Description
A company’s balance sheet and profit & loss accounts are valuable information sources for identifying risk taking and assessing risk management effectiveness. Although amounts found on these statements does not provide valuable insights of performance so Financial analysis and Interpretation is required for determining good or bad performance of company and also for determining its causes.
A Study of Analysis and Interpretation of Financial Statements
LIST OF TABLES
Table No. Name of the Table Pae No.
1 Comparative Balance sheet
2 Comparative Income Statement
3 Comparative Balance sheet
4 Comparative Income Statement
5 Common-size Income Statement
6 Common-size Balance Sheet
7 Trend Income Statement
8 Trend Balance Sheet
C!rrent "atio
1# $!ic% "atio
11 Inventor& t!rnover ratio
12 Total 'ssets T!rnover "atio
13 (ross )ro*it "atio
14 +et pro*it "atio
LIST OF !"A#TS
!hart No. Name of the !hart Pae No.
1 C!rrent "atio
2 $!ic% "atio
3 Inventor& T!rnover "atio
4 Total 'ssets T!rnover "atio
5 (ross )ro*it "atio
6 +et )ro*it "atio
Institute of management studies
I Chapter 1
? Executive summary
? Purpose of the Study
? Objectives of the Study
? Methodology
? imitations of the study
II Chapter !
? Introduction to the company
? "istory of the company
? Introduction
? Pro#le of the company
? Organi$ation structure
III Chapter %
? Introduction to the topic
? &echni'ues of analysis and Interpretation
? (indings
? Suggestions
? Conclusion
? S)O& *nalysis of the company
I+ Chapter ,
*ppendix
? -ibliography
? *nnexure
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
!"APTE#$%
,-,C.TI/, S.00'"12
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
(ada3 Co-4perative Te5tile 0ill 6td 7!l%oti esta8lished in 172 8& late
shri9:979)atil at 7!l%oti in (ada3 district9 It is prod!cin3 main prod!ct as &arn9 The
compan& started ;ith a prod!ction cost o* "S922#la%hs9It is started prod!cin3 &arn in
the &ear 1739
It ;as a 3reat e5perience to !nder3o s!mmer in plant trainin3 on proced!res and policies9
In this report I made an e**ort to %no; the *inancial position o* the (CT0
Compan& 90& topic is ;e can sa& that> @inancial 'nal&sis is a startin3 point *or ma%in3 plans
8e*ore !sin3 an& sophisticated *orecastin3 and plannin39
Purpose of the study
' compan&As 8alance sheet and pro*it B loss acco!nts are val!a8le
in*ormation so!rces *or identi*&in3 ris% ta%in3 and assessin3 ris% mana3ement
e**ectiveness9 'ltho!3h amo!nts *o!nd on these statements does not provide val!a8le
insi3hts o* per*ormance so @inancial anal&sis and Interpretation is reC!ired *or
determinin3 3ood or 8ad per*ormance o* compan& and also *or determinin3 its ca!ses9
The st!d& incl!des the calc!lation o* di**erent *inancial ratios> Trend anal&sis>
comparative income and Balance sheet> common size cash *lo; and *!nd *lo;
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
statements9 It compares *ive &ears *inancial statements o* the compan& to %no; its
per*ormance in these di**erent &ears9
This report incl!des the pro*ile o* the (9C9T9097!l%oti9 It contains 8rie*
introd!ction >nat!re o* the 8!siness> prod!ct pro*ile and process and or3anization
str!ct!re9
This report incl!des the *indin3s and s!33estions> concl!sions o* the st!d&
done in order to 3ive 8etter s!33estions9
This st!d& has done 8& ta%in3 the past *ive &ears *inancial statements o* the
compan&9
@or the anal&sis o* data the simple percenta3e method is !sed and the data is
sho;n 8& !sin3 the some 3raphs9
@inall& the st!d& has helped to me in man& ;a&s to acC!ire the %no;led3e
a8o!t the compan& per*ormance and its pro*ita8ilit&9
OB'E!TI(ES OF ANAL)SIS AN* INTE#P#ETATION 2
@ollo;in3 are the main o8Dectives o* anal&sis and interpretation o* *inancial
statements9
19To st!d& the earnin3 capacit& o* the *irm
29 To st!d& the pro3ress o* the *irm
3 To assess the e**icienc& o* the *irm9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
4 To determine the *irms pa&in3 capacit& to meas!re the *inancial
)er*ormance o* the *irm9
59 To prepare the comparative statements o* the mill9 B& !sin3 the
@inancial Statements o* past &ears
69 To %no; past per*ormance and *inancial position o* the mill9
+ET"O*OLO,) OF *ATA !OLLE!TION -
Be*ore the collection o* data> it is o*ten advisa8le to all other aspects o* the st!d&9 Ee
need to reco3nize the scope> need and importance as ;ell as the o8Dectives o* the
st!d&9 '*ter the p!rpose has 8een de*ined> the ne5t step is to decide a8o!t the so!rces
o* data9 The so!rces o* in*ormation ma& 8e primar& as ;ell as secondar& so!rces9
This chapter entails a revie; o* all the data o8tained and it relevance to the st!d&
8ein3 !nderta%en9
='T' C466,CTI4+ 0,T74=2 There are t;o t&pes o* data collection methods9
19 )rimar& data collection method
29 Secondar& data collection method
)"I0'"1 S4."C,S2
The primar& data are collected 8& the thoro!3h and detailed disc!ssion ;as cond!cted
;ith the *inancial controller and 'cco!nts o**icer and also disc!ssion ;ith colle3e
internal 3!ide9
S,C4+='"1 S4."C,S2
The secondar& data incl!des sales reports> p!rchase reports and *inancial statements
o* the compan&9
'nd also in*ormation *rom the te5t so!rces9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
SA+PLIN, *ESI,N-
# Samplin3 !nit 2 @inancial Statements
1 Samplin3 Size 26ast *ive &ears *inancial statements
2 Samplin3 proced!re 2 =irect
LI+ITATIO+S OF T"E ST.*)
The st!d& is cond!cted on a 3eneral 8asis9
Time Constraint
"estrictions on Behal* o* the compan&
Inter *irm and intra *irm comparison is not possi8le
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
!"APTE#$/
"ISTO#) OF T"E !O+PAN) -
,A*A, !O$OPE#ATI(E TE0TILE +ILL LT*
".L1OTI
7!l%oti is small villa3e has a pop!lation o* 1####> havin3 a di**erent sections
o* people9 The main occ!pation o* the ma5im!m people is a3ric!lt!re9 In this villa3e
there is no irri3ation *acilitiesF dr& land c!ltivation is the onl& ;a& to *ormin3
committee9
In the villa3e the main crops are cotton> Da;ar> chill&> 3ro!ndn!t etc9 The main
commercial crops are chill& B cotton9 'll these mar%eted in and aro!nd (ada39
@armers are e5ploited 8& the private traders and commission a3ents9 To protect the
*ormin3 committees late Shri9:979)atil decided to esta8lish the co-operative mill in
7!l%oti9 0ost o* the *arm la8orers are !nemplo&ed d!e to dr& land c!ltivation9 To
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
solve the !nemplo&ment pro8lem and also to protect the *ormin3 committees *rom
commission a3ents the& started the mill9
The mill is sit!ated in villa3e 7!l%oti near (ada3 i9e9 6%9m *rom (ada39 6ate
shri9:979)atil> politician leader decided to start the mill in this place9 The main
p!rpose o* startin3 the mil is to provide the emplo&ment opport!nities to the people9
7e is devoted *!ll& *or the esta8lishment o* co operative net;or% aro!nd 7!l%oti
providin3 vario!s amenities and scope *or development o* *armers
The mill is started ;ith mission o* providin3 emplo&ment opport!nities and
save the *ormers *rom the commission a3ents9 The main crop 3ro;n s!rro!ndin3
7!l%oti is cotton> this ;as an opport!nit& to start the mill 9 This is one o* the co-
operative societ& located on either side :ar;ar-Bellar& road 8et;een 7!l%oti and
(ada39 It is started ;ith a (innin3 and pressin3 !nit9
'*ter s!ccess*!l settin3 !p o* (innin3 and )ressin3 !nit 8& (ada3 co-
operative cotton sale societ& >the ne5t am8ition o* the Co operators ;as to esta8lish a
Te5tile 0ill o* 25>### spindles capacit& ;hich ;o!ld cons!me the main a3ric!lt!re
prod!ce 8& pa&in3 rem!nerative price to cotton 3ro;ers and to the *armin3
comm!nit&9
The (ada3 Co-operative Te5tile 0ill is esta8lished in the &ear 172 8& late
shri :979)atil 9It is started ;ith proDect cost o* "s922# 6a%hs9
INT#O*.!TION
The (ada3 Co-operative Te5tile 0ill is started 8& 6ate Shri9:979)atil> to
protect the *ormin3 committee 8& private traders and the commission a3ents9 It is
started in this place 8eca!se o* availa8ilit& o* ra; materials and also the la8o!rs9
The (ada3 co-operative te5tile mill is started in the &ear 172 ;ith a proDect
cost o* "s922# 6a%hs9 The (9C9T90 commenced is prod!ction in the &ear 1739 The
proDect cost is met ;ith the *ollo;in3 manner9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
INF#.ST#.!T.#E FA!ILIT)-
6and and 8!ildin3
)lant and machiner&
0iscellaneo!s
Contin3enc&
Eor%in3 capital mar3in
@ree op
erative e5penses
33971 6a%hs
17797# 6a%hs
249#8 6a%hs
69## 6a%hs
229## 6a%hs
159## 6a%hs
22# la%hs
1 0em8ers Shares Contri8!tion - "s9#4#9## la%hs
2 (overnment Share Contri8!tion - "s9#8#9##la%hs
3 Term 6oans GI@CIH - "s91##9##la%hs
Total - "s922#9##la%hs
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Total
)roDect cost o* "s922#6a%hs is met *or all these *acilities i9e9 to esta8lishment
o* the compan&9
!.ST+O#S-
1H Samr!dha 4ver Sales 6td9> 0!m8ai
2H S!r&aDoti International mill ltd >9 Sin%andra8ad
3H =hanala5mi GCB"H 0ill> (anapavaram9
4H S!r&ala5mi Cotton 0ills 6td9> Sin%andra8ad
Nature of the business -
The *irst step the compan& p!rchases the ra; material i9e9 cotton *rom
the *armers9 Then it mi5es it ;ith di**erent C!alit& cotton accordin3 to the
C!alit& o* &arn needed9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The ne5t step is cleanin3 the minor part and spra&in3 the ;ater to it9
Then it %ept 1 da& in the cool place9 +e5t step it 3oes to maDor cleanin3 part it
3oes to all cleanin3 o* the cotton9
The ne5t process is cardin3 process9 7ere the cotton ;ill 8ecome
smoothl& and ;hite9 +e5t 3oes to the simple5 method9 In this cotton 8ecomes
8i3 la&ers and it ma%es the 3ro!p o* la&ers9
The ne5t proced!re is rollin3 and 3rillin39 7ere the 8i3 la&ers are
rolled and it is separated *rom the 3ro!p and comes in the *orm o* loose thread
and ne5t process is dra*tin3 and t;istin3 and the thread 8ecomes stron3 and it
comes la&er 8& la&er in the *orm o* thin &earn9 The ne5t step is notin3 here i*
thread 3oes into t;o parts the machine ;ill Doin it9 It is called notin3 process9
@inall& a*ter all these process the ra; material is converted into the
*inished 3oods ;hich are in the *orm o* &arn9
+ISSION-
,mplo&ees> mem8ers GshareholdersH and societ& at lar3e?
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
(ISION-
in ;hich ever *ield
&o! enter there is competitionF one m!st %no; ho; competition in the mar%et
ma%es it a8sol!tel& necessar& *or man!*act!rers to thin% o* advertisin39 @or
ne; prod!ct> strate3ies and 8& doin3 all these to in areas the sales9
These *ollo;in3 companies are the competitors o* the (9C9T909
1H Banahatti Co-operative Spinnin3 0ill 6td9
2H San3ola Co-operative Spinnin3 0ill 6td9
3H @armers Co-operative Spinnin3 0ill 6td9
!O+PAN) P#OFILE-
+ame
T7, ('='( C4-4),"'TI/, T,-TI6, 0I66 6T=9 7.6:4TI
I 582 2#59
Stat!s
This Co-operative Societ& re3istered !nder the Co-operatives
Societies 'ct o* 15
6ocation :arnata%a state> (ada3 =ist> 7!l%oti
Chairman Shri =9"9 )atil>
,5 0969'9 (ada39
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'rea o*
operation (ada3 7averi
,5port places
+e;-=elhi> So!th
rea> China and Co!ple o* ,!ropean
co!ntriesGthro!3h a3entsB (ovt instit!tesH
+at!re o*
B!siness )rod!ction and sale o* 1'"+
0em8ership
and Share
capital 3#21 Co-operative societies and 817971 6a%hs
+o o*
departments 8 J,i3htK =epartments
+!m8er o*
emplo&ees 45#
+o o* Board o*
=irectors
,lected mem8ers I 18
,5 I o**ice mem8ers I 1
+ominated 8& (ovt I 3
)rod!ction
capacit& 8>5## %3s o* &arn per da& as per the 2##8-# report9
Stora3e
capacit& 75## 0illion T4+9
'rea o* mill
6and area-#525 sC9*t
B!ild!p area- 643945 sC9mtrs
O12*.I5*&IO. S&13C&31E6
Share Holders
Board of Directors
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Chairman
Managing Director
P & I Production Finance Administration Security Marketing
Dy. Dy. Dy. Dy. Sr. Dy.
