CHAPTER -1

INTRODUCTION

1. IMPORTANCE OF FINANCE:-

Finance is regarded as the lifeblood of the business enterprises. This is because in

the modern money oriented economy finance is one of the basic foundations of all
kinds of economic activities. It provides access to all the sources being employed
in manufacturing and merchandising activities. It has been rightly termed universal
lubricant, which keeps enterprise dynamic.

The finance functions are an essential and at the same time a very distinct segment
of the overall managerial function. It is indispensable in any organization as it
helps in:-

• Financial planning and successful promotion of an enterprises.

• Acquisition of funds as and when required at the minimum possible cost.
• Proper use and allocation of the funds.
• Taking sound financial decision.
• Increasing the wealth of the investor and the nation.
• Promotion and mobilizing individual and corporate saving.

This unique of finance given it an elevated status, which it deserves in the overall
business functions. Hence efficient management of every business enterprise is
closely linked with efficient use of its finance. Finance is the genesis of the entire
business activity.
1.2FORMS OF FINANCE:-

The subject of all finance has been traditionally classified into two classes:

• Public finance
• Private finance

• PUBLIC FINANCE:-
It deals with the requirements and disbursements of funds in the government
institution like states, local self-government and central governments.

• PRIVATE FINANCE:-
It is concerned with requirements, receipts and disbursements of funds in case of
an individual, a profit seeking business organization and a non-profit organization.

1.3MEANING OF FINANCE:-

Finance holds the key to all activities. The Sanskrit saying Arthasachivah
which means, .finance reigns supreme.Speaks volumes for the significance of the
finance function of an organization. Financial management refers to all those
managerial activities or efforts which are concerned with ascertainment of the
finance, short term as well as long term needed by the firm, determination of the
sources suitable under the given circumstances and collection of the funds in time,
and control over the utilization of funds.
Financial management refers to the application of general management principles
to particular financial operation. Financial management is that part of management
which is concerned mainly with raising funds in the most economic and suitable;
using these funds as probably as possible; planning future operation, and control
current performance and future developments through financial accounting, cost
accounting, budgeting, statistics and other means. Financial management is an
excellent tool by means of which resources can be allocated to various project,
depending upon their importance and pay-off capacities. It provides the best guide
for future resources allocation by a firm. It provides relatively uniform yardsticks
for judging most of the enterprise‘s operations and projects.

1.4 DEFINITION:-

J.F.BRADELY defines financial management as, “The area of the business

management devoted to a judicious use of capital and careful selection sources of
capital in order to enable a spending unit to move in the direction of reaching its
goals.”
WESTON AND BRIGHAM, Financial management is an area of financial
decision making, harmonizing individual motives and enterprise goals.

1.5 DECISIONS IN FINANCIAL MANAGEMENT:-

Financial decisions are the decision relating to financial matters of a corporate

entity. Financial requirement, Investment, Financing and Dividend decisions are
the most important areas of financial management, which facilitate a business
firmto wealth maximization. Financial decisions have been considered as the
means to achieve long term objective of the corporate.

CHART 1: SHOWS CLASSIFICATION OF FINANCIAL

DECISIONS:-
FINANCIAL DECISION

LONG TERMDECISIONS
SHORT TERM DECISIONS
FINANCIAL DECISION:-

The function of finance involves three major decisions. The firm

must make, the investment decision, the financing decision and the dividend
decision. Each must be considered in relation to the objective of the firm, an
optimal combination of the three will maximize the value of the firm to its
shareholders. Because the decisions are interrelated, we must consider their joint
impact on the market price of the firm‘s stock, so we shall examine each of them.

I. INVESTMENT DECISION: -
Investment decision is concerned with allocation of funds to both
capital and current assets. Capital assets are financed through long term funds and
current assets are financed through short-term funds. The financial manager has to
carefully allocate the available funds to recover not only the cost of funds but also
must earn sufficient returns on the investments. Capital budgeting, CVP analysis
are the techniques generally used in the process of investment decisions.

II. FINANCING DECISION: -

The financial decision is the decision regarding when, where and

how to acquire funds to meet the firm‘s investment needs. Financing decisions is
concerned with identification of various sources of funds. Funds are available
through primary market, financial institution and through the commercial banks.
Cost associated with each of the instrument or sources different. This decision will
be made by considering the different factors like inflation, size of the organization,
government policies, etc.

IV. DIVIDEND DECISION: -

The third major financial decision relates to the disbursements of profits back to
Investors who supply capital to the firm. The dividend is concerned with the
quantum of profit to be distributed among shareholders. The management must
decide whether the firm distribute all the profits are retained them or distribute a
portion and retain the balance.Theoretically, this decision should depend on
whether company or the shareholders can make more profitable use of funds.
However in practice a number of other functions like the market price of shares,
the trend of earnings, the tax positions of shareholders etc., play an important role
in determination of dividend policy of a business enterprise.

1.6 FINANCIAL ANALYSIS:-

 The basis for financial planning, analyzing and decision-making is
the financial information. Financial information is needed to predict, compare and
evaluate the firms earning ability. It is also requiring to aid in economic decision
making investment and financing decision-making. The financial information of an
enterprise is contained in the financial statements or accounting reports.

The financial score of the firm is kept by the accounting system. It points out the
problems faced or likely to be faced by the firm. It also brings to its notice
opportunities that are likely to arise. It indicates possible action when needed.

Financial statements are the product of accounting work done during the
accounting period; say a year. Financial statement normally includes Balance Sheet
and profit and loss account also called Income statement. These are also described
as summarized presentation of monetary data organized according to certain
accounting principles and procedures.
The financial statements are historical documents and relate to a past period. The
period is normally of one year duration. Many business enterprises prepare their
financial statement frequently.
The analysisof financial statements is process of evaluation relationship between
component parts of financial statement to obtain a better understanding of the
firm‘s position and performance. A firm communicates financial information to
theuser through financial statement and reports. Financial statements contain
summarized information of the firm‘s financial affairs; organized systematically
they are means to present the firm‘s financial situation to the users. Analysis of
financial statements involves methodical compilation of accounting data,
identification relevant data, expressing the relationship to identify strong and weak
areas of business operations and to seek possible answer to problems in view.
Planning helps every management in using the limited resources of the firm
efficiently and economically. The future plans of the firm should be paid down in
views of the firm‘s financial strengths and weakness. Thus, financial analysis is the
starting point for making plans, before using any sophisticated forecasting and
budgeting procedures.

Financial analysis is the process of identifying the financial strengths and

Weakness of the firm by properly establishing relationship between the items of
the Balance sheet and Profit and loss account. The analysis includes establishing
relationship comparison and setting trends.

1.7 SIGNIFICANCE AND PURPOSE OF FINANCIAL

ANALYSIS:-
Analysis of financial statement is an attempt to measure the
enterprise liquidity, profitability, solvency and other indicators to assess its
efficiency and performance. Analysis of financial statement is linked with the
objective and interest of the individual agency involved. Some of the agencies
interested in the enterprise include investors, bankers, lenders, customers,
employees, management and regulatory authorities like tax authorities, stock
exchanges. Many of these agencies have diverse and conflicting interests.
An investor is interested in the profitability and safety of his investment and
would like to know whether the business is profitable, has growth potential and is
progressing on sound lines.
Bankers and lenders are interested in servicing of their loans by their enterprise,
that is, regular payment of interest and repayment of principal amount at scheduled
dates. Bankers and lenders would also like to know the safety of their investment
and reliability of returns. Employees interested in better emoluments and
continuation of the business, would like to know its financial performance and
profitability.
Management concerned in the financial performance and financial condition of the
enterprise. It would like to know about its viability as an ongoing concern,
management of cash, debtors and fixed assets, and adequacy of capital structures.
Regulatory authorities would like to ensure that the financial statement prepared
are according to the specified laws and rules and are to the safeguard the interest of
various concerned agencies.
Different agencies thus look at the enterprise from their responsible view pointand
are interested in, knowing about its profitability and financial position.In short, a
detailed cause and effect study of profitability and financial condition is the overall
objective of financial statement analysis.

1.8 TOOLS OF FINANCIAL ANALYSIS:-

There are many tools and techniques are used to analyze the financial statements.
Those are:-

• Ratio analysis
• Trend analysis
• Comparative analysis
• Common size analysis
• Cash flow analysis
• Fund flow analysis
• Du-Pont Model.
• Alt Man Z-Sore Model.
 • RATIO ANALYSIS

Ratio analysis is an important and powerful technique or method. It is used

as a yardstick for evaluating the financial condition and performance of a
firm.Analysis and interpretation of various accounting ratios gives a better
understanding of financial condition and performance of the firm in a better
manner than the perusal of financial statements.

• TREND ANALYSIS:-

Trend analysis is a statistical device applied in the analysis of financial

Statements to reveal the trend of items with the passage of time.

• COMPARATIVE ANALYSIS:-

Comparative financial statements indicate the direction of movement with respect

to financial position and operating results of the firm. The importance of
comparative financial statements can be understood from the requirement of the
Companies Act, 1956 which makes obligatory for all companies to prepare the
final accounts of the companies by presenting current year as well as previous year
figures.
• COMMON SIZE ANALYSIS:-
The common size statements represent the relationship of different items,
Contained in a financial statement, with some common item by expressing each
item as a percentage of the common item.
 • CASH FLOW ANALYSIS:-
A cash flow statement explains the causes of changes in cash position of a
business enterprise, between two dates of balance sheets. Cash flow statement is a
tool that is available to the management to assess, monitor and control the liquidity
available in the enterprise.

