CHAPTER.1.

INTRODUCTION

1 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.1.INTRODUCTION
1.1. ABOUT THE TOPIC
1.1.1. INTRODUCTION OF THE TOPIC A Ratio is only a Comparison of the Numerator with the Denominator. The term Ratio refers s to the Numerical or Quantitative Relationship between two Figures and obtained by Dividing the Former by the latter. Ratios are designed to show how one Number is related to another. It is worked out by dividing one Number by Another. The topic Historical comparison and interpretation of ratios of Garden Silk Mills Ltd, here the topic is all about comparison of ratios of current year with the past few years and the interpretation of those ratios. Ratio analysis is the process of determining and interpreting numerical relationship based on financial statements. It is the technique of interpretation of financial statements with the help of accounting ratio derived from the balance sheet and profit and loss account. It involves the comparison of existing ratios against standard established. 1.1.2. MEANING OF ACCOUNTING RATIO A ratio is simply one number expressed in terms of another , it is an expression of relationship spelt out by dividing one figure by another. It is quotient of two arithmetical numbers obtained from financial statements.Wixon, kell and Bedford in their book accounts handbook define ratio, as an expression of the quantitative relationship between two numbers. According to J. Batty the term accounting in ratio is used to describe the significant relationship which exists between figures shown in balance sheet and profit and loss account in budgetary control system or any other part of accounting organization. 2 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

1.1.3. STEPS INVOLVED IN RATIO ANALYSIS 1. Selection of relevant data from the financial statements

depending upon the objective of the analysis. 2. Calculation of appropriate ratios from the above data. 3. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industries to which the firm belongs. 4. Interpretation of ratios. 5. Projection through ratios.

3 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

1.2. IMPORTANCE OF THE TOPIC

Ratio analysis is very important for any company for comparison of financial data here some importance is given. Useful in financial position analysis the banks, insurance companies and other financial

Accounting ratios reveal the financial position of the concern. This helps institutions in lending and making investment decisions. Useful in simplifying accounting figures ratios simplify, summarize and systematize the

Accounting

accounting figures in order to make them more understable and in lucid form. They highlight the inter-relationship which exists between various segments of the business as expressed by accounting statements. Useful in assessing the operational efficiency

Accounting ratios help to have an idea of the working of a concern. The efficiency of the firm becomes evident when analysis is based on accounting ratios. They diagnose the financial health by evaluating liquidity. Useful in forecasting purposes

If accounting ratios are calculated for a number of years, then a trend is established. This trend helps in setting up future plans and forecasting. Useful in locating the weak spots of the buzz

Accounting ratios are of great assistance in locating the weak spots in the business even though the overall performance may be 4 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

efficient. Weakness in financial structure due to incorrect policies in the past or present are revealed through accounting ratios

1.3. ABOUT THE ORGANIZATION

1.3.1. HISTORY OF THE COMPANY Garden Silk Mills Ltd. is one of the manufacturers of synthetic yarn and fabric in India. The Garden Silk Mills Ltd established in 1920 by Dr. Amichand Shah. He established first composite mill Bela Mill at Sahara Darwaja in Surat and did a revolutionary task for the Surat textile industry. Mr. Praful A. Shah, the youngest son of Dr.Amichand Shah is the managing director of the Garden Silk Mill Ltd. He holds the degree of engineering from the University of Stanford in the U.S.A, 1965. In order to remain at forefront in the market and with a vision to satisfy the ever changing mood of the customer the Company started art studio way back in 1975. With this initiative company has been benefited to a great extent in furnishing a very wide and attractive range of designs to the buyer. The first retail shop was opened in 1970. The extension of the policy of vertical immigration into the retailing sector had advantages of uniform pricing; close marketing monitoring, communication between manufacturer and consumer. It increased retail network now extended to some 213 authorized outlets. After achieving lead at domestic front, In the end of 1970s, The company started exporting Products to European markets.

5 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

In the 1980s, the company started two new manufacturing facilities with investment of about 12 billion at VARELI and JOLWA , about 12 kms away from Surat. Company with its visionary and dynamic leadership had a track record of continuous emphasis on expansion and modernization of plant and equipment. It has the largest water Jet Loom and Filament two-for-one twisting machine installation under one roof in Asia. The company further under its policy of vertical integration started manufacturing Polyester Filament Yarn at Jolwa. The Garden Silk Mills Ltd. has mainly produces two kind of product: 1. POY (Partially Oriented Yarn) 2. FABRICS The Company has one plant of POY in JOLWA and other plant to manufacture fabric in the village of VARELI. Both the plants are not distant from one another and are near to the SURAT city. The company is one of the largest manufacturers of the product like POY and PFY (Polyester Filament Yarn) in India. The company wants to be reach at the top level in the POY product.

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1.3.2. CORPORATE INFORMATION NAME OF THE COMPANY: GARDEN SILK MILLS LTD

REGISTERED OFFICE: -

Sahara Gate, Surat-395010 Tel:(0261) 2311197-98, 2311615 Fax:(0261) 2311029/502 http:/www.gardenvareli.com

PLANTS :-

a) Village Vareli, Tal. Palsana, Dist. Surat-394 327 Tel: (02622)271241-47. b) Village Jolwa, Tal. Palsana, Dist. Surat-394 305 Tel: (02622) 271287-89.

CORPORATE OFFICE: -

Manek Mahal, 90, Veer Nariman Road, Chuchgate, Mumbai - 400 020 Tel: (022) 2287 3117-19 Fax :( 022) 2204 8112.

REGISTERED AND TRANSFER AGENTS:-

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Karvy Computershare pvt.ldt. P Plot.no.17 to 24, vittalrao Nagar, Madhapur, Hyderabad 500 081 Tel.no.040-23420815 to 24 http:/www.karvy.com

BOARD OF DIRECTORS:-

Praful A. Shah (Chairman & managing director) Alok P. Shah (Joint managing director) Suhail P.Shah (Executive director) Shilpa P. Shah (Executive director) Arunchandra N. Jariwala J.P. Shah Rajen P. Shah Sanjay S. Shah (Executive director) Yatish Parekh Sunil S. Sheth Madanlal U Lankapati Anjan Mukherjee (Nominee of LIC )

COMPANY SECRETARY: AUDITORS: -

Kamlesh Vyas Natvarlal Vepari & Co. (Chartered accountant, Surat)

BANKERS:

Bank of Baroda Allahabad Bank 8

G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

State Bank of India Bank of India State Bank of Patiala

Sr. No 1 2 3 4 5 6 7 8 9 10

Category Promoters Mutual funds & UTI Bank Financial Ins. & Insurance Co. FIIs Foreign Financial Institution Private Bodies Corporate NRIs/OCBs Indian Public Share underlying GDRs Others:Trust Clearing Members Total

No. of shares held 21189695 13950 1540946 6805 81141 3765395 3496836 7903598 275675 520 15999 382902560
Corporation Bank Union Bank of India Indian Bank

Holding strength 55.34 0.04 4.02 0.02 0.21 9.83 9.13 20.56 0.72 0.00 0.04 100.00

Landesbank Baden-Wrttemberg

1.3.3. CATEGORIES OF SHAREHOLDERS

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1.3.4. ORGANISATION STRUCTURE OF THE COMPANY

Chairman & Managing Director

Finance Director

Marketing Director

Production Director

Human Resource Director

Vice President

General Manager

Deputy General Manager

Staffs

10

G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

1.3.5. PRODUCTION DEPARTMENT

Chairman & Managing Director

Senior Manager (Weavin g)

Senior Manager (Quality Assurance )

Senior Manager (Utilization)

Senior Manager (Draw Wrapping & Sizing)

Vice President

General Manager

Deputy General Manager

Staffs

11

G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

MANUFACTURING PRODUCTS (a) Sarees. (b) Dress materials (c) Menswear (d)Shirting (e) Ladies Garments (f) Childrens Wearing

TYPES OF PRODUCT MANUFACTURING CYCLE. Initially Products are in Raw Material form which has to be converted into Finished Goods. Such a Process of starting to End each of this Process its called Product Manufacturing Cycles.