Manager Manager Manager Manager Suer!isor Manger
"#tension $.C. Accounts Assistants %r. Assistants
&'cer &'cer. Assistants Suer!isors
Helers Assistants Helers Helers Helers
(orkers
7.0'+ ",S.4"C, 0'+'(,0,+T2
7!man "eso!rces is an activit& involved in direction B co-ordination o*
h!man relations in a or3anization there 8& o8tainin3 ma5im!m prod!ction at the
minim!m e**ort stress B strain on individ!al ;or%ers9
Functions
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
9
19 Sta**in3 B ,mplo&ment
29 Eel*are 'menities
39 Trainin3 B =evelopment9
49 Compensation> Ea3e B Salar& 'dministration9
59 0otivation B Incentives9
69 ,mplo&ee records9
79 6a8o!r on Ind!strial "elation9
89 4r3anizational plannin3> development B tas% speci*ication
0ana3ement is considered as an art o* 3ettin3 thin3 done thro!3h
others ;ith a vie; to achieve the common o8Dectives o* the or3anization 9 8!t these
o8Dectives can 8e achieved onl& i* the or3anization is mana3ed e**icientl& 9 The
mana3ement o* the or3anization is considered to 8e e**icient o* it is a8le to contri8!te
their ma5im!m to;ards the realization o* the or3anization9 The or3anization 8elieves
that the mana3ement sho!ld not primaril& 8e considered ;ith *!ll and proper
!tilization o* ph&sical *actors s!ch as ra; material and machiner& 8!t also pa&
attention to the h!man *actors 9 4n ;hich the ma5im!m !tilization o* ph&sical *actors
depend9
The )ersonnel 0ana3er also sa&s that 0aterial ma& 8e p!rchased at the most
competitive prices and machines ;as ;or%ed to their *!ll capacit& 8!t the o!tp!t
cannot 8e ma5imized ;itho!t the co-operation o* the ;or%ers9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The compan& ;or%s 24 ho!rs a dail&9 The ;or% is divided into 3 shi*ts i9e9
'0 to 493# )0 @irst shi*t
493# )0 to 1293#'0 second shi*t
1293# '0 to 893#'0 third shi*t
C6'SSI@IC'TI4+ 4@ T7, E4": @4"C, 2
Eor% *orce o* the societ& shall 8e classi*ied as !nder 2
1H )ermanent
2H Badli
3H Trainee or apprentice
E,6@'", @'CI6ITI,S I+ (CT02
@ollo;in3 are the Eel*are @acilities provided 8& (CT0 to its ;or%ers9
%2 !anteen-
The personnel department administers the canteen 9 the main
responsi8ilities are to prepare and distri8!te the *ood st!** as per the
sched!led timin3s the di**erent co!nters and to maintain h&3ienic
condition printed and s!pplied 8& the compan&9
/2 +edical Facilities 2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Eor%men covered !nder the ,SI scheme and their *amil& mem8ers ;ill
receive medical *acilit& !nder the emplo&ees state ins!rance as in *orce
*rom time to time9'nd also one hospital is their in the or3anization
premises *or 3eneral and *irst aid treatments9
32 4uarter5s Facilities 2
The C!arters are provided *or the permanent emplo&ees ;ho are
;or%in3 in the (CT09 There are '>B>C>= and , t&pe o* C!arter are
8ein3 provided to the emplo&ees on the seniorit& 8asis 9
62 Transport Facilities7
The emplo&ees are provided ;ith 8!s *acilities9There are one 8!s and
one ma5i ca8 is there ;hich pic%!ps the people scattered in the (ada3
cit& and a*ter the d!t& ho!rs the& are dropped 8ac% at the same *i5ed
points
82 School and !ollee 2
' school and pre !niversit& colle3es has 8een constr!cted in the
7!la%oti near to the compan& ;hich are handed to the state ed!cation
department 9 @or the maintenance and repairs or replacements o* *!rnit!re and
electrical *ittin3 is carried o!t 8& the compan&9
ATTEN*AN!E-
1H ,ver& emplo&ee shall 8e at this place or ;or% at the time *i5ed and
noti*ied !nder cla!se and o* these standin3 orders *rom time to time9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
2H The startin3 and closin3 o* ;or% and startin3 and *inishin3 o*
intervals period ;ill 8e si3naled 8& means o* siren> 8ell or similar
devices9
3H '*ter the siren 8ell ever& emplo&ee sho!ld present at the place o*
;or%9
4H The attendance re3ister shall 8e entered *rom time to time cards and
an& emplo&ees *ailin3 to record or 3et mar%ed the time on the card is
lia8le to 8e treated as a8sent9
5H ,mplo&ee comin3 late or leavin3 earl& ;itho!t permission shall 8e
lia8le to ded!ctions *rom their salar& L;a3es as provided *or in the
pa&ment o* ;a3es act 1369 @or this p!rpose time shall 8e calc!lated
in !nits o* 3# min!tes9
SALA#) AN* 9A,ES 2
19 +otice speci*&in3 pa& da&s shall 8e displa&ed on the notice 8oard o*
the Societ& 9
29 'n emplo&ee shall chec% his salar& or ;a3es immediatel& on receipt9
+o claim *or shorta3es ;ill 8e considered once the recipient has le*t
the immediate presence o* the person ma%in3 pa&ment9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'n& disp!te or complaint re3ardin3 ;a3es shall 8e 8ro!3ht to the
notice o* the mana3ement or an& other o**icer appointed *or the
p!rpose as earl& as possi8le9 It shall 8e the d!t& o* the mana3ement or
the o**icer appointed to attend to s!ch complaints ;itho!t m!ch dela&9
39 .npaid Salaries and Ea3es 2 'n& salaries and ;a3es d!e to the
emplo&ee
+ot paid on the !s!al pa& da& on acco!nt o* the salaries and ;a3es
remainin3 !nclaimed or *or an& other reason ;ill 8e paid 3 da&s a*ter
the speci*ied date o* pa&ment or ;hen claim has 8een s!8stantiated 8&
the emplo&ee or on his 8ehal* o* his le3al representative provided s!ch
claim is made and s!8stantiated ;ithin one &ear *rom the date on
;hich the salar& or ;a3es 8ecome d!e to the emplo&ee9
A*+INIST#ATION *EPA#T+ENT
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'dministrative department pla& ver& important role in the or3anization *or its
smooth r!nnin3 o* the 8!siness and s!ccess o* this compan& is mainl& dependin3 on
the e**icient administration o* the (9C9T909
This department loo%s a*ter administrative *!nctions s!ch as pa&ment o*
salaries> arran3ement o* meetin3s> and *ormation o* policies etc> the 3eneral *!nctions
o* this department are as *ollo;s9
? 0aintenance o* *iles> records etc9 !p to date> collectin3 and presentin3 data in
the *orm o* !se*!l in*ormation *rom the records9
? Implementin3 the or3anization s&stems> proced!res and policies in a
coordinated manner9
? ,ns!rin3 smooth r!nnin3 o* the o**ice 8!& inter*acin3 ;ith the eternal
a3encies as reC!ired9 @or e5-pa&ment o* telephone 8ills> electricit&> ;ater
s!ppl& 8ills etc9
? 0aintenance o* the o**ice premises9
? )rovidin3 reC!ired *acilities9
+O*E#NI:ATION P#O,#A++E
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'*ter a period o* 18 &ears there ;as a need *or !p3radin3 technolo3& o*
certain machines and to eater to the e5port needs> the 0ana3ement proposed a
0odernization )ro3ramme at a cost o* "s9 429## 6a%hs9 The term> lendin3
instit!tions sanctioned "s9 23696 6a%hs and the 8alance "s9 12931 la%hs ;as *rom
the internal reso!rces o* the 0ills9 The 0ill replaced Cardin3 0achines> ;indin3
machines and added one 4pen ,nd Spinnin3 machine and one Imported '!to Conner
o* latest technolo3&9 Eith the implementation o* this )roDect there ;as improvement
in the prod!ctivit& and the C!alit& o* the *inished prod!ct9
To meet the standards o* the C!alit& &arn in demand> 8oth in domestic as ;ell
as in International mar%ets> the 0ana3ement o* the 0ills tho!3ht it inevita8le to
la!nch another 0odernization )ro3ramme coverin3 0achiner& *rom 8lo; room to
Spinnin3 ;as planned9 This pro3ramme> ;ith an estimated cost o* "s9 2# 6a%hs ;as
approved 8& the national Co-operative =evelopment Corporation G+9C9=9C9H and the
(overnment o* :arnata%a9
's part as 0odernization )ro3ramme> +9C9=9C9 has sanctioned "s9 7369##
6%ahs> ;hile (overnment o* :arnata%a contri8!ted "s9 1369## 6%ahs as share capital9
The rest amo!nt o* "s9 469## 6%ahs ;as mo8ilized *rom 0em8ers o* the Societ&
thro!3h shares9
Eith s!ccess*!l implementation o* 2
nd
)hase o* 0odernization )ro3ramme>
the latest version o* '!to leveler 0achiner& at Cardin3 and =ra;in3 Sections are
ind!cted and commissioned9 @ollo;in3 this> e**orts are 8ein3 made to raise the
prod!ctivit& to hi3h standards9 @!rther> completion o* 0odernization ena8les !s to
C!alitative reC!irement o* reC!irement o* International mar%et Standards9
)."C7'S, =,)'"T0,+T2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The p!rchase department is pla& the important role in ever& or3anization9
To r!n the 8!siness contin!o!sl& p!rchase department pla&s a vital role9 )!rchase
activit& has developed the lon3 relationship ;ith the vendors o* the compan&9
)!rchasin3 is a social and mana3erial *!nction ;hich creates the val!e *or prod!ction
!nit9 To satis*& the needs o* the compan& there is a need o* p!rchases as per
reC!irements o* the compan& 8& considerin3 the price C!alit& and C!antit&9
4BM,CTI/,S 4@ T7, )."C7'S, =,)'"T0,+T
? The compan& sho!ld have deep %no;led3e o* variet& o* cottons9
? The compan& sho!ld %no; the $!alit& ass!rance
? B!&in3 C!alit& cotton9
? ,5perimentin3 the C!alit& cotton9
? )roper arran3ement o* the transportation *acilities9
? 0inimizin3 transportation cost9
? 48servin3 C!alit& o* the cotton9
? 0inimization o* the p!rchase cost9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
C4TT4+ )."7'S,S2
The mill p!rchase its cotton at the open a!ction held 8& co-operative namel&
(ada3 cotton sale societ& and T9'9)9C9S909 societ& o* the 'nni3eri > (o%a%
and also mill has p!rchases cotton *rom other states li%e 0aharashtra
@ederation )!nDa8 @ederation> Tamilnad!> and *rom CCIGcotton co-operation
o* IndiaH9
The p!rchase department decides the ;hen to p!rchase >;here to
p!rchase and ho; m!ch to p!rchase 8& disc!ssin3 ;ith a mana3in3 director
and the prod!ction mana3er9 )!rchasin3 dept sends the p!rchase order to the
vendors9 The compan& maDor p!rchases are in CCI onl&9 Beca!se the reC!ired
C!alit& o* the cotton is availa8le in one place and also in more C!antit&9
)."C7'S, )"4C,=.",2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
19 The compan& collects the samples *rom the vario!s s!ppliers9
29 That cotton ;ill 8e chec% in la8orator&
39 '*ter 3ettin3 a res!lts the& are cond!ctin3 a meetin3 at ;here the& are
*inalizin3 ;hich cotton to p!rchase9
49 The p!rchase committee incl!des2
1H 0ana3in3 =irector 2H (eneral 0ana3er
3H)rod!ction 0ana3er 4H $!alit& Controller
5HCost =epartment 7ead
59 Then the& 8ar3ain ;ith the s!ppliers relatin3 to the price9 I* s!ppliers i* a
*armer or an& o* the private cotton trader then the 8ar3ainin3 is necessar&9
I* the& p!rchase the cotton *orm CCI or 0SC@ the prices are *i5ed9
69 The pa&ment period is !s!all& 3# da&s to all s!ppliers9
79 Be*ore 8ar3ainin3 ;ith s!ppliers the compan& collectin3 the dail& cotton
mar%et reports ;hich helps them to determinin3 the price9
0'I+ S.))6I,"S2
Cotton corporation o* India
0aharastra State Cotton @ederation
)/T Cotton Traders9
@rom 0em8ers and @ormers9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The *ollo;in3 ta8le indicates p!rchase o* cotton9
1ear CottonGla%hs %3H
2##3-#4 37937
2##4-#5 33937
2##5-#6 3#967
2##6-#7 294#
2##7-#8 33983
Ta8le sho;in3 p!rchase o* cotton *rom 2##4-#8
+A#1ETIN, *EPA#T+ENT
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
0ar%etin3 department is a vital department o* the or3anization 9 0ar%etin3 has
developed the lon3 relationship ;ith the c!stomer *rom p!rchasin3 and sellin3
prod!cts9
< 0ar%etin3 is a social and mana3erial *!nction ;hich 8& individ!al and 3ro!p
o8tained ;ant and need and ;ant thro!3h creatin3 e5chan3e prod!cts and
val!e ;ith otherAA9
0ar%etin3 o* 1arn 2
The mill man!*act!res 1#s> 2#s> 3#s> 4#s> 6#s> 8#s> 1##s> 2L2#s> 2L4#s> 2L6#s
etc9 In the *orm o* han%s as ;ell as cones as per the prevailin3 mar%et demand
sale o* han% &arn and cone &arn *rom 5#25# respectivel& ;e have 8een
*!l*illin3 the han% &arn o8li3ation stip!lated 8& the te5tile commissioner >
3overnment o* India at the end o* ever& C!arter 9 The dail& prod!ction o* &arn
is a8o!t 8>5## %3s and mill is ;or%in3 ro!nd the cloc% *or all the seven da&s
o* the ;ee%9
Special pre*erence in sellin3 &arn is 3iven to ;eavers co-operative 'pe5
or3anization and :arnata%a 7andloom =evelopment Corporation e5port o*
&arn has 8een o!r priorit& &arn is 8ein3 e5ported to co!ntries li%e So!th
rea thro!3h a3enc&9
)ac%in3 o* 1arn2
)ac%in3 is a process o* convertin3 to a prod!ct *or protection han%s &arn are
pac%in3 in the 8ale *rom and cones &arn are pac%in3 *rom 8a3s9 Bales is
consist o* 18196 %3s9 'nd 8a3 is consists o* 5# %3s
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
0ode o* Sales 2 In this or3anization orders are normall& done thro!3h2
1H B& phone
2H B& their o;n sales depots and
3H B& local sales a3ents9
Sales promotion2
The compan& not adopted an& '33ressive meas!res *or the promotion o* its
sales s!ch as advertisin3 lotteries etc9 B!t some 8asic meas!res ;hich are
adopted normall& 8& ever& concern s!ch as disco!nts9
ST4",S =,)'"T0,+T
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
In (9C9T90 there is Stores =epartment is one ;hich stores all the materials>
eC!ipments and spare parts etc9 Ehich are needed in the si3nalization *or its
smooth r!nnin3 9The main *!nction o* this department is to provide the needs
o* the or3anization i9e9 machines spares parts> pac%a3in3 materials> tools> oils
ect9 To r!n 8!siness contin!asall& this department pla&s ver& important rolein
the or3anization9 In this department the& provide materials accordin3 to order
made 8& the di**erent departments in the or3anization9 The orderslip m!st 8e
sin3 8& the 09=irector department head9
48Dectives o* the Stores =epartment 2
1H Concentratin3 to;ards smooth r!nnin3 o* the prod!ction process9
2H @acilitatin3 all reC!ired eC!ipments on time 9
3H "ed!ction o* Inventor& eC!ipments on time 9
4H Eor%in3 li%e a tra**ic si3nal to si3nalize to all eC!ipments9
5H )roper maintenance o* all eC!ipments9
This Stores =epartment is divided in to t;o s!8 departments the& are2
aH 0aterials stores
8H (eneral Stores9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
aH 0aterial Stores2 It is a s!8 department o* the stores > ;hich maintain the
stoc% o* ra; material needed in the plant i9e9 cotton > paper cones > 8a3s 9 This
department mainl& concerned ;ith stora3e o* 3# da&s stoc% o* ra; material in
the plant9
8H (eneral Stores2 It is also a s!8 department o* the stores ;hich maintainin3
the stoc% o* 3eneral material li%e >paper >*iles >!ni*orms o* ;or%ers >shoes
>3o33les> helmets> 3lo;s> c!ps> spare parts o* machines > stationeries and other
l!8ricants and pac%in3 materials9
These all materials are stored !nder 8in s&stem9 In this department each
material or item ;ill 8e assi3ned a n!m8er to it ;hich is called as Bin n!m8er9
There are a8o!t 11>### items are maintained in this department and all have
8een assi3ned in +oAs9 Bin n!m8er is a di3it n!m8er> ;hich ;ill help in
reco3nizin3 the item ver& C!ic%l& and acc!ratel&9
The *irst three n!m8ers in Bin card ;ill 3ivin3 the in*ormation a8o!t ;hich
section 9 and the second 3 di3it ;ill 3ives in*ormation a8o!t ;hich eC!ipment
and the last 3 di3it ;ill 3ives in*ormation o* ;hich item it is9
The stores department is maintainin3 mainl& t;o led3ers > the& are2