• FUND FLOW ANALYSIS:

Funds flow analysis is a device that indicates the various means through
which funds have been obtained, during a specified period and the ways they have
been used. It shows the inflows and outflows of funds.

• DU-PONT ANALYSIS:

The DuPont analysis is a method for assessing a company's return on equity

(ROE). It is also often called the DuPont identity. The DuPont analysis breaks
down a company's ROE by analyzing asset efficiency or turnover ratio, operating
efficiency and financial leverage this approach measures a company's gross book
value.

1.9 RATIO ANALYSIS:-

Ratio analysis is an important and powerful technique or method. It is used as a
yardstick for evaluating the financial condition and performance of a firm.
Analysis and interpretation of various accounting ratios gives a better
Understanding of financial condition and performance of the firm in a better
manner than the perusal of financial statements.

MEANING:-
A ratio or a financial ratio is a relationship between two accounting
figures, expressed mathematically. Ratio analysis helps to ascertain the financial
condition of the firm. In financial analysis, a ratio is compared against a
benchmark for evaluating the financial positions and performance of a firm.
Financial ratios help to summarizes large quantities of financial data to make
qualitative judgment about the firm‘s financial performance.

1.10 UTILITY OF RATIO ANALYSIS:-

It is a most important tool of financial analysis. Many diverse groups of

people are illustrated in analyzing the financial information to indicate the
operating and financial efficiency and the growth of the firm.
The people use ratios to determine those financial characteristics of the firm in
which they are interested with the help of ratios, one can determine:-
• The ability of the firm to meet its current obligations the extent to which the
Firm has used its long-term solvency by borrowing funds.

• The efficiency with the firm is utilizing its assets in generating the sales
revenue.

• The overall operating efficiency and performance of the firm.

 • With help of ratios an inter-firm comparison can be made.

• Measure the overall profitability of the concern.

• Helpful in assessing the long-term financial viability of a firm.

1.11 LIMITATIONS OF RATIOS:-

• It is difficult to decide on the proper basis of comparison.

• The comparison is considered difficult because of difference in situations
.Two companies or one company over the years.
• The price level changes make the interpretation of ratios invalid.
• The difference in defamations of items in the Balance sheet and profit
andLoss statement makes the interpretation of ratios difficult.
• The ratios calculated at a point of time are less informative and defective so,
they suffer from short-term changes.
• The ratios are generally calculated from past financial statements and thus
are no indicators of the future.
• There are no well-accepted standards and rules of thumbs for all
ratios,which can be accepted as norms. It renders interpretations of ratios
difficult.
 • Change in accounting procedure by a firm often makes ratio analysis
misleading e.g. a change in the valuation methods of inventories.
• Like financial statements, ratios also suffer from the inherent weakness of
accounting records such as their historical nature. Ratios of the past are
nonecessarily true indicators of the future.

• It helps the analysis to get a better insight about financial strength

andweakness of firm. At the same time, it is important to understand that
ratio analysis provides a symptomatic analysis of a company‘s performance
and financial condition. To view each ratio separately and assess the
financialsituation on that basis is not a recommended practice.
• This is so because each ratio reflects a symptom but all the symptoms may
be combined and analysis as a whole before a diagnosis can be made.
• Ratio analysis can be used in the similar way by a financial manager are
related and interrelations must be understood. Each managerial decision
affects not only one ratio but also a number of ratios.
• Ratio analysis is a powerful tool of financial analysis. A ratio is defined as
the relationship between accounting figures expressed mathematically,
isknown as financial ratio.
• In financial analysis, a ratio is used as an index or yardstick for evaluation
the financial position and performance of a firm. It helps the analyst to make
qualitative judgment about the firm‘s position and performance.
• It involves comparison for a useful interpretation of the financial statements.
It should be compared with some standards.

THE STANDARDS OF COMPARISON ARE:-

 • Ratios calculated from the past statements of the same firm.
• Ratios developed using the projected financial statements of the same firm.
• The easiest way to evaluate the performance of a firm is to compare its
present ratios with past ratios, and the ratios of our firm with some selected
firms in the same industry, at the same point of time.

CHART 2: CATEGORIES OF RATIOS

1.12 LONG TERM SOLVENCY RATIOS:-
• Debt equity ratio
• Shareholders equity ratio
• Debt to net worth ratio
• Capital gearing ratio
• Fixed assets to long term funds ratio
• Proprietary ratio
• Dividend cover
• Interest cover
• Debt service coverage ratio

1.13 SHORT TERM SOLVENCY RATIOS:-

• Current ratio
• Quick ratio
• Absolute liquid ratio

1.14 PROFITABILITY RATIOS:-

• Return on capital employed
• Earnings per share
• Cash earnings per share
• Gross profit margin
• Net profit margin
• Cash profit margin
• Return on assets
• Return on net worth
1.15 ACTIVITY RATIOS OR TURNOVER RATIOS:-
 • Inventory turnover ratio
• Debtors‘ turnover ratio
• Creditors turnover ratio
• Assets turnover ratio
• Working capital turnover ratio
• Assets turnover ratio
• Sales to capital employed ratio

1.16 RATIOS SUMMARY:-

The ratios are made up with figures coming from the balance sheet
Andthe income statement.

There are four major categories:-

• Liquidity ratios
• Profitability ratios
• Solvency ratios

1.17 RETURN ON EQUITY (ROE):-

Ratios are often used within the years to see the evolution of the
company. They are also used by comparison with the ratios of similar business.
Regarding a new business these ratios provides with some general rules that you
have to follow: Amongst the ratios, you must always scrutinize the current ratio
(day to day management) and the Du Pont chart which enables you to pilot your
business and to improve your return on equity.
1.18 DU PONT ANALYSIS:-

The Du Pont model was originally developed in 1919 by a finance executive at

E.I. du Pont de Nemours and co. of Wilmington, Delaware, for financial planning
and control purposes.
Du Pont model has been used to detect the drivers of change in financial
Performance. The model is also an excellent tool for a forward-lookingassessment
of strategic alternatives.
This system uses the ratio inter-relationship to provide charts for managerial
Attention. The standard ratios of the company are compared to present ratios and
Changes in performance are judged.
The Du Pont system helps many companies to understand the critical
building blocks in return on assets (ROA) and return on equity (ROE).

Du – Pont analysis tells us that ROE is affected by three things:

• Operating efficiency, this is measured by profit margin.
• Asset use efficiency, which is measured by total asset turnover.
• Financial leverage, which is measured by the equity multiplier.

DU-PONT ANALYSIS:
This ―really‖ modified model still maintains the importance of the impact of
operating decisions (i.e. profitability and efficiency) and financing decisions
(leverage) upon ROE, but uses a total of six ratios to uncover what drives ROE and
give insight to how to improve this important ratio.
The firm‘s operating decisions are those that involve the acquisition and disposal
of fixed assets and the management of the firm‘s operating assets (mostly
inventories and account receivable) and operating liabilities (accounts payable and
accruals). These are captured in the first two ratios of the―really‖ modified Du
Pont model.

These are:
1. Operating profit margin: (Earnings before Interest & Taxes or PBIT/Net
sales)

2. Capital turnover: (Net sales / Total Assets) The firm‘s financing decisions are
those that determine the mix of debt and equity used to fund the firm‘s operating
decisions. These are captured in the third and fourth ratios of the ―really modified
model. These are:

3. Tax effect ratio: (Earnings after Taxes or PAT / PBT)

4. Financial Cost Ratio: (Earnings before Taxes or PBT / PBIT)

5. Depreciation effect Ratio: (PBIT/PBDIT)

6. Financial Structure Ratio: (Total Assets/ Shareholders fund).

RETURN ON EQUITY = ________PAT____x100
SHAREHOLDERS FUND
1.1 DU-PONT MASTER CHART PROFARMA:
 PROFITABILITY = ________PAT____x100
NET SALES
7.16%
RISK / LEVERAGE = ___TOTALASSETS____x100
SHAREHOLDERS FUND
7.16%
EFFICIENCY = ___NETSALES____x100
TOTAL ASSETS
7.16%

SHAREHOLDERS FUND

PAT
NET SALES

TOTAL ASSETS
NET SALES

RESERVES & SURPLUS

SHARE CAPITAL

TOTAL COST
REVENUE
FIXED ASSETS
M. EXP
CURRENT ASSETS

CASH ,BANK
RECEIVABLES

OPERATING EXPENSES
COGS

OTHER CURRENT ASSETS

INVENTORIES

CORPORATE TAXES
FINANCE CHARGES 5

THE RATIOS USED UNDER DU PONT CONTROL MODEL

ARE EXPLAINED AS FOLLOWS:-

1) RETURN ON EQUITY:
Return on equity is derived by taking net income and dividing it by
shareholder’s equity. This indicates the return which the management is realizing
from the shareholders equity and shows how effectively ordinary shareholders
fund are being utilized by the management. As long as it is above the current
interest rates, a company doing fairly well.
RETURN ON EQUITY = _____________PAT___________________X 100
SHAREHOLDERS FUND

2) NET PROFIT / PROFIT ABILITY RATIO: -

Net profit is obtained when operating expenses, interest and taxes are
subtracted from the gross profit. The net profit is measured by dividing profit after
tax by sales

PROFITABILITY = _____________PAT___________________X 100

NET SALES

OBJECTIVE AND SIGNIFICANCE:

It establishes a relationship between net profit and sales and indicates

management‘s efficiency in manufacturing, administering, and selling the
products. This ratio is the overall measure of the firm‘s ability to turn each rupee
sales into net profit. This also indicates the firm‘s capacity to with stand adverse
economic conditions.
3) ASSET TURNOVER RATIO:

This ratio reveals the number of times the net assets are turned over during
the year. An improvement in asset turnover ratio as compared to the previous year
indicates that the turnover of the company has improved. In cases where assets are
not revalued or replaced, its magnitude will be decreasing over the years due to
depreciation. Then, obviously the ratio will be higher as the turnover figures for the
future will reflect an increasing trend.

