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PROJECT REPORT
ON
A STUDY OF ACCOUNTING & FINANCIAL ANALYSIS
OF ARVIND LIMITED
A SIP Report Submitted to
Corporate Guide:
Mr. VINIT SHAH
Arvind Limited
Submitted by:
RAUNAK CHAURASIA
Enroll. No.-117680592098
DECLARATION
I the undersigned hereby declare that the work incorporated in the Summer
Internship report titled Accounting & Financial Analysis of Arvind Limited is
original and has not been submitted to any university as part fulfillment of award
of any degree or diploma.
The material obtained and used from other sources has been duly acknowledged in
the report.
Date:
Raunak Chaurasia. T
Place: Ahmedabad
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CERTIFICATE
This is to certify that the project titled A Study of Accounting & Financial
Analysis of Arvind Limited is a work done by Mr. /Ms. Raunak Chaurasia. T
of this institute. The student has successfully completed this project under my
guidance.
I am sure that the experience gained during the project work will enable him/her to
take similar challenging projects in future.
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
PREFACE
For a long time, there is a wind of recession blowing all over the
business world and wealth liberalization policy in the Indian Economy.
So, now a days market is becoming more and more competitive scenario,
company demands more and more professional and accomplished
employees.
Students have to get practical training along with the theoretical knowledge of the
business
condition.
There
are
many
advantage
of
making these kinds of reports, the student can become aware of the
particular knowledge about marketing of capital goods. Reading gives
only the theoretical knowledge that visits gives practical knowledge.
Fortunately I got golden opportunity to visit and complete my six week training at
ARVIND MILLS LIMITED Here I got chance to see the functioning of Finance
Department and imbibe a lot learning of the subjects.
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ACKNOWLDGEMENT
With the successful completion of my Summer Internship Program, I would
like to express my deep gratitude towards all of those who have helped me during
my learning program.
Firstly I would like to thank Mr. SHOBHIT TYAGI (Head- Human Resource,
Arvind limited) for providing me with this opportunity to be a part of this
organization.
I would also like to thank my Academic guide, Mr. RAJESH GANATRA for
guiding me throughout this project. His dedicated and constant efforts and sincere
advices helped me a lot in gaining knowledge and putting forward my full
potential. He gave me ample of time to complete this report.
Though language is a poor substitute for sentiments but still I want to
express my Special thanks to my company guide Mr. VINIT SHAH (Head finance Department) for his wise advises and critical analysis towards my
project. Without his support this project would never have been a success.
With his each and every contribution there has been a value addition in my
learning.
I would also like to show my thanks to Mr. JATIN THAKKAR who helped me a
lot in completing my project. Her timely and sincere suggestions added value to
my project.
Last but not the least I would like to thank all those persons and organizations who
have helped me directly or indirectly in the successful completion of this study.
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
EXECUTIVE SUMMARY
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
TABLE OF CONENT
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
INDEX
TITLE PAGE
DECLARATION
CERTIFICATE
PREFACE
ACKNOWLEDGMENT
EXECUTIVE SUMMARY
INTRODUCTION TO TEXTILE INDUSTRY
PG. No.
1
2
3
4
5
11
11
12
13
13
14
15
17
COMPANY PROFILE
18
FABRIC PRODUCTION
19
ORGANIZATIONAL STRUCTURE
20
SUBSIDIARIES
20
BOARD OF DIRECTORS
21
GROUP OVERVIEW
22
COMPANY'S VISION
23
COMPANY'S MISSION
23
COMPANY'S PHILOSOPHY
DENIM MANUFACTURING PRROCESS
VARIOUS PROCESSES / DEPARTMENTS
QUALITY ASSURANCE
INSPECTION
ISO & EMS
24
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
(J)
(K)
(L)
(M)
(N)
(i)
(ii)
(iii)
(iv)
(O)
(P)
(Q)
(R)
(S)
(T)
(U)
(V)
(W)
(X)
S.W.O.T ANALYSIS
LITERATURE REVIEW
FINANCIAL ANALYSIS THEORY
INTRODUCTION TO FINANCE
TYPES OF FINANCIAL ANALYSIS
FINANCIAL RATIO
LIMITATION OF FINANCIAL ANALYSIS
ACCOUNTING ANALYSIS
COMPARATIVE ANALYSIS OF BALANCE SHEET
COMMON SIZE OF BALANCE SHEET
TREND ANALYSIS OF BALANCE SHEET
COMPARATIVE ANALYSIS OF INCOME STATEMENT
COMMON SIZE OF INCOME STATEMENT
TREND ANALYSIS OF INCOME STATEMENT
FINANCIAL ANALYSIS
ROI RATIOS
RETURN ON CAPITAL EMPLOYED
RETURN ON NET WORTH
EARNINGS PER SHARE
SOLVENCY RATIOS
NET ASSETS VALUE
DEBT EQUITY
DEBT-SERVICE COVERAGE RATIO
DU PONT ANALYSIS
VALUTION RATIOS
PRICE EARNINGS RATIO
MARKET PRICE TO NAV
MARKET CAPITALIZATION
FINANCIAL RATIOS OF ARVIND LIMITED
RATIONALE OF STUDY
RESEARCH METHODOLOGY
FINDINGS
SUGGESTIONS
LIMITATION OF ANALYSIS
CONCLUSION
LEARNING
BIBLOGRAPHY
ANNEXURE
35
37
40
42
47
49
51
58
61
61
63
64
66
67
70
71
73
74
75
76
77
78
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
INTRODUCTION
OF
TEXTILE INDUSTRY
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INTRODUCTION
The Indian textile industry has a significant presence in the economy as well as in
the international textile economy. Its contribution to the Indian economy is
manifested in terms of its contribution to the industrial production, employment
generation and foreign exchange earnings. It contributes 28% of industrial
production, 13 % of excise collections, and 25 % of employment in the industrial
sector, nearly 28 % to the countrys total
export earning and 6% to the GDP.
Industrial Production
28%
Excise Collections
13%
25%
28%
GDP
6%
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In human history, past and present can never ignore the importance of textile
in a civilization decisively affecting its destinies, effectively changing its social
scenario.
