Index/Content 1. Company Profile 9 2. Business Areas ..10 3. Vision and Mission ...12 4. CMD Profile ..

13

5. Management Team 15 6. Major Awards And Land Marks ....18 7. Industry Profile ..19 8. Objective of Study .22 9. Benefits of Study 23 10. Limitations of Study ..24

11.

Introduction to Financial

Management .25 Objectives of Financial Management 26 12. Functions Of Financial Management 27 13. 14. Challenges to Financial Management in hotel Findings-Ratio industry28 Analysis 30 15. Overview 54
16.

Suggestions ....61

17. 18.

Conclusions Webography

62 ...63

Company Profile Bhagwati Group was founded in 1989 by the visionary thinker & entrepreneur par excellence Mr.Narendra Somani, The Chairman & Managing Director who with his revolutionary business acumen and enterprising attitude created this enterprise from
4

scratch. Bhagwati Banquets & Hotels Ltd - a renowned public limited company, listed at BSE and NSE exchange, with its vision and novel innovations has created an admired empire in the field of food and hospitality industry. Operating as The Grand Bhagwati, it aims to provide quality, excellent food and great services in food & catering segment and today, it is the ONLY ORGANISED CORPORATE CATERING COMPANY across India. BBHL is a company offering the best of both worlds. A unique understanding of the culture and communities combined with the collective expertise of an executive team contributing over 22 years of experience in the service industry. BBHL has one of its kind and unique banqueting models in India. Looking forward and creating benchmarks in the hospitality segment, the company opened first of its kind star category Banqueting hotel
5

with best of the amenities in the year 2002 under the brand name "The Grand Bhagwati". BBHL with the above success has already chartered the future map fueling more growth. For this, company has built an exclusive Five Star hotel convention centre & Club in the city of Surat. The company now is expanding Pan India with its Restaurants, Banquet halls & outdoor catering operations in the city of Jaipur, Bangalore, Nagpur, Pune, Mumbai, Hyderabad, Jodhpur, Indore etc.

Business Areas TGB Hotels Ahmedabad Rajkot Surat Banquets Ahmedabad Rajkot Surat Jaipur Conventions Surat TGB World Cuisine Restaurants Jaipur Surat Forth Coming Restaurants Mumbai Bangalore
7

Jodhpur Indore Pune Nasik Nagpur Hyderabad

TGB Outlets TGB Little Italy Murugan Express TGB Bakeries The Grand Bhagwati TGB Municipal Market TGB Iscon Mall TGB Vastrapur TGB Bopal TGB Maninagar TGB Karnavati Club TGB Judges Bunglow TGB Sattadhar TGB Patang TGB Shahibaug TGB Rajkot TGB Surat TGB Little Italy
8

Murugan Express TGB HL Commerce College Circle

TGB Management Outlets Karnavati Club Patang (The 1st Revolving Restaurant) Gujarat Cricket Association (GCA)

Vision & Mission Vision We at The Grand Bhagwati are committed to meeting and exceeding the expectations of our guests, through continuous dedication and perfection by our team, whom we rely upon to make it happen and are committed to their growth, development and welfare, resulting to create extraordinary value for our stake-holders.

Mission We aim to take our vision not just across Gujarat but to every metro pan India and wherever else our imagination takes us. TGB will soon have its presence across India through Banquets, Conventions, Hotels, Restaurants and Bakerys &
10

Cafs at all major tourist destinations.

CMD Profile

11

Management Team

Hotel TGB - News Title: The Best Multi Cuisine Restaurant in Ahmedabad Date: Apr 5 2011
12

Major Awards & Citation "The Marketing Man of the Year award -2006" by Ahmedabad Management Association. Mr. Narendra Somani CMD of the company has been felicitated by AMA-Zydus Cadila . This award was given for his significant & exemplary contribution in the hospitality segment and taking the brand "The Grand Bhagwati" to the newer heights. The award was given by Mr. Praful Patel- Union Civil Aviation Minister at AMA complex. "The Most Promising Small Enterprise of the Year" award declared by CNBC TV-18. Competing with 35000 SMEs entries The Bhagwati Banquets & Hotels Ltd won the prestigious award organized by ICICI Bank powered by CRISIL across India at the India Emerging Awards-2006. "Sindh Bhushan Award" as "Young Entrepreneur of the year 2006" Mr. Narendra
13

Somani was also felicitated and awarded by the All India Sindhi Association of Industries & Commerce. National award for excellence in Hotel Management organized by the International Association of Education for World Peace (IAEWP), USA. Felicitated for Excellent Cooperation extended to India Tourism by Ministry of Tourism, India. Landmarks Landmarks 1989: Incorporation of Bhagwati Group 2002: First Deluxe Hotel The Grand Bhagwati at Ahmedabad 2006: Awarded Most Promising Small Enterprise of the Year by CNBC TV-18 2010: Gujarats Biggest 5 Star Hotel & Convention Centre at Surat
14