EFICIENCY RATIO = _____________NET SALES___________________X 100

TOTAL ASSETS

4) PROPRIETARY RATIO:
Proprietary Ratio establishes the relationship between proprietor’s funds
and total tangible assets. This ratio is also termed as Net Worth to Total Assets or
Equity-Assets Ratio.
PROPRIETRY RATIO/RISK = _____________TOTAL ASSETS__________________X
100
SHAREHOLDERS FUND

Where Proprietor’s Funds = Shareholder’s Funds = Share Capital (Equity +

Preference) + Reserves and Surplus – Fictitious Assets
Total Assets include only Fixed Assets and Current Assets. Any intangible assets
without any market value and fictitious assets are not included.
5) FIXED ASSETS TURNOVER RATIO:
Fixed assets turnover ratio establishes a relationship between net sales and
net fixed assets. This ratio indicates how well the fixed assets are being utilized.
FIXED ASSETS TURNOVER = _____________NET SALES__________________X
100
FIXED ASSETS

In case Net Sales are not given in the question cost of goods sold may also be
used in place of net sales. Net fixed assets are considered cost less depreciation.

OBJECTIVE AND SIGNIFICANCE:

This ratio expresses the number to times the fixed assets are being turned
over in a stated period. It measures the efficiency with which fixed assets are
employed. A high ratio means a high rate of efficiency of utilization of fixed asset
and low ratio means improper use of the assets.

MERITS OF DU – PONT ANALYSIS:

The Du Pont analysis is used as a tool in measuring the managerial
performance by linking the net profit margin to total assets turnover.
The Du Pont chart is useful in segregation and identification of factors that
affects the overall performance of the company.

The Du Pont analysis considers the inter – relationship of accounting

information given in financial statements.

Comparative analysis can be done with reference to the data of previous

period or industry data or competitor s data.

Return on Investment (ROI) can be improved by increasing one or both of its

components namely, the profit margin and the investment turnover in any of the
following ways:
 Increasing the net profit margin. 

 Increasing the investment turnover 

 Increasing both net profit margin and investment 

The Du Pont chart indicates that the ROI is ascertained as a product of net
profit margin ratio and investment turnover ratio.

LIMITATIONS OF THE DUPONT MODEL FOR FINANCIAL

ANALYSIS:- 
1. It is a short term measurement.

2. It is a before tax measurement.

3. Setting a target for a good ROCE is difficult.

4. It does not link to the cost of capital.

5. It does not link to the time value of money.

CHAPTER -2
RESEARCH DESIGN

2.1 RESEARCH:-
 Research in common parlance refers to a search for knowledge. Research is a
scientific endeavor. It is a systematic and critical investigation into to a
phenomenon. In KHDCL, We put our best efforts to excavate the information to
evaluate the financial performance and safety of the company. We search much
Information supporting to our study in the given parlance.

2.2 RESEARCH DESIGN:-

Research design is a logical and systematic plan prepared for directing a research
study. The Objective of our study is to find out the financial performance of
KHDCL limited and highlight the exact loss recurring spot among the various loss
recurring factors. It constitutes the blueprint for the collection, measurement and
analysis of data. We collected 3 years Position & Income statements and obtained
information from key personal.

2.3 NEED FOR RESEARCH DESIGN:-

A research design involves the complete process of planning and
operation of the research. With the help of the research design the researcher can
conduct his study in an organized and systematic manner. He can plan, direct
organize, control and co-ordinate his efforts towards the objectives with minimum
efficiency.

2.4 TITLE OF THE STUDY:-

“AN EVALUATION STUDY ON FINANCIAL PERFORMANCE
OF KHDCL USING DUPONT ANALYSIS”
2.5 STATEMENT OF THE PROBLEM:-
The objective of study is to evaluate financial healthiness of the KHDC LTD .The
performance of an organization can be analyzed by using various important
techniques. Du-Pont is one among the strongest tools in analyzing the financial
statements which is based on various Ratios. An organization performance may be
affected due to effect on profitability, less efficiency or it may be from risk and
Du-Pont is the vital financial tool where it plays a key role in identifying all kinds
of above mentioned reasons which affects on financial performance of an
organization and the proper measures could be taken to solve the financial
hindrances and the financial concert can be improved. Hence the relevance of this
study is taken.

2.6 SCOPE OF THE STUDY:-

The scope of the study covers the operational jurisdiction of KHDC Ltd,
Bangalore. The study covers the overall financial performance of the organization
and the study is confined only to finance and accounts department of the
organization. The study has been focused on Return on Equity only and the study
is restricted for 3 years (2011-2013).

2.7 BASIC ASSUMPTION:-

Findings of the study are based on the assumption that company has disclosed
correct information.
2.8 OBJECTIVES OF THE STUDY:-

The objectives of the study are as follows:-

• To Study the financial performance of KHDC ltd by applying Du-Pont

model.
• To study the concept of Du-Pont analysis as a sickness predicators.
• To calculate Return on Equity for the last 3 years.
• To study the profitability and Efficiency level of KHDCL.
• To offer construction for improving profitability.

2.9 LIMITATIONS OF THE STUDY:-

The limitations of the study are as follows:-

• Due to time constraint in-depth analysis could not be made.
• Some of the information is considered as confidential and not
available for the study. Analysis in the study will be dependent on the
information supplied by the company.
• The study is confined only to KHDCL.

2.10 METHODOLOGY OF RESEARCH:-

The Methodology consists of the following.

• TYPE OF RESEARCH:-
 This is a social research for education purpose and type of research that
is followed in this study is descriptive research and analytical study.

• METHOD OF RESEARCH:-

The method of research, which is adopted in this study, is descriptive

method. Because the analysis done with the help of data tables and graphs which
areprepared with the help of du-pont model for three financial years.
• STUDY SUPPLEMENTS:-

The trading accounts, profit and loss account, Balance sheet, Auditors
report have been collected on a random technique.

• STUDY AREA:-

The size of KHDCL is very vast and it is very difficult to conduct study in
all the departments. Therefore, the finance department and accounts department
have been selected in this study and study restricted to 3 years.

2.11 SOURCES OF DATA:-

• SECONDARY DATA:-
The data is collected from the 38th annual report 2012-13 of the KARNATAKA
HANDLOOMS DEVELOPMENT CORPORATION LI MITED.
2.12 PLANS OF ANALYSIS
The data has been tabulated. Each data has been analyzed and evaluated. The
findings are recorded and conclusions are given based on findings.

2.13 OPERATIONAL DEFINITION OF CONCEPTS:-

• NET SALES:-
Total invoiced charges for the sale of goods or services over a period less
cash discounts taken by customers, the value of returns by customers and any other
allowances.
• SHAREHOLDERS FUND:-
Shareholders fund represents equity& preference capital plus reserves and
surplus less accumulated losses.
• FIXED ASSETS:-
A fixed asset represents the gross fixed assets minus depreciation provided on this
till the date of calculations.
• CURRENT ASSETS:-
Current assets are those assets which can be converted into cash with in a period of
12 months without incurring major losses.

• TOTAL ASSETS:-
Total assets represent fixed assets plus current assets minus fictitious assets.
 • PBIT:-
The net profit arising from the normal operations and activities of an
Enterprise without taking accounts the extraneous transactions and expenses of a
purely financial nature.

• BALANCE SHEET:-
Balance sheet is an accounting statement prepared from accounting
Balances at a given date and is prepared from an adjusted trial balance.

• TAXES:-
An individual or corporate body by central or local government in order to finance
the expenditure of that government and also as a means of implementing its fiscal
policy, Payments for specific services rendered to or for the payer is regarded as
taxation.

• SHARE CAPITAL:-
The total value of shares issued, or authorized to be issued, by the
company. The capital stated in the memorandum of association is the authorized
capital. The company cannot issue more than this amount unless it first passes a
resolution at a general meeting.
2.14 CHAPTER SCHEME
• CHAPTER-1
INTRODUCTION:
The chapter deals with introductory aspects to the issues
Identified.

• CHAPTER-2
RESEARCH DESIGN:
This chapter structures the research design and gives various other chapters
schemes.

• CHAPTER-3
COMPANY PROFILE:
This chapter deals with profile of THE KARNATAKA HANDLOOM
DEVELOPMENT CORPORATION LTD.