Chips

Yarn

Grey

Finished cloth
12 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Sarees
.

Dress Material

1.3.6. MARKETING DEPARTMENT

Marketing manager

Saree material head

Dress material head

Assistant (Production)

MIS

Assistant (Production)

MIS

TYPES AND CLASSIFICATION OF PRODUCT

Product classification means to differentiation between the products. The GARDEN Company also has many kind of product classification like POY, TEXTURED YARNS and DRAW WINDER. But the main product is the POY this company has the great market after the RELIANCE. List of some products of the company are as follows. (a) POY (Partially Oriented Yarn) (b)Textured Yarn (c) Draw Tex Yarn. 13 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

(d)Fully Drawn Yarn (e) Draw Winder

DETAILS OF COMPETITORS. A competitor means the person who is manufacturing product of the company, which is similar to the other company means that product can be substitute for the competitor. GARDEN company has so many competitors in the domestic market of these RELIANCE is the biggest competitor which is also number one in POY in India. Some name of the competitors are as follows Reliance Synthetics Gupta Synthetics Indo-Rama Synthetics JBF Industries Modern Petrofils Nova Petrochemicals Century Enka

TARGET MARKET Once production is done the other priority of the marketing department is to sell those goods in the market at the right time and at the right place. To sell their product at maximum price they have to consider the different segment of the market and this segment of the market is known as the TARGET MARKET.

14 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

The target market for the GARDEN company is the silk city Surat itself. Company also has sales at other cities of GUJARAT. So, much work is done at Surat city. Also another place they sell their goods in city of MAHARASTRA and also they sell some product in other state of INDIA. They also export their goods but at a small scale. MARKETING PROCESS The Marketing Process has mainly two Fashions of the Products are as follows:(a) New Design (b) Repeat Order (a) New Design:Some variety of design is launched in the market. The designs are developed according to the trends in the market and prevailing season. The developed design is sent to the prevailing season and also the members of the distribution channel. (b) Report Order:After the order is placed, it is consolidated through out the country. The order is carried out according to the capacity of the machine. Maximum production capacity is kept in mind. DISTRIBUTION NETWORK There is usually a large channel of distribution. This includes from manufacture the product. The manufacturer sells it to wholesalers and the wholesalers give it to the retailers and finally retailers is selling it to the consumer. Its also described in this way.

15 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Manufacturer Wholesaler Retailers Consumers The main product of the company is POY. Which is the industrial product and the distribution network of the company is not complex. In this network each stage has involve only one person who is known as DEALER. DEALER is between the manufacturer and wholesalers, also between the wholesalers and retailer, also between the retailers and customers. DEALER has play a very important role in this distribution network. Generally, so many companies are deals with the dealer .The dealers sales the product to the industrial customers and he mainly acts as a guarantee on behalf of the customers for the payment of the company. The dealers also have the information about the customers needs, new fashions, variety etc. is providing to the company. The Garden Company sells their product by dealers only. The dealers get the commission from the company and also from the customers. The dealers network is in Gujarat, Maharashtra, and Rajasthan etc. Some names of the dealers are as follows: (a) Gheewala Brothers (b)Ekta Textiles (c) Anudhara Textiles MARKETING MIX OF THE COMPANY 4 Ps of the company are given below 16 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

(a) Product (b) Price (c) Place (d) Promotion The whole company is greatly depends upon those 4 Ps. The main product of the Garden Silk Mills is Polyester Yarn which is the raw material for production of the fabrics. COMPARITION OF 4 PS WITH COMPETITORS ARE AS FOLLOWS. (a) Products Product is a main part of the company. The product must satisfy the needs of its customer. Garden Silk Mills produce Polyester Yarn which is an industrial product. The company makes the product as per the needs of its customer. So many competitors in the market but the strong competitor of the Garden Silk Mills is Reliance, which produces the same Product. (b) Price

Price shows the value of the companys product. Every companys product price is depends on the consumer demand. When we compare to the both company in a pricing level then we can say that price of the Garden company is less than then the Reliance company. These two competitors play a significant role in the market according to their price of their price of products. (c) Place

Physically distribution is the delivery products at the right time and at the right place. The company has selected different Places for the different department to sell its products like the marketing department is in Surat, because there is a high demand of Yarn in Surat as it is known as Textile city. The production department is in Vareli and The sales department is in Mumbai, Bangalore etc. The company also sells its product to the foreign countries. 17 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

(d)

Promotion

The firm also must undertake promotion work likes advertising, publicity and personal selling etc. The Garden Silk Mills manufactures Synthetic Yarn and Fabric which is the industrial product. The company does promotional activities through electronic media, print media, hoarding, FM radio, etc... They sell their product through a very strong network of dealers across the country which play very significant role between manufacturer and customers. ADVERTISEMENT AND PROMOTION POLICIES Advertising can be making a Good Impression among Consumer According to the Product. The Sales of a Product can be increased to a Great Extent with the Help of Advertisement. But in GARDEN Company Mainly Dealing with Yarn which is Raw Material for Fabric. The Company does Promotional Activities through Electronic media, Print media, Hoarding, FM radio, etc... They Sell Their Product through a very strong network of Dealers across the country which Play very significant role between Manufacturer and Customers. Advertising Offers a Reason to Buy and Sales Promotion. Promotion is now a days more Accepted by top management as an effective Sales Tool. The Company always tries to Promote their Products in the way by Which The Price of The Product is to be Maintain or Reduce and Quality is Improved so that They can Offer better Product to their Product to their customer. They also do Trade Promotions like Giving Free Yarn Samples and Prices off.

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1.3.6. FINANCE DEPARTMENT STRUCTURE

Finance Director

Finance Manager

Accountant

Assistant

Accountant

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1.3.7. HUMAN RESOURCE DEPARTMENT

HUMAN RESOURCE PLANNING Human Resource Planning is the Process by which an Organization ensure that it is the Right Number and Kind of People at the Right Place, at the Right Time Capable of effectively and efficiently and Completing those task that will have the Organization Achieved its overall Objectives. => Human Resource Planning is also Called Manpower Planning, Personnel Planning and Employee Planning. => All the Companies are Followed Different types of Human Resource Planning but GARDEN Company Followed Human Resource Planning is as shown below FORECASTING THE DEMAND OF HUMAN RESOURCE: Forecasting refers to the Estimates of the Future Demand of the Employee and also them Consider mainly two Factors are as Follow: (1) External Factors (2) Internal Factors (1) External Factors 20 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

(1.1) Political, Legal, Social and Technical Charges:The Demand For Certain Categories of Employee and Skills is also Influenced by Changes in Political, Legal and Social Structure of an Economy. In the GARDEN Company, It has appointed the Experience Technicians and Engineers during the last Doubled-Edged Weapon. As it is when Technology Changes, The Company also appointed new Technicians and Engineers for the Cope with the new Technology. (1.2) Competition:GARDEN Company has lots of Competition. But the Company has never LEAN to the Other Companies. The GARDEN Company always Stay a Stable in Competitive Market. The Company always try to make well and Launching well at the Reasonable Price in Market. Because of that they can easily fight with the other Company. (2) Internal Factors (2.1) Organization Decisions:In Human Resource Planning, The Company Undertakes the Strategic Plan. It takes into Consideration the Sales and Production Forecasts. The Company is expecting a Higher Demand of Textured Yarn and for this, The Company has Long Term Planned (2.2) Workforce Factors:The Demand for New Job Occurs because of Retirement, Promotion, and Transfer etc. The GARDEN Companies due to Past Experience the Rate of Occurrences of all these actions by Employees are Predictable. (2.3) Forecasting Techniques:The Manpower Forecasting Techniques Employed by the GARDEN Company has two Forecasts are as below: (a) Expert Forecasting 21 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