Industry Profile As per a report published by the World Travel and Tourism Council, India stood 18th as far as business travel was concerned and it featured alongside the top 5 most visited destinations in 2010. According to a study conducted by the World Travel and Tourism Council the hospitality industry in India is all set to grow at a steady rate of 15 percent per annum. However the growth rate will shoot up in the next few years considering the number of rooms required by both luxury and budget hotels. The growth in the next two to three years is surely going to be stupendous with almost 2, 00,000 rooms added to the existing 110,000. Dwelling perfectly on the principle of ATITHI DEVO BHAVA' (GUEST IS GOD) the hotels in India are just
15

the apt concoction of luxury, humility and unparallel hospitality. The hotels in India are known for offering the best of products and services at absolutely pocket friendly rates. As per expert hoteliers the hotel industry in India is estimated to grow at a rate of 8.8 percent between the years 2007-16. This will place India on the second position in the list of the fastest growing tourism industries in the world. The phenomenal growth of the hotel industry in India would not have been possible without the Initiatives taken the government. The open sky policies and the enormous infrastructural investments made by the Indian government have only fastened the development of the hospitality sector in the country. The Indian hotel industry is affecting the economy both directly and indirectly. The growth of the hotel
16

industry in India has created employment opportunities for millions of Indians. According to estimates almost 20 million people are employed with the hotel industry in India. Over the last decade and half the mad rush to India, business opportunities has intensified and elevated room rates and occupancy levels in India. Even budget hotels are charging Rs.11250 per day. The successful growth story of 'Hotel Industry in India' seconds only to China in Asia Pacific. 'Hotels in India' has a supply of 110,000 rooms. According to the India tourism ministry, 4.4 million tourists visited India in 2009 and the figure went up to almost 10 million in 2010. 'Hotels in India' has a shortage of 150,000 rooms fueling hotel room rates across India. With tremendous pull of opportunity, India is a destination for hotel chains looking for
17

growth. The World Travel and Tourism Council, India, data says, India ranks 18th in business travel and will be among the top 5 in this decade. Sources estimate, demand is going to exceed supply by at least 100% over the next 2 years. Five-star hotels in metro cities allot same room, more than once a day to different guests, receiving almost 24-hour rates from both guests against 6-8 hours usage. With demandsupply disparity, 'Hotel India' room rates are most likely to rise 25% annually and occupancy to rise by 80%, over the next two years. 'Hotel Industry in India' is eroding its competitiveness as a cost effective destination. However, the rating on the 'Indian Hotels' is bullish. 'India Hotel Industry' is adding about 60,000 quality rooms, currently in different stages of planning and development and should be ready by 2012. MNC Hotel Industry giants are flocking India
18

and forging Joint Ventures to earn their share of pie in the race. Government has approved 300 hotel projects, nearly half of which are in the luxury range. Sources said, the manpower requirements of the hotel industry increased from 7 million in 2002 to 15 million in 2010. With the Rs.1035 billion software services sector pushing the Indian economy skywards, more and more IT professionals are flocking to Indian metro cities. 'Hotel Industry in India' is set to grow at 15% a year. This figure will skyrocket in 2010, when Delhi hosts the Commonwealth Games. Already, more than 50 international budget hotel chains are moving into India to stake their turf. Therefore, with opportunities galore the future 'Scenario of Indian Hotel Industry' looks rosy.

19

List of Key Players in Hotel Industry in India

Below is a list of the major hotel groups in India Inter Continental Taj Group Oberoi Group of Hotels ITC Welcome group of Hotels The Park Group of Hotels Le Meridien Group of Hotels Welcome Heritage Group of Hotels

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Objective of Study To gain the practical experience in the field of interest.

To get the overview of functional as well as the managerial areas of the company.

To gain the knowledge about the industry and the company as well. To get the training from well qualified and trained personnel.

21

 To study the companys procedures and functioning in detail.

22

Benefits of Study There are various benefits of performing the summer training at The Grand Bhagwati.

Firstly, I got to learn and experience the day to day functioning of a 5 star hotel.

Got a chance to be a part of it and observe the managerial as well as the functional areas. Quality guidance and co-operation by the HODs. Got an opportunity to know about the back offices or the functional areas of the hotel Experienced the functioning on the practical basis. Got to know how the things work in practical life. It feels prestigious while working with one of the best hotels in the state. Learnt about the financial management and how it is settled.
23

 Got to experience the hard working HR department and the tactics they utilize to control the human resource.

Experienced the food and beverage production department and learnt how the things were managed and operated over there.

Learnt about the sales and marketing department and what are the strategies that are used.

Limitations of Study No limitations of study.

24

25

Study of the department Finding of the study Recommendations

Conclusion Bibliography What is financial management?

Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

26

Scope/Elements
Objectives of Financial Managementincludes 1. Investment decisions

investment in fixed

assets (called as capital budgeting).Investment in current assets are also a part of investment decisions called as working capital decisions.
2.

Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:

3.

Dividend for shareholders- Dividend and the rate of it has to be decided.

Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.
27

The financial management is generally concerned with procurement, allocation and control of financial resources of a concern. The objectives can be1. To ensure regular and adequate supply of funds to the concern.
2.

To ensure adequate returns to the shareholders which will depend upon the earning capacity, market price of the share, expectations of the shareholders?

3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost.
4.

To ensure safety on investment, i.e., funds should be invested in safe ventures so that adequate rate of return can be achieved.

5. To plan a sound capital structure-There should be sound and fair composition of capital so that a
28

balance is maintained between debt and equity capital. Role and Importance of Finance Department ensure that there are adequate funds available to acquire the resources needed to help the organization achieve its objectives. ensure costs are controlled. ensure adequate cash flow. establish and control profitability levels. One of the major roles of the finance department is to identify appropriate financial information prior to communicating this information to managers and decision-makers, in order that they may make informed judgments and decisions. Finance also prepares financial documents and final
29

accounts for managers to use and for reporting purposes (i.e. Annual general Meeting, etc) Functions of Financial Management
1.

Estimation of capital requirements: A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases earning capacity of enterprise. Determination of capital composition: Once the estimation has been made, the capital structure have to be decided. This involves short- term and long- term debt equity analysis. This will depend upon the proportion of equity capital a company

2.

30

is possessing and additional funds which have to be raised from outside parties.
3.

Choice of sources of funds: For additional funds to be procured, a company has many choices likea. Issue of shares and debentures b. Loans to be taken from banks and financial institutions c. Public deposits to be drawn like in form of bonds. Choice of factor will depend on relative merits and demerits of each source and period of financing.

4.

Investment of funds: The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.

31

5.

Disposal of surplus: The net profits decision has to be made by the finance manager. This can be done in two ways: a. Dividend declaration - It includes identifying the rate of dividends and other benefits like bonus.
b.

Retained profits - The volume has to be decided which will depend upon expansion, innovational, diversification plans of the company.

6.

Management of cash: Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintenance of enough stock, purchase of raw materials, etc. Financial controls: The finance manager has not only to plan, procure and utilize the funds but he
32

7.

also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc. Hotel Industry Financial Challenges Hotel industry is an exciting and multifaceted industry that offers a variety of career opportunities to those who have earned a hotel/restaurant management degree. Careers with hotel, restaurant, gaming, and wine and spirit companies are readily available to such graduates. In addition, careers with service firms that support hospitality companies in the areas of accounting, consulting, real estate development, architecture, interior design, real estate brokerage, hotel valuation, investment banking, mortgage brokerage, insurance, advertising, and technology are also available to those with hospitality degrees.

33

Financial Challenges: A multifaceted industry Low profitability Fluctuating sales volume Labor intensive Capital intensive Reliance on discretionary income While a hospitality business typically requires a relatively low level of operating inventories, it requires a relatively high level of capital for its real estate component. This component often includes buildings, operating systems, guest room furniture, and restaurant equipment. Securing financing to
34

acquire these assets is a continuing challenge for management. Finally, hospitality businesses rely heavily on the discretionary income of their customers. During a weak economy, when household discretionary income is low, the hospitality industry usually suffers. Highend establishments, such as resorts and fine dining restaurants, normally feel the effects of a weak economy first, but eventually, the entire industry feels the financial pain. However, as soon as the economy takes a turn for the better, consumers return, discretionary spending increases, and the industry prospers. Accurately predicting these economic fluctuations, and knowing when to buy and sell hospitality assets, can be financially lucrative for the astute hospitality investor. The financial tools utilized by modern-day management to address these challenges and
35

Opportunities are the focus of this book. Understanding of these financial tools and applying them to the challenges and opportunities they will soon face when they take jobs in the industry will serve hospitality graduates well throughout their business careers.

Findings: Balance sheet as at 31st march, 2010 (Rs. In Lacks)

36

Particulars

As on 31/3/ 2010

As on 31/3/ 2009

SOURCES OF FUNDS:

Share Holders Funds Share capital Reserve & Surplus Amount for Preferential convertible warrants 0.00 620.22 2928.64 10745.85 292864 9852.21

Loan Funds Secured Loan 9898.34 4120.31

Deferred Tax Liabilities 392.38 349.22 TOTAL 23965.21 17870.60 APPLICATION OF FUNDS: Fixed Assets
37

Gross Block Less: Accumulated Depreciation Net Block W.I.P. & advances on capital AC INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry debtors Cash and bank balance Loans and advances LESS: CURRENT LIABILITIES & PROVISIONS
38