• CHAPTER-4
DATA ANALYSIS AND INTERPRETATIONS:
The chapter deals with analysis of management practices, growth, financial
performance an ReturnonEquity of, THE KARNATAKA HANDLOOM
DEVELOPMENT CORPORATION LTD.
 CHAPTER-5
SUMMARY OF FINDINGS AND RECOMMENDATIONS:

This chapter gives summary of findings, conclusion and recommendations.

• ANNEXURE
• BIBLIOGRAPHY

CHAPTER-3
 INDUSTRY PROFILE

Handlooms have been known to India right from the historic ages. The use of
fabrics, techniques created to make designer art pieces and expressing ethnicity
through them has been an integral part of India’s base. Its power is such that
handloom industry constitutes around 14% of total preindustrial production and
30% of the total export business. Well, that’s not all; it is also the second largest
industry in India with important segments, such as independent power looms,
modern textile mills, handlooms and garments. This made the handlooms popular
in foreign markets also and raised their demand.

Handlooms are an important craft product and comprise the largest cottage
industries of the country are engaged in weaving cotton, silk and other natural
fibbers. There is hardly a village where weavers do not exist, each weaving out the
traditional beauty of India’s own precious heritage.

Handloom sector plays a very important role in the country’s economy. It is

one of the largest economic activities providing direct employment to over 65
lakhs person engaged in weaving are allied activities. Due to effective government
intervention through financial assistance and implementation of various
developmental and welfare schemes, this sector has been able to withstand
competition from the power looms and mill sectors.
As a result of these measures, the production of handloom fabrics registered
more than tenfold increases from a level of 500 million sq. Meter in earlier 50’s, to
7352 million sq. Meter in 1999-2000. This sector constitutes nearly 19% of the
total cloth produced in the country and also contributes substantially to the export
 earnings. Handloom forms a part of the heritage of India and exemplifies the
richness and diversity of our country and the artistry of the weavers.

The office of the development commissioner for handlooms gas been

implementing since its inception in the year 1976, various schemes for the
promotion and development of the handloom sector and providing assistance to the
handloom weavers in a variety of ways. Some of the major programs formulated
by this office relate to;
• Employment generation programmed
• Modernization and up gradation of technology
• Input support
• Marketing support
• Publicity
• Infrastructure support
• Welfare measure
• Composite growth oriented package
• Development of exportable products
• Research and development.

All these measures aim at meeting the objectives enshrined in the directive
principles of state policy fir the growth of decentralized handlooms sector.
The various schemes implemented by the office of development commissioner
for handlooms address the needs of weavers who constitute the disadvantaged
social strata and occupational groups, which are the bottom of the economic
hierarchy.
 Concerted efforts are being made through the schemes and programmers to
enhance production, productivity, and efficiency of the handloom sector and
enhance the income and socio-economic status of the weavers by upgrading their
skills and providing infrastructural support and essential inputs...

Handlooms .com is a platform for innovation programmed to reach global

customers. Basically we build a strategic market where:

IN HANDLOOM SECTOR
In the district there are 4546 handlooms, Out of which 1994 Cotton and 2552
woollen looms. Which generates about 18000 employments? Above looms are
covered by co-operative societies/Karnataka Handlooms Development
corporation/Khadi Sector Private Sector.

Total of 48 Handloom co-operative societies are working in the district. The

main produce are woolen Kamblies, Blankets and cotton Bed sheets, Towels,
Dhotis etc., Other than Department, Karnataka Handloom Development
Corporation is a Apex body. Which looks the interest of individual weavers, by
declutching them from master weavers than supply raw materials? Design in puts,
training etc. Items produced by weavers will be procured by paying conversion
charges. They have one project office at Radar under which 13 sub centers are
functioning.

IN POWER LOOM SECTORS

In district there are 13826 power looms working under organized unorganized
sector. Total of 32 power loom societies are working. This sector is being
supported by power loom Development Corporation, Bangalore by means of
market support and other technical information to its members.

3.2 COMPANY PROFILE

THE KARNATATA HANDLOOMS DELOVEPMENT
CORPORATION
priyadarshiniCommercialComplex,TankRoad,Ulsoor
Bangalore, Karnataka560042
Tel: 91-80-25575421 / 2557542

3.1. INCEPTION OF THE COMPANY

Government Of Karnataka- Karnataka State Handloom Development
Corporation (KHDC) Bangalore.
In 1964, the KHDC started a production centre at channapatana where
artisans could work on per piece basis. In 1980-81 this was converted to a rural
marketing service centre to impart financial and design assistance, supply raw
material and procure finished goods for sale in tourist handlooms showrooms.
Around 1983-84 KHDC surveyed 900 artisans families living within a 10 kumis
radius of channapatana and identified the poorest and most deserving
artisans.KHDC then with common facility centre which included 30 power lathes
and housing for 126 artisan families.
A standing committee was established to allot the living quarters. Each crafts
person’s family was provided with a house in the complex for a rent of weavers,
whether they live in compound or not, for a fee of rupees 30 per month i.e. rupees
2 per day, assistance is also provided in arranging credit.

Since 1986, artisans have been living and working at the KHDC centre.
KHDC runs a raw material depot at channapatana to supply raw material\s and also
to serve as a procurement agent.

In 1987, KHDC’s total procurement of lacquer ware for Karnataka

government emporiums was worth Rs 642000. This only represents 2.1% of the
total estimated lacquer was production in the channapatana area.
Chairman of Karnataka Handloom Development Corporation (KHDC) Mr.
MD Lakshminarayana said that the corporation will increase wages, of the
weavers working for it, by 20 percent from this month. Mr.Lakshminarayana
was addressing media professionals after attending KHDC's board meeting,
which has shifted its headquarters to Hubli from Bangalore. This hike is apart
from the 10 percent hike that weavers received in the month of August, he
said.

This increase in weavers pay is an outcome of the extraordinary growth

 witnessed by the corporation's business, informed the Chairman. Last year, it
went up to Rs. 1.2 billion from around Rs. 0.9 billion. While, this year the
corporation targets to touch Rs. 2billion,he added.
Now the government is also thinking over the establishment of Karnataka
Textile Development Corporation, which will incorporate both, handloom and
power loom weavers, informed the Chairman.
We are involved in offering a huge assortment of Made-Ups that are crafted in
variety of colours and designs. These are procured from most reliable
vendors. our complete range of made-ups include chenille throw collections,
polyester throw collection, acrylic throw collection, acrylic throw collections,
cotton throw collections, cotton throws collections, throws collections,
polyester chair pad collections and chair pad collections. Our range also
includes new chair cover, wall hanging items, woollen wall hanging, jute wall
hanging collections, jute wall hangings, jute wall hanging, wall hangings, wall
hanging, scenery wall hanging, cotton wall hanging – printed, cotton wall
hanging, cotton wall hangings, silk wall hanging and silk wall hangings.
These are made from best quality fabrics to ensure optimum quality.

3.2. NATURE OF THE BUSINESS CARRIED:

The nature of the business carried out by the KHDC is concerned with the
following.
• Manufacturer of original silks
• Design consultancy
• Manufacturing of traditional and printed silks Sarees
• Designing of Sarees and so ham shirts
• Exporter of Cotton Home Furnishing
• Supply of raw materials like silk, janatha varieties, non janatha varieties and
polyester.

3.3. VISION, MISSIONAND QUALITY POLICIES:

VISION
To make handloom industry a dynamic, vibrate, value based learning
organization with human resources exceptionally skilled, highly motivated and
committed to meet the current and future challenges. This will be driven by core
values of the company fully embedded in the culture of the organization.

MISSION
• The prosperity of the weaver and the prosperity of the corporation
• It’s our aim to improve the economic and social status of the weaver by achieving
and maintaining quality at all levels of production, which will then ensure the well
being of the corporation
• Providing employment to the handlooms weavers outside co-operative sector
round the year, which includes supply of raw material, technical guidance, training
facilities and marketing support.
• Implementing welfare schemes sponsored by government of Karnataka and
government of India for the benefits of weavers
• Repositioning the company from market follower to market leaders

QUALITY POLICY
 KHDCL is committed to continues improvement of all activities it supplies
products and services that confirm to the highest standards of design manufactured,
reliability maintainability, and fitness for use as desired by our customer.
Quality policies of the KHDCL
• To ensure availability of total quality people to meet the original goals and
objectives.
• Continues improvement in knowledge, skill and competence.
• Enhance organization learning

3.4. INDIAN FANTASY IN KHDC

SILK FURNISHINGS:
Add a touch of pure silk to your life.
100% hand woven, pure silk fabrics in a rich kaleidoscope of colours,
weaves, patterns, designs and prints. Perfect material for curtains upholstery,
cushion covers, quilts and more.

BED LINEN
Put the romance back into your bedroom
A fantastic collection of hand woven silk bedspreads, quilts and pillow
covers, plain and printed, with exquisite embroidery and patchwork.
CUTTOM DURRIES
Put your foot down elegantly
Add a touch of class to your floor with these traditional cotton rugs woven
by the age-old ‘throw-shuttle, technique. Choose from a wide range of exquisite
pastel shades and eye-catching ethnic designs.
KITCHEN/TABLE LINEN
Make every meal a memorable one. An exciting collection of aprons, oven gloves,
post holders, tablecloths, place mats, napkins and tea cosies. Made of pure cotton
fabrics woven in ridges.