In the GARDEN Company, Manager is Estimates Future Human Requirements. Sometimes the Company also appoints the expert to Forecast Human Resources along with the Managers Experience and Judgments which gives the Good Effect. (b) Trend Analysis The GARDEN Company is deciding or Forecasting, its Human Resource needs through Projecting Past Trends. Past Rates of Change can be projected into Future or Employment Growth can be estimated by its Relationship with a Particular Index. RECRUITMENT PROCESS OF GARDEN SILK MILLS It is the Process of Searching for Require Person and Stimulating then to apply for Job in an Organization. -> Recruitment Process is Positive in Nature because it attracts as many as possible applications. The GARDEN Company is Recruiting People by Using these three Methods are as follows: (a) Internal Methods (b) Direct Methods (c) Indirect Methods (a) Internal Methods: Internal Methods means to Recruit the Employees from within the Company Some Internal Methods are as follows: (1) Promotion and Transfers:This Method is used to fill the vacancies from within the organizations

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through Promotions and Transfer. Sometimes, The Company also recruits People in two ways Like Either by giving Promotions or by giving Transfer. Promotion is an upward Movement or Vertical level or Development of an employee for the Another Job in an Organization. Transfer is a Horizontal level of an Employee from one Job to another in the Same Organization Without any changes.

(2) Job Posting:This is the way used by Garden company to hire people from within the organization. Under this, the company publishes job opening on bulletins, boards, electronic media and other similar outlets. The main aim of the company is to use this method because it offers a change to highly qualified applicants working within the company to look for growth opportunities within the company without looking for green pastures outsides. (B) Direct Method (1) Campus Recruitment:Generally,the company is not much using this method because of the managers of the company visit in the college campus or their placement center. Most of companies are not used this method because of this method is very costly. (c) Indirect Method

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The indirect method consists of the advertisements in the newspaper, magazines, posters, televisions, radio etc. When company need some person for the particular job, the company applied first of all recruitment process after it selection process then finally to offer job to selected job. First of all temporary job can be offer then after training given to employees during these induction program can be done through this new employee introduce with company and other detail of company Preleminaryemployee. given to new interview

Selection test SELECTION PROCESS OF GARDEN SILK MILLS Employment intrview

Reference & background analysis

Selection decision

Physical examination

Job offer 24 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT Employee contract

1.4. Benefit of the study

(a) To organization: Company can take decision on the basis of ratio analysis and take action according to it. A company can understand the problems and can try to achieve their future goals and objectives. A company comes to know what is the situation in the market as compare to past year and with other firms. The collected data and study help to company to take decision for future course of action.

(b)To myself:

Researcher

has

found

managed

corporate

culture

and

punctuality in Garden Silk Mills Ltd. which has benefited to improve ability and behavior that makes me well advanced before entering in corporate world. 25 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

By this training I came to know about textile industry and its plants and also about Garden Silk Mills Ltd. and its tremendous work over and above financial matters at Garden Silk Mills Ltd. like collection, payments inventory management etc. has also enhanced my skills and to learn corporate practices in the industry.

Due to this training, opportunity to get experience in textile industry and its methodology. It helps in getting complete knowledge about the ratio analysis in Garden Silk Mills Ltd.

CHAPTER.2.INDUSTRY PROFILE

26 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.2.INDUSTRY PROFILE
2.1. NATIONAL LEVEL MACRO PICTURE OF INDUSTRY
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Indian textile industry can be divided into several segments, some of which can be listed as below:

Cotton Textiles Silk Textiles Woolen Textiles Readymade Garments Hand-crafted Textiles Jute and Coir

Indias textile and clothing industry contributes 4% per cent to Gross Domestic Product, 14 per cent in industrial production and 12 percent in export earnings. It is the second largest industry providing employment after agriculture. It provides employment to around 35 million people. TUFS: The Government of India (GOI), Ministry of Textiles (MOT), introduced Technology Up gradation Fund Scheme (TUFS) for Textile and Jute Industries on April 1, 1999, for a period of 5 years, subsequently extended by 3 years to cover sanctions up to March 31, 2007. The Budget for F.Y. 2007-08. It has announced further extension of the Scheme by five years i.e to last till, F.Y. 2011-12. Postextension, the Scheme is under revision and sanctions w.e.f. April 1, 2007, has been kept in abeyance under TUFS. Rs. 3140 crore have been allotted in Union Budget 2009-10 for this scheme. The Scheme is intended to facilitate induction of state-of-theart or near state-of-the-art technology. Existing units with or without expansion and new units are eligible under TUFS. Scheme for Integrated Textile Park (SITP): To provide the industry with world-class infrastructure facilities for setting up their textile units, the Scheme for Integrated Textile Park (SITP) was approved in July 28 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

2005 to create new textile parks of international standards at potential growth centers. As per the target for the 10th Five Year Plan, 30 Textiles projects have been approved. There has been overwhelming response to the scheme. Taking into consideration the response to the scheme and the opportunities for the growth of textile industry in the quota free regime, the Government of India have decided to continue the SITP in the 11th Five Year Plan. This will facilitate additional investment, employment generation and increase in textiles production. In the Union Budget 200910, Rs. 397 crore were provided for this scheme. National Textile Policy: In the year 2000, National Textile Policy

was announced. Its main objective was: to provide cloth of acceptable quality at reasonable prices for the vast majority of the population of the country, to increasingly contribute to the provision of sustainable employment and the economic growth of the nation And to compete with confidence for an increasing share of the global market. The policy also aimed at achieving the target of textile and apparel exports of US $ 50 billion by 2010 of which the share of garments will be US $ 25 billion. The Central Silk Board under the Ministry of Textiles Government of India has taken some steps to revive this sick industry. It has collaborated with the Japanese Government for technology cooperation for increased cultivation and use of bivoltine seeds. Further, the 10th Plan envisages an increased silk production of 21,800 MT, increased exports by 15%, and creation of livelihoods for around 61 lakh people by the end of year 2007. Strengths of Indian textile Industry: India has rich resources of raw materials of textile industry.

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Current Facts on Indian Textile Industry

India retained its position as worlds second highest cotton producer. Acreage under cotton reduced about 1% during 2008-09. The productivity of cotton which was growing up over the years has decreased in 2008-09. Substantial increase of Minimum Support Prices (MSPs). Cotton exports couldn't pick up owing to disparity in domestic and international cotton prices. Imports of cotton were limited to shortage in supply of Extra Long staple cottons.

Strengths

Vast textile production capacity Large pool of skilled and cheap work force Entrepreneurial skills Efficient multi-fiber raw material manufacturing capacity Large domestic market Enormous export potential Very low import content Flexible textile manufacturing systems

Weaknesses

Increased global competition in the post 2005 trade regime under WTO Imports of cheap textiles from other Asian neighbors Use of outdated manufacturing technology Poor supply chain management Huge unorganized and decentralized sector High production cost with respect to other Asian competitors

30 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

2.2. STATE LEVEL INDUSTRY

GujaratvTextilevIndustries Gujarat has a large flourishing textile industry which contributes to the arts and crafts of India. The textiles have a large variety to offer to the end consumers. It mainly depends on factors like varied raw materials, combination of yarns and effective use of traditional techniques. The enriched range of textiles owes to the people of different communities, castes, tribes and regions of the state, who have kept the age old tradition alive. For instance, Tangalia fabric from Surendranagar is inlaid with thread during weaving, to create geometrical patterns and peacock motifs. Deesa fabric was originally worn by tribes of Gujarat. It contains geometric patterns with bold black outlines, in deep earthy colors. GujaratvGarments The state garment industry of Gujarat is one of the most prosperous ones in India. It provides a wide variety to the buyers. Some of the popular dress items of the industry are Salwars, Kurtas, Ghaghras, Cholis, Odhanis, Skirts and Jackets. All of these are produced from authentic hand block-printed material, creatively embellished with appliqu patterns and embroidery. Apart from this, Sarees are an all time specialty of the region. There are a number of weaving styles practiced in the state, popular the world over. The traditional garments are collected from the villages, where the actual craft of hand weaving is practiced.
<<

Brocade Brocade is a distinctive weaving style of Gujarat. The technique makes use of an extra weft pattern, which has raised the art to new heights. To add to the luster of the fabric, gold thread is worked in the twill weave. This reminds of the weave of the hangings of the yore, exhibited in Gujarat museum. Brocades, with an illusion of inlay work 31 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

on fabric, were first woven in Gujarat. The main centers of brocade weaving are Jamnagar, Ahmedabad, Mehsana and Surat.

