Comparative Study And Financial Analysis Of Ginni Filaments Ltd.docx

PROJECT REPORT ON

“Comparative Study &Financial Analysis of Ginni Filaments Ltd” Submitted in Partial Fulfilment for the Award of the Degree of MASTER OF BUSINESS ADMINISTRATION (MBA) (BATCH 2017-2019)

Submitted by:

Aditi Kachhwah (Enroll. No: 00412303917)

Under the Guidance of:

Dr.Kirti Khanna Assistant professor

DELHI INSTITUTE OF ADVANCED STUDIES (Affiliated to Guru Gobind Singh Indraprastha University)

i

i

CERTIFICATE ISSUED BY THE COLLEGE DATE

CERTIFICATE This is to certify that the project entitled “Comparative Study and Financial Analysis of Ginni Filaments Ltd” submitted by Ms. Aditi Kachhwah, RollNo. 00412303917 has been done under my guidance and supervision in partial fulfillment of the requirement for the award of Master of Business Administration. To the best of my knowledge the work and analysis mentioned in this Project Report have been undertaken by the candidate herself and necessary references have been recognized and acknowledged in the text of the report.

Ms. Kirti Khanna

ii

ACKNOWLEDGEMENT I would like to express my gratitude to all those who gave me the possibility to complete this project. I am deeply indebted to my guide Dr. Kirti Khanna from Delhi Institute of Advanced Studies whose help, stimulating suggestions and encouragement helped me in all the time of research and writing of this project. The learning was immense and valuable

Aditi Kachhwah 00412303917

iii

DECLARATION I hereby declare that the project work entitled “Comparative Study and Financial Analysis of Ginni Filaments Ltd” submitted to the Delhi Institute of Advanced Studies, is a record of an original work done by me under the guidance of Dr. Kirti Khanna and this project work is submitted in the partial fulfilment of the requirements for the award of the degree of Master of Business Administration.

I hereby certify that all the endeavor put in the fulfilment of the task are genuine and original to the best of my knowledge and I have not submitted it earlier elsewhere.

Aditi Kachhwah

iv

EXECUTIVE SUMMARY The term “FinancialAnalysis” also known as analysis and interpretation of financial statements refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items the balance sheet, profit and loss account and other operative data. According to Myers’- “Financial statement analysis is largely a study of relationship among the various financial factors in a business is disclosed by a single set of statements, and a study of the trend of these factors as shown in a series of statement.” Ginni Filaments Pvt. Ltd is a textile & yarn industry. The main objective of the company is to manufacture cotton yarn. The company’s focused and its style of management has earned the plaudits amidst investors, employees, vendors and dealers, & also worldwide recognition.in this projet report all the financial tools like ratio analysis, comparative analysis, common sized statement analysis & fund flow statement analysis will be used for finding the financial status of the company and the various factors affecting it.

v

Table of Contents S No

Topic

Page No

1

Certificate (s)

i-ii

2

Acknowledgement (s)

iii

3

Declaration

iv

4

Executive Summary

v

5

List of Tables

vi

6

Chapter-1: Introduction

1 - 20

7

Chapter-2: Literature Review

21 - 29

8

Chapter 3: Methodology

30 - 33

9

Chapter-3: Data Presentation & Analysis

34 - 47

10

Chapter-4: Summary and Conclusions

48 - 50

11

Chapter-5: Recommendations And Limitations

51 - 52

12

References/Bibliography

53 - 54

vi

Chapter - 1 INTRODUCTION

1

INTRODUTION 1.1ABOUT YARN AND TEXTILE INDUSTRY Spinning fiber into yarn is such an ancient art that its origins are lost in the mists of time. That’s not an exaggeration; the oldest recovered artifacts made with ‘yarn’ are string skirts that date up to 20,000 years ago. At that time you would have made plant and animal fibers into yarn by rolling it between your palms or down your thigh, adding more fiber as you ran out. Once you had a good length of ‘string’ you tied it to a rock and twirled it until the whole thing was twisted enough to stay together. By 5,000 BC spindles began to appear. This is estimated to be about 1,000 years before the invention of the wheel, which gives you some idea of how ancient they are. The first spindles were nothing more than straight sticks to wind the yarn onto, usually with a notch in the top to secure the end. Later versions included hooks of bone instead, but with either of these the spindle had to be rolled along the thigh or manually whirled some other way until it was full enough to spin steadily. Enter the whorl! A whorl is weighted disk was added to the bottom of the spindle to make it spin longer and more steadily. Whorls were usually disks of wood, stone, clay, or metal with a hole in the middle. They allowed the spinner to slowly ‘drop’ the spindle as it was spinning – hence the name ‘drop spindle.’ This was an important advancement because it allowed spinners to create longer strands before stopping to wind the yarn. Soon, spinning looked like something that any hand spinner today would instantly recognize, as evidenced by the 2500 year old artwork above. While simple and immensely useful, spindles were a limited tool for spinning. Creating enough fiber to make clothes was slow and extremely time-consuming, and required many people to complete. It was the invention of the spinning wheel that revolutionized the manufacture of yarn and textiles, and in fact, the world. No one knows for certain where or when the first spinning wheels were made. Some believe they originated in India between 500 and 1000 AD. These early spinning wheels – which are still in use today – are called Charkha wheels. Instead of a wheel with a rim, Charkha wheels were composed of spokes with holes in the ends. A string was run through the holes, connecting the spokes in a zigzag and supporting the drive band. The 2

drive band was connected to a spindle on its side, and powered by a hand crank. It had long bamboo spokes and was used for spinning silk. More familiar versions with rims make their first documented appearance in the windows of French cathedrals dating to the 13th century, although as they are illustrated it appears they were used more as giant bobbins for winding yarn than as tools for spinning it. Soon, though, the use of spinning wheels with rims to spin fiber was developed and spread, and by the 14th century a manuscript illustrated in Britain showed women spinning with them. There were still improvements to be made The invention of the spinning wheel sped the production of fiber for cloth anywhere from 10 to 100 times. Suddenly much more cloth could be produced. The textile industry is primarily concerned with the design and production of yarn, cloth, clothing, and their distribution. The raw material may be natural or synthetic using products of the chemical industry. The main steps in the production of cloth are producing the fiber, preparing it, converting it to yarn, converting yarn to cloth, and then finishing the cloth. The cloth is then taken to the manufacturer of garments. The preparation of the fibers differs the most, depending on the fiber used. Flax requires retting and dressing, while wool requires carding and washing. The spinning and weaving processes are very similar between fibers, however. Spinning evolved from twisting the fibers by hand, to using a drop spindle, to using a spinning wheel. Spindles or parts of them have been found in archaeological sites and may represent one of the first pieces of technology available. The key British industry at the beginning of the 18th century was the production of textiles made with wool from the large sheep-farming areas in the Midland sand across the country (created as a result of land-clearance and enclosure). This was a labor-intensive activity providing employment throughout Britain, with major centers being the West Country; Norwich and environs; and the West Riding of Yorkshire. The export trade in woolen goods accounted for more than a quarter of British exports during most of the 18th century, doubling between 1701 and 1770.[6]Exports by the cotton industry – centered in Lancashire– had grown tenfold during this time, but still accounted for only a tenth of the value of the woolen trade. Before the 17th 3

century, the manufacture of goods was performed on a limited scale by individual workers, usually on their own premises (such as weavers' cottages). Goods were transported around the country by clothiers who visited the village with their trains of packhorses. Some of the cloth was made into clothes for people living in the same area, and a large amount of cloth was exported. River navigations were constructed and some contour-following canals. In the early 18th century, artisans were inventing ways to become more productive. Silk, wool, fustian, and linen were being eclipsed by cotton which was becoming the most important textile. This set the foundations for the changes. Textile manufacture during the Industrial Revolution, The woven fabric portion of the textile industry grew out of the industrial revolution in the 18th century as mass production of yarn and cloth became a mainstream industry!