5191.24 1358.00 3833.24 15702.73 540.99

4496.01 1162.65 333.35 7873.88 540.95

1116.26 835.09 1877.02 3517.01

710.68 827.13 1912.74 3271.27

7345.39 3635.51

6721.83 1153.08

NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Branch division TOTAL

3709.88 178.36

5568.75 553.67

23965.21 17870.60

Ratio Analysis It is the most important technique of financial analysis in which quantities are converted into ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or different industries. Ratio analysis determines trends and exposes strengths or weaknesses of a firm. It is a tool used by individuals to conduct a quantitative analysis of information in a company's financial
39

statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. Ratio basics Ratio Analysis compares one figure in one financial statement (say P&L account or Balance Sheet) with another figure in the same financial statement or in another financial statement of the company. A ratio is expressed in the numerator denominator format. Thus the numerator and denominator can be either from the P&L account or the Balance sheet of the same company. Ratios gives color to absolute figures. For example a profit of Rs.100 lakhs means very little to an analyst because he needs to know what the sales
40

was or what the net worth was against which the Rs.100 lakhs was earned. More than the profit, the ratio of profit to sales and the ratio of profit to net worth are useful to understand the performance of a company. Thus if profit grew from Rs 100 lakhs to Rs 125 lakhs, while it is good, what is more important is how it stacked up against the sales achieved or the net worth deployed. Hence, ratio analysis facilitates intra firm comparison. I.e. comparison of your companys performance in the current year with your companys performance in the previous year. It also facilitates inter firm comparison. I.e. Comparison of your companys performance in the current year with your competitors performance in the current year. Peer review, as this is called, helps you benchmark your performance with your peers. Ratios help in ascertaining the financial health of the company and also its future prospects. These ratios can be classified
41

under various heads to reflect what they measure. There may be a tendency to work a number of ratios. Being thorough in the computation and interpretation of a few ratios would be ideal. Computing Ratios When a ratio has a P&L figure both in the numerator and in the denominator or has a Balance sheet figure both in the numerator and in the denominator it is called a Straight Ratio. Where it has the P&L figure in the numerator and the balance sheet figure in the Denominator or the balance sheet figure in the numerator and the P&L figure in the Denominator it is called a Cross or Hybrid Ratio. Following table shows the category of the ratios and their respective measures: Categories of ratio What they Measure

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 Liquidity ratios Capital Structure Ratio Profitability ratios Coverage ratios Turnover ratios Capital Market ratio

Short term solvency Long term solvency Ability to make profit Adequacy of money for payments Usage of Assets Wealth maximization

A: Liquidity or Short Term Solvency Ratios Liquidity refers to the speed and ease with which an asset can be converted to cash. Liquidity has two dimensions: ease of conversion versus loss of value. Any asset can be quickly converted to cash if the price is slashed. A house property valued at Rs 25 lakhs can be converted to
43

cash within 24 hours if you slash the price to Rs 5 lakhs! So a liquid asset is really one which can be converted to cash without major loss of value. An illiquid asset is one that cannot be en-cashed without a major slash in price. Current assets are most liquid. Fixed assets are least liquid. Tangible fixed assets like land and building and equipment arent generally converted to cash at all in normal business activity. They are used in the business to generate cash. Intangibles such as trademark have no physical existence and arent normally converted to cash. Liquidity is invaluable. The more liquid a business is, the less is the possibility of it facing financial troubles. But too much of liquidity too is not good. Thats because liquidity has a price tag.
44

Liquid assets are less profitable to hold. Therefore there is a trade off between the advantages of liquidity and foregone potential profits. Liquidity or Short term solvency ratios provide information about a firms liquidity. The primary concern is the firms ability to pay its bills over the short run without undue stress. Hence these ratios focus on current assets and current liabilities. These ratios are particularly useful to the short term lenders. A major advantage of looking at current assets and current liabilities is that their book values approximate towards their market values. Often these assets and liabilities do not live long enough for the two to step out of line.

45

Current Ratio This is the ratio of current assets to current liabilities. Also known as liquidity ratio, cash asset ratio, and cash ratio; a liquidity ratio that measures a company's ability to pay short-term obligations. it is computed as follows: Current Ratio=Current Assets / Current Liabilities Because current assets are convertible to cash in one year and current liabilities are

46

payable within one year, the current ratio is an indicator of short term solvency. The unit of measure is times. For instance if the current ratio is 1.4 we say that the ratio is 1.4 times. It means that current assets are 1.4 times the current liabilities. To a short term lender, including a creditor, a high current ratio is a source of comfort. To the firm, a high current ratio indicates liquidity, but it also may mean inefficient use of cash and other current assets. The current radio is affected by various types of transactions. For example suppose the firm borrows over the long term to raise money. The short term effect would be an increase in cash and an increase in long term debt. So the current ratio would rise. Finally, a low current ratio is not necessarily bad for a company which has a large Reservoir of untapped borrowing. Ideal current ratio preferred by bank is 1.33

47

Current ratio=7345.39/3635.51=2.02

Net Working capital This is the ratio of sales to net working capital. Net working capital would mean current assets less current liabilities.