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VARDHMAN SPINNING:
Yardman deals in spinning, weaving and processing segment of the industry. It is
planning to double its fabric processing capacity to 50 million meters. It is an
approved supplier to global retailers like Gap, Target and Tommy Hilfiger. Its sales
are little over US$ 120 millions
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INTRODUCTION
OF
ARVIND LIMITED
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COMPANY PROFILE
The aim was to indigenously produce fine and superfine cotton fabric as
well as traditional material for vast potential Indian market. At this juncture,
Arvind Mills was set up with the pioneering effort of three brothers, Kasturbhai,
Narrotambhai and Chimanbhai Lalbhai becoming Worlds largest exporter and
Asias largest producer of denims. During 1980s several mills in Ahmedabad
closed down as a result of competition from cheaper cloth produced by small power
loom enterprises. Militancy spurred by textile labor unions prevented the
shutdown of several lossmaking mills, and in the
mid 1980s Ahmedabad
was a city of industrial
strives. ARVIND MILLS
has risen like a phoenix
from
the
ashes
of
Ahmedabad textile mills.
In just eight years it has
successfully implemented a
turnaround strategy. Established in 1930, Arvind Limited is the flagship company of
$ 498 million. Lalbhai Group has now focused its attention on few selected core
product groups. Arvind today is a one-stop shop for all cotton fabric
requirements, where product range spans the entire gamut of cotton fabric. It is
also a rapidly expanding manufacturer of garments such as jeans and shirts. With
the best technology and business acumen Arvind Mills became the true
multinational producing the finest fabric available in the country that rivaled
imported fabric. Since then, there has been no looking back. Having established
itself as Indias largest denim manufacturer, Arvind Mills is confident that in the
near future it will become the fifth largest denim producer in the world.
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FABRIC PRODUCTION
In the 1980s the growing threat from
small power loom operators forced Ahmadabads
composite
mills to shift their focus to product areas in which
they could compete. In order to better address
newer and wider business opportunities, the
company shifted perspective from domestic to
international markets. At a time when the local
textile industry
was
declining, Arvinds
management devised a turnaround strategy called
Reno vision. It represented an open-minded
approach that would seek out new opportunities.
In 1987 Arvind Mills made a conscious
strategic decision to change its production emphasis
from a portfolio of traditional domestic textiles to
high quality cotton fabrics. This required a level of
technological expertise, which small power loom
operators could not compete with. Arvind
identified denim as a key fabric. International
consultants McKinsey & Co. Helped to frame
companys business
strategy
formulate
its organizational restructuring and establishing international alliances.
Today the company is engaged primarily in the manufacturing of
indigo-dyed denim fabrics, fine and superfine cotton shirting and bottom
weights, and conventional domestic fabrics such as sarees and voiles. In 1995
Arvind Mills held an 80% share of India's domestic market for denim.
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ORGANIZATIONAL STRUCTURE
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SUBSIDIARIES
Arvind Mills has 11 subsidiaries, of which seven are in textile and related
businesses. They are:
Arvind Clothing limited.
Arvind Fashion limited.
Arvind Worldwide Inc, USA
GROUP OVERVIEW
The Lalbhai group, founded by the three Lalbhai brothers in 1908, has
grown to become one of India's most diversified business houses, with a significant
presence in the textiles, ready-to-wear, chemicals, air-conditioners and telecom
industries in India.
TEXTILES/ YARNS
Arvind limited.
Arvind Products limited.
Arvind Fashion limited.
Arvind Brands limited.
Arvind Index
Arvind Cot spin
Garment Export Division, Bangalore
Arvind Overseas limited., Mauritius
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CHEMICALS
Anil Starch Products limited.
Atoll limited.
TELECOM
Arvind Telecom
OTHERS
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COMPANYS VISION
To achieve global dominance over various businesses built around our
core competencies, through continuous product and technical innovation,
customer orientation and a focus on cost effectiveness".
All along Lalbhai Group has maintained a responsive yet levelheaded attitude
towards the society and its training individuals to create a corporate culture
that fosters excellence. Working in this direction the company has created a
learning environment that nurtures individual talent and intellect. It provides a
platform that challenges the individual capabilities urging them to constantly strive
forward towards greater heights using development as the fundamental tool.
It infuses in individuals a spirit of entrepreneurship which gives courage and
conviction to pursue set goals towards logical achievement and a global mindset
that transcends geographical and cultural boundaries evolving as a world leader. All
this is manifest in an environment fostering innovation and leadership.
Drawing from the Team based structure to encourage individuals to mesh up
into cross-cultural teams in all operational processes. This process provides
opportunities for individuals to match their capabilities with organizational
expectations creating a mechanism for updating the system. A strong sense of
ownership and commitment towards the organization and the business as a whole
is the basic premise of all the company actions.
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COMPANYS MISSION
Arvind limited. has laid down certain aims and objectives to be achieved
while pursuing its corporate activities. These are:
To create a vibrant institution for the future of this nation and the world at
large.
COMPANYS PHILOSOPHY
"It is my responsibility as a leader to create an environment where
excellent people would like to come and give their best, to create a vision, to
give freedom for excellence."
- Sanjay Lalbhai (Managing Dir.)
BOARD OF DIRECTORS
Name
Designation
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DENIM MANUFACTURING
PROCESSES
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1.
2.
3.
4.
Ring spinning
Open end spinning
Drip spinning
Air-jet spinning
Lycra is used to increase the elasticity of the fiber. Filament is used in the fiber
which is exported to countries where the level of sweating is lower as compared to
Indian condition where majorly cotton is used for the same reason.
The weaving department has the distinction of being the largest at Arvind Mills
and exports close to 95% of its manufactured fabric. Discussing the denim fabric,
the core competence of AM, original denim is composed of 100% cotton but with a
view to bring in variations to the material in consonance with the emerging trends
in the market, various natural fibers like linen and synthetic fibers like filament,
lycra, polyester are added to cotton. While weaving such mixed fabric, the core is
made of the addend and original cotton is wound around it. Yarn woven vertically
is called warp while that woven laterally is termed as weft. For weaving purposes a
cotton count ranging from 5 to 20 is generally used.
Dyeing department
Arvind Mills has a grill section that was loaded with 12 beams of yarn, though
latest machinery could support even 16 of them. They are also known as warping
beams and their design depends upon the texture and construction of fabric e.g.
weight, length etc.
Each beam consist of 350-400 ends and 12 such beams are joined together to form
one at last with 4000-4800 ends which is used in the weaving process.
Four types of dyeing processes are used in Arvind mills namely:
1.
2.
3.
4.
Indigo dyeing
SBIT-sulphur bottoming indigo topping
IBST-indigo bottoming sulphur topping
Sulphur dyeing
All the above processes differ in the process of loading on the fabric.