1.2ABOUT THE ORGANISATION – GINNI FILAMENTS PVT LTD

Ginni Filaments Limited is a textile company, incorporated on 28th July, 1982 as a public limited Company and obtained the certificate of commencement of Business on 10th September. The Company is engaged in the manufacturing of cotton yarn, knitted fabric, non-woven fabric, garments and wipes. Its segments include Textiles and Others. The Textiles segment includes yarn, fabric, nonwoven fabrics and garments. The ‘Others’ segment includes consumer products, such as wipes and others. The Company's geographical segments include In India and Outside India. It offers cotton yarns, including ring spun yarns, open end yarns, and specialty yarns, such as core spun lycra yarns and ring slub yarns; knitted fabric, including single jersey, double jersey fabric and flat knit; garments, such as leggings for men, ladies and children, sweat shirts and round necks; spun lace nonwoven fabrics, including plain, aperture, embossed, colored, printed, impregnated and chemical treated spun lace roll goods, and consumer products, including toilet wipes, lens cleaning wipes, baby wipes, bed bath towels, floor wipes and shampoo towels.

4

The main head office of the company is located in tehsil chatta, district Mathura, UttarPradesh.It was commissioned with 26208 spindles to produce ultrafine combed cotton yarn. A export oriented unit, it was designed to produce a quality that was genuinely world class. Sophisticated plant and machinery from the world renowned machinery manufacturers- RIETER, shlafhorst, Volkmann etc. With top of line support system for quality monitoring were installed.

PRODUCTS OF THE COMPANY 

Yarn



Fabric



Garments



Non-woven spun lace fabri



Consumer products

In January last year, GFL embarked upon ambitious expansionsproject by entering the arena for open end yarn. It has 1680rotors with a capacity to produce 600 tons per month of open end yarn in the count range of Ne 6 to 20. Products have been well acceptedby buyers all around the world. Thecompany has also graduated into knitting fabrics & installed 26 knitting machines from M/S Terrot and Mayor to produce various fabric. sine April 2005, it has expanded into processed knitted fabrics. Thecomplete machinery has been imported from Thies&Santex. Ginni has started working with some leading international brands like BENETTON, & A, ALLEN SOLLY,VAN HEUSEN, J C PENNY etc. the success story of evolution of the company is story of single minded devotion to the quality. in order to get fully vertically integrated & be present from fiber to fashion, Ginni filaments limited entered garment business with its first plant in Noida in September 2006, with a capacity of 2,50,000 pcs per month. The capacity increased to one million pcs per month in a phased manner.

5

the plant for spun-lace non woven fabrics with an installed capacity of 12,000 MT/P.A. which is the first of its kind in India commenced production in march, 2007 in Panoli industrial estates, Gujarat. The converted products made out of spun-lace non woven fabrics have been launched by the company in the Indian market.



Milestones a. 1982 -The Company was incorporated on 28th July, as a public limited company and obtained the certificate of commencement of Business On 10th September. It was promoted by J.K. Bhagat. The main objective of the company is to manufacture cotton yarn. -The Company undertook to set up a 100% export oriented unit for the manufacture of cotton combed yarn of fine counts. -The plant and machinery were to be procured from Lakshmi Machine Works, Ltd., Coimbatore, Reiter Machine Works, Switzerland, Volkmann GmbH & Co. and W.Schlathorst& Co. West Germany. b. 1990 -1,00,000 No. of equity shares subscribed for by the Promoters, directors, etc. 91,50,000 equity shares issued at par of which 57,50,000 shares reserved and allotted as follows: (i) 60,000 shares to promoters, Indian residents directors etc. (ii) 10, 30,000 shares to the Promoters' Associate Companies; (iii) 10, 00,000 shares to the SBI Mutual Fund and (iv) 36, 60,000 shares to non-resident Indian/persons residing abroad. - Out of the remaining 34, 00,000 shares 4, 57,000 shares offered on a preferential basis to the employees (including work (directors)/workers of the Company and the promoter 6

companies (only 16,800 shares taken up). The balance 29, 42,500 shares together with the unsubscribed 4, 40,700 shares of the employee's quota offered for public subscription during June 1990. Additional 5, 10,000 shares allotted to the public to retainoversubscription. c. 1991 - The Company undertook an expansion/diversification project toenhance the spinning capacity by 10,224 spindles. - The Company undertook the scheme for installation of some balancing equipment and twisting machines. d. 1992 - 39, 04,000 rights shares issued (prem. Rs. 25 per share; prop. 40:100). Another 600 shares (prem. Rs. 25 per share allotted to employees). e. 1994 - 20,60,000 No. of equity shares of Rs. 10 each fully paid up wereallotted to the Foreign Institutional Investors and MutualFundby way of private placement on preferential basis on an averagepremium of Rs. 51.54 per shares. 53,354 warrants were alsoallotted to the present promoters, employees by way of privateplacement on preferential basis. f. 1995 - The Company proposed to set up a 100% Export Oriented Unit formanufacturing cotton yarn and knit fabric with an installedcapacity of 80,640 spindles and 18 knitting machines at Gujarat. g. 1996 - The Company proposed to expand the capacity by installing a Rotor Spinning Machine for spinning coarser count of cottonyarn. h. 2000 7

-Dr. H.P. Bhattacharya has been appointed as the Director of the company and Mr. ShishirJaipuria has been appointed as the ManagingDirector effective from October 30. i. 2005 -The Company set up a knit process house j. 2006 -The Company ventured into Nonwoven Consumer Products -The Company installed rotor k. 2007 -The Company ventured into Spun lace Nonwoven. -The Company ventured into Consumer products made from spun lace fabric. -Ginni Filaments Ltd has appointed Shri Sandeep Gupta as Nominee Director of IFCI on the Board of the Company w.e.f. 28th July, 2007 in place of Shri Ashwani Kumar Sharma. -Ginni Filaments Ltd has appointed Shri S. Singhvi as ComplianceOfficer in place of Shri D.C. Gupta. l. 2009 - Ginni Filaments Ltd has appointed Shri. S. Singhvi as Director (Finance) and Shri. R. R. Maheshwari as Director (Marketing & Business Development). m. 2011 -Ginni Filaments Limited has appointed Shri SaketJaipuria as Wholetime Director designated as Executive Director.