Here, silk-satin cloth is used for the Brocade while color is used for the borders. The traditional patterns which adorn the Brocade sarees include floral sprays, stylized shrubs, mango as a motif and a circular coin known as an asharfi. Other garment designs popular amongst the buyers are intricate constellation pattern, animals, fruits, dancing figures, peacocks, women holding fans and different types of lotus. Tanchoi Tanchoi is another weaving style in Gujarat. This weaving technique changes the texture of the fabric. The base material used in this technique is satin. An extra weave float is merged into the fabric. The process is simple yet ingenious. It was introduced by Chinese weavers in Surat. Later, the Parsi community used it extensively. The technique is employed to weave sarees as well as dress material in silk. GharcholavandvPanetar Another famous weaving style of the state includes Gharchola and Panetar. Panetar are Gujarati sarees with satin weave. You can also find them in Gajji silk with red borders. Another popular saree of the region is Gharchola. These are traditional Hindu and Jain wedding sarees, made of silk. For such an auspicious occasion, the number of squares in the saree is kept in the multiples of 9, 12 or 52. Cambay is known for these two weaving styles. Here, the sarees are first woven with silk and then with gold and silver threads. They are then tie dyed or block printed.

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2.3. INDUSTRY PROFILE AT SURAT LEVEL

Surat, an emerging city in the state of Gujarat, is known as the textile city of Gujarat. And, the epithet is perfectly suited to the city. The textile industry is one of the oldest and the most widespread industries in Surat. A major part of the citys population is associated with the textile industry. Overview of the Surat textile industry The textile industry in Surat is mainly engaged in the activities of yarn production, weaving, processing as well as embroidery. Surat is well known for its synthetic products market. It is mainly engaged in the production and trading of synthetic textile products. Nearly 30 million meters of raw fabric and 25 million meters of processed fabric are produced in Surat daily. The city has several textile markets that exist since times immemorial. Zampa Bazaar, Bombay Market, JJ Textile Market and Jash Market are among them. Katat Gam, Magdalla and Udhana are the areas of Surat where manufacturing is mainly concentrated. In the course of time, people from various other places like Rajasthan and Kolkata settled in Surat in order to carry out their textile business. Brands from Surat The famous brands of Garden and Vimal textiles evolved from Surat. A few other brands like Parag and Prafful from Surat did become famous for a short time, but failed to create a lasting impression in 33 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

the market.

Major markets The main market for Surats textile products are India and other Asian countries. Around 90% of polyester used in India comes from Surat. However, international demand for its products is not very significant. The Middle East is the major export market for Surats textile products. According to experts, more improvisation in the quality is required to cater to the demands of the international market. Growth The Surat textile industry has grown considerably over time. As per recent figures, textile production in Surat has grown by 10% in the last 5 years, while the market for embroidery has grown from an almost negligible amount to around Rs. 30000 million over the same period. Strengths One of the main reasons behind the growth of Surats textile industry is the citys ability to adapt to changes and the latest trends. The city is quick to respond to any changes in the preferences of people. The industrialists here have strong entrepreneurial skills. Challenges faced The Surat textile industry has gone through quite a few setbacks as well. Most of the traders have a fixed group of clients, with whom they trade. Most of the business is done on a credit basis. According to the Federation of Surat Textile Traders Association, the industry suffered a loss of Rs. 200 crores in the year 2004-05 on account of frauds by customers. The industry suffered a huge loss in the floods of 2006 as well. Around 40000 textile shops were damaged in Surat in these floods and the total loss was reported to be at Rs.10 crore per 34 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

day. However, the city has always been quick to rise from these setbacks. Conclusion In spite of certain drawbacks, the city occupies a major position in the production of manmade fabrics. Around 65% of Indias manmade fabric production is done in Surat. The city expects a growth rate of 1520% in manmade fabric demand in the near future. Hence, the future of the Surat textile industry does look bright.

35 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.3.RESEARCH METHODOLOGY

36 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.3. RESEARCH METHODOLOGY

3.1 FORMULATION OF PROBLEM Ratio analysis is the very important for analyzing the financial data and comparing it to the past years for that here the research problem is comparison of ratios of current year with the history and then interpretation of it for financial purpose of the company. 3.2. REVIEW OF LITERATURE A. THE GLOBAL STEEL INDUSTRY The current global steel industry is in its best position in comparing to last decades. The price has been rising continuously. The demand expectations for steel products are rapidly growing for coming years. The shares of steel industries are also in a high pace. The steel industry is enjoying its 6th consecutive years of growth in supply and demand. And there is many more merger and acquisitions which overall buoyed the industry and showed some good results. The subprime crisis has lead to the recession in economy of different countries, which may lead to have a negative effect on whole steel industry in coming years. However steel production and consumption will be supported by continuous economic growth. CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY

37 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

The countries like China, Japan, India and South Korea are in the top of the above in steel production in Asian countries. China accounts for one third of total production i.e. 419m ton, Japan accounts for 9% i.e. 118m ton, India accounts for 53m ton and South Korea is accounted for 49m ton, which all totally becomes more than 50% of global production. Apart from this USA, BRAZIL, UK accounts for the major chunk of the whole growth. The steel industry has been witnessing robust growth in both domestic as well as international markets. In this article, let us have a look at how has the steel industry performed globally in 2007. Capacity: The global crude steel production capacity has grown by around 7% to 1.6 bn in 2007 from 1.5 bn tones in 2006. The capacity has shown a growth rate of 7% CAGR since 2003. The additions to capacity over last few years have ranged from 36 m tones in 2004 to 108 m tones in 2007. Asian region accounts for more than 60% of the total production capacity of world, backed mainly by capacity in China, Japan, India, Russia and South Korea. These nations are among the top steel producers in the world.

38 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Production: The global steel production stood at 1.3 bn tones in 2007, showing an increase of 7.5% as compared to 2006 levels. The global steel production showed a growth of 8% CAGR between 2003 and 2007. China accounts for around 36% of world crude steel production followed by Japan (9%), US (7%), Russia (5%) and India (4%). In 2007, all the top five steel producing countries have showed an increase in production except US, which showed a decline.

Rank Country 1 2 3 4 5 6 China Japan US Russia India South Korea

Production (mn tones) World share (%) 489 120 98 72 53 51 36.0% 9.0% 7.0% 5.0% 4.0% 3.5%

Source: JSW Steel AR FY08

Consumption: The global steel consumption grew by 6.6% to 1.2 bn tonnes as compared to 2006 levels. The global finished steel consumption showed a growth of 8% CAGR, in line with the production, between the period 2003 and 2007. The finished steel consumption in China and India grew by 13% and 11% respectively in 2007. The BRIC countries were the major demand drivers for steel consumption, accounting for nearly 80% of incremental steel consumption in 2007.