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The dyeing process in a flow chart is explained below. (Ref. fig 1.1)
Pre-wetting PWA
|
W.B.1 (W.B.-Washing box)
|
Dye box (6 shades are used)
|
W.B.2
|
Sulphur
|
W.B.3
|
Pre dryer
|
Saw box (Sizing)
|
Post dryer
|
Compromising (speed is increased)
|
H/S
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Finishing department
The department churns out 300000 meters of finished denim cloth a day. What
happens to the fabric that has come off loom is called surface finishing that entails
softening of fabric, thus making it fit to wear. Further, de sizing is done in order to
reduce tension in the knit yarn, to ensure that it doesnt break out of undue tension.
To accomplish the process, there are three basic mechanisms involved namely
desized finishing, desized mercerized finishing and desized mercerized tint
finishing. In yesteryears, there existed a demand for long lasting colors in denim
apparel, which is no longer present. Consumers are becoming more inclined
towards denim that loses color in a few washes. For such emerging needs and
choices, double dyeing concept has been adopted that renders denim fabric various
effects after subsequent washes.
The process is as follows
1. Singeing is done and the hairiness of the fabric is burned by flames.
2. Desizing removes the sizer put on by the suker muller in the dyeing
department to increase the strength of the fabric (a mixture of desizing agent,
alcozyme and acetic acid is used for the same).
3. Mercerizing is the process of caustic wash and the unit studies is GPL (gram
per liter).
4. Stunter is used to settle the width shrinkage and to adjust the elasticity by
killing the elastic properties of lycra in the fabric which is to the tune of 30
to 40% earlier and can be dropped down to 3 to 8% as per customer
requirement.
Finishing techniques used in Arvind mills are:
1. Glaze finishing
2. Padding
3. Curing
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4. Montfort finishing
5. Foam finishing
In addition there is an intervening singeing and washing process that brings in
more softness in the fabric. The product is washed off water soluble chemical
remnants, steam dried and then causted that lead to swelling of the material. Earlier
foam technology was used for this purpose, which has now been replaced by wet
technology that gives more softness and binding to fabric. This is the followed by
moving the fabric through centering machines that kill extra percentage of inbuilt
Lycra to peg elasticity at the desired level as demanded by the customers.
Temporizing is the next process to be carried out with the help of rubber and leads
to permanent shrinkage of the fabric.
Quality Assurance department
Traditional view:
Traditionally quality assurance was looked as if a post-mortem report where in the
yarn and the fabric was checked for the quality and standards as per required by the
customer. A proper policing was kept on what has been done and what is to be
done
Modern view:
In the modern day quality assurance has a wider scope and it includes activities
like process ownership and cal liberation where in the department ownership is
given to a person and it becomes his/her duty to deal with it in the most efficient
manner.
Quality assurance at Arvind mills has the following labs. :
1. Cotton laboratory
2. Physical testing laboratory
3. Chemical testing laboratory
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4. Calibration laboratory
5. Color quest laboratory
6. Clearance department
COTTON LABORTARY:
Cotton is held for the 70% cost of the fabric cost only and hence becomes a major
factor which if controlled will add maximum contribution to the strength of Arvind
mills.
The coefficient of variance is calculated for the width, diameter and hairiness of
the fiber. The machine used for this purpose is USTER TESTER 5.the fiber is
passed at a speed of 400m/min and the variance is hence calculated. The variance
is calculated against international or the preset Arvind standards
The length, weight and the exact count of the fiber is also calculated and the
CASCADE machine is used for this purpose which ensured the right thing at the
right time as per customer demands.
PHYSICAL TESTING LABORTARY
This testing happens at the yarn manufacturing stage and the yarn is tested for its
1. Length
2. Elongation
3. Elasticity etc
The yarn should be tested in a way so as to know whether the yarn can take all the
loadings or not and if yes to what extent can it take.
This helps in deciding what processes the yarn can face and what effects can be
deduced.
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Single yarn strength and its elongations are measured using the USTER
TENSORPAID 3 machine which is the most trusted name in the field and comes
from Switzerland.
INSTRON 4465 is used to check the tensile strength of the fiber and the tear
strength is also calculated in grams.
For all the above written testings the standard lab conditions are made at a
temperature of 60+/- 2 f and the humidity level is maintained at 65%+/-2%
Factors like stretchabliltyskew and shrinkage are tested after marking is done
followed by three washings of the fabric; the fabric is toned to the environment
after keeping it in the standard environment.
CHEMICAL TESTING LABORTARY:
In the chemical laboratory they check all the fuels, dyes, and all the chemicals that
are used in the production process. They even check the denim if it is washed with
bleach how much it fades the color. They try different process like how the denim
would react in different conditions like in case of perspiration, salt water, normal
water, in extreme temperature.
COLOUR QUEST LABORTARY:
In the color quest they try to find out the different shades and they see to it that
after the washing and drying process does the shade match the requirement of the
customer or not.
CALIBRATION LABORATORY:
Definition:
Calibration is a specialized measurement process where in one compares test and
measuring instruments/equipments of unknown status to well defined standards of
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greater accuracy in order to detect /eliminate error by adjustments & report any
variation in accuracy capability.
CALIBRATION ACTIVITY
Calibration through in house facility
93%
7%
Temperature
Pressure
Mass
Electrical
Dimensional
DTNG Department
In Arvind mill manufactures 8.5 million of denim per month. Out of which 60% is
exported and remaining is manufactured for the domestic market. There are around
34 companies who are the manufactures of the denim product in the market.
The USP of Arvind mill is that it believes in innovation and constantly keeps on
innovating new products. It innovates around 1700 new product material every
year which is equivalent to 5 new product materials every day. Arvind mill
manufactures around 1600 denim fabric out of which 1300 includes different
shades of blue color.
New designs are created on the basis of the following parameters:1) Customer based development: Product is developed on the basis of
customer requirements. Sometimes the customer asks for the exact imitation
of the product (on the basis of texture, strength, durability, etc) at a cheaper
rate. In order to target the exact customers and fulfill demands Arvind mills
has its marketing team worldwide including Europe who keeps on meeting
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the customers from time to time in order to get their feedback and review for
the required product.
Trouble shooting: with the new technologies good quality of the same material at
a cheaper rate can be manufactured. Due to huge demand of its denim product in
the market Arvind mills department of weaving spinning and finishing outsources
not less than 1000 tones of yarn per year.
Inspection Department
After the processing of the denim in the finishing department it is sent to the
inspection department where certain parameters are checked n then inspected in the
inspection machine. The parameters that are checked before inspecting in the
machines are
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dumped to a certain land that is certified by the government for disposal of such
harmful wastes.
There are other types of certifications are
ISO -14000-2004 is followed which looks after the resources utilization or
depletion of resources.
ISO-18000 OSHOS its occupational standards for health and safety where every
measure for safety of the staff is taken into consideration.