8

Important members of the company Dr. Raja ram Jaipuria - Chairman & Managing Director (up to January 17, 2015) Shri ShishirJaipuria - Chairman & Managing Director Shri SaketJaipuria - Executive Director Shri S. Singhvi - Director - Finance Shri R.R. Maheshwari - Director - Marketing & Business Development Company secretary - Shri Rajesh Tripathi Auditors - P.L. Gupta & Co. Bankers - State Bank of India, Bank of Baroda, The Federal Bank Limited and State Bank of Bikaner & Jaipur CSR and Ginni Filaments Ltd. Ginni filaments is also indulged in CSR is Corporate Social Responsibility.Today’s global businesses face a daunting challenge i.e. Achieve and sustain competitive advantage while empowering customers and communities to grow and prosper. Corporate Social Responsibility (CSR) is an organization’s obligation to consider the interests of their customers, employees, shareholders, communities, and the ecology and to consider the social and environmental consequences of their business activities. By integrating CSR into core business processes and stakeholder management, ginni is trying to achieve the ultimate goal of creating both social value and corporate value. The various CSR activities of GFL involve the following:

Jaipuria groups of Educational Institutions •

Jaipuria Institute of Management, Indrapuram, Ghaziabad – 360 Students (MBA program)

•

Seth Anand Ram Jaipuria College, Calcutta 9

• 

Seth Anand Ram Jaipuria School (Kanpur, Lucknow, Rajasthan)

Jaipuria charitable institutions •

Public Guest Houses at Pilgrim centers - Seth Anand Ram JaipuriaSmritiBhavan ( Haridwar, Vrindawan, Chitrkoot)

•

Eye Hospital - Seth Anand Ram Jaipuria Eye Hospital (Rajasthan)

•

Temple - Ram Temple at Chitrakoot.

10

1.3 INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS

Benjamin Graham and David Dodd first published their influential book "Security Analysis" in 1934.A central premise of their book is that the market's pricing mechanism for financial securities such as stocks and bonds is based upon faulty and irrational analytical processes performed by many market participants. This results in the market price of a security only occasionally coinciding with the intrinsic value around which the price tends to fluctuate.Investor Warren Buffett is a well-known supporter of Graham and Dodd's philosophy.

The Graham and Dodd approach is referred to as Fundamental analysis and includes: 1) Economic analysis; 2) Industry analysis; and 3) Company analysis. The latter is the primary realm of financial statement analysis. On the basis of these three analyses the intrinsic value of the security is determined. 

Meaning of financial statement

According to John N. Myer “the financial statements provide the summary of accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and income statement showing the results and operations during a certain period.” Financial statements are the summarized statements of accounting data produced at the end of an accounting process by an enterprise through which it communicates the accounting information to the internal and external users. Customarily, set of financial statements includes – -balance sheet -profit & loss statements -notes to accounts 11



Annual report for financial analysis

Annual report of a company as per law should disclose the prescribed information to enable the users to make informed decision. The information is disclosed in financial statements, Director’s Report and by separate statements being part of the annual report. A complete set of annual report of a company has: 1. A report by the Board of Directors containing: a. Report in terms of section 217 of companies Act, 1956; b. Directors’ responsibility Statement (section 217 (2AA)of the Companies Act,1956); c. Report on corporate governance; and d. Management Discussion and Analysis. 2. Auditors’ Report to the shareholders (Section 227 of the Companies Act, 1956). 3. Balancesheet (section 211 and Part I or Schedule VI of the Companies Act 1956). 4. Statement of Profit and Loss (Section 211 and Part II of schedule VI of the Companies Act 1956). 5. Notes to Accounts: a. Accounting Policies adopted by the company; b. Explanatory notes explaining significant transactions and events; and c. Additional information required to be disclosed in terms of Part III of Schedule VI of the Companies Act 1956). 6. Cash Flow Statement as per accounting standards-3. 7. Segment Report as per accounting Standards-17 where applicable.



Meaning of financial analysis

The term “financial analysis” also known as analysis and interpretation of financial statements refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items the balance sheet, profit and loss account and other operative data. 12

Acc. To Myers’- “Financial statement analysis is largely a study of relationship among the various financial factors in a business is disclosed by a single set of statements, and a study of the trend of these factors as shown in a series of statement.” 

Horizontal and vertical analysis

Horizontal analysis compares financial information over time, typically from past quarters or years. Horizontal analysis is performed by comparing financial data from a past statement, such as the income statement. When comparing this past information one will want to look for variations such as higher or lower earnings.

Vertical analysis is a percentage analysis of financial statements. Each line item listed in the financial statement is listed as the percentage of another line item. For example, on an income statement each line item will be listed as a percentage of gross sales. This technique is also referred to as normalization or common-sizing. 

Purpose of financial statement analysis

The purpose of financial statement analysis depends upon the need of person who is analyzing these statements. These varying needs may be 1. Assessing the earning capacity or profitability- on the basis of financial analysis, the earning capacity of an enterprise can be assessed or computed. In addition, the earning capacity of the enterprise, in coming years, may also be forecasted. All the external users of financial statements, especially investors and potential investors, are interested in this 2. Assessing the managerial efficiency – the financial statement analysis helps to point out where the managers have been efficient and where they have been inefficient. For example, by using financial ratios, it is possible to analyze relative proportion of production, administrative and marketing expenses. Any favorable or unfavorable variations can be identified and reasons thereof can be ascertained to pinpoint managerial inefficiency or efficiency. 3. Assessing the short term and long term solvency of enterprise – these can be assessed on the basis of financial statement analysis. Creditors or suppliers are interested to know the 13

short-term solvency or liquidity of the firm, i.e., its ability to meet short term liabilities. Debenture holders and lenders are interested to know the long term solvency of enterprise to assess the ability of the company to pay the principal amount and interest on basis of financial analysis. 4. Inter firm comparison – this becomes easy with financial analysis. It helps in assessing thrir own performance as well as that of others, if mergers and acquisitions are to be considered. 5. Forecasting and preparing budgets – past financial statement analysis helps in assessing developments in future, especially in the next year. For example, given a certain investment, it may be possible to forecast the next years’ profit on the basis of earning capacity shown in the past. An analysis thus helps in forecasting and preparing the budgets. 6. Understandable – the financial analysis helps the users of financial statements to understand the complicated matter in simplified manner. Financial data can be made more comprehensive by charts and graphs, which can be easily understood.