39 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Rank Country 1 2 3 4 5 6 China US Japan

Consumption tonnes) 408 108 80

(mn World (%) 36.0% 9.0% 6.7% 4.6% 4.2% 3.3%

share

South Korea 55 India Russia 51 40

Sourc e: JSW Steel AR FY08 Outlook: As per IISI estimates, the finished steel consumption in world is expected to reach a level of 1.75 bn tones by 2016, growth of 4% CAGR over the consumption level of 2007. The steel consumption in 2008 and 2009 is estimated to grow above 6% B. Indian Steel Industry India, which has emerged among the top five steel producing and consuming countries over the last few years, backed by strong growth in its economy. Capacity: Steel capacity increased by 6% to 60 m tones in FY08. It registered a robust growth of 8% CAGR between the period FY04 and FY08. The capacity expansion in the country was primarily through brown field expansions as it requires lower investments than a greenfield expansion.

40 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Production: Steel production has registered a growth of 6% to reach a level of 54 m tones in FY8. The production has grown nearly in line with the capacity expansion and registered a growth of 7% CAGR with an average capacity utilization of 92% between the period FY04 and FY08. India is currently the fifth largest producer of steel in the world, contributing almost 4% of the total steel production in world. The top three steel producing companies (SAIL, Tata Steel and JSW Steel) contributed around 45% of the total steel production in FY08.

Fig-4 41 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Consumption: Steel consumption has increased by 10% to 51.5 m tones in FY08. Consumption growth has been exceeding production growth since past few years. It grew at a CAGR of 12% between FY04 and FY08. Construction & infrastructure, manufacturing and automobile sectors accounted for 59%, 13% and 11% for the total consumption of steel respectively in FY08. Although steel consumption is rapidly growing in the country, the per capita steel consumption still stands at 48 kgs. Moreover, in the rural areas in the country, it stands at a mere 2 kg. It should be noted that the worlds average per capita steel consumption was 189 kg and while that of China was 309 kg in 2007.

Fig-5 Trade equations: India became net importer of steel in FY08 with estimated net imports of 1.9 m tones. In the past few years, its exports have remained at more or less the same levels while on the other hand, imports have increased on the back of robust demand and capacity constraints in the domestic markets. The imports showed a growth of around 48% while exports declined by around 6% in FY08. Outlook: As per IISI estimates, the demand for steel in India are expected to grow at a rate of 9% and 12% in 2008 and 2009. The

42 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

medium term outlook for steel consumption remains extremely bullish and is estimated at an average of above 10% in the next few years. 3.3. RESEARCH OBJECTIVES The primary objectives for doing this work are as follows. 1. Measuring the profitability of the company. 2. Judging of operational efficiency of company. 3. Assessing the solvency of the company. 4. Measuring short and long term financial position of the company. 5. Facilitating comparative analysis of the performance. The secondary objective of the study is to determine future coarse of action to improve efficiency of the company. 3.4. RESEARCH DESIGN It is a comparative study on financial data of the company; here the analytical research design is taken as a research methodology for computing the ratios. 3.5. SAMPLE SIZE For the comparison purpose there are 16 ratios computed and interpreted. 3.6. DATA COLLECTION METHOD Secondary Data: The sources of secondary data collection are the literature review as the books that were referred. Internet was also one of the main sources of secondary data collection. 1) Balance sheet of the company. 2) Website of Garden Silk Mills Ltd. 3) Annual Report of company (2006-07) 4) Annual Report of company (2007-08) 43 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

5) Annual Report of company (2008-09) 6) Annual Report of company (2009-10)

3.7. STATISTICAL TOOLS

For easy understanding of the financial data, use of statistical charts is very necessary for that purpose statistical bar graph is used.

3.8. LIMITATION OF THE STUDY

1. False results:Accounting ratios can be correct only if the data are correct. Sometimes, the information given in the financial statements is affected by showing position better than what actually. 2. No idea of probable happenings in future:Ratios are an attempt to make an analysis of the past financial statements, so they are historical documents. Now-a-days keeping in view the complexities of the business, it is important to have an idea of the probable happening in future. 3. Variation in accounting methods:The two firms results are comparable with the help of accounting ratios only if they follow the same accounting methods. Comparison will become difficult if the two concern follow the different method of providing depreciation or valuing stock. 4. Price level changes:Changes in price levels make comparison for various years difficult. Because of rising prices fixed assets being shown at cost and not at market price. 5. No common standards:44 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

It is very difficult to lay down a common standard for comparison because circumstances differ from concern to concern and the nature of each industry is different. 6. Different meaning assign to the same term:Different firms, in order to calculate ratio may assign different meanings. This may effect the calculation of ratio in different firms and such ratio when used for comparison may lead to wrong conclusion. 7. Ignores qualification factors :Accounting ratios are tools of quantitative analysis only. But sometimes qualification factors may surmount the quantitative aspects. The calculation derived from the ratio analysis under such circumstances may get distorted.

45 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.4. CONCEPTUAL FRAMEWORK

46 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.4. CONCEPTUAL FRAMEWORK

4.1. INTRODUCTION OF RATIO ANALYSIS
Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statement so that the strengths and weaknesses of a firm as well assist historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items/variables. Ratio analysis is an important and age old technique of financial analysis. The data given in financial statements, in absolute form, are dump and are unable to communicate anything. Ratios are relative from of financial date and very useful technique to check upon the efficiency to a firm some ratio indicates the trend or progress or downfall of the firm. A ratio refers to the establishements of relationship between any two inter-related variables. Ratio analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements.

47 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

4.2. FUNCTIONAL CLASSIFICATION OF RATIOS

Classification of Ratios

Solvency ratios

Profitability ratios -

Activity ratios

Short term

Long term

Stock turnover Ratio Creditor Turnover Debtor Turnover Fixed Assets turnover ratio Total asset turnover ratio Capital turnover ratio

Current Ratio Quick ratio

- Proprietary Ratio - Debt Equity Ratio

A.In relation to sales Gross profit Ratio Net profit Ratio Operating profit ratio

B. In relation to investment - Return on equity - Return on total assets - Earning per share - Earning yield ratio - Price earning BUSINESS G.H.PATEL PG INSTITUTE OFratio - Dividend yield ratio MANAGEMENT

48

4.3. MEANING AND OBJECTIVE OF RATIOS. Current ratio

Meaning: The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. Objective: The objective of computing this ratio is to measure the ability of the firm to meet its short term obligation and to reflect the short term financial solvency of a firm.

Quick ratio
Meaning: The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position. Objective: The objective of computing this ratio is to measure the ability of the firm to meet its short term obligation as and when due without relying upon the realization of stock. 49 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

 Proprietary ratio
Meaning: This relates the shareholders fund to total assets. It is a variant of the debt equity ratio. This ratio shows the long term or future solvency of the business. It is calculated by dividing shareholders funds by the total asset.

Objective: The purpose of proprietary ratio is indicating available to

creditors and general financial strength of the firm.

Debt equity ratio

Meaning: The debt-equity ratio is another leverage ratio that

compares a company's total liabilities to its total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. Objective: The objective of computing this ratio is to measure the relative proportion of debt and equity in financing the assets of the firm.

Gross profit ratio

Meaning: This ratio measures the relationship between gross profit and net sales. Objectives: Gross profit ratio is calculated to know. 1. Whether a business is in a position to meet operating expenses or not. 2. How much the share holders can get after meeting such expenses?

Net profit ratio

50 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Meaning: It is also called net profit to sales ratio. The profit margin is indicative of managements ability to operate the business with sufficient success not only to recover from revenue of the period, the expense of operating the business and the cost of borrowed fund. Objective: The main objective of computing this ratio is to determine the overall profitability due to various factors such as operational efficiency, trading on equity, etc.

Return on equity
Meaning: This ratio indicates how profitable a company is by comparing its net income to its average shareholders' equity. The return on equity ratio (ROE) measures how much the shareholders earned for their investment in the company. The higher the ratio percentage, the more efficient management is in utilizing its equity base and the better return is to investors. Objective: The main objective of computing this ratio is to find out how efficiently the fund supplied by the equity shareholders has been used.