KHDC PREMIER PRODUCTS

Traditional Silk Sarees

We offer a wide spectrum of Traditional Silk Sarees, which is reckoned as a
traditional Indian wear. In our range, we offer Silk Sarees, KanjeevaramSarees,
Silk Sarees and Traditional Silk Sarees. Available in different designs, colours and
styles, these are widely demanded by our clients spread across the world. We also
meet customized requirement for our clients benefit.

Printed silk Sarees

 We offer a wide range of fancy printed silk Sarees that are manufactured as
per the client’s requirements. These are available in various sizes, colors, designs
and patterns.

Soham shirts

We offer a wide variety of Soham Shirts that is designed from quality cloth
material. These are available in all standard sizes and colour combinations.
Skilfully stitched and comfortable to wear our range is in high demand by our
clients spread across the globe. We also meet customized requirement of our
clients.

Cotton bed linen

The bed linens we manufacture are made of plain 100% cotton percale and
50/50 blended options. Further, we also use latest trends in designing the same
with 100% cotton jacquard in stripes, dots, dobby box, and uneven stripes.
Zari Printed Silk Sarees

These Zari Printed Silk Sarees are exclusively designed

with a perfect blend of colour combinations and attractive
patterns. The varied prints used include floral and other.
Post Production Loom Process

Different varieties of fabrics produced by weavers of The Karnataka Handloom

Development Corporation throughout Karnataka is collected at warehouses at
Peenya and it is processed at " PRIYADARSHINI TEXTILE PROCESS HOUSE"
situated at Peenya 2nd stage about 15 km from Bangalore. The Process House is
established in the year 1980 having post loom processing capacity of 5-6 lakhs
meters of different varieties of cloth. Government of Karnataka's prestigious
VidyaVikas Scheme and JanathaSareeDhothi Scheme required fabrics are being
processed in the same Process House. This Process House is possessing G.M.P
certificate issued by Drugs Controller, Govt. of Karnataka to process and supply
Bandage Cloth required for all Government Medical Hospitals. .
The Process House is having a fully automatic flatbed screen printing machine, silk
Sarees table printing and Computer Aided Designing to produce attractive designs
on Sarees, Dress Materials and Furnishings which are being sold at our retail sales
outlets "PRIYADARSHINI HANDLOOMS" Showrooms throughout Karnataka
and all metro cities. Also the process house is having a modernized silk yarn
dyeing plant having production capacity of 2500 kgs of silk yarn per month with
computer colour matching. The process house is shortly acquiring I.S.O.9001-2000
certificate

Production pre looms

 Yarn is the most important input in the handloom production; KHDC has been
arranging all type of standard quality yarn to the weavers to meet their requirement
at reasonable prices. KHDC is equipped with its network to provide the following
services:
Equipped to offer standard quality of yarn from a large number of spinning mills,
few of them are meeting the national and international standards. Mills are
empanelled with KHDC. All varieties of yarn made of natural and artificial fibres
like cotton, silk, wool, jute, acrylic, polyester and their blends are available on
demand.
Large number of weavers getting their required variety, quality of yarn to meet the
present competition in the field of traditional and non-traditional handloom
production. Future plan is to associate its services with the export oriented
organizations’ by way of procurement and supply of yarn, with the objective to
increase yarn business adequately.

• Chenille Throw Collections

 Our company, Universal Buying
Services, prominently known as a
leading buying agent involved in
supplying a wide range ofChenille
ThrowCollections to our esteemed
customers spread all over the
world. These are procured from our
most trusted and valued vendors.
The complete range is available in
variety of colours and in 100%
cotton textures at very competitive
rates.

Polyester Throw Collection

We are one of the eminent players in
the field of offering Polyster Throw
Collection. Our company is recognized
as the leading buying agent. Our
complete range is procured from the
selected manufacturers who are
concerned about the quality and follow
the prevailing quality standards while
making these products. It is widely
accepted for its unique designs and
Polyster texture.

Acrylic Throw Collection

Under the able guidance of our trained

professionals, we are capable of supplying a
wide range of Acrylic Throw Collection. It
is widely used by young generation girls as
it is available in different colours, designs,
patterns and texture. Our vendors ensure
each and every product is tested on various
quality parameters.
Acrylic Throw Collections

With wide and rich industrial experience and knowledge of

skilled and trained professionals, we, Universal Buying Services, is capable of
offering an extensive range of highly qualitative ACRYLIC THROW
COLLECTIONS. These are available in several colour combinations and designs
to attract each individual.

Cotton Throws Collections

We at, Universal Buying Services, are involved

in procuring and supplying a wide range of
high quality Cotton Throws Collections.
These collections are offered in variety of
designs, pattern, colour combinations and
beautiful texture. We have a special team who
take care of the packaging to ensure it is
protected from dampness and other damages
while transporting and storage.

Throws collection

We are involved in supplying an extensive

array of widely used THROWS
COLLECTIONS. These are available at very
competitive rate with several eye-catching
designs and attractive colors. We also make
sure we craft these Collections in different
patterns and texture to suit the varied needs of
our esteemed clients.

Chair Pad Collections

Our organization is engaged in supplying a

wide range of Chair Pad Collections. We
strive hard to cater the varied needs of our
clients by identifying the order and then
accordingly sourcing it from reliable
vendors. These Chair Pads are also offered
in numerous of designs, sizes, shapes and
color combinations. We procure them in
 variety of textures like cotton, Polyster ,
silk and combination of terra wool with
cotton.

New Chair Cover

We are one of the leading and eminent suppliers of a vast assortment of highly
qualitative NEW CHAIR COVER that are used for covering the chairs. These are
most commonly used in functions, seminars and other such occasions where large
number of chairs is used to make seating arrangement for big crowd. These are
usually offered in white and blue colours. Our complete range is quality tested on
various set industrial parameters to ensure complete customer satisfaction

3.4. AREA OF OPERATION

KHDCL has 2 different branches in Karnataka.
• Bangalore branch
• Hubli branch
• Bagalkote
3.5. OWNERSHIP PATTERN
Company is under the control of government of Karnataka. Its day to day activities
and operations is looked after by a group of peoples appointment by the
government of Karnataka has directors and members who are answerable to the
government of Karnataka.

BOARD OF DIRECTORS
Chairman
SRI M.D.LAKSHMINARAYANA
Managing Directors
DR.H.BASKER, IAS.,
SRI MOHAMMAD MOHSIN, IAS.,

Directors
SMT SANDHYA VENUGOPAL SHARMA, IAS.,
SRI PANDURANGA BOMMAIAH NAYAK, KAS.
SRI INDER DHAMEEJA, IAS.,
SRI SHAMBHU DAYAL MEENA, IAS.,
SRI I.R.PERUMAL, IAS.,
 SRI G.KUMAR NAIK, IAS.,
SRI B.A.HARISH GOWDA, IAS.,
SMT. MENU S KUMAR, IC &IES.,
SRI B.S.RAMPRASAD, IAS.,
SRI VIPUL BANSAL, IAS.,
SRI K.R.SHASHIDAR, IAS.,
SRI P.MANIVANNAN, IAS.,
SRI D.A.VENKATESH, IFS.,
SRI V.A.MACHAKANUR, KAS.,

Company A.KUMARASWAMY, FCA secretary

3.6. INFRASTRUCTURE FACILITIES
• Training facilities
To impact training in the modern management and production techniques
dyeing practices, marketing of handloom products etc. The office of the
development commissioner for handlooms has been operating training
programmers for human resources development in the co-operative sector for the
benefits of personnel engaged in handloom sector at different levels through
institution like NCCT, NCUI AND NHDC.

• Welfare package
A provision of rs.900 lakhs has been made for welfare schemes i.e. thrift
fund, group insurance and health package scheme.

• Work shed-cum housing

 The government of India introduced the centrally sponsored scheme called
Work shed-cum housing scheme” for the handloom weaver for the beginning of 7 th
– 5 year plan i.e. 1985-86. The scheme is implemented primarily with a view to
provide suitable work place to the weavers and their by achieving better
productivity.
• Health package
The government of India introduced the health package scheme for
handloom weavers during the year 1992-93. Under this scheme weavers are
provided financial assistance for the treatment of diseases like asthma, TB,
inflammation of the respiratory system, cost of testing of eyes and spectacles,
supply of drinking water, maternity benefits to women weavers, payment of
additional compensation.

• Group insurance
The government of India introduced a group insurance scheme for handloom
wavers throughout the country from the year 1992-1993 in order to help weaver to
meet its socio-economic obligation towards his family and to act as a support
system against the uncertainty of his working capacity in old ages.