1H 0aterial "eceipts 6ed3er9
2H 0aterial Iss!ed 6ed3er9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
't he time o* each entr& in the led3er the& are C!otin3 the date> item n!m8er
C!antit& price L piece> total price9
P#O*.!TION *EPA#T+ENT-
)rod!ction means conversion o* ra; materials into a *inished prod!ct9 In this
mill the& are prod!cin3 the &arn9 i9e9 cotton is converted as &arn G*inished prod!ctH9
The (9C9T90 is one o* spinnin3 mill> it is ta%en permission *rom the 3overnment
spinnin3 and te5tile9 In *!t!re it is plan to prod!ce a cloths 8!t no; it is prod!cin3
onl& 1arn9 The (9C9T90 has a ;ell eC!ipped 8!ildin3 and also plant and machineries9
In mill the& set the machines seC!entiall& as per ;or% *lo; i9e9 plant la&o!t
s&stem is applied ver& s&stematicall&9 In prod!ction to control the ;asta3es> to save
the time> to increase ;or% e**icienc& and to increase the prod!ctivit& the plant la&o!t
pla& a vital role9 Ee st!d& a8o!t plant la&o!t in theoreticall& 8!t this proDect helps me
to %no; it in practicall& 9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T7, E4": @64E 04=,62
0I-I+(2 Bales o* di**erent co!nts are mi5ed alon3 ;ith !sa8le ;astes>
on di**erent percenta3e in the mi5in3 8ins> cotton 8ales o* di**erent C!alit& are opened
and stac%ed> called stoc% mi5in3> 24 7o!rs *or conditionin3 8e*ore it is process
*!rther9
B64E "4402 Cotton in losses *orm is spendin3 on mi5in3 8ale
openers and ta%en *!rther o* di**erent cleanin3 points ;here the cotton is 8eaten and
trash is e5tracted9 @inall& converted into 6ap *orm o* di**erent len3th> ;ei3h per &ard>
dependin3 on the co!nt9
C'"=I+(2 6ap *orm Blo; room *eed to Cards ;here the cotton is
converted *rom 6ap *orm to slive *orm9 =!rin3 this process trash> short *i8ers and
other imp!rities are e5tracted the di**erent cleanin3 points> li%e lic%er in> @lats section
.nits9 The sliver is prod!ced o* di**erent 7an% dependin3 on the co!nts9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
)",)'"'T4"12 Cards sliver is dra;n thro!3h di**erent dra*tin3 "ollers
and the sliver is elon3ated and increasin3l& the len3th o* the sliver and radiatin3 in the
cross section 8& passin3 thro!3h di**erent dra*tin3 rollers and convert into a s!ita8le
pac%a3e 8& 3ivin3 little t;ist to the material called "ove and ;o!nd on a Bo88in9
S)I++I+(2 The 8o88ins *rom the )reparator& process are *eed to the
dra*tin3 rollers as *inal treatment to the material and *!rther increasin3 the len3th and
red!ction the cross section o* the material9 This process the material process thro!3h
"in3 and Traveler and ;o!ld on the 8o88in to *orm a s!ita8le pac%a3e the 3ivin3
optim!m o* the t;ist dependin3 on co!nt o* the &arn9
C4+, EI+=I+(2 7ere the &arn sp!n is cleaned 8& passin3 thro!3h
cleanin3 devise called sl!8 catcher and ;o!ld thro!3h s!ita8le pac%a3e o* reC!ired
len3th and ;ei3ht in the *orm o* a Cone9
=4.B6I+(2 7ere t;o &arn o* the same co!nt are do!8led 8& 3ivin3
necessar& t;ist in the *orm o* pac%a3e called 8o88ins9
",,6I+(2 7ere sin3le &arn or do!8led &arn are ;o!nd on the s;i*tin3 o*
the machine called "eel in the *orm o* 7an% and are ma%e in the *orm o* :nots9 There
are t;o t&pes> a )lain or Cross "eel9
B.+=6I+( B B'6I+(2 7ere the n!m8er o* %nots plain or cross is in a
press dependin3 on the co!nt and ;ei3ht o* the 8o!ndless are as per reC!irements9
B!ndles are pressed in the *orm o* Bale dependin3 on the co!nt> )lain or Cross as per
the reC!irement *rom the mar%et9
)'C:I+(2 7ere n!m8er o* cones or cheeses is 8a33ed dependin3 on the
co!nt o* the &arn n!m8er o* cones and ;ei3ht o* the cones9 =ependin3 on the
reC!irement o* the mar%et9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
4.ALIT) !ONT#OL *EPA#T+ENT-
$!alit& Control =epartment is a vital department o* this or3anization9
Beca!se it provide in*ormation re3ardin3 C!alit& o* the ra; materials and also
*inished 3oods9 To p!rchasea standard C!alit& materials there sho!ld 8e C!alit&
control department9 'ccordin3 to the e5perts the *irst step is imported in
8!siness i9e9 in prod!ction activities the *irst step is the ra; material9
There*ore ;hile p!rchasin3 the ra; material the C!alit& control department is
important9
$!alit& Control =epartment is the %e& *actor to prod!cin3 the C!alit&
prod!cts9 $!alit& control =epartment pla&s an important role in controllin3
and increasin3 the C!alit& o* the prod!ct and it also helps in increasin3 the
e**icienc& o* the prod!cts9 $!alit& control sho!ld 8e e5ercised at the all %e&
sta3es o* the prod!ction processes> so that it helps in the stoppa3e o* the
variation in the *inal prod!ct9
In the (CT0 $!alit& Control =epartment there is la8orator& ;here the
samples o* the cotton are tested 8e*ore p!rchase9 In this la8 1925 crore ;orth
machine is installed ;hich is completel& comp!terized machine and it is also
one o* the ;ell eC!ipped la8 in the :arnata%a9
@.+CTI4+ 4@ T7, $.'6IT1 C4+T"46 =,)'"T0,+T 2
o "andom la8 ;ei3ht chec%in3
o Eithin lap variation
o Cleanin3 e**icienc&
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
o Easte st!d& speeds
o Erappin3 chec%in3
o +aps st!d&
o .ni*ormit& chec%in3
o Idle spindle
o Top roller press!re chec%in3
o "e;indin3 st!d&
o (a!3e and tension ;ei3ht chec%in3
o :not inspection
o :not ;ei3ht chec%in3
4BM,CTI/, 4@ T7, $.'6IT1 C4+T"46 =,)'"T0,+T2
? Increasin3 c!stomer satis*action
? )rod!cin3 the C!alit& prod!cts9
? "ed!ction in the scrap
? Contin!o!s improvement in the prod!ctivit&9
? "ed!ction in prod!ction overheads9
? $!ic% response to order *!l*illment9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
B'SIC C4+C,)TS .S,= I+ T,-TI6, 0I66
@i8er 2 ' slender *ilament F a *ine thread li%e part o* a s!8stance 9
:apas 2 Cotton ;ith seeds and imp!rities
6int 2 Cotton *ree *rom seeds and imp!rities
(innin3 2 The mechanical process o* separatin3 the cotton *i8ers *rom
seeds
Bale 2 ' 8!ndle or pac%a3es o* cotton compressed and 8o!nd ;ith
cord or ;ire ;ei3ht ro!nd a8o!t 17# :3s9
Spinnin3 2 The process o* dra;in3 o!t and t;istin3 the *i8er o* cotton>
Eool etc9 Into thread or &arn either 8& hand or machine9
Spindles 2 The rods or pins o* spinnin3 machine %no;n as the rin3 *rame holdin3
the 8o88ins on the ;hich &arn ;o!nd as it is sp!n 9 S!ch spinnin3 is
e5pressed in terms o* the n!m8er or spindles or rotors9
"otors 2 In the modern o* spinnin3 %no;n as the open end spinnin3 instead o*
spindles rollers are !sed9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
1arn 2 ' te5tile thread o8tained 8& t;istin3 o* consec!tivel& disposed and
Strai3htened !ltimate composite *i8ers9
7an% B cones2 1arn is s!pplied to the mar%et in to di**erent *orms han% &arn and
cone &arn 9 7an% &arn is convenient *orm o* 8leachin3> >
and transport 8!t needs ;indin3 8e*ore placin3 on the loom 9
It is !sed 8& hand loom ;eavers 9Cone &arn ho;ever eliminates the
+eed *orm ;indin3 and can 8e directl& !sed in po;er looms 9
Co!nt 2 ' co!nt is meas!re o* thic%ness or *itness o* &arn >The vario!s
co!nts
3ro!ps man!*act!red are 1#s > 2#s > 24s> 3#s>32s>34s>4#s> 6#s> 8#s
1##s 8oth in 7an% and Cone9
6o;er co!nts indicates coarse &arn and hi3her co!nts indicates *ine
1arn
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
@I+'+C, =,)'"T0,+T
@inance department is vital department o* a or3anization 9@inance is concerned
;ith providin3 and !sin3 cash and credit *or carr&in3 on 8!siness correctl&9
The mill has mem8ership and paid !p share capital as on 31
st
march 2##7
SI9+4 Cate3or& +o9o* Share 7olders Share Captial
1H
2H
3H
N'A Class Individ!al L0em8er
NBA Class G:9'9I9C9H
NCA Class GState (overnmentH
3#1
1
1
1#7946
#159##
65926
Total 3#21 817972
0ill has *!nds that ma& 8e raised
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
1H B& iss!e o* Shares
2H B& receivin3 deposits *rom mem8ers9
3H B& raisin3 loans
4H B& entrance *ees
5H B& acceptin3 donations> s!8sidies and 3rants9
6H B& commercial instit!tions9
=ed!ction can 8e made *rom the sale o* proceeds o* the cotton 8ro!3ht 8& mem8ers
at rate not e5ceedin3 7O o* the sale prod!cts9
The mill ma& raise loans disco!nt on the 8ill and overdra*ts as and ;hen necessar&
*rom the ind!strial *inance corporation o* India9
E4":I+( C')IT'6 @I+'+C,
Introd!ction 2
@!nds availa8le *or a period o* one &ear or less are called short term *inance9 The
short term *!nds are !sed to *inance ;or%in3 capital9 The main so!rce o* short term
;or%in3 capital are as *ollo;s2
1H Trade Credit2
Trade credit re*ers to the credit that a c!stomer 3ets *rom s!pplier o* 3oods in
the normal co!rse o* 8!siness9 In practice > the 8!&in3 *irm do not have to pa& cash
immediatel& *or the p!rchase made 9 This de*erral o* pa&ments is a short term
*inancin3 called trade credit 9It contri8!tes to a8o!t one third o* the short term
*inancin3 94pen acco!nt trade credit appears as s!ndr& creditors on the 8!&ers
8alance sheet 9 Trade credit ma& also ta%e the *orm o* 8ills pa&a8le9
2H Ban% @inance @or Eor%in3 Capital 2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Ban%s are the main instit!tional so!rce o* ;or%in3 capital *inance9 '*ter trade
credit> 8an% credit is the most important so!rce o* *inancin3 ;or%in3 capital
reC!irements o* *irms9 ' 8an% considers a *irmAs sales and prod!ction plan and
desira8le levels o* c!rrent assets in the determinin3 its ;or%in3 capital reC!irements9
The amo!nt approved 8& the 8an% *or the *irms ;or%in3 capital is called credit limit9
Ban% do not lend 1##O o* the credit limit9 ' *irm can dra; *!nds *rom its 8an% ;ithin
the ma5im!m credit limit sanctioned9 It can dra; *!nds in the *ollo;in3 *orms9
aH 4verdra*ts2 .nder the overdra*t *acilit&> the 8arro;er is allo;ed to ;ithdra;
*!nds in e5cess o* the 8alance in his c!rrent in his c!rrent acco!nt !p to a certain
speci*ied limit d!rin3 as stip!lated period9
8H Cash Credit2 ' 8orro;er is allo;ed to ;ithdra; *!nds *orm the 8an% !p to the
sanctioned credit limit9 7e is not reC!ired to 8orro; the entire sanction credit> rather>
he can dra; periodicall&9
3H Commercial )aper 2
Commercial paper represent !nsec!red promissor& notes 8& *irm to raise short
term *!nds9 Commercial paper is cheaper so!rce o* raisin3 short term *inance as
compared to the 8an% credit and proves to 8e e**ective even d!rin3 a period o* ti3ht
8an% credit9 7o;ever > it can 8e !sed as a so!rce o* *inance onl& 8& lar3e companies
enDo&in3 hi3h credit ratin3 and so!nd *inancial health9
4H Installment Credit 2
This is another method 8& ;hich the asset are p!rchased and the possession o*
3oods is ta%en immediatel& 8!t the pa&ment is made in installment over a
predetermined period o* time (enerall& interest is char3ed on the !npaid price or it
ma& 8e adD!sted in the price9 It is !sed as so!rce o* short term ;or%in3 capital9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
5H 'ccr!ed ,5penses 2
'ccr!ed ,5penses are the e5penses ;hich have 8een inc!rred 8!t not &et d!e and
hence not &et paid also9 The most important item o* accr!als are ;a3es and salaries>
interest and ta5es9 Ea3es and Salaries are !s!all& paid on monthl&> *ortni3htl& or
;ee%l& 8asis *or the service alread& rendered 8& emplo&ees9 In the same manner>
accr!ed interest and ta5es also constit!te a short term so!rce o* *inance
S4."C, 4@ @I+'+C, .S,= B1
T7, ('='( C4-4),"'TI/, T,-TI6, 0I66 6T=9 7.6:4TI
The (CT0 have raised di**erent variet& o* @inance *or ;or%in3 capital p!rpose9
Ehich are as *ollo;s 2
1H Trade Credit2 Ee alread& set the trade credit is the credit that a c!stomer 3ets
*rom the s!ppliers9 (CT0 p!rchased the cotton *rom di**erent or3anization li%e
Cotton sale societ& o* (ada3 and Cotton Societ& o* 'nni3eri 9 Ee can %no; the
percenta3e o* trade credit in the 8alance sheet o* (CT09
2H The (CT0 ma%e the sale o* di**erent areas li%e Ban3alore >Solap!r and also other
states 9It also sells the &arn to :arnata%a 7andloom =evelopment Corporation etc9>
*rom these some percenta3e o* 'dvance the& 3et9
3H 4ther So!rce o* @inance2
1H :9C9C9 Ban% 6td9>
2H +9C9=9C9 6oan
3H BiDap!r =9C9C9 Ban% 6td
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
48Dective and @inance =epartmentF
? To have permanent record o* all the transaction *or *!t!re re*erence9
? To %no; the res!lt o* the 8!siness in terms o* pro*it and losses9
? To the e5act reason *or pro*it and loss9
? To %no; the *inancial position o* the 8!siness9
? To %no; the pro3ress o* the 8!siness *rom &ear to &ear
? To have val!a8le in*ormation *or le3al and p!rpose
@!nctions o* @inancial =epartment2
To prepare Tradin3 'Lc
To prepare )ro*it and 6oss 'Lc
To prepare Balance Sheet
0aintenance o* acco!nts is !nder ta%en
"ate *i5in3
S!ppliers 8ill pa&in3
0aintenance o* cash and 8an% 8alance9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
!"APTE#$ 3
INT#O*.!TION TO T"E TOPI!
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
ANAL)SIS AN* ITE#P#ETATION OF FINAN!IIAL
STATE+ENTS -
@inancial statements provide s!mmarized vie; o* the *inancial position
and operation o* the compan&9 0an& parties are interested in *inancial statement
anal&sis to %no; a8o!t the *inancial position o* the *irm9 The& incl!de investors>
creditors> lenders> s!ppliers etc It is process o* esta8lishin3 the meanin3*!l
relationship 8et;een the items o* *inancial statements9 To %no; *inancial position
o* the compan& ;ith the help o* past and present per*ormance o* the compan&9
Items incl!des Balance sheet> )ro*it and loss acco!nt> "eports and ,5planator&
notes9
+eanin of financial statements-
@inancial statements are the consolidated and s!mmarized *orm o* 8!siness
transactions ;hich are pre-pared at the end o* each acco!ntin3 &ear9
These statements reveal the *inancial in*ormation o* the 8!siness enterprises *or a
certain period9 The *inancial statements are prepared *or ascertainment o* res!lts o* a
8!siness and comm!nicate the acco!ntin3 in*ormation to the !sers9 The *inancial
statement provides ans;ers to the *ollo;in3 C!estions9
1H Ehat is the *inancial stat!s o* the *irm on a partic!lar dateP
2H 7o; is the *irmAs *inancial per*ormance over the periodP
7ere *or the proDect the pro*it and loss aLcs> 8alance sheet are !sed *or
comparative anal&sis and interpretation o* the st!d&9
1H Balance sheet-
Balance sheet is the statement o* *inancial position o* a 8!siness
concern as on speci*ied date9 It represents all the assets o;ned 8& the *irm and
lia8ilit& o;ed to others9 In other ;ords> it contains the vario!s assets> lia8ilities
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
and o;ners eC!it& as on partic!lar date9 The 8alance sheetis prepared on the
8asis o* *ollo;in3 eC!ation9
ASSETS Q E4.ITIES
;AH Q ;E2
4r 'ssets Q 4;ners eC!it& R creditors eC!it&
4r 'ssets Q GShare capital R "eserves R s!rpl!s-6ossesH Ro!tside lia8ilities
/2Income statementGProfit and loss a realization principle and also on the 8asis o*
matchin3 principle9 The realized reven!es are matched a3ainst its related
e5pired cost9 The res!lt is net pro*it or loss *or the &ear9
The eC!ation is as !nder2
#e=enues > ains ? ;E@penses A Losses2 > net profit or loss.