Net working capital=Current asset-current liability

48

The amount of money a company has on hand, or will have, in a given year. Working capital is calculated by subtracting current liabilities from current assets That is, one takes the value of all debts and obligations for the current year and subtracts that from the value of all cash and assets that might reasonably be converted into cash in the current year. This is a good measure of the short and medium-term financial health of a company, and may indicate by how much it can expand its operations without resorting to borrowing or another capital raising tactic. Working capital is also called operating assets or net current assets. Net working capital=7345.39-3635.51=3709.88

49

Debt Equity Ratio It is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as corporate ones. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.
50

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.
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Debt Equity Ratio=Long Term liability/Shareholders funds Hence, D.E.R=9898.34/13674.49=0.7239

Proprietary ratio It indicates the extent to which the tangible assets are financed by owners fund. This is a variant of the debtto-equity ratio. It is also known as equity ratio or net worth to total assets ratio.This ratio relates the shareholder's funds to total assets. Proprietary / Equity ratio indicates the longterm or future solvency position of the business. This ratio throws light on the general financial strength of the company. It is also regarded as a test of
52

the soundness of the capital structure. Higher the ratio or the share of shareholders in the total capital of the company better is the long-term solvency position of the company. A low proprietary ratio will include greater risk to the creditors. Proprietary ratio= (tangible net worth/total

tangible assets)*100 PR = (3632.32/4521.49)*100= 80.33

53

Gross Profit Ratio GPR is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.

(Gross Profit / Sales)*100

The term gross profit refers to the difference between sales and works cost. Higher the percentage the better it is for the company. Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from business to business. However, the gross
54

profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends. Causes/reasons of increase or decrease in gross profit ratio: It should be observed that an increase in the GP ratio may be due to the following factors. Increase in the selling price of goods sold without any corresponding increase in the cost of goods sold. Decrease in cost of goods sold without corresponding decrease in selling price. Omission of purchase invoices from accounts. Under valuation of opening stock or overvaluation of closing stock. On the other hand, the decrease in the gross profit ratio may be due to the following factors. Decrease in the selling price of goods, without corresponding decrease in the cost of goods sold. Increase in the cost of goods sold without any increase in selling price. Unfavorable
55

purchasing

or

markup

policies.

Inability

of

management to improve sales volume, or omission of sales. Over valuation of opening stock or under valuation of closing stock Hence, an analysis of gross profit margin should be carried out in the light of the information relating to purchasing, mark-ups and markdowns, credit and collections as well as merchandising policies. Gross Profit Ratio= (1601.50/8298.23)*100 = 19.30% Operating Profit This is the ratio of operating profit to sales. Operating Profit / Sales

56

The term operating profit is the difference between gross profit and administration and selling overheads. Non operating income and expenses are excluded. Interest expenditure is also excluded because interest is the reward for a particular form of financing and has nothing to do with operational excellence. Higher the percentage the better it is for the company. Operating Profit= (97604 / 8298.23) = 11.76

57

Net profit Ratio This is the ratio of net profit to sales. (Net Profit / Sales)*100

The term net profit refers to the final profit of the company. It takes into account all incomes and all expenses including interest costs. Higher the percentage the better it is for the company. NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment.
58

This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in minds that the performance of profits also is seen in relation to investments or capital of the firm and not only in relation to sales. It measures Overall Profitability of the company. Net Profit Ratio = (976.04 / 8298.23)*100 = 11.76%

59

Inventory Turnover Ratio A ratio showing how many times a company's inventory is sold and replaced over a period. This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days".
60

It can also be expressed as the ratio of cost of goods sold to average inventory. While closing inventory is technically more correct, average inventory could be used since an external analyst is unsure whether the year end numbers are dressed up. The numerator is Cost of goods sold and not sales because inventory is valued at cost. However to use Sales in the numerator is also a practice that many adopt. If the inventory turnover ratio is 3, it means that we sold off the entire inventory thrice. As long as we are not running out of stock and hence losing sales, the higher this ratio is, the more efficient is the management of inventory. If we turned over inventory over 3 times during the year, then we can say that we held inventory for approximately 121 days before selling it. This is called the average days sales in Inventory and is given by the following formula:

61

 365 / Inventory turnover ratio The ratio measures how fast we sold our products. Note that inventory turnover ratio and average days sales in inventory measure the same thing. It is calculated as follows: Inventory turnover ratio = sales / inventory It may also be calculated as = COGS / inventory

Hence, I.T.R. = sales / inventory = 8298.23 / 1116.26 = 7.43

Average days sales in Inventory = 365 / Inventory turnover ratio

62

= 365 /7.43 = 49.13

Average Inventory ratio

63

It indicates the number of times the inventory is rotated during the relevant accounting period. It is obtained by the summation of the opening stock and closing stock and further divided by 2. Average Inventory Ratio= (Opening stock + Closing stock)/2 = (427.44+680.16) /2= 767.52

Debtors Turnover Ratio This is the ratio of sales to closing debtors. Sales / Debtors While closing debtors is technically more correct, average debtors could be used since an external analyst is unsure whether the year end numbers are dressed up.