3.7. ACHIEVEMENTS AND AWARDS

The Karnataka Handloom Development Corporation was established in 1975 with
the objective of providing support to weavers. Today KHDC has 13000 handlooms
under its wing. KHDC works ceaselessly to encourage and support hundreds of
thousands of weavers. Revive ancient designs and weaves and integrate them into
today's lifestyle. Production Process Production - Pre Loom Yarn is the most
important input in the handloom production, KHDC has been arranging all type of
standard quality yarn to the weavers to meet their requirement at reasonable prices.
KHDC is equipped with its network to provide the following services: Equipped to
offer standard quality of yarn from a large number of spinning mills, few of them
are meeting the national and international standards. Mills are empanelled with
KHDC.
All varieties of yarn made of natural and artificial fibbers like cotton, silk, wool,
jute, acrylic, polyester and their blends are available on demand. Large number of
weavers getting their required variety, quality of yarn to meet the present
competition in the field of traditional and non-traditional handloom production.
Future plan is to associate its services with the export oriented organizations by
way of procurement and supply of yarn, with the objective to increase yarn
business adequately. Post Production Loom Process Different varieties of fabrics
produced by weavers of The Karnataka Handloom Development Corporation
throughout Karnataka is collected at warehouses at Peenya and it is processed at
"PRIYADARSHINI TEXTILE PROCESS HOUSE" situated at Peenya 2nd stage
about 15 km from Bangalore.
The Process House is established in the year 1980 having post loom processing
capacity of 5-6 lakhs meters of different varieties of cloth. Government of
Karnataka's prestigious VidyaVikas Scheme and JanathaSareeDhothi Scheme
required fabrics are being processed in the same Process House. This Process
House is possessing G.M.P certificate issued by Drugs Controller, Govt. of
Karnataka to process and supply Bandage Cloth required for all Government
Medical Hospitals. The Process House is having a fully automatic flatbed screen
printing machine, silk Sarees table printing and Computer Aided Designing to
produce attractive designs on Sarees, Dress Materials and Furnishings which are
being sold at our retail sales outlets "PRIYADARSHINI HANDLOOMS"
Showrooms through out Karnataka and all metro cities. Also the process house is
having a modernized silk yarn dyeing plant having production capacity of 2500
kgs of silk yarn per month with computer color matching.
The process house is shortly acquiring I.S.O.9001-2000 certificate. bleaching
dyeing silk dyeing designing Printing ( silk) printing (cotton) centering warehouse
Export Promotion The Karnataka Handloom Development Corporation established
in 1975 with the objective of providing support to weavers, it today has 13000
handlooms under its wing.

3.8. FUNCTIONAL ANALYSIS:

Marketing department
All feature for development & progress of retail sales & introduction of new
varieties which was introduced in the previous year have been continued during the
current year also.
In the current year the corporation has opened new showroom at VV Puram,
Bangalore and in Koppel in addition to the existing showrooms.
The corporation has launched " PRIDE the next Generation Shirts" of 100% cotton
exclusively for younger generation.
(A). Participation in the major exhibitions/ sales campaigns.
The corporation has organized sales campaign in major cities like Bangalore,
Mysore etc. during festival time. And also participated in exhibition such IITF-
Delhi, Silk Fab, Silk mark, NH Expo sponsored DCH Gov. of India & other
Gov.Organization.
(B). In order to promote the sales of Handloom products, the Government of
Karnataka has announced 20% rebate for 135 days during the year 2012-13 for
major festivals.
Personnel Department:
Personnel department in KHDC Ltd. is a very important and clearly defined
department. The department performs the personnel and administrative functions.
It has a direct link with the employees and understands their needs and wants. The
personnel officer is in charge of his department and under him junior
superintendent. Junior assistant. Steno receptionist. Driver, peon etc.

Functions of Personnel Department:

• Recruitment and selection training
• Provide sound program of salary and wage administration
• Allowance for the employees
• Provide and maintain safety measures
• Keep employment records
• Handle labour problems and employee dispute

Duties of Personnel Officer:

• To arrange for appointment of personnel.
• To arrange recruitment as identified.
• To comply with all statutory rules relating to personnel and administrative
matter.
• To provide job security, job enrichment and job enlargements.
• To provide sound promotion policy providing simple scope for self-
advancement.
• To ensure statutory compliance of E.S.I, P.F. etc.
• To collect, analyze, and present the required data for such discussion or
negotiation between the board of director and the implementation of security
measures.
• To provide guidelines to the security officer for the implementation of
security measures.
• To attend labour courts and conciliations by the labour and other
departments.
• To prepare and maintain (update) gradation/ seniority list of all the
employees of the company.

Remuneration to employees:
The monitory reward paid by the management to worker or an employee for the
performance of the assigned task is called “wages” or “salary”. Salary is the
remuneration paid to non-operative staff. Salaries are paid on a monthly basic to
office staff, manager and technical advisors etc. wages is the remuneration paid to
the workers involved in production. Work and who’s output can be directly
measured. Some employees are working on daily wages.

Welfare Measures:
Employees will get PF, ESI, minimum bonus and gratuity benefits.

Bonus for Employees:

The word bonus denotes an incentive payment to the workers aimed at enhancing
their efficiency and loyalty to their organization.
Promotion takes place when an employee moves to a higher than one formerly
occupied. His responsibility, status and pay also increase. The promotions method
adopted here is “seniority basic”.

3.9. ORGANIZATIONAL STRUCTURE:

The term structure in 7s frame work model refers to the organizational structure of
the company .organizational structure refers to relatively more durable
organizational arrangements and relationship.
It prescribes the formal relationship among various positions and activities.
Arrangement about reporting how an organization member is to communicate with
other members, the various activities performed by members is all the part of
organizational structure.

ORGANISATIONAL STRUCTURE

CHAIRMAN

MANAGING DIRECTOR
 JOINT DIRECTOR

FINANCIAL CONTROLLER

MANAGER PERSONNEL & ADMIN

CHIEF MANAGER ACCOUNTS

COMPANY SECRETARY
CHIEF MANAGER MARKETING
MANAGER PRODUCTION
MANAGER (INTERNAL AUDIT)

ASST ADMINISTRATIVE OFFICER

ASST MARKETING MANAGER
ASST PRODUCTION MANAGER
ASST PERSONNEL
OFFICER
ASST AUDIT

OFFICER
MANAGER
ACCOUNTS
 3.11. SWOT ANALYSIS OF THE COMPANY:
A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to form usually can be classified
as Strengths (S) or Weakness (w). And that to the firm can be classified as
Opportunities (O) or Threats (T). Such an analysis of the strategic environment is
referred to SWOT analysis. The SWOT analysis provides information that helpful
matching the firm’s resources and capabilities to the competitive environment in
which it operates. As such it is instrumental in strategy formulation and selection.

STRENGTH
• Skill availability
• Availability of raw material
• Low capital cost / investment
• presence of government support
• Work carried out from home
• Desire to upgrade

WEAKNESS
• Low yield
• Not to change in technology and design
• lock of marketing linkage
• Product of average quality
• Varied level of artisans
• Survival of government subsides

OPPORTUNITIES
• Exclusive hand woven fabric have good domestic and export market
• possibility of more value addition
• Dovetailing with available government schemes
• Versatility in changing designs and texture with minimum investment
• Product innovation and diversification
• Trust and capacity building fashion fabrics for middle class people

THREATS
• Competition from power loom and machine made products
• Moving to other occupation
• Competition from similar products from other states
 CHAPTER-4
DATA ANALYSIS AND INTERPRETATION

4.1 INTRODUCTION TO DATA ANALYSIS AND

INTERPRETATION:-

The purpose of the data analysis and interpretation phase is to transform the
data collected into credible evidence about the development of the
intervention and its performance.

Analysis can help answer some key questions:

Has the program made a difference?

How big is this difference or change in knowledge, attitudes, or behavior?

THIS PROCESS USUALLY INCLUDES THE FOLLOWING STEPS:-

Organizing the data for analysis (data preparation)

Describing the data

Interpreting the data (assessing the findings against the adopted evaluation
criteria)
Wherequantitative datahave been collected, statistical analysis can:


help measure the degree of change that has taken place.

allow an assessment to be made about the consistency of data.

Where qualitative datahave been collected, interpretation is more difficult.

OHere, it is important to group similar responses into categories and identify
common patterns that can help derive meaning from what may seem unrelated and
diffuse responses.

OThis is particularly important when trying to assess the outcomes of focus groups
and interviews.
IT MAY BE HELPFUL TO USE SEVERAL OF THE
FOLLOWING 5 EVALUATION CRITERIA AS THE BASIS FOR
ORGANIZING AND ANALYZING DATA:-


RELEVANCE: -
Does the intervention address an existing need? (Were the outcomes achieved
aligned to current priorities in prevention? Is the outcome the best one for the
target group—e.g., did the program take place in the area or the kind of setting
where exposure is the greatest?)

• EFFECTIVENESS:-
Did the intervention achieve what it was set out to achieve?


• EFFICIENCY: -
Did the intervention achieve maximum results with given resources?

RESULTS/IMPACT: -
Have there been any changes in the target group as a result of the intervention?