T"E FINAN!IAL ANAL)SIS AN* INTE#P#ETATION.
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The si3ni*icance o* *inancial statement not lies in their preparation
8!t in their anal&sis and interpretation9 There*ore anal&sis and interpretation is
an attempt to determine the importance o* *inancial statements9 It increases the
meanin3 o* acco!ntin3 data9 To provide more !nderstandin3 in la&manAs
lan3!a3e9 That helps to *orecast the *!t!re earnin3s> a8ilit& to pa& dividend
polic& etc9 the anal&sis and interpretation are 2 terms complementar& to each
other9 @or interpretation anal&sis is necessar&9 'nd anal&sis ;itho!t
interpretation is meanin3less9
ANAL)SIS - c!rrent assets to c!rrent
lia8ilities> cost o* sales to inventor&> *i5ed assets to capital etc9
INTE#P#ETATION2
To interpret means to p!t the meanin3 o* data in simple and
!nderstanda8le manner to a la&man9 Interpretation can 8e made onl& a*ter
anal&sis9 It is the e5planation o* the concl!sion dra;n *rom anal&sis in simple
terms9 The interpretation involves the *ollo;in39
1H St!d& o* relationship amon3 the o* items o* *inancial
statements9
2H St!d& o* trend over a period or act!al data ;ith the standard
data !sed *or comparison
3H Concl!sions or in*erences are p!t in simple terms *or eas&
and more !nderstandin3 *or a common man9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
.SES O# A*(ANTA,ES OF ANAL)SIS OF FINAN!IAL STATE+ENTS.
1H It helps to determine *inancial stren3th or ;ea%ness o* the 8!siness *irm9
2H It hi3hli3hts the si3ni*icant *acts and relations ;hich cannot 8e
!nderstood 8& mere readin3 o* *inancial statements9
3H It is 8ased on some lo3ical and scienti*ic method and is !se*!l *or
decisions9
4H It is !se*!l to !nderstood m!ltidirectional relationships o* the vario!s
items o* *inancial statements9
5H It minimizes the threat o* ;ron3 or dela&ed decisions9
6H It helps to eval!ate correctness and acc!rac& o* the decisions9
TOOLS OF FINAN!IAL ANAL)SIS O# TE!"NI4.ES OF ANAL)SIS
1H Comparative @inancial statements
2H Common size statement
3H "atio 'nal&sis
4H Trend 'nal&sis
!omparati=e statements
Comparative *inancial statements are those statements ;hich s!mmaries and present
related acco!ntin3 data *or n!m8er o* &ears9 It is an arran3ement o* the *inancial
statements in s!ch a manner that each element o* the *inancial statement is
compara8le ;ith same element o* the *inancial statement o* another period9 (enerall&
the *inancial statements o* t;o periods are !sed *or compara8le st!d&9 Ehile pre-
parin3 comparative statements one sho!ld %eep in mind that the acco!ntin3 principles>
policies sho!ld 8e same9 'n& material chan3e in s!ch principles policies etc9
comparative statements !seless9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
A comparati=e statement pro=ides the folloBin.
19'8sol!te chan3e in amo!nt or *i3!res9
29'8sol!te chan3e in percenta3es9
39Increase or decrease in *i3!res and percenta3es9
Ad=antaes of comparati=e statements.
%. It is help*!l *or inter period comparison9
/. It is help*!l *or inter *irm comparison9
39 It is !se*!l to st!d& the trends o* vario!s elements o* *inancial statements9
Types of comparati=e statements.
@or the p!rpose o* comparative anal&sis the *inancial statements are classi*ied into
2 t&pes namel&>
1H !omparati=e balance sheet.
2H !omparati=e income statement.
%2!omparati=e balance sheet.
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
.nder this techniC!e the 8alance sheet o* t;o di**erent dates or 8alance
sheets o* one *irm to another *irm ma& 8e !sed *or comparative st!d&9 an
item or 3ro!p o* item o* one 8alance sheet is compared ;ith the same item
or 3ro!p o* item o* another 8alance sheet9 The comparative 8alance sheet
is help*!l to st!d& the liC!idit& position> *inancial stat!s> lon3 term
*inancial position etc9 *ollo;in3 are the steps *or pre-pare comparative
8alance sheet9 IH "edra*t the 8alance sheet in vertical *orm9
IIH )re-pare t;o additional col!mns one *or a8sol!te chan3e
and and another *or percenta3e chan3e9
IIIH St!d& the trend Gincrease or decreaseH and *orm the
opinions9
I/H Interpret the same9
/2!omparati=e income statements-
The comparative income statement is pre-pared to st!d& 3ro;th rate in
pro*ita8ilit&> e5penses> cost o* 3oods sold etc9 !s!all& t;o &ears income statements
are compared9 @or this p!rpose t;o additional col!mns are prepared *or recordin3 the
a8sol!te chan3e and percenta3e chan3e9 The *acts and *i3!res in the *inancial
statements i9e9G Balance sheet )B6 aLc "eports B also some notes Hcan 8e
trans*ormed into meanin3*!l and !se*!l *i3!res thro!3h a process called 'nal&sis and
Interpretation9
Comparative Income Statements *or the &ear 2##8-#
Particulars 2##7-#8 2##8-# '8sol!te
increaseLd
ecrease in
"s
'8sol!te
increaseL
decrease
in O
'H +et sales
6ess 2 cost o*
3oods sold
2742533489 25673185 -17514163 -6938O
18522474 18#37814 -41428# -2965O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
G4p9stoc%Rp!rch
ase-clo9stoc%H
0aterial
cons!med
6ess2
man!*act!rin3
e5pensesGcost o*
prod!ctionH
Cost o* 3oods
sold
(ross pro*it
6ess 2 operatin3
e5penses
'dministration
e5penses
'dd 2 +on
operatin3
Incomes
4peratin3 pro*it
6ess2 Interest
+et )ro*itLloss
9
78144336 72311126 -583321# -7946O
926343681#9
1#8165378
2526832#
4#4865
-1#7474#
-6766673
-49#7O
-62955O
8484195
6811
1277673#
1374484897
25525
444324
1#67#21
-617156
3#12462
-3#464
26#31
-13165#13
11186#2
-764268
-1764513
-352#-
176143#7
11935O
-76942O
128944O
-#937O
35988O
T7, ('='( C4-4),"'TI/, T,-TI6, 0I6696T=- 7.6:4TI
Comparative Balance Sheet 's on 31-3-2##8-#
)'"TIC.6'"S
C!rrent 'ssets
Cash in hand
S9 de8tors
4ther C9 'ssets
Gcash at 8an% >
advances> other
2##7-#8 2##8-# I+C",'S,L=,C",'S,
I+ "s
I+C",'S,L=,C",'S,
I+ O
4#46#935
517#43
868#448698
27#4
51##3132
7584337
-13366
-7#6811
-1#61##
-33O
-194O
-13O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
receiva8les
>closin3
stoc%9etcH
'H Total c!rrent
assets
6ess 2 c!rrent
lia8ilities
4thers pa&a8les
BH Total c!rrent
lia8ilities
Eor%in3 capital
CH Q G'-BH
=H @i5ed assets
,H capital
emplo&ed
,H QGCR=H
Share capital
"eserve *!nd
4ther @!nds
6on3 term loans
6ess2 loss
Gprevio!s &earH
1385548# 126873623 -11678267 -894
453559
1831776
52486226
2#127#7
282631
36#31
598
198
6425372 7267833 3253561 497
612518 54146# -1434828 - 21
18#66#46# 181211834 551374 #93
24787 2354#6524 -14383455 -5975
817733##
124556#
18#562312
664####
243113
817733##
124556#
18323387#
63#5####
1#5562#6
-
-
2671558
-38#####
13165#13
-
194
-598
14
Capital
emplo&ed
24787 2354#6524 -14383455 -5975
'+'61SIS2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
19 The a8ove Income statement realize that there is decrease in cost
o* 3oods sold G49#7OH>net salesG6938OH and also (ross )ro*it
compare to 2##7-#89 There is 62955O decrease in 3ross pro*it i9e9
"s967666739 It is more than 5#O decrease in 3ross pro*it9
29 In the statement ;e can realize that *or 27>42>53>348 net sales the
man!*act!rin3 e5penses is 7>81>44>366 in the &ear 2##8> 8!t
compare to present &earG2##8-#H the man!*act!rin3 cost is more
i9e9 *or 25>67>3>185 net sales the m9 e5penses are "s9 7>23>11>126
39 There is also increase in operatin3 cost "S9 11186#2 i9e9 11935O in
the &ear 2##8-# compare to 2##7-#8
49 There is an decrease in +on-operatin3 Income i9e9 76942O9 These
all res!lts in +et loss d!rin3 the &ear 2##8-# o* "s9 13165#139
59 The a8ove comparative 8alance sheet sho;s the lia8ilities are
more compare to previo!s &ear9
I+T,")",T'TI4+2
The compan&As *inancial per*ormance is not apprecia8le 8eca!se there is heav& loss
in the &ear 2##8-#9 There is need o* control on man!*act!rin3 e5penses and also
other e5penses and lia8ilities9
Comparative Income Statements *or the &ear 2##7-#8
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Particulars 2##6-#7 2##7-#8 '8sol!te
increaseLdecrease
in "s
'8sol!te
increaseLdecrease
in O
'H +et sales
6ess 2 cost o*
3oods sold
4penin3 stoc%
R p!rchases
-closin3 stoc%
0aterial
cons!med
6ess2
man!*act!rin3
e5pensesGcost
o* prod!ctionH
Cost o* 3oods
sold
(ross pro*it
6ess 2
operatin3
e5penses
'dministratio
n e5penses
'dd 2 +on
operatin3
Incomes
4peratin3
pro*it
6ess2 Interest
+et )ro*it
25465586695 27425334891 15748196 796O
46274537
15353635
5588767
5588767
18#187848
5#785141
61523#
2665148
-51#4626
2#977O
17935O
-913O
11#73472795 886#87491 -2177385394 -1966O
83442868924
227364##792
78144336914
26343681#91
-52853291
36#728#29
-6934O
15986O
27218693
11365#295
158536698
26168395
1885735#975
1143612797
7421222978
1#8165378
8484195
6811895
1277673#947
1374484897
255259#4
44432398
-1647533193
-1548#83
-142724893
-1684253948
-51125#1978
-214#6#293
-2718898
-6#936O
-13958O
-39#O
-56986O
-27911O
-18971O
-4#O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T7, ('='( C4-4),"'TI/, T,-TI6, 0I6696T=- 7.6:4TI
Comparative Balance Sheet 's on 31-3-2##7-#8
)'"TIC.6'"S
C!rrent 'ssets
Cash in hand
S9 de8tors
4ther C9 'ssets
Gcash at 8an% >
advances> other
receiva8les
>closin3
stoc%9etcH
'H Total c!rrent
assets
6ess 2 c!rrent
lia8ilities
4thers pa&a8les
BH Total c!rrent
lia8ilities
Eor%in3 capital
CH Q G'-BH
=H @i5ed assets
,H capital
emplo&ed
,H QGCR=H
Share capital
"eserve *!nd
4ther @!nds
6on3 term loans
6ess2 loss
Gprevio!s &earH
2##6-#7 2##7-#8 I+C",'S,L=,C",'S,
I+ "s
I+C",'S,L=,C",'S,
I+ O
2#53#
4732#434
16#4851
4#46#935
517#43
868#448698
13#
4385#
-48##3649#2
7O
9#O
-5924O
13845815 1385548# -3#2497 -#928O
584622479#1
18872865
453559
1831776
-8868651911
58119#5
-15916O
59#8O
77335112 6425372 -7#74#9#5 -1#923O
6161#7#3 612518 751881594 1292#O
18#4#1#7 18#66#46# 51385#94 #928O
242#1261# 24787 777736 3921O
817727##
124556#
177234868
664####
688#517
817733##
124556#
18#562312
664####
243113
6##
-
3327444
-444324
-
1987O
495O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Capital
emplo&ed
242#1261# 24787 777736 3921O
'+'61SIS2
1H In the &ear 2##7 increase in sales is amo!nted to "s915748196# that is 796O9
The openin3 stoc% and p!rchases has increased 8& 2#977OB 17935O and The closin3
man!*act!rin3 e5penses is decreased in the 2##8 to 51#4626 B 52853291G913O B
6934OH9 The cost o* 3oods sold is increased to "s9 36#728#29G15986OH9 =!e to
decrease in closin3 stoc% the (ross )ro*it is decreased to 1647533193G6#936H in the
&ear 2##89
2H The operatin3 e5penses have red!ced in the &ear 2##8 8& "s9 1548#83G13958OH9
This is 8eca!se o* control over administrative e5penses9
3H There is decrease in +on-operatin3 income in 2##8 to "s91684253948i9e9 56986O9
and +on-operatin3 ,5penses is red!ced to "s9 214#6#293 i9e9 18971O
The (ross )ro*it is red!ced in the &ear 2##8 to "s92718898G4#OH compare to the
&ear 2##79
4H B& seein3 the comparative Balance Sheet> there is sli3ht di**erence in capital
emplo&ed and also lia8ilities9
5H There is increase in ;or%in3 capital i9e91292#O compare to previo!s &ear9
I+T,")",T'TI4+2
The compan& Ns @inancial per*ormance in the &ear 2##8 is not apprecia8le 8eca!se o*
decrease in reven!e and control over cost res!lts into decrease in (ross )ro*it and the
+et )ro*it compare to 2##79
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'+'61SIS '+= IT,")",T'TI4+ 4@ @I+'+CI'6 ST'T,0,+TS2
29C4004+ SIS, ST'T,0,+TS2
The *inancial statements are prepared ;ith the a8sol!te *i3!res9 "eadin3 o*
a8sol!te *i3!res is not eas& *or C!ic% 3raspin3 or !nderstandin39 There*ore the& are
converted into simple *i3!res s!ch as percenta3es to their totals *or eas&
!nderstandin3s9 In case o* 8alance sheet each item o* the asset is e5pressed to the total
assets and each lia8ilit& to the total lia8ilit&9 Similarl& in case o* income statement
each item o* reven!e or e5penses are e5pressed to total sales9
Ehen the *inancial statements o* the same concern *or several &ears are
converted into percenta3es and presented *or the comparative st!d& are called
comparative statements9 The total size o* the *inancial statement is *i5ed as 1## 9
'll the items o* the statements are e5pressed as percenta3es to the total9
)"4C,=.",2
19Incase o* Balance Sheet total assets and total lia8ilities are considered as 1##9
29 ,ach item o* asset is e5pressed interms o* percenta3e to the total assets9 Similarl&
each lia8ilit& to total lia8ilities9
39 Incase o* Income statement total sales is treated as 1##9
49 ,ach item o* reven!e and e5pense is e5pressed as a percenta3e to the total sales9
59 St!d& o* these percenta3es to esta8lish relationship
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
69 Interpretation o* the relationship in simple terms9
T1),S 4@ C4004+ SIS, ST'T,0,+TS2
19 Common Size Income Statement
29 Common Size Balance Sheet
19Common Size Income Statements2
These statements are prepared to st!d& the proportion o* vario!s elements
o* income statement items to the total sales reven!e9The total sales items is
considered "s91## and all other items are e5pressed as a percenta3e to the total
sales9 In case o* increase in sales tends to increase in the e5penses directl&
related to sales9 This %ind o* anal&sis helps to st!d& the operational e**icienc&
and *inancial per*ormance o* the concern9
19 C4004+ SIS, B'6'+C, S7,,T2
Common Size Balance Sheet means the size o* the 8alance sheet o*
vario!s &ears or items or *irms is to 8ro!3ht to a common *i3!re9 That is the
totals o* the assets and lia8ilities are considered as 1## and all the items o*
assets and lia8ilities are e5pressed in terms o* percenta3es9 The relationships
are esta8lished ;ith one item to its respective total and is compared ;ith
another &ears Balance Sheet9