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If the debtors turnover ratio is 8, it means that we collected our outstanding 8 times a year. As long as we do not miss out sales, the higher this ratio is, the more efficient is the management of debtors. This ratio is far easier to grasp if we converted it into number of days. If we turned over debtors 8 times a year, we can say that debtors on an average were 45 days. This is called the average days sales in receivable and is given by the following formula: 365 / Receivable turnover ratio The ratio is often called the Average Collection period. Debtors Turnover Ratio= (8298.23 / 835.09) = 9.94 times Average Collection period= 365 / 9.94 = 36.72 days

65

Creditors Turnover Ratio In so far as we wanted to know how well we used our debtors we must also know how well we utilize the creditors. Towards this we compute the Creditors turnover ratio which is the ratio of purchases to closing creditors. Credit Purchases / Creditors Average creditors could also be used since an external analyst is unsure whether the year end numbers are dressed up. If the creditors turnover ratio is 5, it means that we paid our outstanding 5 times a year. As long as we do not miss out purchases, the smaller this ratio is, the more efficient is the

66

management of creditors. This ratio becomes more understandable if we convert it into number of days. If we turned over creditors 5 times a year, we can say that creditors on an average were 73 days. This is called the average days purchases in payables and is given by the following formula: 365 / Creditors turnover ratio The ratio is often called the Average Payment period.

Creditors Turnover Ratio= 2706.29 / 1941.69 = 1.40 times Average Payment period =.365 / 1.40 = 260.71 Days

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Asset Turnover Ratio This is the ratio of sales to total assets. Sales / Total Assets While total assets is technically more correct, average assets could also be used. Average asset is the simple average of opening and closing assets. If the total assets turnover ratio is 4, it means that for every rupee invested we have generated Rs.4 of sales. The term total assets would be the sum of fixed assets and current assets. The higher the ratio the better it is for the company.

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The reciprocal of the total assets turnover ratio is the Capital Intensity ratio. It can be interpreted as the rupee invested in assets needed to generate Re.1 of sales. High values correspond to capital intensive industries. 1 / Total assets turnover ratio Asset Turnover Ratio= 8298.23 / 3833.25 = 0.8

Fixed Assets turnover ratio This is the ratio of sales to fixed assets. The fixed assets should typically be on net basis i.e. net of accumulated depreciation. Sales / Net fixed assets

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Average fixed assets i.e. the simple average of opening and closing fixed assets can also be used. If the fixed assets turnover ratio is 3, it means that for every rupee invested in fixed assets we have generated Rs.3 of sales. The higher the ratio the better it is for the company. Fixed Assets turnover ratio = 8298.23 / 3833.25 = 2.16 Current Asset Turnover Ratio Ratio that indicates how efficiently a firm is its current assets to generate revenue.

using

Net sales/Current Assets

Current Asset Turnover Ratio = 8298.23 / 3709.88 = 2.24

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Return on Assets An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or the ROA of a similar company. The assets of the company are comprised of both debt and equity. Both of these types of financing are used to fund the operations of the company. The ROA figure gives investors an idea of how effectively the
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company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. For example, if one company has a net income of Rs.1 million and total assets of Rs. 5 million, its ROA is 20%; however, if another company earns the same amount but has total assets of Rs.10 million, it has an ROA of 10%. Based on this example, the first company is better at converting its investment into profit. When you really think about it, management's most important job is to make wise choices in allocating its resources. Anybody can make a profit by throwing a ton of money at a problem, but very few managers excel at making large profits with little investment. ROA= NPAT / Total Assets = 976.04 / 23965.21 = 0.04 Return on Capital Employed
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This is the more popular ratio and is the ratio of EBIT to capital employed (EBIT / Capital employed)*100 The term capital employed refers to the sum of net fixed assets and net working capital. This ratio measures the productivity of money. Higher the percentage the better it is for the company. ROCE= (1385.54/2928.64)*100 = 47.31% Return on Equity Capital In real sense, ordinary shareholders are the real owners of the company. They assume the highest risk in the company. (Preference share holders have a preference over ordinary shareholders in the payment of dividend as well as capital. Preference share holders get a fixed rate of dividend irrespective of the quantum of profits of the company). The rate of dividends varies with the

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availability of profits in case of ordinary shares only. Thus ordinary shareholders are more interested in the profitability of a company and the performance of a company should be judged on the basis of return on equity capital of the company. Return on equity capital which is the relationship between profits of a company and its equity can be calculated as follows:

Return on Equity Capital = [(Net profit after tax Preference dividend) / Equity share capital] 100

This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on shareholders investment and higher the ratio better is.