SUSTAINABILITY: -
Will the outcomes continue after the intervention has ceased?
4.1 DU-PONT MASTER CHART FOR THE YEAR 2010-11 (Rs, in lakhs)
RETURN ON EQUITY = ________PAT____x100
 SHAREHOLDERS FUND
= (10.86% )

RISK / LEVERAGE = ___TOTALASSETS____x100

SHAREHOLDERS FUND
= 196.78%
7.16%
EFFICIENCY = ___NETSALES____x100
TOTAL ASSETS
= 72.61%
7.16%
PROFITABILITY = ________PAT____x100
NET SALES
= (7.6%)
7.16%

TOTAL ASSETS = 180,84,40,551

SHAREHOLDERS FUND = 91,89,79,385

 NET SALES =131,31,22,000
NET SALES =131,31,22,000
PAT = (9,98,56,292)

RESERVES & SURPLUS = 10,01,58,685

CURRENT ASSETS =175,17,43,828
SHARE CAPITAL = 51,88,20,700
TOTAL COST = 162,66,21,844
M. EXP. = 72,10,57,496
FIXED ASSETS = 9,46,21,257
REVENUE = 152,67,65,552

COGS =111,22,00,079
RECEIVABLES = 41,93,76,873
OPERATING EXPENSES = 42,33,30,350
CASH ,BANK =60,82,20,088
OTHER CURRENT ASSETS = 23,27,60,209
INVENTORIES =49,13,86,658
CORPORATE TAXES = NIL
FINANCE CHARGES =
9,10,,415

RETURN ON EQUITY = ________PAT____x100

SHAREHOLDERS FUND
= (12.48%)
4.2 DU-PONT MASTER CHART FOR THE YEAR 2011-12 (Rs, in lakhs)

NET SALES = 137,21,26,000

PAT = 2,59,28,367

PROFITABILITY = ________PAT____x100
 NET SALES
=( 1.88%)
RISK / LEVERAGE = ___TOTALASSETS____x100
SHAREHOLDERS FUND
=939.26% 7.16%
EFFICIENCY = ___NETSALES____x100
TOTAL ASSETS
=70.32% 7.16%

SHAREHOLDERS FUND = 20,77,39,127

TOTAL ASSETS =195,12,25,461

NET SALES =137,21,26,000

REVENUE = 150,90,07,305
TOTAL COST =153,49,35,761

CURRENT ASSETS =176,95,29,825

FIXED ASSETS =6,49,65,671
RESERVES & SURPLUS = (31,10,81,573
SHARE CAPITAL =51,88,20,700

COGS =42,90,66,087
OPERATING EXPENSES =102,23,12,504

RECEIVABLES =41,67,00,418
CASH ,BANK =59,55,03,592

OTHER CURRENT ASSETS =18,84,79,744

INVENTORIES =56,88,46,071
CORPORATE TAXES =NIL
FINANCE CHARGES =8,35,57,080
4.3 DU-PONT MASTER CHART FOR THE YEAR 2012-13 (Rs, in lakh)
RETURN ON EQUITY = ________PAT____x100
SHAREHOLDERS FUND
= (49%)

RISK / LEVERAGE = ___TOTALASSETS____x100

SHAREHOLDERS FUND
1218.76%
EFFICIENCY = ___NETSALES____x100
TOTAL ASSETS
6 7.33%
PROFITABILITY = ________PAT____x100
 NET SALES
(5.97%)

SHAREHOLDERS FUND =18,07,07,760

NET SALES =148,29,00,000

TOTAL ASSETS =220,24,09,791

NET SALES =148,29,00,000
PAT = (8,85,59,020)

RESERVES & SURPLUS = (33,81,12,1940)

SHARE CAPITAL =51,88,20,700

REVENUE = 165,56,61,767
TOTAL COST =174,42,20,787

CURRENT ASSETS =198,36,66,146

FIXED ASSETS =351,35,293

COGS = 46,51,11,821
RECEIVABLES =49,48,02,824
CASH ,BANK =12,35,14,809
OPERATING EXPENSES =119,37,12,180

OTHER CURRENT ASSETS =71,43,68,387

INVENTORIES =65,09,80,126

CORPORATE TAXES =
FINANCE CHARGES =8,53,96,786

TABLE 4.1: SHOWS PAT TO SHAREHOLDERS FUND (Rs in

lakhs)

YEAR 2012-13 2013-14 2014-15

PAT (9,98,56,292) (2,59,28,367) (8,85,59,020)

SHAREHOLDERS 91,89,79,385 20,77,39,127 18,07,07,761

FUND
PAT TO
SHAREHOLDERS 10.86% 12.48% 49.00%
FUND
(source: Annual report )

ANALYSIS

From the above table4.1, it can be analysed that from the year 2010-11 to 2012-
13 the ratio between PAT to SHAREHODLERS FUND is (10.86%) (12.28%) and
(49%) respectively.

GRAPH 4.1.A: SHOWS PAT (Rs in lakhs)

(9,98,56,292)

8,85,59,020

2,59,28,367

GRAPH 4.1.B: SHOWS SHARE HOLDERS FUND(Rs in lakhs)

18,07,07,761
20,77,39,127

91,89,79,385

GRAPH 4.1.C: SHOWS PAT TO SHARE HOLDERS FUND

(Rs in lakhs)

49.00%

10.86 %%%%%%

12.48%

INTERPRETATION

From the above graph, it can be interpreted that the PAT to shareholders fund is
negative over the period of three years .The company is incurring a continuousloss
from last three financial years .The profitability of the corporation is affected by
the following factors which resulted in net loss of 8.85 crores in the year 2012-13.

1. Additional provisioning of EL encashment Rs -251.50lakhs

2. Additional gratuity provision Rs - 778.16lakhs

Total -1029.66lakhs

TABLE 4.2: SHOWS PAT TO NET SALES (Rs in lakhs)

YEAR 2012-13 2013-14 2014-15

(9,98,56,292) (2,59,28,367) (8,85,59,020)
PAT
131,31,22,000 137,21,26,000 148,29,00,000
NET SALES
PAT TO NET 7.60% 1.88% 5.97%
SALES
(source :Annual report)

ANALYSIS

From the above table 4.2, it can be analysed that the sales was 13131.22 lakhs in
the year 2010-11 and in the year 2011-12 it as increased to 13721.26 lakhs and in
the year 2012-13 it as further increased to 14829.00 lakhs. The percentage of PAT
to Net sales shows 5.97%, 1.88% and 7.60% respectively for the past 3 years.
GRAPH4.2.A: SHOWS PAT (Rs in lakhs)

8,85,59,020 %%%%%%

2,59,28,367 %%%%%%

9,98,56,292

GRAPH4.2.B: SHOWS NET SALES (Rs in lakhs)

148,29,00,000

137,21,26,000

131,31,22,000

RAPH4.2.C: SHOWS PAT TO NET SALES:-

1.88%

5.97%

7.60%
INTERPRETATION

The above graph reveals that, the net sales of the company had increased from
2010-11 to 2012-13 . In other words the company has done well in terms of
improved turnover as a result the gross profit and contribution increased by Rs
03.94 crores. However the following factors adversely affected the profitability of
the corporation .

1. Additional provisioning of EL encashment

2. Additional gratuity provisioning

TABLE 4.3: NET SALES TO TOTAL ASSETS (Rs in lakhs)

YEAR 2012-13 2013-14 2014-15

131,31,22,000 137,21,26,000 148,29,00,000
NET SALES
180,84,40,551 195,12,25,461 220,24,09,791
TOTAL
ASSETS
NET SALES TO 72.61% 70.32% 67.33%
TOTAL
ASSETS
(Source: Annual report)

ANALYSIS

From the above table 4.3, it is cleared that net sales and total assets both
are increasing from2010-11 to 2012-13. Capital turnover ratios are 72.61%
in the year 2010-11 and it decreased to 70.32% in the year 2011-12 and in
 the year 2012-13 also it decreased to 67.33% . A rapid 2.29% decrease we
can observe.

GRAPH 4.3.A: SHOWS NET SALES (Rs in lakhs)

148,29,00,000

137,21,26,000

131,31,22,000

220,24,09,791

195,12,25,461

180,84,40,551

GRAPH 4.3.B: SHOWS TOTAL ASSETS:-(Rs in lakhs)

67.33%

70.32%

72.61%

GRAPH 4.3.C: SHOWS NET SALES TO TOTAL ASSETS:

INTERPRETATION

From the above graph, it can be clearly interpreted that the assets turnover ratio is
72.61% in the year 2010-11,it as decreased to 70.32% and 67.33% in the years
2011-12 and 2012-13 respectively. This shows that the overallperformance of the
company is decreasing, when compared to the earlier year. The efficiency is also
decreasing comparatively with preceding year.
TABLE 4.4: SHOWS NET SALES TO FIXED ASSETS (Rs in
lakhs)

YEAR 2012-13 2013-14 2014-15

131,31,22,000 137,21,26,000 148,29,00,000
NET SALES
9,46,21,257 6,49,65,671 3,51,35,293
FIXED ASSETS
NET SALES TO 13.87 Times 21.12 Times 42.20 Times
FIXED ASSETS
RATIO
(Source: Annual report)
ANALYSIS

From the above table4.4,it can be analysed that the fixed assets turnover ratios are
13.87 times, 21.12 times and 42.20 times from the year 2010-11 to 2012-13
respectively. As mentioned in above analysis the sales are increasing from
13131.22 lakhs to 148.29 lakhs over a period of time and the fixed assets
decreasing marginally as years goes.

GRAPH4.4.A: SHOWS NET SALES (Rs in lakhs)

148,29,00,000

137,21,26,000

131,31,22,000

GRAPH4.4.B: SHOWS FIXED ASSETS (Rs in lakhs)

6.49,65,671

3,51,35,293

9,46,21,257
GRAPH4.4.C: SHOWSNET SALES TO FIXED ASSETS
(Rs in lakhs)

42.20 Times

21.12 Times

13.87 Times

INTERPRETATION

From the above graph shown,it can be observed that the company is marginally
good in utilising total assets in generating sales but still the fixed assets proportion
with total assets is very less.