Uses of financial analysis:

It helps in various decision making process such as security anlaysis, dividend decision credit analysis general business analysis etc. these are discussed below: 1. Security analysis – it is a process by which the investors come to know whether the firm is fulfilling their expectations in regard to payment of dividend, capital appreciation and security of money such analysis is done by security analyst who’s interested in cash generating ability, dividend payout policy and the behaviour of share prices. 2. Credit analysis – such analysis is useful when a firm offers credit to a new customer or dealer. The manager of the firm would like to know whether to extend credit to them or not. Such analysis is also useful for a bank granting loan to public. 3. Debt analysis – such analysis is done by the firm to know the borrowing capacity of a prospective borrower.

14

4. Dividend decision –financial analysis helps the firm in deciding the rate of dividend. The management has to decide about how much potion of the earnings to distribute and how much to retain. Such decisions indicate the profitability of the firm and hence to some extent effect the behaviour of share price. 5. General business analysis – financial analysis can be used to identify the key profit areas and profit drivers with business risk in order to assess the profit potential of the firm it helps in future growth scenarios for the firm.



Tools of financial Analysis:

The analysis and interpretation of financial statement is used to determine the financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. A financial analyst may use following methods:1. Comparative statements – comparative statements means the comparative study of financial elements of balance sheet P&L statement of two or more years of enterprise itself. In this, the amounts of two years are placed isde by side along with the changes in amount and percentage to facilitate comparisons. The comparative statements include o comparative balance sheet o comparative income statement 2. Common size statement o common sized income statement o common sized balance sheet 3. Ratio analysis - Financial ratios are very powerful tools to perform some quick analysis of financial statements. There are four main categories of ratios: liquidity ratios, profitability ratios, activity ratios and leverage ratios. These are typically analyzed over time and across competitors in an industry. 15

Liquidity ratios are used to determine how quickly a company can turn its assets into cash if it experiences financial difficulties or bankruptcy. It essentially is a measure of a company's ability to remain in business. A few common liquidity ratios are the current ratio and the liquidity index. The current ratio is current assets/current liabilities and measures how much liquidity is available to pay for liabilities. The liquidity index shows how quickly a company can turn assets into cash and is calculated by: (Trade receivables x Days to liquidate) + (Inventory x Days to liquidate)/Trade Receivables + Inventory. Profitability ratios are ratios that demonstrate how profitable a company is. A few popular profitability ratios are the breakeven point and gross profit ratio. The breakeven point calculates how much cash a company must generate to break even with their startup costs. The gross profit ratio is equal to gross profit/revenue. This ratio shows a quick snapshot of expected revenue. Activity ratios are meant to show how well management is managing the company's resources. Two common activity ratios are accounts payable turnover and accounts receivable turnover. These ratios demonstrate how long it takes for a company to pay off its accounts payable and how long it takes for a company to receive payments, respectively. Leverage ratios depict how much a company relies upon its debt to fund operations. A very common leverage ratio used for financial statement analysis is the debt-toequity ratio. This ratio shows the extent to which management is willing to use debt in order to fund operations. This ratio is calculated as: (Long-term debt + Short-term debt + Leases)/ Equity. 4. Fund Flow & Cash Flow analysis

16

comparative balance sheet Comparative statments comparative income statment common sized income statment TOOLS

Common size statment common sized balancesheet

Ratio Analysis

Fundflow and cashflow analysis



Process of Financial Statement Analysis 1. Rearrangement of financial statements – for analysis, it is necessary to reclassify the data contained in the financial statements into purposive classes so that maximum information from every data for analysis can be obtained. Reclassification and rearrangement of different data depend upon the purpose of analysis.

2. Comparison – after classification of the data of the financial statements into different categories. It’s necessary to derive comparative data of same enterprise of the past periods if it’s a time series analysis. In case of cross- sectional analysis, it’s necessary to derive comparative data of the same accounting period of similar or comparable enterprise. For this, a comparative study is necessary.

17

3. Analysis – comparative financial data are then analyzed with reference to financial characteristics like profitability, solvency and liquidity.

4. Interpretation – the concluding part of financial statement analysis is interpretation of financial information generated in the process of financial statement analysis. The interpretation should be precise and directed towards indicating the movement of various financial characteristics.



Parties Interested In Financial Analysis

1. Management – Financial analysis helps management to ascertain overall as well as segment-wise efficiency of the business. Moreover, it helps them in decisionmaking as well as in controlling and self-evaluation.

2. Employees And Trade Union – Employees are interested in their welfare i.e., better emoluments, bonus, better working conditions and their job securities. So, they are always interested in profitability, operating sustainability and financial strength of the business. Trade unions are also interested in financial analysis because the degree of profitability helps them in negotiating and entering into wages agreement with the employers.

3. Shareholders or Owners or Investors – owners invest their savings I the enterprise. Therefore, they are interested in profitability and safety of their investment. They would like to know about business profitability and sustainability to ensure safety of their investments.

18

4. Tax authorities – Tax authorities are interested in ensuring proper assessment of tax liabilities of the enterprises as per the law in force from time to time

5. Customers – They have an interest in information about the enterprise’s continuance, especially when they have a long-term involvement with, or are dependent on, an enterprise.

6. Bankers and Financial Institutions – they are interested in servicing of loans granted by an enterprises i.e., regular payment of interest and repayment of principal amount on due dates. In other words, they are interested in long term and short term solvency of a firm. 

Types of financial statement analysis

Internal Analysis Internal analysis is made by the top management executives with the help of Management Accountant. The finance and accounting department of the business concern have direct approach to all the relevant financial records. Such analysis emphasis on the overall performance of the business concern and assessing the profitability of various activities and operations. External Analysis Shareholders as investors, banks, financial institutions, material suppliers, government department and tax authorities and the like are doing the external analysis. They are fully depending upon the published financial statements. The objective of analysis is varying from one party to another.

19

Short Term Analysis The short term analysis of financial statement is primarily concerned with the working capital analysis so that a forecast may be made of the prospects for future earnings, ability to pay interest, debt maturities – both current and long term and probability of a sound dividend policy. A business concern has enough funds in hand to meet its current needs and sufficient borrowing capacity to meet its contingencies. In this aspect, the liquidity position of the business concern is determined through analyzing current assets and current liabilities. Hence, ratio analysis is highly useful for short term analysis.

Long Term Analysis There must be a minimum rate of return on investment. It is necessary for the growth and development of the company and to meet the cost of capital. Financial planning is also necessary for the continued success of a company. The fixed assets structure, leverage analysis, ownership pattern of securities and the like are made in the long term analysis.

20

CHAPTER - 2 LITERATURE REVIEW

21

 Dr.S.Vijayalakshmi, Sowndarya.K and Sowndharya.K (March, 2017) Financial performance is done to evaluate capability, stability and profitability of the company. Financial analysis helps investors to appraise whether they should invest in a particular company or not. The main objective of their study was to know the short term and long term financial position of the company and to know the profit level of the company. It was analyzed using short term, long term and profitability ratios for the period 2011- 2016, based on the secondary data that is balance sheet and profit/loss account. They concluded that company has to stabilize its income without much increase in operating expenses.