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ROEC = [(976.04 - 0.00) / 2928.64]*100 =33.33 Earnings per Share This is the ratio of profit after tax and preference dividends to number of equity shares outstanding. (Profit after tax / No. of equity shares) This measures the amount of money available per share to equity shareholders. The EPS has to be used with care. Two companies raising identical amounts of money and making identical after tax profits can report substantially different EPS. Consider this example. A Ltd. raises Rs.100 lakhs of equity with each share having a

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face value of Rs.10. The premium on issue is Rs.90 implying that 1, 00,000 shares are raised. In accounting speak, Rs.10 lakhs goes to equity account and Rs.90 lakhs goes to share premium account. Suppose the company makes a profit after tax of Rs.50 lakhs. Since there are 1 lakhs shares outstanding the EPS is Rs.50. The return on net-worth is 50%. Now B Ltd. raises Rs.100 lakhs of equity with each share having a face value of Rs.10. The premium on issue is Rs.40 implying that 2,00,000 shares are raised. In accounting speak, Rs.20 lakhs goes to equity account and Rs.80 lakhs goes to share premium account. Suppose the company makes a profit after tax of Rs.50 lakhs. Since there are 2 lakhs shares outstanding the EPS is Rs.25. The return on net-worth is 50%. Both companies have the same RONW, the same face value per share, but the first
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company returns an EPS of Rs.50 and the second an EPS of Rs.25

EPS= (976.04 / 2928.64)*10= 3.33

Price Earning Ratio This is the ratio of market price per equity share to earning per share. Also known as the PE multiple, the following is the formula: Market price per share / Earnings per share. Suppose the PEM is 12. Typically, this means that if all earnings are distributed as
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dividends then it would take the investor 12 long years before he recovers his initial investment. If that be so, why do investors invest in companies with high PEM? Reason: Investors expect the companys earnings to grow. The PEM can hence be looked upon as an investors confidence in the growth prospects of the company. PER = 10 / 3.33 = 3 Dividend per Share The the sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued.

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Dividend per Share (DPS) = (Dividends announced during the period / Number of Shares in issue)

Dividends per share are usually easily found on quote pages as the dividend paid in the most recent quarter which is then used to calculate the dividend yield. Dividends over the entire year (not including any special dividends) must be added together for a proper calculation of DPS, including interim dividends. Special dividends are dividends which are only expected to be issued once so are not included. The total number of ordinary shares outstanding is sometimes calculated using the weighted average over the reporting period. Dividends are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign that the company's management believes that the growth can be sustained.
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DPS = (292.86 / 2928.64) = 0.10

Dividend Payout Ratio The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio.

Dividend per share/EPS

Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends. The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. However investors seeking capital growth may prefer lower payout ratio because capital gains are taxed at a lower rate. High growth firms in early life
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generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors. DPR = 0.10/3.33 = 0.03

Capital Gearing Ratio Closely related to solvency ratio is the capital gearing ratio. Capital gearing ratio is mainly used to analyze the capital structure of a company. The term capital structure refers to the relationship between the various long-term form of financing such
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as debentures, preference and equity share capital including reserves and surpluses. Leverage of capital structure ratios are calculated to test the long-term financial position of a firm. The term "capital gearing" or "leverage" normally refers to the proportion of relationship between equity share capital including reserves and surpluses to preference share capital and other fixed interest bearing funds or loans. In other words it is the proportion between the fixed interest or dividend bearing funds and non fixed interest or dividend bearing funds. Equity share capital includes equity share capital and all reserves and surpluses items that belong to shareholders. Fixed interest bearing funds includes debentures, preference share capital and other long-term loans. Capital gearing ratio is important to the company and the prospective investors. It must be carefully planned as it affects the company's capacity to maintain a
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uniform dividend policy during difficult trading periods. It reveals the suitability of company's capitalization.

Capital gearing ratio = (Preference share capital + Debentures + long term borrowings) / Equity funds

CGR = (9898.34 / 2928.64) = 3.38

Return on Capital Employed A ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings.
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A variation of this ratio is return on average capital employed (ROACE), which takes the average of opening and closing capital employed for the time period. This is the more popular ratio and is the ratio of EBIT to capital employed (NPAT / Capital employed)*100

The term capital employed refers to the sum of net fixed assets and net working capital. This ratio measures the productivity of money. Higher the percentage the better it is for the company. ROCE = (976.04/ 2928.64)*100 = 33.33

Return on owners Fund

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This ratio is of practical importance to the proprietors as well as prospective investors. It enables them to compare the earning capacity of the enterprise with that of other enterprise. There should be a minimum return on investment to shareholders. Bankers and financers will not be ready to finance if it does not show adequate profit. (NPAT / Shareholders Funds)*100 ROF= (976.04 / 13674.49)*100 =7.14

Overview Sources of long term finance Working Capital Management

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 Management of Inventory

Sources of long term finance finance is the life blood of business. It is of vital significance for modern business which requires huge capital. Funds required for a business may be classified as long term and short term. Finance is required for a long period also. It is required for purchasing fixed assets like land and building, machinery etc. Even a portion of working capital, which is required to meet day to day expenses, is of a permanent nature. To finance it we require long term capital. The amount of long term capital depends upon the scale of business and nature of business. A business requires funds to
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purchase fixed assets like land and building, plant and machinery, furniture etc. These assets may be regarded as the foundation of a business. The capital required for these assets is called fixed capital. A part of the working capital is also of a permanent nature. Funds required for this part of the working capital and for fixed capital is called long term finance.