'lternativel& capital emplo&ed ma& also 8e considered as 1## and all
other items o* the 8alance sheet are e5pressed in percenta3es9
This %ind o* 'nal&sis is help*!l to st!d& the @inancial )osition 6iC!idit&
Solvenc& etc9 o* the concern in vario!s &ears
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T7, ('='( C4-4),"'TI/, T,-TI6, 0I66-7.6:4TI9
C4004+ SIS, I+C40, ST'T,0,+T
@4" T7, 1,'" ,+=I+( 31-3-2##8-#
)artic!lars
2##8
"S O
2##
"S O
Sales
-cost o*
sales
(ross
pro*it
-operatin3
e5penses
-+on
operatin3
e5p
R+on
operatin3
Incomes
+et
pro*itLloss
274253348
26343681#
1#816538
84841
6811
25525
-83274#6
1277673#
444324
1##
6
49##
396
#94#
393
-
298
4965
1967
25673185
2526832#
4#4865
1#67#21
-617156
-26#31
-16177475
3#12462
-13165#13
1##
8
2
4927
-
2927
-
396#
-
5987
1917
-5
E4":I+( +4T,S2
19Calc!lation o* cost o* 3oods sold
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
4penin3 stoc%
Rp!rchases
-closin3 stoc%
0ateriacons!med
0an!*act!rin3 e5p
Cost o* sales
2##8
5588767
18#187848
5#785141
18522474
78144336
26343681#
2##
5#785141
16877141
3186#88
18#37814
72311126
2526832#
C4004+ SIS, B'6'+C' S7,,T2
)artic!lars "sG2##8H O "sG2##H O
6ia8ilities
Sharecapital
"eserves
4ther lon3
term loans
C!rrent lia8ilities
'ssets2
@i5ed assets
C!rrent assets
)B6aLcGlossH
817733##
124556#
2475#2321
68874222
18#15756
138252
243113
1978
3912
6#9##
179##
1##
4396#
33946
2298#
1##
81773##
124556#
24628387#
7267833
181211834
126873621
1#5562#6
197#
3912
5935
17958
1##
43985
3#957
25945
1##
'+'61SIS2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
19B& seein3 the a8ove statement ;e come to %no; that there is sli3ht chan3es in
lon3 term lia8ilities> 8!t in c!rrent lia8ilities is increased to #958O in the &ear
2##9
29 In the 2## the c!rrent assets are less compare to the &ear 2##89 It sho;s that
the compan& is not !tilizin3 the ;or%in3 capital properl&9
39@rom the common size Income statement ;e can see that the operatin3
e5penses are increased compare to previo!s &ear9 It is 8eca!se o* not control over
on e5penses
49This increasin3 e5penses ;ill res!lts in the losses9
I+T,")",T'TI4+2
The a8ove statement reveals that the compan& is not !tilizin3 the *!nds properl&9 The
cost 3oods sold are increasin3 9 This ;ill res!lts in the loss o* the compan&9
39 T",+= '+'S61SIS2
The trend anal&sis is another tool o* *inancial anal&sis9 Trend means a tendenc&9
Trend anal&sis is revie; and appraisal o* tendenc& in acco!ntin3 varia8les9 This
anal&sis is more s!ita8le *or *orecastin3 or 8!d3etin39 This anal&sis a series o* trends
in*ormation9 It discloses the direction o* items in the *inancial statement either
!p;ard > do;n;ard on constant over a period o* time9
@or the p!rpose o* calc!latin3 trend percenta3es n!m8er o* &ears *inancial
statements are reC!ired9 Trend ratio are calc!lated on the 8asis o* 8ase &ear
in*ormation 9The trend ratios on pop!lar is statistics and are similar to inde5 n!m8ers9
Ehich indicate the movement or *l!ct!ation in vario!s elements *inancial o*
statements o* the 8!siness9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
)"4C,=.",2
19 'rran3ement o* &ears o* the *inancial statements in ascendin3 order9
29 Select a normal &ear as a 8ase &ear !s!all& *irst &ear ma& 8e considered as the
8ase &ear9
39 Consider all the *i3!res o* 8ase &ear as 1##
49 Conversion o* other &ears *i3!res on the 8asis o* 8ase &ear percenta3e9
59 St!d& the trend percenta3es 8& esta8lishin3 some relationship amon3 them9
69 Interpretation o* the trend series in simple terms9
@4"0.6' @4" C'6C.6'TI4+ 4@ T",+= ),"C,+T'(,S9
1## T+e5t &ears *i3!res
Base &ear *i3!res
T#EN* ANAL)SIS-
The *ollo;in3 *i3!res are e5tracted *rom the ann!al repots o* the (9C9T90
)artic!lars 2##5 2##6 2##7 2##8 2##
Sales
Cost o*
3oods sold
)ro*it
2632512
26736134
-773358
2313#442
215622553
-228728
254655866
227364##7
7421223
274253348
26343684#
444324
25673185
2526832#
-13165#13
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T",+= "'TI4S2GBase &ear is 2##5H
partic!lar
s
2##5 2##6 2##7 2##8 2##
Sales
Cost o*
3oods
sold
)ro*it
1##
1##
1##
85961
8#942
-295
4922
84981
595
1#1947
8926
57953
49
4925
-17#922
ANAL)SIS-
%. The sales is increased constantl& e5cept 2##69The cost o* 3oods sold is
increasin3 as compare to sales9 i9e9 in the &ear 2##7 the sales are 4922> the
cost o* 3oods sold is 84981 8!t in the &ear 2##6 the sales are 85961 the cost o*
3oods sold is 8#9429 8& seein3 this ;e come to %no; that the cost o* sales are
increase9
/. The Trend 'nal&sis sho;s that there is loss in the &ear 2##6 and 2##9
3. The a8ove statement reveals that the sales are decreased 8!t the costs are same
compared to all &ears9
6. @rom the a8ove 'nal&sis ;e come to %no; that there is a pro*its in the &ear
2##7 B #89 ,5cept these &ears the compan& is !nder loss9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
8. The a8ove statement reveals that the cost o* 3oods are increased compare to
sales9
IT,")",T'TI4+2
The a8ove statements reveals that the compan& sales is less in the present &ear9 It
indicates that the prod!ction is less compare to previo!s &ear9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
#ATIO ANAL)SIS2
INT#O*.!TION-
The *inancial statement o* a compan& contains a lot o* in*ormation a8o!t
the *inancial per*ormance o* the compan&9 @inancial statements mainl& consist o* the
Balance Sheet and )ro*it and 6oss 'cco!nts9 These statements 3ive the overall
pict!re o* the compan&> 8!t to anal&se each aspect o* 8!siness e5tensivel&> *inancial
ratios are !sed9 The Balance Sheet and the Statement o* Income are essential> 8!t the&
are onl& the startin3 point *or s!ccess*!l *inancial mana3ement9 @inancial "atio
'nal&sis derived *rom @inancial Statements anal&ses the s!ccess> *ail!re> and
pro3ress o* 8!siness9
"atio 'nal&sis is a ver& po;er*!l anal&tical tool !se*!l *or meas!rin3 the
per*ormance o* an or3anization9 The ratio anal&sis concentrates on the
interrelationship amon3 the *i3!res appearin3 in the mentioned *inancial statements9
The ratio anal&sis helps the mana3ement to anal&ze the past per*ormance o* the *irm
and to ma%e *!rther proDections
's the or3anization emplo&s capital on *i5ed assets *or the p!rpose o* eC!ippin3 itsel*
;ith the reC!ired man!*act!rin3 *acilities to prod!ce 3oods and services ;hich are
salea8le to the c!stomers to earn reven!e> it is necessar& to meas!re the de3ree o*
s!ccess achieved in this 8earin39 This ratio esta8lishes the relationship 8et;een the
amo!nt o* sales reven!e and the amo!nt o* capital emplo&ed on *i5ed assets9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
"atio re*ers to the esta8lishment o* relationship 8et;een an& t;o inter-related
varia8les 9@or e5ample> 8oth the amo!nt o* pro*it and the amo!nt o* sales reven!e
earned are inter-related as one is in*l!enced 8& another9
'cco!ntin3 "atios sho;s the inter-relationships that e5ist amon3 vario!s
acco!ntin3 data9 'cco!ntin3 "atios e5press the relationships> in the mathematical
terms> 8et;een t;o or more itemsGo* *inancial statements and othersH ;hich have a
ca!se and e**ect relationship or ;hich are connected ;ith each other in one ;a& or
the other9
Since the 'nal&sis and Interpretation o* @inancial Statements is made ;ith the
help o* ratios it is called "atio 'nal&sis9 The ratio anal&sis is > an e**ective tool or a
device to dia3nose the *inancial and operational diseases o* 8!siness enterprises9 The
"atio 'nal&sis o* @inancial Statements stands *or the p!rpose o* arran3ement o* data>
comp!tation o* ratios> interpretation o* the ratios so comp!ted and proDections
thro!3h ratios9
ST,)S I+ "'TI4 '+'61SIS2
1H Collect all the data reC!ired *or comp!tin3 the necessar& ratios ;hich
in t!rn depends !pon the p!rpose o* calc!latin3 the ratios
2H Eith the help o* a8ove in*ormation> comp!te the necessar& acco!ntin3
ratios9
3H Compare the ratios so comp!ted either ;ith the ratios o* the same
compan& *or the previo!s &earLs9
4H Interpret the ratios in the li3ht o* the comparison> dra; in*erences> and
prepare reports9
(arious Accountin #atios ;Functional Bise classification2
• 6iC!idit& "atios
• T!rnoverLactivit& "atios
• )ro*ita8ilit& "atios
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
LI4.I*IT) #ATIOS-
6iC!idit& re*ers to the a8ilit& o* the or3anization to 3enerate cash internall&
*rom 8!siness operations or to raise cash e5ternall& *rom the *inancial
instit!tions so that it can meet all its cash reC!irements and dischar3e all its
c!rrent o8li3ations9 It is not an e5a33eration 8!t a *act that liC!idit& is ver&
essential *or the ver& s!rvival o* the or3anization9
The liC!idit& ratios meas!re the *irmAs a8ilit& to meet its short-term Gless than
one &earH o8li3ations as and ;hen the& 8ecome d!e9 6iC!idit& ratios esta8lish a
relationship 8et;een cash and other c!rrent assets to provide a meas!re o* then
liC!idit& o* the or3anization9
The corporate liC!idit& has t;o dimensions namel&> C!antitative and
C!alitative concepts9 The C!antitative concept incl!des the C!ant!m> str!ct!re and
!tilizations o* liC!id assets and in C!alitative concepts> it is the a8ilit& to meet all
present and potential demands on cash *rom an& so!rce in manner that minimizes cost
and ma5imize the val!e o* the *orm9 Th!s corporate liC!idit& is vital *acto in 8!siness
e5cess liC!idit&> thro!3h a 3enerator o* solvenc& ;o!ld re*lect lo;er pro*ita8ilit&>
deteriorations in mana3erial e**icienc& increased spec!lation and !nD!sti*ied
e5pansion> e5tension o* too li8eral credit and dividend policies9 Too little liC!idit&
then ma& lead to *r!strations o* 8!siness o8Dections> red!ced rate o* ret!rn> 8!siness
opport!nit& missed and ;ea%enin3 o* morale9 The important ratios to meas!re the
liC!idit& o* a *irm are2
'H C!rrent "atio
BH $!ic%L'cid Test "atio
'H C!rrent "atio2 The a8ilit& o* a compan& to meet its short-term commitment
is normall& assessed 8& comparin3 C!rrent 'ssets ;ith C!rrent 6ia8ilities9 's
the Eor%in3 Capital is eC!ivalent to the di**erence 8et;een C!rrent 'ssets and
C!rrent 6ia8ilities> or as the Eor%in3 Capital is the e5cess o* C!rrent 'ssets
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
over C!rrent lia8ilities> this ratio is called Eor%in3 Capital "atio9 This ratio
esta8lishes the relationship 8et;een C!rrent 'ssets and C!rrent 6ia8ilities
C311E.& *SSE&S &O C311E.& I*-II&IES 7
Current *ssets 8 current liabilities
)ear Current
assets
Current
*ia+ilities
,atio
-../0
-..1
223-424
.-
3-./56-
1
2.5-
-..10
-..5
224754
621
684671 2.36
-..50
-..3
2674/47
21
3366122
-
2.34
-..30
-..7
26711/7
4.
54/-163
-
2.4
4
-..70
-..4
2-57365
-2
3-53746
6
2.3
/
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'+'61SIS2
19 The a8ove chart sho;s that there is a sli3ht *l!ct!ations in the c!rrent assets
and c!rrent lia8ilities9
29 In present &ear the c!rrent ratio is less i9e9 1974 compare to previo!s &ear9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
39 The a8ove chart reveals that the c!rrent ratio is increasin3 &ear 8& &ear e5cept
2##
I+T,")",T'TI4+2 The c!rrent ratio is not satis*actor& ;ith a standard i9e92219so
compan& as to maintain standard c!rrent ratio9 In the present &ear the c!rrent ratio is
not satis*actor&9
4uicC ratio-
$!ic% ratio is also %no;n as liC!id ratio or acid test ratio or near mone& ratio9
It is the ratio 8et;een C!ic% or liC!id assets and C!ic% lia8ilities9 's pointed o!t> the
c!rrent ratio in the st!d& o* solvenc& ma& 8e sometimes misleadin3 d!e to hi3h ratio
o* stoc% to c!rrent assets9
4uicC ratio> 4uicC assets
4uicC liabilities
$!ic% assets Q c!rrent assets- inventories
$!ic% lia8ilit&Q c!rrent lia8ilit&- 8an% over dra*t
1ear 4uicC assets 4uicC
liabilities
#atio
2##4-2##5 64343512 54888 19#8
2##5-2##6 66826151 684671 #96
2##6-2##7 765335 77335112 #9
2##7-2##8
8#4831
35 6425372
1916
2##8-2##
8#5844
7267833
1911
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'+'61SIS2
19 The a8ove chart sho;s that there is sli3ht *l!ct!ation in $!ic% assets and
$!ic% lia8ilities9
29 In the &ear 2## the C!ic% ratio is less i9e9 1911 compare to 2##8 C!ic% ratio
i9e9 19169 there is sli3ht di**erence in C!ic% ratio i9e9 G#9#5H
39 The C!ic% ratio is hi3hest in the &ear 2##4-#5 i9e9#967 comparin3 to all ne5t
&ears
49 The a8ove chart reveals that there is not m!ch di**erence in liC!id ratios o* the
compan&9
IT,")",T'TI4+2 In the present &ear the C!ic% ratio is not satis*actor& 8eca!se
the C!ic% assets is less than the C!ic% lia8ilities9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T."+4/,"L 'CTI/IT1 "'TI4S2
'nother important dimension o* liC!idit& or the short term *inancial position is the
comp!tation o* the rates at ;hich di**erent short-term assets are converted into cash
and ho; promptl& the lia8ilities have 8een dischar3ed9 The important ratios !sed *or
this p!rpose are Stoc% T!rnover "atio> @i5ed 'ssets T!rnover "atio> and Eor%in3
Capital T!rnover "atio9
1H In=entory so the compan& have to !tilize *!nds properl& i9e9 there is
a need o* control on e5penses
6. According to comarati!e Statements ;e come to kno; that the
sales :ross ro8t are declining comare to re!ious year
A company’s balance sheet and profit & loss accounts are valuable information sources for identifying risk taking and assessing risk management effectiveness. Although amounts found on these statements does not provide valuable insights of performance so Financial analysis and Interpretation is required for determining good or bad performance of company and also for determining its causes.