 HabimanaTheogene, Tom Mulegi, NiyompanoHosee, Mount Kenya University (June 2017) Financial ratio analysis is important to the management, owners, customers, suppliers, competitors, regulatory agencies, tax payers and lenders each having their views in applying financial statement analysis in their evaluations and making judgments about the financial health of organization, while some authors found that financial ratios analysis is not an adequate method by which to evaluate the overall performance of an organization; also the balanced scorecard is more efficient than financial ratios analysis. The general objective of their study was to analyze the contribution of financial ratio analysis on decision making in commercial banks in Rwanda. Specific objectives were to analyze the contribution of liquidity ratio analysis in effective decision making in BK; to determine the effect of efficiency ratio analysis on the effective decision making in BK; to measure the extent to which asset quality ratio analysis affects decision making in BK and to assess the role of profitability ratio analysis on the effective decision making in BK. Their research was descriptive and correlational design and used both qualitative and quantitative methods. The population under study was comprised of 139 employees of BK and then, the sample size of the study was 104 employees. This study employed the stratified random sampling technique. They used regression analysis to establish relationship between variables under study. SPSS version 16 was used in their study. The data was presented in forms of frequency and percentages. The study revealed that if efficiency ratio increased by one per cent, the 22

effective decision making also increased by 0.910. Hence, there is a positive effect of efficiency ratio analysis on effective decision making and if asset quality ratios analysis increased by one per cent, the effective decision making also increased by 16.935. Hence, there is a positive effect of asset quality ratios analysis on effective decision making. The study concluded that ratios analysis is a good way to evaluate the financial results of bank in order to measure its performance. Ratios allow the bank to compare its business against different standards using the figures on its financial statements. This research recommends National Bank of Rwanda to speed up the sensitization campaign of the Rwandan commercial Banks to focus on ratios analysis as among the best tool to the effective decision making in commercial bank.

 Sugandha Sharma & Dr. Navneet Joshi (June 2017) Their research paper aimed at analyzing the financial position of ITC using ratio analysis. The period of 10 years was selected for the study from year 2006 to 2015. The ratios are hence displayed in the bar form and the calculated ratio was then compared with the ideal ratio

 Sweta Singh, Administrative Management College(July 2017) They stated that to start any business, we need to have finance and success of that business is entirely dependent upon proper management and application of finance. It is necessary to maintain a proper balance between these two which can be done with the help of calculating different type of ratios like current ratios, quick ratios and debt coverage ratio etc. For every manufacturing sector the state of liquidity management/cash management should be very much consistent and stable, which we can measure by calculating the quick asset ratio. In their study they explained that the study of ratio analysis will help in forecasting the future performance of the company. Although there are various methods and techniques available for studying the company’s performance but in their research paper, they focused on how accurately ratio analysis may help in getting the desired result.

23

 Aashaq Hussain and PK Sharma (January 2017) Department of Commerce, Govt. Hamidia College Bhopal, Madhya Pradesh, India 2 Barkatullah University Bhopal, Madhya Pradesh, India They stated that it has been accepted fact that the long term growth of economy depends equally on all the sectors via primary, secondary and tertiary. But it has also been realized that secondary sector give impetus to rest of the sectors for an accelerated growth and development. They focused on the cement industry of the country and made an analysis of two cement giants namely JPC and ACC. Ratio analysis was used to draw the inferences from the secondary sources of data. It was found that short term financial position of JPC was better than ACC in the year 2011 and 2012. While as long tern financial position of ACC was good enough than JPC.

 Deepika S and Dhivya B (January 2017) According to them Finance is considered as life blood of business enterprise. The success and survival of any organization depends upon how efficiently it is able to raise funds as and when needed and their proper utilization. The object of their study was to know the profitability and solvency and the future value of the business concern during the period of five years from 2012-2016. To fulfill the objectives Ratio Analysis and Correlation were used for the calculation of the company. The suggestions are offered to control the fluctuation in price changes

 Dr. PramodBhargavaa (2017) He stated that Financial analysis now a day is an important instrument for the critical review of the performance of a business. It helps the concern to analyze the financial data and provide information which is required to take decisions regarding investments and also help to understand financial position better. The financial analysis portrays the financial health of a company and helps the companies to improve their financial resources and manage generated funds efficiently. Information and technology industry has grown up extraordinarily in India during previous years. Its contribution in economy has also increased 24

with a huge margin. Investment in IT industry is considered as a profitable and less risky investment destination in the Indian context. The paper is an attempt to facilitate the investor and the management to assess the financial position of a firm from the proprietor’s point of view. In order to identify the financial management efficiencies his paper analyzed management of proprietor’s funds in IT Companies of India, Specifically for Wipro Ltd. & Infosys Ltd. his paper also suggest the initiatives to be taken by both the companies for improving their financial management techniques and achieving the optimum capital structures.

 Dr. M. Ravichandran&M. Venkata Subramanian (March 2016) They stated financial analysis referred to financial statement analysis or accounting analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. The main idea behind this study is to analyze the financial operating position of the company. They researched with help of secondary data which is gathered from the annual report of the company. The financial performance can be measured by using various financial tools such as profitability ratio, solvency ratio, comparative statement, etc. Based on the analysis, findings arrived that the company has got enough funds to meet its debts & liabilities, the income statement of the company shows sales of the company increased every year at good rate and profit also increased every year.

 DušanBaran, Andrej Pastýr& Daniela Baranová (2016) Through their research paper they stated that the success of every business enterprise is directly related to the competencies of business management. The business enterprise can, as a result, create variations of how to approach the new complex and changing situations of success in the market. Therefore managers are trying during negative times to change their management approach, to ensure long-term and stable running of the business enterprise. They are forced to continuously maintain and obtain customers and suppliers. By implementing these measures they have the opportunity to achieve a competitive advantage over other business enterprises. 25

 Dr. Ashok Kumar Rath (2016) In his study, he stated that the Steel Giants of India are namely, ArcellorMitttal, Tata Steel Ltd. & Steel Authority of India presenting India on the Global front. Tata steel is expanding its production capacity in India and has some Greenfield Steel Projects under implementation, including one at the Kalinga Nagar Industrial Complex atDuburi in Jajpur district. Their project report was an effort to suggest the best financing option for the project expenditure of Rs.21200 Cr and toidentify its financial strength and weaknesses with the help of various financial statement analysis tools and techniques.

 Mohammed Nuhu, The Federal Polytechnic Damaturu, Nigeria (July 2014) He stated that accounting information provided by means of financial statements- The income statement and the Balance Sheet are often in summarized form. Viewed on the surface, the truths about the results and the financial position of a business hidden in them remain veiled. To be of optimal benefit and as well enable the users make well – informed decisions, financial statements need to be analyzed by means of ratios. Therefore, in order to establish the role of ratio analysis in business decisions, his research was carried out; using NBC Maiduguri Plant was used as the Case study. The researcher made use of both primary and secondary sources of data collection. However, for the former, questionnaires were administered, whereas for the later, relevant were received. The data Collected via the primary data sources were analyzed using simple averages and percentages.

