Advances.

The cash ratio measures the extent to which a corporation or other entity can quickly
liquidate assets and cover short-term liabilities, and therefore is of interest to short-
term creditors. It is also called liquidity ratio or cash asset ratio. For the year ended
2005-2006, the cash ratio has fallen from 2.46:1(2005) to 1.73:1 in 2006. Current
investments have not fluctuated as compared to the earlier year.

Increase in the current liabilities by 1117.56 lakhs can also be attributed to the fall
in the cash ratio. Sales have registered an increase of 15%. The increase in the current
liabilities is much more than the increase in the current assets, hence there is a decline
in the cash ratio.

Raymond Ltd. is a cash rich company. The liberal policy is adopted to augment its
sales thereby not losing its key customers. It is suggested that the company should
adopt stringent credit practices for its debtors thereby, having more funds at its
disposal for investments as well as for daily operating requirements and thus saving
on the interest costs. In order to keep up with the industry credit standards Raymond
Ltd. has been gradually reducing its credit period.

Overall it can be concluded that the company has a defensive approach as it believes
in maintaining its sales in this competitive environment. The ratio has been improving
and so have been the sales, thus showing the efficient management of the company.