A Study of Analysis and Interpretation of Financial Statements
LIST OF TABLES
Table No. Name of the Table Pae No.
1 Comparative Balance sheet
2 Comparative Income Statement
3 Comparative Balance sheet
4 Comparative Income Statement
5 Common-size Income Statement
6 Common-size Balance Sheet
7 Trend Income Statement
8 Trend Balance Sheet
C!rrent "atio
1# $!ic% "atio
11 Inventor& t!rnover ratio
12 Total 'ssets T!rnover "atio
13 (ross )ro*it "atio
14 +et pro*it "atio
LIST OF !"A#TS
!hart No. Name of the !hart Pae No.
1 C!rrent "atio
2 $!ic% "atio
3 Inventor& T!rnover "atio
4 Total 'ssets T!rnover "atio
5 (ross )ro*it "atio
6 +et )ro*it "atio
Institute of management studies
I Chapter 1
? Executive summary
? Purpose of the Study
? Objectives of the Study
? Methodology
? imitations of the study
II Chapter !
? Introduction to the company
? "istory of the company
? Introduction
? Pro#le of the company
? Organi$ation structure
III Chapter %
? Introduction to the topic
? &echni'ues of analysis and Interpretation
? (indings
? Suggestions
? Conclusion
? S)O& *nalysis of the company
I+ Chapter ,
*ppendix
? -ibliography
? *nnexure
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
!"APTE#$%
,-,C.TI/, S.00'"12
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
(ada3 Co-4perative Te5tile 0ill 6td 7!l%oti esta8lished in 172 8& late
shri9:979)atil at 7!l%oti in (ada3 district9 It is prod!cin3 main prod!ct as &arn9 The
compan& started ;ith a prod!ction cost o* "S922#la%hs9It is started prod!cin3 &arn in
the &ear 1739
It ;as a 3reat e5perience to !nder3o s!mmer in plant trainin3 on proced!res and policies9
In this report I made an e**ort to %no; the *inancial position o* the (CT0
Compan& 90& topic is ;e can sa& that> @inancial 'nal&sis is a startin3 point *or ma%in3 plans
8e*ore !sin3 an& sophisticated *orecastin3 and plannin39
Purpose of the study
' compan&As 8alance sheet and pro*it B loss acco!nts are val!a8le
in*ormation so!rces *or identi*&in3 ris% ta%in3 and assessin3 ris% mana3ement
e**ectiveness9 'ltho!3h amo!nts *o!nd on these statements does not provide val!a8le
insi3hts o* per*ormance so @inancial anal&sis and Interpretation is reC!ired *or
determinin3 3ood or 8ad per*ormance o* compan& and also *or determinin3 its ca!ses9
The st!d& incl!des the calc!lation o* di**erent *inancial ratios> Trend anal&sis>
comparative income and Balance sheet> common size cash *lo; and *!nd *lo;
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
statements9 It compares *ive &ears *inancial statements o* the compan& to %no; its
per*ormance in these di**erent &ears9
This report incl!des the pro*ile o* the (9C9T9097!l%oti9 It contains 8rie*
introd!ction >nat!re o* the 8!siness> prod!ct pro*ile and process and or3anization
str!ct!re9
This report incl!des the *indin3s and s!33estions> concl!sions o* the st!d&
done in order to 3ive 8etter s!33estions9
This st!d& has done 8& ta%in3 the past *ive &ears *inancial statements o* the
compan&9
@or the anal&sis o* data the simple percenta3e method is !sed and the data is
sho;n 8& !sin3 the some 3raphs9
@inall& the st!d& has helped to me in man& ;a&s to acC!ire the %no;led3e
a8o!t the compan& per*ormance and its pro*ita8ilit&9
OB'E!TI(ES OF ANAL)SIS AN* INTE#P#ETATION 2
@ollo;in3 are the main o8Dectives o* anal&sis and interpretation o* *inancial
statements9
19To st!d& the earnin3 capacit& o* the *irm
29 To st!d& the pro3ress o* the *irm
3 To assess the e**icienc& o* the *irm9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
4 To determine the *irms pa&in3 capacit& to meas!re the *inancial
)er*ormance o* the *irm9
59 To prepare the comparative statements o* the mill9 B& !sin3 the
@inancial Statements o* past &ears
69 To %no; past per*ormance and *inancial position o* the mill9
+ET"O*OLO,) OF *ATA !OLLE!TION -
Be*ore the collection o* data> it is o*ten advisa8le to all other aspects o* the st!d&9 Ee
need to reco3nize the scope> need and importance as ;ell as the o8Dectives o* the
st!d&9 '*ter the p!rpose has 8een de*ined> the ne5t step is to decide a8o!t the so!rces
o* data9 The so!rces o* in*ormation ma& 8e primar& as ;ell as secondar& so!rces9
This chapter entails a revie; o* all the data o8tained and it relevance to the st!d&
8ein3 !nderta%en9
='T' C466,CTI4+ 0,T74=2 There are t;o t&pes o* data collection methods9
19 )rimar& data collection method
29 Secondar& data collection method
)"I0'"1 S4."C,S2
The primar& data are collected 8& the thoro!3h and detailed disc!ssion ;as cond!cted
;ith the *inancial controller and 'cco!nts o**icer and also disc!ssion ;ith colle3e
internal 3!ide9
S,C4+='"1 S4."C,S2
The secondar& data incl!des sales reports> p!rchase reports and *inancial statements
o* the compan&9
'nd also in*ormation *rom the te5t so!rces9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
SA+PLIN, *ESI,N-
# Samplin3 !nit 2 @inancial Statements
1 Samplin3 Size 26ast *ive &ears *inancial statements
2 Samplin3 proced!re 2 =irect
LI+ITATIO+S OF T"E ST.*)
The st!d& is cond!cted on a 3eneral 8asis9
Time Constraint
"estrictions on Behal* o* the compan&
Inter *irm and intra *irm comparison is not possi8le
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
!"APTE#$/
"ISTO#) OF T"E !O+PAN) -
,A*A, !O$OPE#ATI(E TE0TILE +ILL LT*
".L1OTI
7!l%oti is small villa3e has a pop!lation o* 1####> havin3 a di**erent sections
o* people9 The main occ!pation o* the ma5im!m people is a3ric!lt!re9 In this villa3e
there is no irri3ation *acilitiesF dr& land c!ltivation is the onl& ;a& to *ormin3
committee9
In the villa3e the main crops are cotton> Da;ar> chill&> 3ro!ndn!t etc9 The main
commercial crops are chill& B cotton9 'll these mar%eted in and aro!nd (ada39
@armers are e5ploited 8& the private traders and commission a3ents9 To protect the
*ormin3 committees late Shri9:979)atil decided to esta8lish the co-operative mill in
7!l%oti9 0ost o* the *arm la8orers are !nemplo&ed d!e to dr& land c!ltivation9 To
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
solve the !nemplo&ment pro8lem and also to protect the *ormin3 committees *rom
commission a3ents the& started the mill9
The mill is sit!ated in villa3e 7!l%oti near (ada3 i9e9 6%9m *rom (ada39 6ate
shri9:979)atil> politician leader decided to start the mill in this place9 The main
p!rpose o* startin3 the mil is to provide the emplo&ment opport!nities to the people9
7e is devoted *!ll& *or the esta8lishment o* co operative net;or% aro!nd 7!l%oti
providin3 vario!s amenities and scope *or development o* *armers
The mill is started ;ith mission o* providin3 emplo&ment opport!nities and
save the *ormers *rom the commission a3ents9 The main crop 3ro;n s!rro!ndin3
7!l%oti is cotton> this ;as an opport!nit& to start the mill 9 This is one o* the co-
operative societ& located on either side :ar;ar-Bellar& road 8et;een 7!l%oti and
(ada39 It is started ;ith a (innin3 and pressin3 !nit9
'*ter s!ccess*!l settin3 !p o* (innin3 and )ressin3 !nit 8& (ada3 co-
operative cotton sale societ& >the ne5t am8ition o* the Co operators ;as to esta8lish a
Te5tile 0ill o* 25>### spindles capacit& ;hich ;o!ld cons!me the main a3ric!lt!re
prod!ce 8& pa&in3 rem!nerative price to cotton 3ro;ers and to the *armin3
comm!nit&9
The (ada3 Co-operative Te5tile 0ill is esta8lished in the &ear 172 8& late
shri :979)atil 9It is started ;ith proDect cost o* "s922# 6a%hs9
INT#O*.!TION
The (ada3 Co-operative Te5tile 0ill is started 8& 6ate Shri9:979)atil> to
protect the *ormin3 committee 8& private traders and the commission a3ents9 It is
started in this place 8eca!se o* availa8ilit& o* ra; materials and also the la8o!rs9
The (ada3 co-operative te5tile mill is started in the &ear 172 ;ith a proDect
cost o* "s922# 6a%hs9 The (9C9T90 commenced is prod!ction in the &ear 1739 The
proDect cost is met ;ith the *ollo;in3 manner9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
INF#.ST#.!T.#E FA!ILIT)-
6and and 8!ildin3
)lant and machiner&
0iscellaneo!s
Contin3enc&
Eor%in3 capital mar3in
@ree op
erative e5penses
33971 6a%hs
17797# 6a%hs
249#8 6a%hs
69## 6a%hs
229## 6a%hs
159## 6a%hs
22# la%hs
1 0em8ers Shares Contri8!tion - "s9#4#9## la%hs
2 (overnment Share Contri8!tion - "s9#8#9##la%hs
3 Term 6oans GI@CIH - "s91##9##la%hs
Total - "s922#9##la%hs
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Total
)roDect cost o* "s922#6a%hs is met *or all these *acilities i9e9 to esta8lishment
o* the compan&9
!.ST+O#S-
1H Samr!dha 4ver Sales 6td9> 0!m8ai
2H S!r&aDoti International mill ltd >9 Sin%andra8ad
3H =hanala5mi GCB"H 0ill> (anapavaram9
4H S!r&ala5mi Cotton 0ills 6td9> Sin%andra8ad
Nature of the business -
The *irst step the compan& p!rchases the ra; material i9e9 cotton *rom
the *armers9 Then it mi5es it ;ith di**erent C!alit& cotton accordin3 to the
C!alit& o* &arn needed9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The ne5t step is cleanin3 the minor part and spra&in3 the ;ater to it9
Then it %ept 1 da& in the cool place9 +e5t step it 3oes to maDor cleanin3 part it
3oes to all cleanin3 o* the cotton9
The ne5t process is cardin3 process9 7ere the cotton ;ill 8ecome
smoothl& and ;hite9 +e5t 3oes to the simple5 method9 In this cotton 8ecomes
8i3 la&ers and it ma%es the 3ro!p o* la&ers9
The ne5t proced!re is rollin3 and 3rillin39 7ere the 8i3 la&ers are
rolled and it is separated *rom the 3ro!p and comes in the *orm o* loose thread
and ne5t process is dra*tin3 and t;istin3 and the thread 8ecomes stron3 and it
comes la&er 8& la&er in the *orm o* thin &earn9 The ne5t step is notin3 here i*
thread 3oes into t;o parts the machine ;ill Doin it9 It is called notin3 process9
@inall& a*ter all these process the ra; material is converted into the
*inished 3oods ;hich are in the *orm o* &arn9
+ISSION-
,mplo&ees> mem8ers GshareholdersH and societ& at lar3e?
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
(ISION-
in ;hich ever *ield
&o! enter there is competitionF one m!st %no; ho; competition in the mar%et
ma%es it a8sol!tel& necessar& *or man!*act!rers to thin% o* advertisin39 @or
ne; prod!ct> strate3ies and 8& doin3 all these to in areas the sales9
These *ollo;in3 companies are the competitors o* the (9C9T909
1H Banahatti Co-operative Spinnin3 0ill 6td9
2H San3ola Co-operative Spinnin3 0ill 6td9
3H @armers Co-operative Spinnin3 0ill 6td9
!O+PAN) P#OFILE-
+ame
T7, ('='( C4-4),"'TI/, T,-TI6, 0I66 6T=9 7.6:4TI
I 582 2#59
Stat!s
This Co-operative Societ& re3istered !nder the Co-operatives
Societies 'ct o* 15
6ocation :arnata%a state> (ada3 =ist> 7!l%oti
Chairman Shri =9"9 )atil>
,5 0969'9 (ada39
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'rea o*
operation (ada3 7averi
,5port places
+e;-=elhi> So!th
rea> China and Co!ple o* ,!ropeanco!ntriesGthro!3h a3entsB (ovt instit!tesH
+at!re o*
B!siness )rod!ction and sale o* 1'"+
0em8ership
and Share
capital 3#21 Co-operative societies and 817971 6a%hs
+o o*
departments 8 J,i3htK =epartments
+!m8er o*
emplo&ees 45#
+o o* Board o*
=irectors
,lected mem8ers I 18
,5 I o**ice mem8ers I 1
+ominated 8& (ovt I 3
)rod!ction
capacit& 8>5## %3s o* &arn per da& as per the 2##8-# report9
Stora3e
capacit& 75## 0illion T4+9
'rea o* mill
6and area-#525 sC9*t
B!ild!p area- 643945 sC9mtrs
O12*.I5*&IO. S&13C&31E6
Share Holders
Board of Directors
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Chairman
Managing Director
P & I Production Finance Administration Security Marketing
Dy. Dy. Dy. Dy. Sr. Dy.