 R.Idhayajothi, Dr.O.T.V.Latasri, N. Manjula, A.MeharajBanu& R. Malini (June 2014) According to the authors, Financial is regarded as the life blood of a business enterprise. In the modern oriented economy, finance is one of the basic foundations of all kinds of economics activities .Finance statements are prepared primary for decision -making .They play a dominant role in setting the frame work and managerial conclusion and can be drawn from these statements is of immense use in decision- making through analysis and interpretation of financial statements .So every company will be interested in knowing its 26

financial performance. The project entitled “Financial performance analysis of Ashok Leyland company Ltd '' throw light on overall financial performance of the company.

 Dr. Ayad Shaker Sultan, School of Business Administration and Economics University of Sulaimania – Kurdistan Region of Iraq (2014) His paper attempted to analyze the financial statements and measure the performance in terms of assets utilization, and profitability. In detail the research methodology used for the study that has focused on the past and present performance of Baghdad Sort-drink Industry. The study purely relies on secondary data, which were collected for a period of ten years (2004 to September 2013) from the audited annual reports of the company and maintained and made available by several organizations viz., Baghdad Sort-drink Industry, and Iraq’s Stock Exchange for the purpose of effective periodical analysis. In order to know the performance of the industry that was evaluated with the help of five financial ratios. The paper used accounting ratios and financial report analysis, namely, profitability ratios, which might affect the financial performance of the firm. Profit Margin (PM), Return on Assets (ROA), Return on Equity (ROE), Capital turnover ratio and Expense ratio. All these analyses were done to the case of Baghdad Soft-Drinks Company. This study reveals that financial strengths and weaknesses of the Baghdad Soft-drink Industry over the connected period there were gray areas took place in June 2007 to June 2009, which resulted in decline of all the concerned profitability ratios and subsequently the performance of Baghdad Soft-Drinks Industry, during the two years. In conclusion, ROE is the most comprehensive measure of profitability of a firm; it considers the operating and investing decisions made as well as the financing and tax related decisions.

 Florenz C. Tugas, CISA, CPA (November 2012) Most financial statement analyses focus on firms belonging to industries that either contribute significantly to economic figures or posit in a highly competitive business environment. Whatever the motivation may be, financial statement analysis should be made available to all industries for reasons of comparability and benchmarking. So much so to 27

industries that silently propel economic development and growth, of which the education subsector is. In the Philippines, there are only three listed firms in the education subsector. These are Centro Escolar University (CEU), Far Eastern University (FEU), and iPeople, Inc. (Malayan Colleges). Their research paper aims to analyze the financial statements of these three firms for three periods (2009, 2010, and 2011) using liquidity ratios, activity ratios, leverage ratios, profitability ratios, and market value ratios. For liquidity, the following ratios were used: current ratio; quick or acid-test ratio; cash flow liquidity ratio; average collection period; and days payable outstanding. For activity, the following ratios were used: accounts receivable turnover; accounts payable turnover; fixed assets turnover; and total assets turnover. For leverage, the following ratios were used: debt ratio; debt to equity ratio; and times interest earned. For profitability, the following ratios were used: operating profit margin; net profit margin; return on total assets; return on equity; and basic earning power ratio. For market value, the following ratios were used: price-earnings ratio; market-book ratio; and dividend yield. Imploring a comparative approach, this research paper also seeks to come up with benchmark figures that will be useful for other firms (not publicly-listed) belonging to the education subsector. To do this, financial statements of CEU, FEU, and Malayan for the indicated periods were obtained from the Philippine Stock Exchange (PSE) website. Necessary information derived from these financial statements were summarized and used to compute the financial ratios for the three-year period. To provide a basis for analysis, for each financial ratio, the firm adjudged as the best one (using rule of thumb and ratio trends) was given three points, the next one, two points, and the last one, one point. The total points for each ratio category were then computed to arrive at an overall basis for analysis. Results showed that in terms of liquidity, FEU ranked first, followed by Malayan, then CEU; in terms of activity, FEU ranked first, followed by CEU, then Malayan; in terms of leverage, Malayan ranked first, followed by CEU, then FEU; in terms of profitability, FEU ranked first, followed by Malayan, then CEU; and in terms of market value, CEU and FEU tied for first and then Malayan followed. Overall, FEU (44 points) ranked first, followed by Malayan (40 points), then CEU (36 points).

 Francis Declerck (July 2001) 28

The financial analysis of sixteen biotech companies was carried by him in relationship with their research activity according to the following typology: 1/ pure biotech companies, 2/ pharmaceutical companies, and 3/ other medical application companies. Companies studied by him are: AstaMedica, Amgen, Amershan, Chiron, Evotec, Genset, Genentech, Genzyme, Innogenetics, Qiagen, Eli Lilly, Novartis, Novo Nordisk, Roche, Solvay and Shering.

29

CHAPTER 3 METHODOLOGY

30

3.1 RESEARCH METHODOLOGY

Research is a systematic method of finding solutions to problems. It is essentially an investigation, a recording and analyzing of evidence for the purpose of gaining knowledge. According to Clifford woody, “research comprises of defining and redefining problem, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, researching conclusions, testing conclusions to determine whether they fit the formulated hypothesis”.

Research methodology involves a number of interrelated activities, which overlap and do not rigidly follow a particular sequence. A marketing research involves the following major steps. 

Formulating research problem

The first step in research is formulating research problem. It is the most important stage in Applied Research as it rightly said “A problem well defined is half solved”.

In this Project Report I have studied the concept of Working Capital and Ratio Analysis & have carried the analysis of the same in GINNI FILAMENTS PVT LIMITED. 

Statistical tools & techniques

The statistical techniques like Percentages and Ratios have been in the study. These have been very useful in doing the interpretation and analysis of the data collected through secondary sources. 

Data representation

The result have presented with the help of pie-charts and bar diagrams which clearly represents that the research conducted is a Formal Research and the Research Design is a sound one.

31



Determining the source of data

The next step is to determine the source of data to be used. The marketing research may be based on primary or secondary data or on both.

3.2 OBJECTIVE OF THE STUDY

1.

To analyze the liquidity and solvency position of the firm.

2.

To study and analyze the overall profitability of the firm.

3.

To relate the various items of profit and loss account with sales.

4.

To study and analyze the capital structure of the firm.

3.3 SOURCES OF DATA Sources to collect data can be classified under two categories, Primary and Secondary sources. In this report I have used the information gathered through secondary data which include mainly the Annual Reports of GINNI FILAMENTS PVT LIMITED Secondary Datawas collected from books, magazines, web sites, going through the records of the organization, etc. It is the data which has been collected by individual or someone else for the purpose of other than those of our particular research study. Or in other words we can say that secondary data is the data used previously for the analysis and the results are undertaken for the next process means data are available i.e. they refer to the data which have already been collected and analyzed by someone else. The secondary data involved in this project has been gathered from websites, internets and going through the company records and other relevant sources.