Return on total assets

Meaning: This ratio indicates how profitable a company is relative to its total assets. The return on assets (ROA) ratio illustrates how well management is employing the company's total assets to make a profit. The higher the return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by comparing net income to average total assets, and is expressed as a percentage. Objective: The main objective of computing this ratio is to find out how efficiently the total assets have been used by the management. 51 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

 Earning per share Meaning: The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by investment professionals and the investing public. The financial reporting of both companies and investment research services use a basic earnings per share (EPS) figure divided into the current stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per each dollar of EPS). Objective: The main objective of computing this ratio is to measure the profitability of the firm on per equity share basis.

Earning yield ratio

Meaning: This ratio measures the relationship between market price per equity share and earnings per share.

Capitalization ratio

Meaning: This ratio measures the relationship between market price and earning per share. Dividend yield ratio Meaning: When market price is taken along with dividend received, this is known as dividend yield ratio. Only change is that in place of earning per share, dividend per share is written.

Stock turnover ratio

Meaning: This ratio establishes a relationship between costs of goods sold and average inventory.

52 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Objective: The objective of computing this ratio is to determine the efficiency with which the inventory is utilized.

Creditor turnover ratio

Meaning: This is also known as accounts payable or creditors velocity. This ratio establishes a relationship between net credit purchase and average trade creditors. Objective: The objective of computing this ratio is to determine the efficiency of firm with the creditors are managed.

Debtor turnover ratio

Meaning: This is also called as debtors velocity or receivable turnover. This ratio establishes a relationship between net credit sales and average trade debtors. The purpose of computing this ratio is to determine the efficiency of the firm with which the trade debtors are managed. If the firm has not been able to collect its debtors within a reasonable time its, funds unnecessarily locked up in receivables. In such case short term loans have to be arranged for paying off its current liabilities. This depends on quality of debtors. Objective: The main objective of computing this ratio is to determine the efficiency with which the trade debtor are managed.

Fixed assets turnover ratio

Meaning: This ratio is a rough measure of the productivity of a company's fixed assets (property, plant and equipment or PP&E) with respect to generating sales. For most companies, their investment in fixed assets represents the single largest component of their total assets. This annual turnover ratio is designed to reflect a company's 53 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

efficiency in managing these significant assets. Simply put, the higher the yearly turnover rate, the better. Objective: The objective of computing this ratio is to determine the efficiency with which the fixed assets are utilized.

Total assets turnover ratio

Meaning: This ratio is the relationship between sales and total assets. Objective: The objective to compute this ratio is to know what is the performance of the total assets in relation to total sales.

4.4. ADVANTAGES AND USES OF RATIO ANALYSIS

There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to workout a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: To workout the profitability: Accounting ratio help to

measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business. To workout the solvency: With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans. 54 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Helpful in analysis of financial statement: Ratio analysis help the outsiders just like creditors, shareholders, debentureholders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc.

Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them.

To simplify the accounting information: Accounting ratios are very useful as they briefly summarize the result of detailed and complicated computations.

To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources.

To workout short-term financial position: Ratio analysis helps to workout the short-term financial position of the company with the help of liquidity ratios. In case short-term financial position is not healthy efforts are made to improve it.

Helpful for forecasting purposes: Accounting ratios indicate the trend of the business. The trend is useful for estimating future. With the help of previous years ratios, estimates for future can be made. In this way these ratios provide the basis for preparing budgets and also determine future line of action.

4.5. PURPOSE AND TYPES OF RATIOS

Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay 55 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios measure the firm's ability to repay long-term debt. Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. Financial ratios allow for comparisons between companies

between industries between different time periods for one company between a single company and its industry average

Ratios generally hold no meaning unless they are benchmarked against something else, like past performance or another company.

CHAPTER.5.DATA ANALYSIS AND INTERPRETATION

56 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

5.1. SHORT TERM SOLVENCY RATIOS.

57 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

5.1.1. CURRENT RATIO Current assets ----------------------Current liabilities

(Rs.in lacks)

Current ratio

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Current Assets 27726.95 33871.35 52418.31 58322.52 52703.71

Current liability 6824.90 7028.73 10545.04 15860.60 27479.45

Ratio 4.06 4.81 4.97 3.68 1.92

CHART.

Figure 1

INTERPRETATION From the above chart it is concluded that the current ratio for year 2009-10 is 1.92 which is lesss than the ideal current ratio 2 : 1 that means company is able to pay their current liabilities but there is a problem of over capitalization. The current ratio for year 2008-09 is less than the years 2005-06, 2006-07, 2007-08s current ratio which shows that company is putting their efforts for efficient utilization of current assets. 5.1.2. QUICK ASSETS RATIO 58 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Quick assets Quick ratio = ------------------------Quick liabilities

(Rs.in lacks )

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Quick Assets 18018.87 20868.76 33842.42 36567.41 16167.51

Quick liability 6824.90 7028.73 10545.04 15860.60 27469.45

Quick ratio 2.64 2.97 3.21 2.31 0.5

CHART.

INTERPRETATION The Quick Assets ratio of 1:1 is considered satisfactory. From the above chart it is concluded that the quick ratio for year 2008-09 is 2.31 which is less than the years 2005-06, 2006-07,2007-08 s quick ratios. The quick ratio for year 2008-09 is beyond the satisfactory level if it is compared with the past years it is good for the company that level of quick ratio is coming down. It indicates rupees of quick assets available for each rupee of current liability. 59 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

5.2. LONG TERM SOLVENCY RATIOS.

5.2.1. DEBT EQUITY RATIO Total long term debt Debt equity ratio = ----------------------------Total equity
(Rs.in lacks)

Years 2005-06 2006-07 2007-08 2008-09 2009-10 CHART.

Total Long term debt 63907.86 69123.45 80214.8 90397.23

102,791.92

Total equity 34073.64 35802.96 39179.34 45945.68 49029.03

Ratio 1.87 1.93 2.04 1.96 2.10

INTERPRETATION

60 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

From the above chart it is concluded that the debt equity ratio is increasing from year 2005-06 to 2007-08 but in year 2008-09 it is down. The debt equity ratio for year 2008-09 is 2.10. which is higher than last year but it is near to the standard debt equity ratio which is 2 : 1 it means for every two shares there is one debt. If the debt is less than two times the equity it means that creditors are relatively less and financial structure of the business is sound.

5.2.2. PROPRIETARY OR EQUITY RATIO

Shareholders fund Proprietary ratio = -----------------------------Total assets

(Rs.in lacks)

Years 2005-06 2006-07 2007-08 2008-09 2009-10

Shareholder s fund 34243.37 35897.37 39225.77 46013.04 49029.03

Total assets 102732.77 106091.81 131252.32 155711.63 163539.72

Proprietary ratio 0.33 0.34 0.30 0.30 0.30

CHART.

61 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

INTERPRETATION: From the above chart it is concluded that the proprietary ratio is decreasing from year 2006-07 it was 0.34,in 2007-08 it was 0.30 and remains constant after that. so it can be said that performance of the company in year 2008-09 is better than past..

5.3. PROFITABILITY RATIOS IN RELATED TO SALES

5.3.1. GROSS PROFIT RATIO Gross profit -------------------- 100 Net sales (Rs.in lacs) Years 2005-06 2006-07 2007-08 2008-09 2009-10 CHART. 62 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT Gross profit 12073.95 15915.53 18316.07 21298.41 Net sales 95485.95 139331.39 167627.70 177547.77 Gross profit ratio 12.644 % 11.422 % 10.926 % 11.995 % 6.355%

Gross profit ratio =

15,984.44

251,489.41

INTERPRETATION From the above chart it is concluded that gross profit ratio for the year 2009-10 is 6.355% ,in year 2007-08 it is 10.93 % in 2006-07 it is 11.42 % it is critical condition for the company that gross profit margin is declining during the year 2009-10.