Marketing Department
As Arvind mill is one of the leading company in textile industry they
provide their fabric to domestic as well as international market also. They
have different teams which handle marketing activity in different region.
Arvind mill produce 8 million meter fabric every month. Out of which 60% is
exported and the rest is manufactured for the domestic market. For, promotion of
their products in domestic & international market they organize fashion shows.
They have different designer for U.s, Europe, and domestic market. They introduce
their new collection twice every year (summer spring and autumn winter) known
as American line collection for the American market and Europe line collection for
the European market. Apart from that the also hold exhibition and seminars for the
concerned buyers.
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S.W.O.T ANALYSIS
STRENGHT:
WEAKNESS:
Production capacity of
million tons monthly wise
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OPPORTUNITIES:
THREATS:
Able
to
handle
more
franchisee of international brands
Regularly
technology
innovation
in
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LITERATURE REVIEW
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Susan Ward on May 1, 2008 in his article Financial Ratio Analysis for
Performance Check emphasis that financial analysis using ratios between key
values help investors cope with the massive amount of numbers in company
financial statements. For example, they can compute the percentage of net profit a
company is generating on the funds it has deployed. All other things remaining the
same, a company that earns a higher percentage of profit compared to other
companies is a better investment option.
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FINANCIAL
ANALYSIS THEORY
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INTRODUCTION
In the financial world, every company must know its financial position. It
is necessary for the company to know its profitability and for that purpose it is
require analyzing company's financial statements. Financial statement shows the
real picture of the company in terms of money. Management of the company is
keenly interested in knowing the real performance of the company. So it is
required to analysis the financial statement for knowing the actual financial
position and forecasting the future trend.
Business activity is associated with finance. The goals and success of business
cant be achieved without finance.
To collect the fund at lower cost and to achieve the goal of business the finance is
necessary. Finance manager help to develop the company by using his skill &
ability.
For the development of company and reduce the problem that are created in
finance, every businessman make a good finance policy. As we know that
competition is increasing day to day. So for getting good position in market and to
stand in the competition it is necessary for the company to analysis its Financial
statements.
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FINANACIAL STATEMENTS
Financial statements as used in corporate business, refers to a set of report and
schedule which an accountant prepare at the end of the period for a business
enterprise. The financial statements are the means with the help of which the
accounting system perform its main function of providing summarized information
about the financial affair of the business. This statement comprises of balance sheet
position statement and profit & loss account or income statement. In India every
company has to present its financial statement in the form and contents as
prescribed under section 211 of the Companies Act, 1956.
ANALYSIS OF FINANCIAL STATEMENTS
Financial analysis determines the significant operation and financial characteristics
of a firm from accounting data. It is a technique typical devoted to evaluate the
past, current and projected information of a business firm. Financial Analysis is an
attempt to determine the significance and meaning of financial statement data so
that forecast can be made of the future prospects for earnings, ability to pay interest
and debit maturities and profitability.
Published financial statements are the only source of information about the
activities and affairs of a business entity available to the public, shareholders,
investors, creditors and the government. This various groups are interested in the
progress, position and prospect of such entity in various ways. But these statements
however correctly and objectively prepared by them do not reveal the significance,
meaning and relationship of the information contained therein. For this purpose
financial statements have to be carefully studied, dispassionately analyzed and
intelligently interpreted.
Financial analysis results in the presentation of information by arranging financial
statement data in a systematic manner that aids business managers, investors. It
also provides valuable insights into a company's performance.
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financial statement. Vertical analysis can also be done for studying the relationship
within a set of financial statements at a point of time.
3. On the basis of objective of analysis:
1) Long term analysis:
This analysis is made in order to study the long term financial stability and
liquidity as well as profitability and earning capacity of the business. The objective
of this analysis is to know whether the firm will be able to earn a minimum amount
which will be sufficient to maintain a reasonable rate of return on the investment.
2) Short term analysis:
This analysis is done in order to determine the short term solvency, stability,
liquidity and earning capacity of the business. The requirement if any, and
sufficient borrowing capacity to meet the contingencies in the near future.
Parties Interested in Financial Statement Analysis:
1) Financial Executives:
The first party interested in the financial analysis in the financial department of the
business concern who have a deep insight into the financial of the enterprise and a
view of the past performance which help in decision making.
2) Management:
The management of the concern is also interested in the analysis of the
statementsbecause it helps them in reaching conclusion regarding the overall
operation of the business.The management is interested in every aspect of the
financial analysis as it is their overall responisbility to see that the firm's finances
are used most effectively and firm's financial position is sound.
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3) Creditors:
Creditors also evaluate the financial statements and on the basis of these financial
statements they come to know about the credit worthiness of the business
enterprises and chose to extends, maintain or restrict credit. Creditors will be
interested to give credit for those business enterprises which is having sound
financial position and are capable of repaying their credit. Some of the aspects of
enterprise operation that are useful for the creditors are liquidity of funds,
soundness of the financial structure, profitability of the operations, effectiveness of
working capital management etc. The bankers and trade creditors of a business
enterprise are interested in its cash generation and credit worthiness. They want to
assess whether the enterprise will be able to pay the interest due as per agreed
schedules. They get all this information from the analysis of balance sheet and
income statement of the company.
4) Investor:
Investors, present as well as prospective are interested in the financial profitability
of the business. Every investor expects to earn fair return on his investments.
5) Government:
The financial statements are used to assess the tax liability of the business
enterprise. The government studies economic situations of the country which
enables it to find out whether business is following various rules and regulations or
not
6) Bankers:
The banker is interested to see that the loan amount is secure. The bankers will
analsize the balance sheet to determine financial strength of the concern and profit
& loss account will also be studied to find out the earning position of the business.
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FINANCIAL RATIO
Ratio analysis means the proportionate comparisons of any two variable of
Trading Account, Profit and loss account, Balance sheet.
Ratio analysis is a widely used tool of financial analysis it is defined as a
systematic use of ratio to interpret the financial statement so that the strength
and the weakness of the firm as well as its historical performance and its
current financial condition can be determined. The term ratio refers to the
numerical or quantitative relationship between to variables or items.
2) LIQUIDITY:
The use of ratios was made initially to ascertain the liquidity of business. The
current ratio, liquid ratio and acid test ratio will tell whether the business will be
able to meet its current liquidities as and when Banks and other lenders will be able
to conclude from these ratios whether the firm will be able to pay regular interest
and loan installments.
3) Efficiency:
The turnover ratios are excellent guides to measure the efficiency of managers.