32

3.4 DATA PRESENTATION TOOLS Tools used for presenting the analyzed data are as follow:

 Bar graphs 

Pie charts

33

CHAPTER 4 DATA PRESENTATION AND ANALYSIS

34

1. COMPARATIVE ANALYSIS Comparative Balance Sheet of Ginni Filaments (₹cr) Mar 18 17-Mar increase or decrease

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS Equity Share Capital Preference Share Capital Total Share Capital Reserves and Surplus Total Reserves and Surplus Total Shareholders Funds NON-CURRENT LIABILITIES Long Term Borrowings Deferred Tax Liabilities [Net] Other Long Term Liabilities Long Term Provisions Total Non-Current Liabilities CURRENT LIABILITIES Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Total Current Liabilities Total Capital And Liabilities

%

70.65 0 70.65 108.17 108.17 178.82

70.65 11.85 82.5 105.31 105.31 187.81

0 -11.85 -11.85 2.86 2.86 -8.99

0.00 -100.00 -14.36 2.72 2.72 -4.79

62.21 10.04 2.72 8.19 83.15

59.97 11.26 2.29 8.47 81.99

2.24 -1.22 0.43 -0.28 1.16

3.74 -10.83 18.78 -3.31 1.41

204.38 55.68 46.87 4.02 310.95 572.92

154.17 36.88 65.6 3.63 260.27 530.07

50.21 18.8 -18.73 0.39 50.68 42.85

32.57 50.98 -28.55 10.74 19.47 8.08

250.41 0.17 3.71 254.29 28.9 0 1.26 284.45

229.78 0.13 17.91 247.82 28.9 0 4.6 281.32

20.63 0.04 -14.2 6.47 0 0 -3.34 3.13

8.98 30.77 -79.29 2.61 0.00 0.00 -72.61 1.11

161.89 87.58 5.35 0 33.65 288.47 572.92

144.05 66.74 4.99 0 32.97 248.75 530.07

17.84 20.84 0.36 0 0.68 39.72 42.85

12.38 31.23 7.21 0.00 2.06 15.97 8.08

ASSETS NON-CURRENT ASSETS Tangible Assets Intangible Assets Capital Work-In-Progress Fixed Assets Non-Current Investments Long Term Loans And Advances Other Non-Current Assets Total Non-Current Assets CURRENT ASSETS Inventories Trade Receivables Cash And Cash Equivalents Short Term Loans And Advances OtherCurrentAssets Total Current Assets Total Assets

35

Interpretation 1.

Comparative Balance Sheet reveals that there has been a major rise in the total assets of the organization. Major increase was in intangible assets i.e. by 30.77% 580 570 560 550 540

2018

530

2017

520 510 500 Total Assets

2.

There has been rise in short term borrowings by 32.57% 250

200 150 2018 100

2017

50 0 short term borrowings

36

2. CASH FLOW ANALYSIS

37

CASH FLOW 100

80 60

IN LACKS

40 20 0

-20 -40 -60 -80

2018

cash flow from operating activities 35.94

2017

85.34

cash flow from investing activities -30.82

cash flow from finaning activities -4.77

-29.83

-54.54

INFLOWS/OUTFLOWS

The cash flow from operating activities showed a major fall by 42%. Also company’s investments were higher by 0.99cr.

3. RATIO ANALYSIS

3.1 Liquidity Ratios Current ratio It is also known as Working capital ratio. It is a measure of liquidity and used in making analysis of short term financial position. Current Ratio

=

Current Assets / Current Liabilities.

38

Year

2018

2017

Current assets

288.47

248.75

Current liabilities

310.95

260.27

Current Ratio

0.93

0.96

1.2

1

0.8

0.6

2018 2017

0.4

0.2

0

Interpretation: Rise in the current liabilities has not affected the current ratio of the company because there was simultaneous rise in the current assets as well. However, this ratio isn’t satisfactory as compared to the thumb rule i.e. 2:1 Liquidity Ratio Liquid Ratio is more rigors test of liquidity than the current ratio. It is the ratio between quick ratio & current liabilities. Quick ratio refers to all current assets except Inventory & prepaid expenses. Liquid Ratio = Liquid assets / Current Liabilities

39

Liquid assets = Current Assets- Prepaid Exp – Inventories Year

2018

2017

Liquid assets

126.58

104.7

Current liabilities

310.95

260.27

0.41

0.40

Liquid Ratio

0.45 0.4 0.35 0.3 2018 0.25

2017

0.2 0.15 0.1 liquidity ratio

Interpretation: As seen from the analysis this ratio is almost same in both the years and not quite satisfactory with a thumb rule i.e. 1.5: 1

3.2 Solvency Ratios Debt Equity Ratio It shows the relationship between external and internal equities & it is calculated to measure the claim of outsiders and owners against company’s assets 40

Debt Equity Ratio = Total Debts / Shareholders’Equity Year

2018

2017

Total Debts

266.59

214.14

Shareholders’ Equity

178.8

187.81

Debt Equity Ratio

1.49

1.14

2.5

2

1.5

1.49 1.14

2018 2017

1

0.5

0 Debt Equity Ratio

Interpretation: There has been major change in the debt equity ratio. Higher the ratio higher is the risk. Company has gone for external sources for funding rather than increasing shareholders’ fund. However, business is still in a stable position. Equity Ratio

Establish the relationship between shareholders’ funds and total assets of the company, the components of this ratio are 41

Equity Ratio = Shareholder’s Funds / Total Assets *100 Year

2018

2017

Shareholders’ Funds

178.82

187.81

Total Assets

572.92

530.07

Equity Ratio

31.21

35.06

Equity Ratio 36 35.06 35 34 33 2018 32

31.21

2017

31 30 29

Equity Ratio

Interpretation: Companyis not relying more on shareholder funds than on loan funds. This is not a favorable point for the creditors and the money lenders. 3.3 Profitability Ratios Gross Profit Ratio Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. Thus it is calculated by dividing the gross profit by sales.

42

Gross Profit Ratio = Gross Profit / Sales * 100

Year

2018

2017

Gross Profit

2.19

30.30

Sales

706.23

743.92

Gross Profit Ratio

0.31%

4.07%

4.5

4.07

4 3.5 3 2.5 2018

2

2017

1.5 1 0.5

0.31

0 Gross Profit Ratio

Interpretation: There has been major fall in the Gross Profit ratio because the rate of decrease in sales is more than the rate of decrease in cost of goods sold which is not good for the company.