Manager Manager Manager Manager Suer!isor Manger
"#tension $.C. Accounts Assistants %r. Assistants
&'cer &'cer. Assistants Suer!isors
Helers Assistants Helers Helers Helers
(orkers
7.0'+ ",S.4"C, 0'+'(,0,+T2
7!man "eso!rces is an activit& involved in direction B co-ordination o*
h!man relations in a or3anization there 8& o8tainin3 ma5im!m prod!ction at the
minim!m e**ort stress B strain on individ!al ;or%ers9
Functions
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
9
19 Sta**in3 B ,mplo&ment
29 Eel*are 'menities
39 Trainin3 B =evelopment9
49 Compensation> Ea3e B Salar& 'dministration9
59 0otivation B Incentives9
69 ,mplo&ee records9
79 6a8o!r on Ind!strial "elation9
89 4r3anizational plannin3> development B tas% speci*ication
0ana3ement is considered as an art o* 3ettin3 thin3 done thro!3h
others ;ith a vie; to achieve the common o8Dectives o* the or3anization 9 8!t these
o8Dectives can 8e achieved onl& i* the or3anization is mana3ed e**icientl& 9 The
mana3ement o* the or3anization is considered to 8e e**icient o* it is a8le to contri8!te
their ma5im!m to;ards the realization o* the or3anization9 The or3anization 8elieves
that the mana3ement sho!ld not primaril& 8e considered ;ith *!ll and proper
!tilization o* ph&sical *actors s!ch as ra; material and machiner& 8!t also pa&
attention to the h!man *actors 9 4n ;hich the ma5im!m !tilization o* ph&sical *actors
depend9
The )ersonnel 0ana3er also sa&s that 0aterial ma& 8e p!rchased at the most
competitive prices and machines ;as ;or%ed to their *!ll capacit& 8!t the o!tp!t
cannot 8e ma5imized ;itho!t the co-operation o* the ;or%ers9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The compan& ;or%s 24 ho!rs a dail&9 The ;or% is divided into 3 shi*ts i9e9
'0 to 493# )0 @irst shi*t
493# )0 to 1293#'0 second shi*t
1293# '0 to 893#'0 third shi*t
C6'SSI@IC'TI4+ 4@ T7, E4": @4"C, 2
Eor% *orce o* the societ& shall 8e classi*ied as !nder 2
1H )ermanent
2H Badli
3H Trainee or apprentice
E,6@'", @'CI6ITI,S I+ (CT02
@ollo;in3 are the Eel*are @acilities provided 8& (CT0 to its ;or%ers9
%2 !anteen-
The personnel department administers the canteen 9 the main
responsi8ilities are to prepare and distri8!te the *ood st!** as per the
sched!led timin3s the di**erent co!nters and to maintain h&3ienic
condition printed and s!pplied 8& the compan&9
/2 +edical Facilities 2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Eor%men covered !nder the ,SI scheme and their *amil& mem8ers ;ill
receive medical *acilit& !nder the emplo&ees state ins!rance as in *orce
*rom time to time9'nd also one hospital is their in the or3anization
premises *or 3eneral and *irst aid treatments9
32 4uarter5s Facilities 2
The C!arters are provided *or the permanent emplo&ees ;ho are
;or%in3 in the (CT09 There are '>B>C>= and , t&pe o* C!arter are
8ein3 provided to the emplo&ees on the seniorit& 8asis 9
62 Transport Facilities7
The emplo&ees are provided ;ith 8!s *acilities9There are one 8!s and
one ma5i ca8 is there ;hich pic%!ps the people scattered in the (ada3
cit& and a*ter the d!t& ho!rs the& are dropped 8ac% at the same *i5ed
points
82 School and !ollee 2
' school and pre !niversit& colle3es has 8een constr!cted in the
7!la%oti near to the compan& ;hich are handed to the state ed!cation
department 9 @or the maintenance and repairs or replacements o* *!rnit!re and
electrical *ittin3 is carried o!t 8& the compan&9
ATTEN*AN!E-
1H ,ver& emplo&ee shall 8e at this place or ;or% at the time *i5ed and
noti*ied !nder cla!se and o* these standin3 orders *rom time to time9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
2H The startin3 and closin3 o* ;or% and startin3 and *inishin3 o*
intervals period ;ill 8e si3naled 8& means o* siren> 8ell or similar
devices9
3H '*ter the siren 8ell ever& emplo&ee sho!ld present at the place o*
;or%9
4H The attendance re3ister shall 8e entered *rom time to time cards and
an& emplo&ees *ailin3 to record or 3et mar%ed the time on the card is
lia8le to 8e treated as a8sent9
5H ,mplo&ee comin3 late or leavin3 earl& ;itho!t permission shall 8e
lia8le to ded!ctions *rom their salar& L;a3es as provided *or in the
pa&ment o* ;a3es act 1369 @or this p!rpose time shall 8e calc!lated
in !nits o* 3# min!tes9
SALA#) AN* 9A,ES 2
19 +otice speci*&in3 pa& da&s shall 8e displa&ed on the notice 8oard o*
the Societ& 9
29 'n emplo&ee shall chec% his salar& or ;a3es immediatel& on receipt9
+o claim *or shorta3es ;ill 8e considered once the recipient has le*t
the immediate presence o* the person ma%in3 pa&ment9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'n& disp!te or complaint re3ardin3 ;a3es shall 8e 8ro!3ht to the
notice o* the mana3ement or an& other o**icer appointed *or the
p!rpose as earl& as possi8le9 It shall 8e the d!t& o* the mana3ement or
the o**icer appointed to attend to s!ch complaints ;itho!t m!ch dela&9
39 .npaid Salaries and Ea3es 2 'n& salaries and ;a3es d!e to the
emplo&ee
+ot paid on the !s!al pa& da& on acco!nt o* the salaries and ;a3es
remainin3 !nclaimed or *or an& other reason ;ill 8e paid 3 da&s a*ter
the speci*ied date o* pa&ment or ;hen claim has 8een s!8stantiated 8&
the emplo&ee or on his 8ehal* o* his le3al representative provided s!ch
claim is made and s!8stantiated ;ithin one &ear *rom the date on
;hich the salar& or ;a3es 8ecome d!e to the emplo&ee9
A*+INIST#ATION *EPA#T+ENT
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'dministrative department pla& ver& important role in the or3anization *or its
smooth r!nnin3 o* the 8!siness and s!ccess o* this compan& is mainl& dependin3 on
the e**icient administration o* the (9C9T909
This department loo%s a*ter administrative *!nctions s!ch as pa&ment o*
salaries> arran3ement o* meetin3s> and *ormation o* policies etc> the 3eneral *!nctions
o* this department are as *ollo;s9
? 0aintenance o* *iles> records etc9 !p to date> collectin3 and presentin3 data in
the *orm o* !se*!l in*ormation *rom the records9
? Implementin3 the or3anization s&stems> proced!res and policies in a
coordinated manner9
? ,ns!rin3 smooth r!nnin3 o* the o**ice 8!& inter*acin3 ;ith the eternal
a3encies as reC!ired9 @or e5-pa&ment o* telephone 8ills> electricit&> ;ater
s!ppl& 8ills etc9
? 0aintenance o* the o**ice premises9
? )rovidin3 reC!ired *acilities9
+O*E#NI:ATION P#O,#A++E
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'*ter a period o* 18 &ears there ;as a need *or !p3radin3 technolo3& o*
certain machines and to eater to the e5port needs> the 0ana3ement proposed a
0odernization )ro3ramme at a cost o* "s9 429## 6a%hs9 The term> lendin3
instit!tions sanctioned "s9 23696 6a%hs and the 8alance "s9 12931 la%hs ;as *rom
the internal reso!rces o* the 0ills9 The 0ill replaced Cardin3 0achines> ;indin3
machines and added one 4pen ,nd Spinnin3 machine and one Imported '!to Conner
o* latest technolo3&9 Eith the implementation o* this )roDect there ;as improvement
in the prod!ctivit& and the C!alit& o* the *inished prod!ct9
To meet the standards o* the C!alit& &arn in demand> 8oth in domestic as ;ell
as in International mar%ets> the 0ana3ement o* the 0ills tho!3ht it inevita8le to
la!nch another 0odernization )ro3ramme coverin3 0achiner& *rom 8lo; room to
Spinnin3 ;as planned9 This pro3ramme> ;ith an estimated cost o* "s9 2# 6a%hs ;as
approved 8& the national Co-operative =evelopment Corporation G+9C9=9C9H and the
(overnment o* :arnata%a9
's part as 0odernization )ro3ramme> +9C9=9C9 has sanctioned "s9 7369##
6%ahs> ;hile (overnment o* :arnata%a contri8!ted "s9 1369## 6%ahs as share capital9
The rest amo!nt o* "s9 469## 6%ahs ;as mo8ilized *rom 0em8ers o* the Societ&
thro!3h shares9
Eith s!ccess*!l implementation o* 2
nd
)hase o* 0odernization )ro3ramme>
the latest version o* '!to leveler 0achiner& at Cardin3 and =ra;in3 Sections are
ind!cted and commissioned9 @ollo;in3 this> e**orts are 8ein3 made to raise the
prod!ctivit& to hi3h standards9 @!rther> completion o* 0odernization ena8les !s to
C!alitative reC!irement o* reC!irement o* International mar%et Standards9
)."C7'S, =,)'"T0,+T2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The p!rchase department is pla& the important role in ever& or3anization9
To r!n the 8!siness contin!o!sl& p!rchase department pla&s a vital role9 )!rchase
activit& has developed the lon3 relationship ;ith the vendors o* the compan&9
)!rchasin3 is a social and mana3erial *!nction ;hich creates the val!e *or prod!ction
!nit9 To satis*& the needs o* the compan& there is a need o* p!rchases as per
reC!irements o* the compan& 8& considerin3 the price C!alit& and C!antit&9
4BM,CTI/,S 4@ T7, )."C7'S, =,)'"T0,+T
? The compan& sho!ld have deep %no;led3e o* variet& o* cottons9
? The compan& sho!ld %no; the $!alit& ass!rance
? B!&in3 C!alit& cotton9
? ,5perimentin3 the C!alit& cotton9
? )roper arran3ement o* the transportation *acilities9
? 0inimizin3 transportation cost9
? 48servin3 C!alit& o* the cotton9
? 0inimization o* the p!rchase cost9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
C4TT4+ )."7'S,S2
The mill p!rchase its cotton at the open a!ction held 8& co-operative namel&
(ada3 cotton sale societ& and T9'9)9C9S909 societ& o* the 'nni3eri > (o%a%
and also mill has p!rchases cotton *rom other states li%e 0aharashtra
@ederation )!nDa8 @ederation> Tamilnad!> and *rom CCIGcotton co-operation
o* IndiaH9
The p!rchase department decides the ;hen to p!rchase >;here to
p!rchase and ho; m!ch to p!rchase 8& disc!ssin3 ;ith a mana3in3 director
and the prod!ction mana3er9 )!rchasin3 dept sends the p!rchase order to the
vendors9 The compan& maDor p!rchases are in CCI onl&9 Beca!se the reC!ired
C!alit& o* the cotton is availa8le in one place and also in more C!antit&9
)."C7'S, )"4C,=.",2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
19 The compan& collects the samples *rom the vario!s s!ppliers9
29 That cotton ;ill 8e chec% in la8orator&
39 '*ter 3ettin3 a res!lts the& are cond!ctin3 a meetin3 at ;here the& are
*inalizin3 ;hich cotton to p!rchase9
49 The p!rchase committee incl!des2
1H 0ana3in3 =irector 2H (eneral 0ana3er
3H)rod!ction 0ana3er 4H $!alit& Controller
5HCost =epartment 7ead
59 Then the& 8ar3ain ;ith the s!ppliers relatin3 to the price9 I* s!ppliers i* a
*armer or an& o* the private cotton trader then the 8ar3ainin3 is necessar&9
I* the& p!rchase the cotton *orm CCI or 0SC@ the prices are *i5ed9
69 The pa&ment period is !s!all& 3# da&s to all s!ppliers9
79 Be*ore 8ar3ainin3 ;ith s!ppliers the compan& collectin3 the dail& cotton
mar%et reports ;hich helps them to determinin3 the price9
0'I+ S.))6I,"S2
Cotton corporation o* India
0aharastra State Cotton @ederation
)/T Cotton Traders9
@rom 0em8ers and @ormers9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The *ollo;in3 ta8le indicates p!rchase o* cotton9
1ear CottonGla%hs %3H
2##3-#4 37937
2##4-#5 33937
2##5-#6 3#967
2##6-#7 294#
2##7-#8 33983
Ta8le sho;in3 p!rchase o* cotton *rom 2##4-#8
+A#1ETIN, *EPA#T+ENT
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
0ar%etin3 department is a vital department o* the or3anization 9 0ar%etin3 has
developed the lon3 relationship ;ith the c!stomer *rom p!rchasin3 and sellin3
prod!cts9
< 0ar%etin3 is a social and mana3erial *!nction ;hich 8& individ!al and 3ro!p
o8tained ;ant and need and ;ant thro!3h creatin3 e5chan3e prod!cts and
val!e ;ith otherAA9
0ar%etin3 o* 1arn 2
The mill man!*act!res 1#s> 2#s> 3#s> 4#s> 6#s> 8#s> 1##s> 2L2#s> 2L4#s> 2L6#s
etc9 In the *orm o* han%s as ;ell as cones as per the prevailin3 mar%et demand
sale o* han% &arn and cone &arn *rom 5#25# respectivel& ;e have 8een
*!l*illin3 the han% &arn o8li3ation stip!lated 8& the te5tile commissioner >
3overnment o* India at the end o* ever& C!arter 9 The dail& prod!ction o* &arn
is a8o!t 8>5## %3s and mill is ;or%in3 ro!nd the cloc% *or all the seven da&s
o* the ;ee%9
Special pre*erence in sellin3 &arn is 3iven to ;eavers co-operative 'pe5
or3anization and :arnata%a 7andloom =evelopment Corporation e5port o*
&arn has 8een o!r priorit& &arn is 8ein3 e5ported to co!ntries li%e So!th
rea thro!3h a3enc&9)ac%in3 o* 1arn2
)ac%in3 is a process o* convertin3 to a prod!ct *or protection han%s &arn are
pac%in3 in the 8ale *rom and cones &arn are pac%in3 *rom 8a3s9 Bales is
consist o* 18196 %3s9 'nd 8a3 is consists o* 5# %3s
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
0ode o* Sales 2 In this or3anization orders are normall& done thro!3h2
1H B& phone
2H B& their o;n sales depots and
3H B& local sales a3ents9
Sales promotion2
The compan& not adopted an& '33ressive meas!res *or the promotion o* its
sales s!ch as advertisin3 lotteries etc9 B!t some 8asic meas!res ;hich are
adopted normall& 8& ever& concern s!ch as disco!nts9
ST4",S =,)'"T0,+T
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
In (9C9T90 there is Stores =epartment is one ;hich stores all the materials>
eC!ipments and spare parts etc9 Ehich are needed in the si3nalization *or its
smooth r!nnin3 9The main *!nction o* this department is to provide the needs
o* the or3anization i9e9 machines spares parts> pac%a3in3 materials> tools> oils
ect9 To r!n 8!siness contin!asall& this department pla&s ver& important rolein
the or3anization9 In this department the& provide materials accordin3 to order
made 8& the di**erent departments in the or3anization9 The orderslip m!st 8e
sin3 8& the 09=irector department head9
48Dectives o* the Stores =epartment 2
1H Concentratin3 to;ards smooth r!nnin3 o* the prod!ction process9
2H @acilitatin3 all reC!ired eC!ipments on time 9
3H "ed!ction o* Inventor& eC!ipments on time 9
4H Eor%in3 li%e a tra**ic si3nal to si3nalize to all eC!ipments9
5H )roper maintenance o* all eC!ipments9
This Stores =epartment is divided in to t;o s!8 departments the& are2
aH 0aterials stores
8H (eneral Stores9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
aH 0aterial Stores2 It is a s!8 department o* the stores > ;hich maintain the
stoc% o* ra; material needed in the plant i9e9 cotton > paper cones > 8a3s 9 This
department mainl& concerned ;ith stora3e o* 3# da&s stoc% o* ra; material in
the plant9
8H (eneral Stores2 It is also a s!8 department o* the stores ;hich maintainin3
the stoc% o* 3eneral material li%e >paper >*iles >!ni*orms o* ;or%ers >shoes
>3o33les> helmets> 3lo;s> c!ps> spare parts o* machines > stationeries and other
l!8ricants and pac%in3 materials9
These all materials are stored !nder 8in s&stem9 In this department each
material or item ;ill 8e assi3ned a n!m8er to it ;hich is called as Bin n!m8er9