E.g. the stock turnover will indicate how efficiently the sale is being made. The
debtors turnover will indicate the efficiency of collection department and assets
turnover shows the efficiency with which the assets are used in business. All such
ratios related to sales present a good picture of the business.
4) Inter Firm Comparison:
The absolute ratios of a firm are not of much use unless they are compared with
similar ratios of other firms belonging to the same industry. This is inter firm
comparison which shows the strength and weakness of the firm as compared to
other firms and will indicate corrective measures
5) Useful for Budgetary Control:
Regular budgetary reports are prepared in a business where the system of
budgetary is in use. If various ratios are prepared in this report it will give a fairly
good idea about various aspects of financial position.
6) Useful for Decision making:
Ratio guides the management in making some of the important decisions. Suppose
the liquidity ratio shows an unsatisfactory position the management may decide to
get additional liquid funds. Even for capital expenditure decisions, the ratio of
return on investment will guide the management.
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Anyone who draws any conclusion on the basis of accounting ratios about the
financial conditions and earning capacity of the business must take into account the
following limitations of the ratios.
1) Single years ratio has limited utility:
The utility of ratios computed from the financial statements of one year only is
obviously limited. They must be compared with the past results of the company as
also with the result of other business firms in the same industry.
2) Other factors must be considered:
While comparing ratios of different firms, it must be remembered that different
firms follow different accounting plans and policies. For example, some may use a
straight line method while other may use diminishing balance method. Hence care
has to be exercised before any conclusions are drawn from such comparison.
3) Limited utility of historical ratios:
While comparing ratios of past several years, it should be remebered that changes
in price level may render such comparison useless. An asset purchased some
10years before may be shown at its historical value and comparison of these assets
with sales may be of no value as sales are expressed in current market value.
4) Lack of standard ratios:
There is practically no standard ratio against which the actual performance can be
compared. The satisfactory level of various ratios may differ from one industry to
another because circumstances differ from industry to industry and even from firm
to firm.
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5) Inaccurate Base:
The accounting ratios can never be more correct than the information from which
they are computed. If the accounting data is not accurate, the accounting ratios
based on these figures would give misleading results
6) Rigidity harmful:
If in the use of the ratios, the manager remains rigid and sticks to them, it will lead
to dangerous situation. For example, if the manager believes the current ratio
should not fall below 2:1, then many profitable opportunities will have to be
forgone
7) Ratios of two irrelevant figures:
Ratio must be established between related matters. It is of no use if the ratios are
found between two figures which have no relation with each other. E.g. , ratio of
factory expenses to selling expenses is illogical and does not give any useful
conclusion.
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ANALYSIS
ACCOUNTING ANALYSIS:
The comparative and common sized of the balance sheet of the company.
The comparative and common sized of the income statement of the
company.
the changes in assets
the changes in liability
the changes in profits
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FINANCIAL ANALYSIS:
I have calculated the profitability ratios which are under following:
1. ROI Ratios
Return on Capital Employed
Return on Net Worth
Earnings Per Share
2. Solvency Ratio
Net Asset Value
Debt Equity
Debt Service Coverage Ratio
3. Du Pont Analysis
4. Valuation Ratios
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ACCOUNTING ANALYSIS
Comparative and Common Size Financial Statement
Financial statements reveal the financial credibility of a company. A financial
statement, which expresses the different values in form of percentage, is called a
Common size financial statement. A common size financial statement helps in
comparing two companies, which differ in size. Two components of the common
size financial statement are:
Balance sheet
Income statement
When both these components are clubbed together, a comparative and common
size financial statement is obtained.
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The size of the companies being compared is not important. The companies
being compared may be small or big. Hence, it is termed as common size.
Since size of the company does not matter, it removes any kind of bias,
while comparing companies. Analyzing the operational activities of
comparing companies can also be obtained.
A common size financial statement is used for predicting future trends and
analyzing prevailing trends in the industry.
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2006-07
2007-08
2008-09
2009-10
2010-11
209.38
1106.93
1316.31
1772.74
161.57
1934.31
466.15
3716.77
218.98
1172.53
1391.51
1774.94
97.52
1872.46
395.17
3659.14
218.98
919.82
1138.80
1920.90
103.04
2023.94
608.77
3771.51
231.98
1107.31
1339.29
1728.73
141.85
1870.58
453.62
3663.49
254.40
1236.00
1490.40
1763.23
48.89
1812.12
651.33
3953.85
2817.21
772.32
2044.89
71.45
46.05
645.01
204.85
20.86
870.72
752.93
1.45
1742.60
3787.49
2942.99
906.78
2036.21
116.14
104.99
575.34
261.77
14.79
851.90
617.71
1.53
1692.27
3728.48
3056.80
1014.51
2042.29
81.58
100.06
581.47
350.84
20.15
952.46
633.37
6.68
1774.15
3816.44
3002.45
1084.34
1918.11
46.86
300.29
432.00
424.16
33.35
889.51
579.64
9.79
1826.09
3.744.20
3172.22
1170.26
2001.96
142.28
309.40
699.16
563.63
14.20
1276.99
514.19
14.89
2257.75
4259.71
Sources of funds
Equity Share Capital
Reserves & Surplus
Net Worth
Secured Loans
Unsecured Loans
Total Debt
C.L & Provisions
Total Liabilities
Application Of Funds
Gross Block
(-) Depreciation
Net Block
Capital Work Progress
Investments
Inventories
Sundry Debtors
Cash & Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Total Assets
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2006-07
2007-08
2008-09
2009-10
2010-11
5.63
29.78
35.41
47.70
4.35
52.05
12.54
100.00
5.98
32.04
38.02
48.51
2.67
51.18
10.80
100.00
5.81
24.39
30.20
50.93
2.73
53.66
16.14
100.00
6.33
30.23
36.56
47.19
3.87
51.06
12.38
100.00
6.43
31.26
37.69
44.60
1.24
45.84
16.47
100.00
74.38
20.39
53.99
1.89
1.22
17.03
5.41
0.55
22.99
19.88
0.04
46.01
100.00
78.93
24.32
54.61
3.11
2.82
15.43
7.02
0.40
22.85
15.58
0.04
45.39
100.00
80.10
26.58
53.51
2.14
2.62
15.24
9.19
0.53
24.96
16.60
0.18
46.49
100.00
80.19
28.96
51.23
1.25
8.02
11.54
11.34
0.89
23.76
15.48
0.26
48.77
100.00
74.47
27.47
47.00
3.34
7.26
16.41
13.23
0.33
29.98
12.07
0.35
53.00
100.00
Sources of funds
Equity Share Capital
Reserves
Net Worth
Secured Loans
Unsecured Loans
Total Debt
C.L & Provisions
Total Liabilities
Application Of Funds
Gross Block
(-) Depreciation
Net Block
Capital Work Progress
Investments
Inventories
Sundry Debtors
Cash & Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Total Assets
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Interpretation:
For the analysis of Balance sheet we have taken the total of the liabilities
side as base.