Purpose of long term finance Long term finance is required for the following purposes: 1. To Finance fixed assets: Business requires fixed assets like machines, Building, furniture etc. Finance required to buy these assets is for a long period,

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because such assets can be used for a long period and are not for resale. 2. To finance the permanent part of working capital: Business is a continuing activity. It must have a certain amount of working capital which would be needed again and again. This part of working capital is of a fixed or permanent nature. This requirement is also met from long term funds. 3. To finance growth and expansion of business: Expansion of business requires investment of a huge amount of capital permanently or for a long period.

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Sources of long term finance The main sources of long term finance are as follows: 1. Shares: These are issued to the general public. These may be of two types: (i) Equity and (ii) Preference. The holders of shares are the owners of the business. Here Equity shares are issued. Authorized share capital is 50000000 Equity shares of Rs.10/- each Issued, Subscribed and paid up capital is 29286400 Equity shares of Rs.10/- each fully paidup.

2. Debentures:
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These are also issued to the general public. The holders of debentures are the creditors of the company. No debentures are issued here. 3. Public Deposits : General public also like to deposit their savings with a popular and well established company which can pay interest periodically and pay-back the deposit when due. 4. Retained earnings: The company may not distribute the whole of its profits among its shareholders. It may retain a part of the profits and utilize it as capital.

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5. Term loans from banks: Many industrial development banks, cooperative banks and commercial banks grant medium term loans for a period of three to five years. Here, Term Loans are granted from Axis Bank Ltd., Indian Overseas Bank , SBI. Foreign Currency Term Loan from SBI. Cash credit from SBI and Axis Bank Ltd.

6. Loan from financial institutions: There are many specialized financial institutions established by the Central and State governments which give long term loans at reasonable rate of interest. Some of these institutions are: Industrial Finance Corporation of India (IFCI), Industrial
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Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI), Unit Trust of India (UTI ), State Finance Corporations etc. Vehicle Loans from: Reliance Capital Ltd. - 4.48 lac ICICI Bank Ltd. - 2.56 lac Kotak Mahindra Bank Ltd. 44.50 lac Axis Bank Ltd 2.83 lac

Working Capital Management

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A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Implementing an effective working capital management system is an excellent way for many companies to improve their earnings. The two main aspects of working capital management are ratio analysis and management of individual components of working capital. A few key performance ratios of a working capital management system are the working capital ratio, inventory turnover and the collection ratio. Ratio analysis will lead management to identify areas of focus such as inventory management, cash management, accounts receivable and payable
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management. Here the Net Working Capital of the company is Rs. 3709.88 Management of Inventory Inventory management is primarily about specifying the shape and percentage of stocked goods. It is required at different locations within a facility or within many locations of a supply network to proceed the regular and planned course of production and stock of materials. The scope of inventory management concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. Balancing these competing requirements leads to optimal inventory

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levels, which is an on-going process as the business needs shift and react to the wider environment. Inventory management involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling, and related costs are kept in check. It also involves systems and processes that identify inventory requirements, set targets, provide replenishment techniques, report actual and projected inventory status and handle all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. Also may include ABC analysis, lot tracking, cycle counting support etc. Management of the inventories, with the primary objective of determining/controlling stock levels within the physical distribution function to balance the need for product availability against the need for minimizing stock holding and handling costs.
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The reasons for keeping stock There are three basic reasons for keeping an inventory: Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amounts of inventory to use in this "lead time."

Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.

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There are basically three main categories/stages of inventory.

Raw Material- In the company, the raw materials that are used mainly includes the raw eatable items such as fruits and vegetables, cereals and dry fruits, different types of flour, spices, juices, milk, etc.These are some of the raw materials that are daily used in kitchen of the hotel. Work in Progress-When the raw materials are inputted for the production process, it is known as work in progress. Finished goods-finished goods are the final product that is obtained after the production process.

Each and every department keeps the checklist of the Inventories that are used during a particular period of time and than
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the financial data is handed over to the finance department. it is checked weekly , monthly , quarterly and yearly.

Suggestion Hotel should increase the wages level of the employees.

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 Hotel provides food & accommodation for free as additional facilities localize dont take advantage of accommodation although they are not provided the additional allowances to compensate this faculty; therefore they feel like loosing something. Therefore Hotel should provide allowances to those who are not using food and/or accommodation or any other complimentary services/facilities provided by hotel. The authority of Hotel must take steps to reduce stress and monotony among employees for job The hotel can put a suggestion/complain box where every body can drop their views/problems/complains/suggestions.

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Conclusion From the research material reviewed, it appears that the extensive investment in TGB hotels all over Gujarat is proved to be a huge success. There is evidence of the Peoples satisfaction which supports revenue maximization objectives. The hospitality industry has a stronger passion for customer satisfaction than ever before and TGB should support this trend. Winning customers heart and satisfaction
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through unique hospitality allow the management to cater the business successfully.

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Webography
1. 2. 3.

http://www.accountingformanagement.com/ http://www.investopedia.com/ http://thegrandbhagwati.com/

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