TABLE4.5: NET
SALES TO 2012-13 2013-14 2014-15
 CURRENT
ASSETS(Rs in
lakhs)
YEAR
131,31,22,000 137,21,26,000 148,29,00,000
NET SALES
99,27,61,797 176,95,29,825 198,36,66,146
CURRENT
ASSETS
NET SALES TO 132.26 Times 77.54 Times 74.75 Times
CURRENT
ASSETS
(source :Annual report)

ANALYSIS

From the Table 4.5 it can be analysed that, the current assets turnover
is132.26times in the year 2011, it as decreased to 77.54times and 74.75times in the
years 2012 and 2013. It shows thefinancial efficiency of the company is
decreasingyear by year.
GRAPH4.5.A: SHOWS NET SALES(Rs in lakhs)

148,29,00,000

137,21,26,000

131,31,22,000

GRAPH4.5.B: SHOWS CURRENT ASSETS(Rs in lakhs)

99,27,61,797

176,95,29,825

198,36,66,146

GRAPH4.5.C: SHOWS NET SALES TO CURRENT ASSETS:-

77.54 Times

132.26 Times

74.75 Times
INTRPRETATION

From the above graph, it can be interpret that the financial efficiency of the
company is average. The current assets requirement of the company is increasing
over the period of three years.

TABLE 4.6: SHOWS NET SALES TO TOTAL COST (Rs in lakhs)

YEAR 2012-13 2013-14 2014-15

NET SALES 131,31,22,000 137,21,26,000 148,29,00,000

COGS 111,22,00,079 42,90,66,087 46,51,11,821

OPERATING 42,33,30,350 102,23,12,504 119,37,12,180

COST

INTEREST 9,10,91,415 8,35,57,080 8,53,96,786

 TAXES - - -

TOTAL COST 162,66,21,844 153,49,35,671 174,42,20,787

COST TO 80.72% 89.39% 85.01%

TURNOVER
(Source: Annual report)

ANALYSIS

The cost is the main key area where management should alert while reaching
the company’s objectives. If cost decreases profit increases and vice versa. In the
above table, we have segregated total cost into 4 major parts i.e. cost of goods sold
,operating expenses, interest or financial cost and taxes. This segregation helps us
to find out where and for which expending more and most.

From the table4.6, it is well known to us that the sales increasing from
13131.22lakhs to 148.29 lakhs. Though the sales is increasing the COGS never
took down turn but reaching new high extent because the fixed expenses
proportion is high i.e.11122.00 lakhs in the year 2010-11 and it decreased to
4290.66 lakhs in the year 2011-12 and it as slightly increased to 4651.11 lakhs in
the year 2012-13. Here interest to be noted in highlight as it is decreased from 9,
10,91,415 to 8,53,96,786 from the year 2010-11 to 2012-13. The next is operating
expenses which is un predictable as it varies from 4233.30 lakhs to 11937.12 lakhs
over a period three years, i.e. from 2010-11 to 2012-13.In case of taxes the
company is not paid any taxes because the company is incurring loss from lost
three years.

GRAPH 4.6.A: SHOWS NET SALES TO COSTOF GOODS

SOLD:-(Rs in lakhs)

46,51,11,821

42,90,66,087

148,29,00,000

137,21,26,000

111,22,00,079

131,31,22,000
GRAPH 4.6.B: SHOWS NET SALES TO OPERATING COST(Rs
in lakhs)

119,37,12,180

102,23,12,504

42,33,30,350

137,21,26,000

148,29,00,000

131,31,22,000
GRAPH 4.6.C: SHOWS NET SALES TO INTEREST(Rs in lakhs)

9,10,91,415

8,35,57,080

8,53,96,786

137,21,26,000

148,29,00,000

131,31,22,000
GRAPH 4.6.D: SHOWS NET SALES TO TAXES (Rs in lakhs)
137,21,26,000

131,31,22,000

148,29,00,000
GRAPH 4.6.E: SHOWS NET SALES TO TOTAL COST(Rs in
lakhs)

162,66,21,844

153,49,35,671

174,42,20,787

148,29,00,000

137,21,26,000

131,31,22,000

GRAPH 4.6. F: SHOWS NET SALES TO COST OF TURNOVER

(Rs in lakhs)
89.39%

85.01%

80.72%

137,21,26,000

131,31,22,000

148,29,00,000

INTERPRETATION

From the above graph,it could interpret that the apportionment of cost on sales
is high. The sales is 80.72% on total cost in the year 2010-11 where company
can’t meet it’s total cost through it’s sales and profit is not expectable .this
percentages goes fluctuating over a period of time where company’s liquidity
position falls as well.

CHAPTER-5

Summary of findings, conclusion and suggestions

• FINDINGS:-
 • From The study on financial performance of KHDCL, we can find that
the profitability of the company is negative from last 3 years due to
the following reasons.
a)Additional provisioning of EL encashment RS.251.50 lakhsb)Additional
gratuity provision RS.778.16 lakhs
Total 1029.66 lakhs

• The ratio between PAT to shareholders fund is -1.62% and -36.52%

respectively, from the year 2010-2011 to 2012-13. Which shows that
profitability of the corporation have negative impact on shareholders fund.
It may lead to losing of shareholders trust.

• The last 3years of analysis reveals that sale was Rs.131,31,22,000 in the year
2010-11 and increased to Rs.137,21,26,000in the year 2011-12. And further
it increased to 148, 29.00.000 crores in the year 2012-13.

• The sales is 80.72% on total cost in the year 2010-11,89.39%in the year
2011-12 and85.01% in the year2012-13.where company cannot meet its
total cost through its sales and profit is un expectable.

• Though the sales increasing the COGS never took down turn but reaching
new high extent because the fixed expenses proportion is high
I.e.Rs.1112200079 crores in the year 2010-11 and decreases to
Rs.42,90,66,087in the year 2011-12 and increases to Rs.46,51,11,821 in the
year 2012-13.

• It can be find out that from the year 2010-11 to 2012-13, the percentage of
PAT to shareholders fund is (10.86%), (12.48%), (49. %) respectively.
• The total liabilities are increased by 0.057 % during the year. It shows
clearly reduction in paying capacity of the company

• The proportion of the cash and bank balance that are held by the company to
the total current assets is not satisfactory, which could be one of the major
drawback for the firm to obtain liquidity from various sources.
• The profit of the company decreased over past 3 years.
• The overheads of the company are less during the year 2012-13 compare to
previous year. it shows the company reducing its expenses year by year.

• The receivables have increased in the year 2013 compare to previous years
amounting to Rs4948.02824lakhs and it leads to increasing in net working
capital.

• The average receivable to total turnover of the company increased by 0.32 %

during the year.
 5.2 SUGGESTIONS:-

ØIt is suggested for the company to frame and follow the effective
management policy in order to increase efficiency in the process of selling
and marketing the products which results in high sales and increase in
profits.

ØThe management must make an alternative plans to make use of resources

so that profit increases.

ØThe cash balance must be improved so that the liquidity position would
become strong enough to conduct the business activities smoothly.

ØMarketing research must be done regularly. This would result in increasing

the demand for the products and sales would also increase.

ØIt is suggestible for the company to replace the fixed assets with advanced
technology which reduces the idle capacity and increases the overall
salability which would result in high returns.

ØThe Company should go for economic purchasing to reduce costs of

production.

ØThe Company should take up good project proposals on sales promotions

which could elevate the sales in turn revenue of the company to come up.
It is suggested for the company to take good promotional activities so that
the sales of the company get increases in turn the revenue of the company
also increases.
5.3 CONCLUSIONS:-

From the study conducted by me entitled ” A study on financial performance

of KHDCL using Du Pont analysis” helped to, Came to know the performance of
KHDC, Their way of classification of assets & liabilities in the balance sheet,
classification of cost particulars and their method of costing and even to know the
risks taken by KHDC both financially & technically by calculating various types of
ratios.

Determination of the status of the organization through financial analysis

sometimes does not help in determining vital signs of financial distress of company
and forecasting of certain financial indicators which can hold key for formulation
of the strategic policies. In this view DU-PONT is handy for determining the early
warning signals of the financial distress, if computed periodically and appraised
these measures can be of great help to the companies for financial forecasting and
monitoring. If company adopted the DuPont model to measure financial and
solvency positions it could able to identify the distress in financial position or
financial health of the company. Hence, DuPont model plays vital role in
measuring financial health & liquidity position respectively.
 BIBILIOGRAPHY:

REPORTS:

1).Annual reports for the period 2011 to 2013 of KHDC.

2). Manuals and Boucher’s of KHDC.

3). Magazines and libraries.

Text books: Authoers name

Cost and Financial Analysis -Shashi K.Gupta

Cost and Management Accounting- S.N.Maheshwari

Management Accounting -R.K.Sharma

Management Accounting - R.S.N.Pillai&Bagavathi.

Financial management -M.Y.Khan and P.K Jain.

Management Accounting-M.R. Agarwal.

List of Websites referred:

www.KHDC.com
www.ubservice.net
www.tradeindia.com