The total capital of the company has increased compared to last year because of
increase in reserves & surplus by 6.87 % compared to 2008-09 year.
The secured loan amount has decreased by 2.59 % this means that company has
paid off some its loan amount and so its liability is less.
The fixed assets of the company has increased by 2.09 % which is good for
company.
Total Current assets of the company has increased by 6.22 % as there is an
decrease in the cash balance which is not good for the company because now it
cannot pay off its liability easily.
The current liability of the company has increased by 4.09 % which is not good
because now it has to pay more amounts.
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Particulars
2006-07
2007-08
2008-09
2009-10
2010-11
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.05
1.05
1.05
1.00
0.60
0.97
0.85
0.98
1.05
0.83
0.86
1.08
0.64
1.05
1.30
1.01
1.11
1
1.01
0.97
0.88
0.97
0.97
0.99
1.22
1.11
1.13
0.99
0.30
0.94
1.40
1.06
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.04
1.17
1.00
1.62
2.28
0.89
1.28
0.70
0.98
0.82
1.05
0.97
0.98
1.08
1.31
1.00
1.14
2.17
0.90
1.71
0.97
1.09
0.84
4.60
1.02
1.00
1.06
1.40
0.94
0.66
6.52
0.67
2.07
1.60
1.02
0.77
6.75
1.05
0.99
1.12
1.51
0.98
1.08
6.72
1.08
2.75
0.68
1.46
0.68
10.26
1.30
1.12
Sources of funds
Equity Share Capital
Reserves
Net Worth
Secured Loans
Unsecured Loans
Total Debt
C.L& Provisions
Total Liabilities
Application Of Funds
Gross Block
(-) Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash & Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Total Assets
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Explanation:
Trend analysis is an extension of horizontal analysis. Their
methodology is very simple. The utility of this tool of analysis lies in the fact that
while two years comparisons may provide indication of growth.
Overall assessment:
The equity share capital is increasing year by year and the higher amount of
the base year value.
The net worth is increasing year by year but the total debt is decreasing year
by year.
The total of the balance sheet is higher than base year means increasing year
by year.
Gross block amount is increasing stage but in the net block is not much in
increasing stage. Because the reason behind that depreciation and the
working progress amount is calculated.
The bad thing is that the cash and bank balance is highly decreasing in 2011
year as compared to the Value of base year.
It is not good for the company, if they want to some fund which is required
that fulfilled the new technology.
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Common size income statement analysis allows an analyst to determine how the
various components of the income statement affect a company's profit.
It also allows for the analysis of a company over various time periods, revealing
for example what percentage of sales is cost of goods sold and how that value has
changed over time.
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2006-07
2007-08
2008-09
2009-10
2010-11
1845.01
15.78
1829.23
143.09
97.95
2070.27
2215.65
2.33
2213.32
97.11
9.49
2319.92
2347.50
2.68
2344.82
-54.05
34.85
2325.62
2318.49
1.74
2316.75
69.5
-18.78
2367.47
2665.81
2.23
2663.58
80.71
93.63
2837.92
Income
Sales Turnover
(-) Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
2006-07
2007-08
2008-09
2009-10
2010-11
89.12
0.76
88.36
6.91
4.73
100.00
95.51
0.10
95.41
4.19
0.41
100.00
100.94
0.12
100.83
-2.32
1.50
100.00
97.93
0.07
97.86
2.94
-0.79
100.00
93.94
0.08
93.86
2.84
3.30
100.00
Income
Sales Turnover
(-) Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
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Interpretation:
The income statement or profit and loss account is considered as a
very useful statement of all financials statement. It depicts the expenses incurred
on production, sales and distribution and sales revenue and the net profit or loss for
a particular period. It shows whether the operations of the firm resulted in profit or
loss at the end of a particular period. In comparative analysis for the income is that
the income of the company is gradually increase in every year.
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Particulars
2006-07
2007-08
2008-09
2009-10
2010-11
1.00
1.00
1.00
1.00
1.00
1.00
1.20
0.15
1.21
0.68
0.10
1.12
1.27
0.17
1.28
-0.38
0.36
1.12
1.25
0.11
1.27
0.49
-0.20
1.14
1.44
0.14
1.45
0.56
0.96
1.37
Income
Sales Turnover
(-) Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Interpretation:
Trend analysis is an extension of horizontal analysis. Their methodology is very
simple. The utility of this tool of analysis lies in the fact that while two years comparisons may
provide indication of growth
The amount of sale is very variable. The amount of net sale is also very variable. But it is
good position.
Total income is increasing means the base year value is lower than other years. The
reason behind that, the stock adjustments are increasing good stage.
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Changes in Assets
--------------------------------------------------In Rs. Cr. --------------------------------------------------
Particulars
2006-07
2007-08
2008-09
2009-10
2010-11
Assets
2044.89
2036.21
2042.29
1918.11
2001.96
Interpretation:
In comparative analysis for assets, it is showing that in 2010 the
assets have gradually decrease and in 2012 it is stable. No major assets increase
in last three years. It means there are not purchasing the assets in major
quantity.
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Change in Liabilities
--------------------------------------------------In Rs. Cr. --------------------------------------------------
Particulars
2006-07
2007-08
2008-09
2009-10
2010-11
Liabilities
3716.77
3659.14
3771.51
3663.49
3953.85
Interpretation:
In comparative analysis for 2011 years is that liabilities of the
company are increasing highly which is not good for the company. The debtors
have not give money regularly.
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Change in Profit
--------------------------------------------------In Rs. Cr. --------------------------------------------------
Particulars
2006-07
2007-08
2008-09
2009-10
2010-11
Profit
11.34
-21.55
12.36
20.27
24.20
Interpretation:
In comparative analysis of profit, in 2010-11 profit of the company
has increase substantially but in 2008 it has decrease substantially.
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FINANCIAL ANALYSIS
Ratio
Formula
ROCE
(%)
(EBIT /
CE) X
100
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(197.12
5.20
(206.81
5.53
(168.15
4.39
(265.32
8.06
(350.24
8.22
/
/
/
/
/
3787.49)
3737.98)
3826.51)
3290.58)
4259.71)
x 100
x 100
x 100
x 100
x 100
Note: Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus +
Long Term Debt- Fictitious Assets
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Interpretation:
A measure of the return that a company is realizing from its capital
employed. The ratio can also be seen as representing the efficiency with which
capital is being utilized to generate revenue. It is commonly used as a measure for
comparing the performance between businesses and for assessing whether a
business generates enough returns to pay for its cost of capital. Of course the
higher the ratio, the better will be the profitability of the company.