5.3.2. NET PROFIT RATIO NPAT ------------ 100 Net sales (Rs.in lacs) Years 2005-06 2006-07 2007-08 2008-09 2009-10 NPAT 2210.45 2325.97 4000.37 6334.96 Net sales 95485.95 139331.39 167627.70 177547.77 Net profit ratio 2.31 % 1.67 % 2.39 % 3.57 % 2.51%

Net profit ratio =

6,320.47

251,489.41

63 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHART.

INTERPRETATION From the above chart it is concluded that net profit ratio for the year 2005-06 is 2.31% ,in 2006-07 it is 1.67%, in 2007-08 it is 2.39% in the year 2008-09 it is 3.57% and in a2009-10, it was 2.51, which is ear less than last year. so for this year, company feels stip pressure from profit side.

5.4. PROFITABILITY RATIOS IN RELATED TO SALES

5.4.1. RETURN ON EQUITY SHARE NPATID -------------------------------------- 100 Equity share holders funds

Return on equity share =

Years

NPATID

Total equity Shareholder s fund 46013.04 39225.77 35897.37 34243.37

(Rs.in lacs) Return on equity share 6.46 % 6.48 % 10.20 % 13.78 % 64

2005-06 2006-07 2007-08 2008-09

2210.45 2325.97 4000.37 6334.96

G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHART.

14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005-06 2007-08 Return on equity share 2006-07 6.46% 6.48% 10.20%

13.78%

2008-09

INTERPRETATION From the above chart it is concluded that return on equity share for the year 2005-06 is 6.46%, in 2006-07 it is 6.48%,in 2007-08 it is 10.20% and in the year 2008-09 it is 13.78% so it is continuously increasing from last three years so it is good for the company.

5.4.2. EARNING PER SHARE RATIO NPATID Earning per share = --------------------------No. of Equity share (Rs.in lacs)

65 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Years

NPATID

No. of Equity Share 38290560 38290560 38290560 38290560

EPS

2005-06 2006-07 2007-08 2008-09 2009-10

221045000 232597000 400037000 633496000

5.77 6.07 10.45 16.54 16.50

632047000

38290560 0

CHART.

INTERPRETATION From the above chart it is concluded that earning per share for the year 2005-06 is 5.77, in 2006-07 it is 6.07, in 2007-08 it is 10.45 and in the year 2008-09 it is 16.54 and slight lower at next year. So it is

66 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

continuously increasing from last three years so it is good for the company, because rupee income per share is continuously increasing.

5.4.3. EARNING YIELD RATIO EPS Earning yield ratio = -------------------------------Market price per share (Rs.in lacs) Years Market price per equity share 11.50 11.50 11.50 11.50 11.50 Earning yield ratio 50 % 53 % 91 % 144 % 143.56%

EPS 5.77 6.07 10.45 16.54 16.50

2005-06 2006-07 2007-08 2008-09 2009-10

CHART.

67 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

INTERPRETATION From the above chart it is concluded that earning yield ratio for the year 2005-06 is 50%, in 2006-07 it is 53%,in 2007-08 it is 91% and in the year 2008-09 it is 144% and slightly lower at the next year. so it is continuously increasing from last three years so it is good for the company.

5.4.4. DIVIDEND YIELD RATIO

Dividend yield ratio=

Dividend per share -------------------------------- 100 Market price per share (in Rs.)

Years 2005-06 2006-07 2007-08 2008-09 2009-10

Dividend per share 1.5 1.5 1.5 1.5 1.5

Market price per equity share 11.50 11.50 11.50 11.50 11.50

Dividend yield ratio 13.04 % 13.04 % 13.04 % 13.04 % 13.04%

68 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHART

INTERPRETATION From the above mentioned chart it is concluded that dividend yield ratio is remaining same for all the years because company give 15 % dividend to their share holders and market price per share is Rs.10 and thats why dividend yield ratio is same for all the years which is 13.04%.

5.4.5. RETURN ON TOTAL ASSETS

NPBIT Return on total assets = ----------------- 100 Total assets

69 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Years NPBIT 2005-06 2006-07 2007-08 2008-09 2009-10 12073.95 15915.53 18316.07 21298.41 16625.86

Total assets 102732.77 106091.81 131252.32 155711.63 163579.72

Return on total assets 11.75 15.00 13.95 13.68 10.16

CHART

INTERPRETATION From the above chart it is concluded that return on total assets for the year 2005-06 is 11.75, in 2006-07 it is 15,in 2007-08 it is 13.95 in the year 2008-09 it is 13.68 and in 2009-10 it is 10.16. so it is interpreted that the overall performance of the company is good but compare to the past years it is bad situation of the company. 70 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

5.5. ACTIVITY RATIOS

5.5.1. INVENTORY TURNOVER RATIO COGS ---------------------------Average inventories (Rs.in lacks) Inventory turnover ratio 9.62 10.41 9.19 7.56 6.45

Inventory turnover ratio

Year 2005-06 2006-07 2007-08 2008-09 2009-10 CHART

Cost of Goods Sold 78361.96 118204.43 145101.02 152526.63 235504.97

Average Inventory 8146.74 11355.08 15789.24 20165.5 36536.86

INTERPRETATION From the above chart it is concluded inventory turnover ratio for the year 2005-06 is 9.62, in 2006-07 it is 10.41, in 2007-08 it is 9.19, in the year 2008-09 it is 7.56 and in 2009-10 it is 6.45, which is continuously decreasing from last two years so it is not good for the company because inventory is not transferred immediately in to cash.

71 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

5.5.2. FIXED ASSETS TURNOVER RATIO COGS -----------------------------Net total fixed assets (Rs.in lacs) Year 2005-06 2006-07 2007-08 2008-09 2009-10 Cost of Goods Sold 78361.96 118204.43 145101.02 152526.63 235504.97 Net fixed assets 75005.82 72220.46 78834.01 97389.11 Fixed assets turnover ratio 1.04 1.63 1.84 1.57 2.06

Fixed assets turnover ratio =

114,261.6 4

CHART.

INTERPRETATION From the above chart it is concluded that fixed assets turnover ratio for the year 2005-06 is 1.04, in 2006-07 it is 1.63, in 2007-08 it is 1.84 and in the year 2008-09 it is 1.57 so it is continuously increasing up to 2007-08 but in year 2008-09 it is not more than above so it can be interpreted that current position of the company is well but if compare to past year it is not good. 5.5.3. Total assets turnover ratio

72 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Gross sales Total assets turnover ratio = ---------------Total assets (Rs.in lacs) Year 2005-06 2006-07 2007-08 2008-09 2009-10 Gross sales 107923.89 151341.92 182338.89 184633.80 Total assets 102732.77 106091.81 131252.32 155711.63 Total assets turnover ratio 1.05 1.43 1.39 1.19 1.63

266,233.59

163,579.7 2

CHART

INTERPRETATION From the above chart it is concluded that total assets turnover ratio for the year 2005-06 is 1.05, in 2006-07 it is 1.43, in 2007-08 it is 1.39 in the year 2008-09 it is 1.19 and in the year 2009-10 it is so it is 1.63 interpreted that the total assets turnover ratio is good as compare to the previous years.

5.5.4. Debtor turnover ratio 73 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Debtor turnover ratio =

Net credit sales ----------------------------Average trade debtors (Rs.in lacks)

Year 2005-06 2006-07 2007-08 2008-09 CHART

Net credit sales 95485.95 139331.39 167627.70 177547.77

Average debtors 3691.89 5659.54 8632.22 9893.35

Debtor turnover ratio 25.86 24.61 19.41 17.95

30 25 20 15 10 5 0

25.86

24.61 19.41 17.95

2005-06

2006-07

2007-08

Debtor turnover ratio

2008-09

INTERPRETATION From the above chart it is concluded that debtor turnover ratio for the year 2005-06 is 25.86, in 2006-07 it is 24.61, in 2007-08 it is 19.41 and in the year 2008-09 it is 17.95 so it is continuously decreased up to 2008-09.Dew to liberal policy for the debtors this type of problems occurs. Credit might be given for increasing the sales of the company.