Net Profit Ratio Net profit ratio established a relationship between net profit and sales. This ratio is the overall measure of firm’s profitability and is calculated as: 43

Net Profit Ratio = Net profit after tax / Net Sales *100

Year

2018

2017

Net profit after tax

2.66

16.15

706.23

743.92

0.37

20.17

Sales Net Profit Ratio

2.5 2.17 2 1.5 2018 2017

1 0.5

0.37

0 Net Profit Ratio Interpretation:the fall in net profit ratio is comparatively less due to the fall in operating expenses of the company. However, it’s still a matter of concern since net profit margin fell by 85% percentage.

Return on Investment This ratio is also known as return on capital employed percentage. Return on Investment = Profit Before interest and taxes / Total investment *100 44

Total investment = total assets – current liabilities Year

2018

2017

Profit Before interest and taxes

32.31

59.12

Total investment

261.97

269.8

Return on Investment

12.33%

21.91%

21.91 %

25.00% 20.00% 15.00%

12.33 % 2018

10.00%

2017

5.00% 0.00%

return on investment Interpretation: The Company’s overall profitability is also negatively affected by fall in return on investment. It decreased from 21.91% to 12.33%.

3.4Activity Ratios 

Working Capital Turnover Ratio

Itindicates the velocity of utilization of net working capital. It indicates the efficiency with which working capital is being used by the company. Working Capital Turnover Ratio = Net Sales /Average working capital 45

Average working capital = current assets – current liabilities Year

2018

Net sales Average working capital Working Capital Turnover Ratio

44

2017

706.23

743.92

17

17

41.54

43.76

43.76

43.5 43 42.5 42 41.54

2018 2017

41.5 41 40.5 40 Working Capital Turnover Ratio

Interpretation: there is a downfall in the working capital turnover ratio. The utilization of working capital has not been done efficiently in FY18 as compared to the previous year.



Stock Turnover Ratio

It indicates whether the inventory has been efficiently used or not. It indicated the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

46

Inventory / Stock Turnover Ratio: Net Sales / Avg. Inventory at Cost Year

2018

2015

Net sales

706.23

743.92

Average inventory at cost

161.89

144.05

Inventory Turnover Ratio

4.36

5.16

8

6 5.16 4.36

2018 2017

4

2 Inventory Turnover Ratio This year, since the ratio fell from 5.16 to 4.36 it depicts the reducing sale and popularity of the company’s products.

47

CHAPTER 5 FINDINGS AND CONCLUSION

48

FINDINGS 

Company is utilizing long term loans to finance fixed assets and investments, it’s not relying on own funds.



The debt-equity ratio of the company is higher than 1 which means higher leverage.



The profitability ratios haven’t shown good results.There is fall in gross profit of the company since the revenue from operations was reduced by 8.06%.



The changes in inventories of FG, WIP and Stock-In trade was higher than previous year. It shows that company overproduced in FY17. However, it still did not help with the decreasing profits.



There is stability in equity share capital. However, preference shares are completely wiped out from the capital structure of the company.



Inventory turnover ratio was also reduced from 5.16% to 4.36% which again shows the reduced sale and popularity of the company’s products.



Current liabilities were increased by 19.47%. Which shows that company is relying more on short term borrowings for its working capital requirements.

49

CONCLUSION The company holds a good market share in the international business world but its complete dependence

over long term borrowing as a source of finance is negatively

affecting its

performance. However, involvement in CSR is helping the company to increase goodwill. The cotton yarn segment in facing major losses but effective and efficient managing will help the company to overcome the downfalls. Company has to work in field of reduction in cost of production. Company has seen major downfall in its operating revenues and the reason behind which is reduced sales. This is affecting company’s profitability. While studying the profit notes to accounting, it was observed that garment segment contributed the least in the company’s profit this year.

50

CHAPTER 6 RECOMMENDATIONS

51

SUGGESTIONS



The Company isn’t enjoying a good current position. It should take steps to further improve its position by repositioning the composition of current assets.



Inventory control is not proper and the capital employed is not being used efficiently. So the company should apply the proper Inventory Control System so that there is no wastage of funds.



Since the company is relying more on the leverage, it has turned into a leverage firm. Fir should strive to become more conservative.



Use of internal funds will reduce expenses like interest on loans and might help with profits.



Some of the sectors like garment sector of the firm aren’t contributing to the firm’s sale and therefore the firm should focus more on improving sales of garment sector.



Reduced investment of the company has also reduced the other revenues and therefore the firm should try to invest more to generate inflows from financing activities.



Firm’s marketing expenses are equivalent to zero which isn’t helping the sales and therefore firm should also focus on marketing of its product.

52

Bibliography Books T.S. Grewal’s Analysis of Financial Statements Fernado Alvarez and Martin Fridson’s Financial Statement Analysis: A Practitioner’s Guide References •

Dr.S.Vijayalakshmi, Sowndarya.K and Sowndharya.K “A Study on Financial Performance Analysis of Bharti Airtel Limited” (March, 2017)

•

HabimanaTheogene, Tom Mulegi, NiyompanoHosee, Mount Kenya University “Financial Statements Analysis and the Performance of Commercial Banks in Rwanda: A Case Study of Bank of Kigali” (June 2017)

•

Sugandha Sharma & Dr. Navneet Joshi “Financial Ratio Analysis ofITC Limited “ (June 2017)

•

Sweta Singh, Administrative Management College “Ratio Analysis in Manufacturing Sector-A Study “ (July 2017)

•

Aashaq Hussain and PK Sharma “Comparative financial analysis: (A case study of associated cement company v/s Jaypee cement company)” (January 2017)

•

Deepika S and Dhivya B “A study of financial statement analysis of oil and natural gas Corporation limited “ (January 2017)

•

Dr. M. Ravichandran&M. Venkata Subramanian “A Study on Financial Performance Analysis of Force Motors Limited” (March 2016)

•

DušanBaran, Andrej Pastýr& Daniela Baranová “financial stability and investment attractiveness of the hotel business enterprises: theoretical aspects and practical analysis” (2016)

53

•

Dr. Ashok Kumar Rath “A Study on Financial Statement Analysis of Tata Steel Odisha Project, Kalinga Nagar” (2016)

•

Mohammed Nuhu, The Federal Polytechnic Damaturu, Nigeria “Role of Ratio Analysis in Business Decisions: A Case Study NBC Maiduguri Plant” (July 2014)

•

R.Idhayajothi, Dr.O.T.V.Latasri, N. Manjula, A.MeharajBanu& R. Malini “A Study on Financial Performance of Ashok Leyland Limited at Chennai.” (June 2014)

•

Dr. Ayad Shaker Sultan, School of Business Administration and Economics University of Sulaimania – Kurdistan Region of Iraq ‘Financial Statements Analysis - Measurement of Performance and Profitability: Applied Study of Baghdad Soft-Drink Industry” (2014)

•

Florenz C. Tugas, CISA, CPA “A Comparative Analysis of the Financial Ratios of Listed Firms Belonging to the Education Subsector in the Philippines for the Years 20092011”(November 2012)

Web sources www.moneycontrol.com www.wikipedia.org www.ginnifilaments.com Annual report of Ginni filaments Ltd.

54