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Formula
RONW
(%)
(PAT /
NW) X
100
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(25.27 /
1.92
(27.36 /
1.96 (-47.87 / -4.20 (52.00 /
3.88
(134.8 /
9.06
1316.31)
1391.51)
1138.80)
1339.29)
1490.40)
x 100
x 100
x 100
x 100
x 100
Interpretation:
The amount of net income returned as a percentage of shareholders
equity. Return on net worth measures a corporation's profitability by revealing how
much profit a company. This ratio indicates the productivity of the owned funds
employed in the firm. However, in judging the profitability of a firm, it should not
be overlooked that during inflationary periods, the ratio may show an upward trend
because the numerator of the ratio represents current values whereas denominator
represents historical values. it conclude the resources of the firm are being used,
higher the ratio, better are the results.
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EPS (Rs)
Formula
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(PAT / Avg. (25.27
1.20
(27.36
1.24 (-47.87 -2.19 (52.00
2.24
(134.8
5.30
outstanding
/
/
/
/
/
Eq. shares) 20.938)
21.898)
21.898)
23.198)
25.440)
X 100
x 100
x 100
x 100
x 100
x 100
Interpretation:
The portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serve as an indicator of a company's
profitability. This ratio is generally considered to be the single most important
variable in determining a shares price the more the earnings per share ratio, more
would be the profitability of the company that means that the chances of getting
high return on investment is maximum, if you invest in the stock of a company
having a high earnings per share ratio. So here, the people would invest more in
2010-11 than in 2009 or 2008, because the ratio of 2011 is greater than that of
other years.
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SOLVENCY RATIOS:
Net Asset Value
Ratio
NAV
(Rs)
Formula
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(NW / Avg. (1316.31 62.87 (1391.51 63.55 (1138.80 52.00 (1339.29 57.73 (1490.40 58.58
outstanding
/
/
/
/
/
Eq. shares) 20.938)
21.898)
21.898)
23.198)
25.440)
X 100
x 100
x 100
x 100
x 100
x 100
Interpretation:
This ratio measures the net worth or net asset value per equity share. Its
thus seeks to assess as to what extent the value of equity share of a company
contributed at par or at a premium has grown or the value/wealth has been created
for the shareholders. The higher the ratio is, the better the financial position of the
company. If, we assume the no. of equity shares issued is no change in net worth of
the company. The book value per share decreased from 2008-09 and increased in
2011 indicating that the net worth of the company decreased and then increased in
2011.
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Debt Equity
Ratio
Formula
Debt
Equity
(Times)
(Longterm
Debt /
NW) X
100
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(1934.31 1.47 (1872.46 1.35 (2023.94 1.77 (1870.58 1.40 (1812.12 1.22
/
/
/
/
/
1316.31)
1391.51)
1138.80)
1339.29)
1490.40)
x 100
x 100
x 100
x 100
x 100
Interpretation:
This ratio indicates the ability to pay back the long term
borrowings so the lower the ratio, the better it is. As we see that the debt equity
ratio is increasing from 2008-09, this indicates that the company does not have
sufficient funds to pay back its debts. The ratio should be ideally less than 1, but
then as the ratio has slightly decreased from 2010-11, this indicates the companys
position has improved to some extent. But still company is facing crisis in terms of
paying back the long term borrowings.
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Formula
DSCR
(Times)
(PAT +
Dep. +
Int. on
Debt /
Int. on
Debt)
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(25.27 +
1.08
(27.36 +
1.09 (-47.87+ 1.04
(52.00 +
1.08 (134.80+ 1.13
143.36 +
136.64 +
122.05+
113.8 +
116.16 +
1934.31)
1872.46)
2023.94)
1870.58)
1812.12)
/
/
/
/
/
1934.31
1872.46
2023.94
1870.58
1812.12
Interpretation:
This ratio shows how many times interest charges are covered by funds
that are available for payment of interest. An interest cover of 2:1 is considered
reasonable by financial institutions. A very high ratio indicates that the firm is
conservative in using debt and a very low ratio indicates excessive use of debt.
This ratio suggests as compare to interest payment how much the company
earning. This ratio is been calculated specially for interest capacity of the business.
We conclude that in 2008, it is decreased but gradually increase in 2011 year. That
is why it is for the good company.
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DU PONT ANALYSIS
Ratio
RONW
(%)
Formulae
2006-07
(25.27 / 1316.31) x
100
2007-08
(25.27 / 1829.23) x
100
1.92
1.38
1.39
(27.36 / 2213.32) x
100
(2213.32 / 1391.51)
1.96
1.23
1.59
(-47.87 / 1138.80) x
100
(-47.87 / 2344.82) x
100
(2344.82 / 1138.80)
-4.20
2009-10
(52.00 / 1339.29) x
100
-2.04
(52.00 / 2316.75) x
100
=
2010-11
(27.36 / 1391.51) x
100
=
2008-09
(1829.23/ 1316.31)
2.06
(2316.75 / 1339.29)
3.88
2.24
1.73
(134.80 / 1490.40) x
100
(134.8 / 2663.58) x
100
(2663.58 / 1490.40)
=
9.06
x
5.06
1.79
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Interpretation:
This ratio analysis shows increase in RONW through which we can
see improvement in both net profit margin as well as net worth turnover. In other
word the overall ROI has improved due to higher resource efficiency as well as
higher operating margins. In year 2009 thus there is fall in both net profit margin
as well as net worth turnover. When it gradually increases in year 2010 and 2011
thus we can see improvement in both ratios which is good for company.
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Formula
P/E
(Times)
Market
Price of
the Eq.
share /
EPS
2006-07
(Rs
Result
crores)
(43.45
36.00
/ 1.20)
2007-08
(Rs
Result
crores)
(37.7 / 30.17
124
2008-09
(Rs
Result
crores)
(13.4 /
-6.13
(-2.19)
2009-10
(Rs
Result
crores)
(33.75 / 15.06
2.24)
2010-11
(Rs
Result
crores)
(69.20
13.06
/ 5.30)
Interpretation:
This ratio measures the number of times the earning of the latest year at
which the share price of a company is quoted. This ratio reflects the market
assessment of the future earnings potential of the company. The high P/E ratio
reflects earning potential and a low P/E ratio low earning potential. In above
calculation, the higher ratio shows that the market price more and more and
prestige would be good. Among five years, the good stage of the company in the
year of 2007. However, in 2011 the ratio is 13.06, which is a show that the market
price is less & prestige would be bad.