5.5.5. CREDITOR TURNOVER RATIO Credit purchase ----------------------------Average trade creditor 74 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Creditor turnover ratio =

(Rs.in lacks) Year 2005-06 2006-07 2007-08 2008-09 Credit Purchase 62771.75 99296.16 123242.83 124042.61 Average Creditors 4230.87 4363.40 5273.73 8377.30 Creditor turnover ratio 24 15 15 24

CHART
24

25 20 15 10 5 0

24 15

15

2005-06

2006-07

2007-08 Creditor turnover ratio

2008-09

INTERPRETATION From the above chart it is concluded that creditor turnover ratio for the year 2005-06 is 24, in 2006-07 it is 15, in 2007-08 it is 15 and in the year 2008-09 it is 24 so it.

75 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.6.FINDING AND RECOMMENDATION

76 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

FINDING
Debtor turnover ratio is 24.46 times in 2005-06, 24.62 times in 2006-07, and 19.42 times in 2007-08, 17.95 times in 2008-09. The receivables collection period is 15 days, 15 days, 19 days, and 20 days respectively. So collection days are increasing day by day which is weak sign for the company. Stock turnover ratio is 9.62 in 2005-06, 10.47 in 2006-07, 9.19 in 200708 and 7.56 in 2008-09 and holding days is 37 days, 34 days, 39and 48 days respectively. It was highest in the 2008-09 i.e 7.56 when holding days are highest 48 days. Current ratio of the company is 4.06, 4.81, 4.97 and 3.68 respectively. It is over the acceptable norm i.e.2:1 and the company have higher ratio which indicates company can be in better position to meet current obligation. Quick ratio of the company is between2.64to2.31 in last four years. The satisfactory ratio is 1:1. So it can be said that it has satisfactory liquidity position.

77 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

In general company make good profit every year and companys efficiency is also good so it is concluded that company made much improvement in 2008-09 compare to last three year.

RECOMMENDATION
From the analysis of ratios, researcher has some suggestion for company; this might help them in improving management of company.

The

Company

should

give

more

importance

to

inventory

management and try to increase inventory turnover ratio. This will help in reducing inventory costs.

As far as cash management is concerned, cash inflow is efficiently undertaken, but improvement in cash out flows i.e. payments & disbursement of cash requires considerable attention. As managerial point of view, different collection center will be established for prompt collection and centralize payments of money from head bank to various suppliers of materials are required.

Company should focus on current ratio of the company because the position of company is good concern to liquidity but there is problem of money which is being ideal.

78 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.7.CONCLUSION

79 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

CHAPTER.7.CONCLUSION
Liqudity level of the Garden Silk Mills Ltd.is too good to face current liabilities. 80 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

The balance sheet or other financial statement given for analysis may be wrong in figure. By this summer project report, we can get information regarding short term financial position, long term financial position, activity and profitability of the company.

whole system of infolw and outflow of cash in an organisation is good. The financial position of the company is affected by several factors like o Economic, agricultural, environmental, social, political etc.

CHAPTER.8.REFERENCE

81 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

8.1. BIBLIOGRAPHY
BOOKS 82 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

1. Financial Accounting by P C Tulsian (Pearson education 2009) 2. Financial Accounting for managers by Ambrish Gupta (Pearson education 2009) 3. Financial Management by I M Pandey.

WEBSITES. www.GardenVareli.com 1. www.businessmapsofindia.com 2. www.fibre2fashion.com 3. www.CorporateInformation.com 4. www.money control.com 5. www.universalteacher4u.com 6. www.accounting formanagement.com 7. www.oppapers.com LITERATURE REVIEW 1. Ratio analysis of Bhushan Steel Industry

8.2 ANNEXURE A: PROFIT & LOSS A/C

Particular Income 2005-06 2006-07 2007-08 2008-09*

83 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Sales Less ; Excise Net sale Income from finance operation Other income Total Expenditure Consumption of raw material Purchase (Increase)/decrease stock Mfg. & other expenses Total Profit before interest, depreciation & tax Less; Interest finance charge Profitbeforedepriciation7tax Less; depreciation Profit before tax Less; current tax provision for

107923.8 9 12473.94 95485.95 64 469.06 96019.01

151341.92 12012.53 139331.39 124.73 662. 140118.89

182338.89 14711.19 167627.70 106.00 1278.79 169012.49

184633.80 7086.03 177547.77 12.00 928.88 178488.65

62771.75 1299.29 (1059.25) 20933.27 83945.06 12073.95

99296.16 4558.21 (3289.15) 23638.14 124203.36 15915.53

123242.83 4447.02 (4440.31) 27446.88 150696.42 18316.07

124042.61 1466.16 829.01 32510.48 157190.24 21298.41

4020.11 8053.84 4866.13 3187.71 75.00 842.26

5149.26 10766.27 5757.05 5009.22 783.00 1860.25 40.00

5702.01 12614.06 5740.12 6873.94 760..03 2058.54 55.00

6264.20 15034.21 5978.13 9056.08 1016.2 1644.92 60.00

deferred tax fringe benefit tax profit after tax Balance brought forward from previous year Transferred from debenture redemption Reserve Amount apportion Available for 5093.36 6644.41 9852.81 15310.08 0.00 0.00 0.00 1125.00 2210.45 2882.91 2325.97 4318.44 4000.37 5852.44 6334.96 7850.34 60.00

*Due to data insufficiency in year 2008-09 particularly last quarter is forecasted as

per the instruction of the company staff.

ANNEXURE B: BALANCE SHEET

84 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT

Particular SOURCES OF THE FUNDS Shareholders Funds: Share Capital Reserves and Surplus Loan Funds: Secured Loans Unsecured Loans Deferred Tax Liability Total APPLICATION FUNDS Fixed Assets: Gross Block Less: Depreciation Net Block Capital Work in Progress Investment Current Assets,

2005-06

2006-07

2007-08

2008-09 *

3829.06 30414.31 34243.37 49321.99 14585.87 63907.86 5212.72 103363.9 5

3829.06 32068.31 35897.37 63491.84 5631.61 69123.45 7072.97 112093.79

3829.06 35396.71 39225.77 67986.85 12227.95 80214.80 9131.52 128572.09

3829.06 42183.98 46013.04 83809.02 6588.21 90397.23 10365.21 146775.48

106157.8 6 33648.12 72509.74 2496.08 75005.82 7286.35

109609.54 38986.55 70622.99 1597.47 72220.46 12936.30

112888.35 44407.21 68481.14 10352.87 78834.01 7818.38

133863.98 50312.83 83551.16 13837.95 97389.11 6877.03

loans,& 9708.08 4844.93 2844.93 10329.64 27726.95 13002.59 6474.15 1941.15 12452.78 33871.35 18575.89 10790.29 7616.56 15435.57 52418.31 21755.11 8996.41 7287.86 20283.14 58322.52

Advance Inventories Sundry Debtors Cash & Bank Balance Loans & advances Less: Current Liabilities & Provision Current liabilities Provision Net Current Assets Miscellaneous Expenditure Total

5426.15 1398.75 6824.90 20902.05 169.73 103363.9

4774.93 2253.80 7028.73 26842.62 94.41 112093.79

7476.21 3068.83 10545.04 41873.27 46.43 128572.09

11984.62 3875.98 15860.60 42461.92 67.9 146775.48

5 *Due to data insufficiency in year 2008-09 particularly last quarter is forecasted as per the instruction of the company.

85 G.H.PATEL PG INSTITUTE OF BUSINESS MANAGEMENT