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Formula
Market
Price
to NAV
(Times)
Market
Price of
the Eq.
share /
NAV
2006-07
(Rs
Result
crores)
(43.45
0.69
/
62.87)
2007-08
(Rs
Result
crores)
(37.70
0.59
/
63.55)
2008-09
(Rs
Result
crores)
(13.40
0.26
/
52.00)
2009-10
(Rs
Result
crores)
(33.75
0.58
/
57.73)
2010-11
(Rs
Result
crores)
(69.20
1.18
/
58.58)
Interpretation:
This ratio is useful to know about market values of an equity share is
generally higher than its NAV. Thus its reflects potential of a share. In the above
calculation shows that it is low in 2009 year and its highly increased in 2011 year.
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Market Capitalization
Ratio
Formula
Market
Capitalization
(Rs)
Market
Price of the
Eq. share /
Avg.
outstanding
Eq. shares
2006-07
2007-08
2008-09
2009-10
2010-11
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
(Rs
Result
crores)
crores)
crores)
crores)
crores)
(43.45 909.76 (37.70 825.55 (13.40 293.43 (33.75 782.93 (69.20 1760.45
/
/
/
/
/
20.94)
21.90)
21.90)
23.20)
25.44)
Interpretation:
This ratio is useful to know about total valuation of a company based
on the market price of its equity. In the above calculation shows that it is low in
2009 year and its highly increased in 2011 year.
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
Table of Financial Ratios of ARVIND MILLS LTD. for last Five Years
Particulars
Mar '07
Mar '08
Mar '09
Mar '10
Mar '11
5.20
5.53
4.39
8.06
8.22
1.92
1.96
-4.20
3.88
9.06
1.20
1.24
-2.19
2.24
5.30
62.87
63.55
52.00
57.73
58.58
Debt Equity
1.47
1.35
1.77
1.40
1.22
1.08
1.09
1.04
1.08
1.13
1.38
1.23
-2.04
2.24
5.06
1.39
1.59
2.06
1.73
1.79
36.00
30.17
-6.13
15.06
13.06
0.69
0.59
0.26
0.58
1.18
Market Capitalization
909.76
825.55
293.43
782.93
1760.45
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
In the Financial World every company must know about its own financial position.
It is necessary for the company to know its profitability. And for that purpose it is
require analyzing companys Financial Statements. Financial statements show the
real picture of the company in terms of money. Management of the company is
keenly interested in knowing the real performance of the company. That is why
financial statement analysis is required for knowing the actual financial position
and forecasting the future
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Scope:
The study of financial statement analysis is very useful for the Management in
taking future decisions.
It is very much useful from the investors point of view.
The financial statement analysis is very much useful for financial institutions.
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RESEARCH METHODOLOGY
Research in common parlance refers to a search for knowledge. In fact research is
an art of scientific investigation. The Advanced Learners Dictionary of current
English lays down the meaning of research as a careful investigation or inquiry
especially through search for new facts in any branch of knowledge.
For the preparation of project report several method were used to collect data and
pertinent information. The data required for the studies were collected is primary
source. Detailed questionnaire were prepared covering as many variables as
possible.
SOURCE OF DATA :
Secondary data:
Balance sheet, business magazines & from executives interviews (media
interview) basically, this research is based on the secondary data, provided by the
company and other financial tools.
TYPE OF RESEARCH:
Descriptive Research:
Descriptive research is carried out with specific objectives and hence its result in
definite conclusion. This research tries to explain the characteristics of the
particular project. In this project we are using the descriptive research.
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CHIMANBHAI PATEL INSTITUTE OF MANAGEMENT & RESEARCH
Findings
Types of Analysis
COMPARATIVE BALANCE SHEET
COMPARATIVE INCOME
STATEMENT
TREND ANALYSIS
Changes in Assets
Change in Liabilities
Findings
The comparative balance sheet gives
information about company position
such as current asset is more than
current liabilities and share capital
amount is increasing every year which is
very good for company. Cash & bank
balance has decease which bad for
company
The comparative income statement
shows the net profit or net loss of
Arvinds thus we see current scenario
company is in gradually increase in like
sales, gross profit, net profit which is
good for company aspect of view.
In trend analysis company is facing
problem in cash & bank balance which
has decrease compared to base year
which is bad for company. In other
aspect net sales and total income amount
is also increasing trend which excellent
growth of company.
Its shows the information about
company position of assets, through
which it should be twice than current
liabilities. Here the company has Rs
651.33 cr. & assets of Rs 1276.99 cr.
Company has made good effort to
decrease liabilities & increase assets.
The information about company
position of liabilities, through which
decrease in various liabilities which is
good for company.
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Change in Profit
ROI RATIOS
SOLVENCY RATIOS
DU PONT ANALYSIS
VALUATION RATIOS
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SUGGESTION
It is observed that Companys Net profit margin ratio has increase by 5.06%
in 2010-11 as compared to 2009-10; here company is doing excellence work
so no need to change it.
It has been seen that RONW in 2008-09 was -4.20% 2009-10 was 3.88 %
and finally in 2010-11 was only 9.06 %. Thus RONW is increase gradually.
So the Company should has made effort in optimizing the usage of the funds
invested by Equity share holder.
It is observed that Debt Equity has increased in 2008-09 was 1.77 times &
2010-11 it has decreased to 1.22 times. This indicates company has to do
more work to improve their condition.
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The study provides an insight into the financial and other aspects of the company.
Every study will be bound with certain limitations.
Most of the information has been kept confidential and as such not assed as
it was the policy of the company.
The study is limited only to past few years information which might not
show the clear picture about the performance.
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CONCLUSION:
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LEARNING
It was a great learning experience for me during my training period. I have learned
many things about the corporate culture. The internship training gave me many
opportunities to learn many things in a very short period of time. It almost felt like
I was working for a company.
The finance department cannot function effectively without the help &
support of H.R, Marketing or Operational department neither they can work
individually. They constantly need each others support. They work as a
team.
The most important learning that has gained is interpersonal skills. As this
skill can either make or break the career.
To adjust to different working places and conditions and also learned the
importance of being assertive and not aggressive.
Apart from these, Discipline and Punctuality are the other two values that
have to be imbibed in us for a successful career and a person.
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BIBLIOGRAPHY:
www.arvindmills.com
www.moneycontrol.com
The research papers of financial analysis are available from the internet.
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ANNEXURE
I have not used primary data. So the questioner is not prepared.
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