There are a8o!t 11>### items are maintained in this department and all have
8een assi3ned in +oAs9 Bin n!m8er is a di3it n!m8er> ;hich ;ill help in
reco3nizin3 the item ver& C!ic%l& and acc!ratel&9
The *irst three n!m8ers in Bin card ;ill 3ivin3 the in*ormation a8o!t ;hich
section 9 and the second 3 di3it ;ill 3ives in*ormation a8o!t ;hich eC!ipment
and the last 3 di3it ;ill 3ives in*ormation o* ;hich item it is9
The stores department is maintainin3 mainl& t;o led3ers > the& are2
1H 0aterial "eceipts 6ed3er9
2H 0aterial Iss!ed 6ed3er9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
't he time o* each entr& in the led3er the& are C!otin3 the date> item n!m8er
C!antit& price L piece> total price9
P#O*.!TION *EPA#T+ENT-
)rod!ction means conversion o* ra; materials into a *inished prod!ct9 In this
mill the& are prod!cin3 the &arn9 i9e9 cotton is converted as &arn G*inished prod!ctH9
The (9C9T90 is one o* spinnin3 mill> it is ta%en permission *rom the 3overnment
spinnin3 and te5tile9 In *!t!re it is plan to prod!ce a cloths 8!t no; it is prod!cin3
onl& 1arn9 The (9C9T90 has a ;ell eC!ipped 8!ildin3 and also plant and machineries9
In mill the& set the machines seC!entiall& as per ;or% *lo; i9e9 plant la&o!t
s&stem is applied ver& s&stematicall&9 In prod!ction to control the ;asta3es> to save
the time> to increase ;or% e**icienc& and to increase the prod!ctivit& the plant la&o!t
pla& a vital role9 Ee st!d& a8o!t plant la&o!t in theoreticall& 8!t this proDect helps me
to %no; it in practicall& 9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T7, E4": @64E 04=,62
0I-I+(2 Bales o* di**erent co!nts are mi5ed alon3 ;ith !sa8le ;astes>
on di**erent percenta3e in the mi5in3 8ins> cotton 8ales o* di**erent C!alit& are opened
and stac%ed> called stoc% mi5in3> 24 7o!rs *or conditionin3 8e*ore it is process
*!rther9
B64E "4402 Cotton in losses *orm is spendin3 on mi5in3 8ale
openers and ta%en *!rther o* di**erent cleanin3 points ;here the cotton is 8eaten and
trash is e5tracted9 @inall& converted into 6ap *orm o* di**erent len3th> ;ei3h per &ard>
dependin3 on the co!nt9
C'"=I+(2 6ap *orm Blo; room *eed to Cards ;here the cotton is
converted *rom 6ap *orm to slive *orm9 =!rin3 this process trash> short *i8ers and
other imp!rities are e5tracted the di**erent cleanin3 points> li%e lic%er in> @lats section
.nits9 The sliver is prod!ced o* di**erent 7an% dependin3 on the co!nts9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
)",)'"'T4"12 Cards sliver is dra;n thro!3h di**erent dra*tin3 "ollers
and the sliver is elon3ated and increasin3l& the len3th o* the sliver and radiatin3 in the
cross section 8& passin3 thro!3h di**erent dra*tin3 rollers and convert into a s!ita8le
pac%a3e 8& 3ivin3 little t;ist to the material called "ove and ;o!nd on a Bo88in9
S)I++I+(2 The 8o88ins *rom the )reparator& process are *eed to the
dra*tin3 rollers as *inal treatment to the material and *!rther increasin3 the len3th and
red!ction the cross section o* the material9 This process the material process thro!3h
"in3 and Traveler and ;o!ld on the 8o88in to *orm a s!ita8le pac%a3e the 3ivin3
optim!m o* the t;ist dependin3 on co!nt o* the &arn9
C4+, EI+=I+(2 7ere the &arn sp!n is cleaned 8& passin3 thro!3h
cleanin3 devise called sl!8 catcher and ;o!ld thro!3h s!ita8le pac%a3e o* reC!ired
len3th and ;ei3ht in the *orm o* a Cone9
=4.B6I+(2 7ere t;o &arn o* the same co!nt are do!8led 8& 3ivin3
necessar& t;ist in the *orm o* pac%a3e called 8o88ins9
",,6I+(2 7ere sin3le &arn or do!8led &arn are ;o!nd on the s;i*tin3 o*
the machine called "eel in the *orm o* 7an% and are ma%e in the *orm o* :nots9 There
are t;o t&pes> a )lain or Cross "eel9
B.+=6I+( B B'6I+(2 7ere the n!m8er o* %nots plain or cross is in a
press dependin3 on the co!nt and ;ei3ht o* the 8o!ndless are as per reC!irements9
B!ndles are pressed in the *orm o* Bale dependin3 on the co!nt> )lain or Cross as per
the reC!irement *rom the mar%et9
)'C:I+(2 7ere n!m8er o* cones or cheeses is 8a33ed dependin3 on the
co!nt o* the &arn n!m8er o* cones and ;ei3ht o* the cones9 =ependin3 on the
reC!irement o* the mar%et9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
4.ALIT) !ONT#OL *EPA#T+ENT-
$!alit& Control =epartment is a vital department o* this or3anization9
Beca!se it provide in*ormation re3ardin3 C!alit& o* the ra; materials and also
*inished 3oods9 To p!rchasea standard C!alit& materials there sho!ld 8e C!alit&
control department9 'ccordin3 to the e5perts the *irst step is imported in
8!siness i9e9 in prod!ction activities the *irst step is the ra; material9
There*ore ;hile p!rchasin3 the ra; material the C!alit& control department is
important9
$!alit& Control =epartment is the %e& *actor to prod!cin3 the C!alit&
prod!cts9 $!alit& control =epartment pla&s an important role in controllin3
and increasin3 the C!alit& o* the prod!ct and it also helps in increasin3 the
e**icienc& o* the prod!cts9 $!alit& control sho!ld 8e e5ercised at the all %e&
sta3es o* the prod!ction processes> so that it helps in the stoppa3e o* the
variation in the *inal prod!ct9
In the (CT0 $!alit& Control =epartment there is la8orator& ;here the
samples o* the cotton are tested 8e*ore p!rchase9 In this la8 1925 crore ;orth
machine is installed ;hich is completel& comp!terized machine and it is also
one o* the ;ell eC!ipped la8 in the :arnata%a9
@.+CTI4+ 4@ T7, $.'6IT1 C4+T"46 =,)'"T0,+T 2
o "andom la8 ;ei3ht chec%in3
o Eithin lap variation
o Cleanin3 e**icienc&
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
o Easte st!d& speeds
o Erappin3 chec%in3
o +aps st!d&
o .ni*ormit& chec%in3
o Idle spindle
o Top roller press!re chec%in3
o "e;indin3 st!d&
o (a!3e and tension ;ei3ht chec%in3
o :not inspection
o :not ;ei3ht chec%in3
4BM,CTI/, 4@ T7, $.'6IT1 C4+T"46 =,)'"T0,+T2
? Increasin3 c!stomer satis*action
? )rod!cin3 the C!alit& prod!cts9
? "ed!ction in the scrap
? Contin!o!s improvement in the prod!ctivit&9
? "ed!ction in prod!ction overheads9
? $!ic% response to order *!l*illment9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
B'SIC C4+C,)TS .S,= I+ T,-TI6, 0I66
@i8er 2 ' slender *ilament F a *ine thread li%e part o* a s!8stance 9
:apas 2 Cotton ;ith seeds and imp!rities
6int 2 Cotton *ree *rom seeds and imp!rities
(innin3 2 The mechanical process o* separatin3 the cotton *i8ers *rom
seeds
Bale 2 ' 8!ndle or pac%a3es o* cotton compressed and 8o!nd ;ith
cord or ;ire ;ei3ht ro!nd a8o!t 17# :3s9
Spinnin3 2 The process o* dra;in3 o!t and t;istin3 the *i8er o* cotton>
Eool etc9 Into thread or &arn either 8& hand or machine9
Spindles 2 The rods or pins o* spinnin3 machine %no;n as the rin3 *rame holdin3
the 8o88ins on the ;hich &arn ;o!nd as it is sp!n 9 S!ch spinnin3 is
e5pressed in terms o* the n!m8er or spindles or rotors9
"otors 2 In the modern o* spinnin3 %no;n as the open end spinnin3 instead o*
spindles rollers are !sed9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
1arn 2 ' te5tile thread o8tained 8& t;istin3 o* consec!tivel& disposed and
Strai3htened !ltimate composite *i8ers9
7an% B cones2 1arn is s!pplied to the mar%et in to di**erent *orms han% &arn and
cone &arn 9 7an% &arn is convenient *orm o* 8leachin3> >
and transport 8!t needs ;indin3 8e*ore placin3 on the loom 9
It is !sed 8& hand loom ;eavers 9Cone &arn ho;ever eliminates the
+eed *orm ;indin3 and can 8e directl& !sed in po;er looms 9
Co!nt 2 ' co!nt is meas!re o* thic%ness or *itness o* &arn >The vario!s
co!nts
3ro!ps man!*act!red are 1#s > 2#s > 24s> 3#s>32s>34s>4#s> 6#s> 8#s
1##s 8oth in 7an% and Cone9
6o;er co!nts indicates coarse &arn and hi3her co!nts indicates *ine
1arn
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
@I+'+C, =,)'"T0,+T
@inance department is vital department o* a or3anization 9@inance is concerned
;ith providin3 and !sin3 cash and credit *or carr&in3 on 8!siness correctl&9
The mill has mem8ership and paid !p share capital as on 31
st
march 2##7
SI9+4 Cate3or& +o9o* Share 7olders Share Captial
1H
2H
3H
N'A Class Individ!al L0em8er
NBA Class G:9'9I9C9H
NCA Class GState (overnmentH
3#1
1
1
1#7946
#159##
65926
Total 3#21 817972
0ill has *!nds that ma& 8e raised
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
1H B& iss!e o* Shares
2H B& receivin3 deposits *rom mem8ers9
3H B& raisin3 loans
4H B& entrance *ees
5H B& acceptin3 donations> s!8sidies and 3rants9
6H B& commercial instit!tions9
=ed!ction can 8e made *rom the sale o* proceeds o* the cotton 8ro!3ht 8& mem8ers
at rate not e5ceedin3 7O o* the sale prod!cts9
The mill ma& raise loans disco!nt on the 8ill and overdra*ts as and ;hen necessar&
*rom the ind!strial *inance corporation o* India9
E4":I+( C')IT'6 @I+'+C,
Introd!ction 2
@!nds availa8le *or a period o* one &ear or less are called short term *inance9 The
short term *!nds are !sed to *inance ;or%in3 capital9 The main so!rce o* short term
;or%in3 capital are as *ollo;s2
1H Trade Credit2
Trade credit re*ers to the credit that a c!stomer 3ets *rom s!pplier o* 3oods in
the normal co!rse o* 8!siness9 In practice > the 8!&in3 *irm do not have to pa& cash
immediatel& *or the p!rchase made 9 This de*erral o* pa&ments is a short term
*inancin3 called trade credit 9It contri8!tes to a8o!t one third o* the short term
*inancin3 94pen acco!nt trade credit appears as s!ndr& creditors on the 8!&ers
8alance sheet 9 Trade credit ma& also ta%e the *orm o* 8ills pa&a8le9
2H Ban% @inance @or Eor%in3 Capital 2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Ban%s are the main instit!tional so!rce o* ;or%in3 capital *inance9 '*ter trade
credit> 8an% credit is the most important so!rce o* *inancin3 ;or%in3 capital
reC!irements o* *irms9 ' 8an% considers a *irmAs sales and prod!ction plan and
desira8le levels o* c!rrent assets in the determinin3 its ;or%in3 capital reC!irements9
The amo!nt approved 8& the 8an% *or the *irms ;or%in3 capital is called credit limit9
Ban% do not lend 1##O o* the credit limit9 ' *irm can dra; *!nds *rom its 8an% ;ithin
the ma5im!m credit limit sanctioned9 It can dra; *!nds in the *ollo;in3 *orms9
aH 4verdra*ts2 .nder the overdra*t *acilit&> the 8arro;er is allo;ed to ;ithdra;
*!nds in e5cess o* the 8alance in his c!rrent in his c!rrent acco!nt !p to a certain
speci*ied limit d!rin3 as stip!lated period9
8H Cash Credit2 ' 8orro;er is allo;ed to ;ithdra; *!nds *orm the 8an% !p to the
sanctioned credit limit9 7e is not reC!ired to 8orro; the entire sanction credit> rather>
he can dra; periodicall&9
3H Commercial )aper 2
Commercial paper represent !nsec!red promissor& notes 8& *irm to raise short
term *!nds9 Commercial paper is cheaper so!rce o* raisin3 short term *inance as
compared to the 8an% credit and proves to 8e e**ective even d!rin3 a period o* ti3ht
8an% credit9 7o;ever > it can 8e !sed as a so!rce o* *inance onl& 8& lar3e companies
enDo&in3 hi3h credit ratin3 and so!nd *inancial health9
4H Installment Credit 2
This is another method 8& ;hich the asset are p!rchased and the possession o*
3oods is ta%en immediatel& 8!t the pa&ment is made in installment over a
predetermined period o* time (enerall& interest is char3ed on the !npaid price or it
ma& 8e adD!sted in the price9 It is !sed as so!rce o* short term ;or%in3 capital9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
5H 'ccr!ed ,5penses 2
'ccr!ed ,5penses are the e5penses ;hich have 8een inc!rred 8!t not &et d!e and
hence not &et paid also9 The most important item o* accr!als are ;a3es and salaries>
interest and ta5es9 Ea3es and Salaries are !s!all& paid on monthl&> *ortni3htl& or
;ee%l& 8asis *or the service alread& rendered 8& emplo&ees9 In the same manner>
accr!ed interest and ta5es also constit!te a short term so!rce o* *inance
S4."C, 4@ @I+'+C, .S,= B1
T7, ('='( C4-4),"'TI/, T,-TI6, 0I66 6T=9 7.6:4TI
The (CT0 have raised di**erent variet& o* @inance *or ;or%in3 capital p!rpose9
Ehich are as *ollo;s 2
1H Trade Credit2 Ee alread& set the trade credit is the credit that a c!stomer 3ets
*rom the s!ppliers9 (CT0 p!rchased the cotton *rom di**erent or3anization li%e
Cotton sale societ& o* (ada3 and Cotton Societ& o* 'nni3eri 9 Ee can %no; the
percenta3e o* trade credit in the 8alance sheet o* (CT09
2H The (CT0 ma%e the sale o* di**erent areas li%e Ban3alore >Solap!r and also other
states 9It also sells the &arn to :arnata%a 7andloom =evelopment Corporation etc9>
*rom these some percenta3e o* 'dvance the& 3et9
3H 4ther So!rce o* @inance2
1H :9C9C9 Ban% 6td9>
2H +9C9=9C9 6oan
3H BiDap!r =9C9C9 Ban% 6td
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
48Dective and @inance =epartmentF
? To have permanent record o* all the transaction *or *!t!re re*erence9
? To %no; the res!lt o* the 8!siness in terms o* pro*it and losses9
? To the e5act reason *or pro*it and loss9
? To %no; the *inancial position o* the 8!siness9
? To %no; the pro3ress o* the 8!siness *rom &ear to &ear
? To have val!a8le in*ormation *or le3al and p!rpose
@!nctions o* @inancial =epartment2
To prepare Tradin3 'Lc
To prepare )ro*it and 6oss 'Lc
To prepare Balance Sheet
0aintenance o* acco!nts is !nder ta%en
"ate *i5in3
S!ppliers 8ill pa&in3
0aintenance o* cash and 8an% 8alance9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
!"APTE#$ 3
INT#O*.!TION TO T"E TOPI!
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
ANAL)SIS AN* ITE#P#ETATION OF FINAN!IIAL
STATE+ENTS -
@inancial statements provide s!mmarized vie; o* the *inancial position
and operation o* the compan&9 0an& parties are interested in *inancial statement
anal&sis to %no; a8o!t the *inancial position o* the *irm9 The& incl!de investors>
creditors> lenders> s!ppliers etc It is process o* esta8lishin3 the meanin3*!l
relationship 8et;een the items o* *inancial statements9 To %no; *inancial position
o* the compan& ;ith the help o* past and present per*ormance o* the compan&9
Items incl!des Balance sheet> )ro*it and loss acco!nt> "eports and ,5planator&
notes9
+eanin of financial statements-
@inancial statements are the consolidated and s!mmarized *orm o* 8!siness
transactions ;hich are pre-pared at the end o* each acco!ntin3 &ear9
These statements reveal the *inancial in*ormation o* the 8!siness enterprises *or a
certain period9 The *inancial statements are prepared *or ascertainment o* res!lts o* a
8!siness and comm!nicate the acco!ntin3 in*ormation to the !sers9 The *inancial
statement provides ans;ers to the *ollo;in3 C!estions9
1H Ehat is the *inancial stat!s o* the *irm on a partic!lar dateP
2H 7o; is the *irmAs *inancial per*ormance over the periodP
7ere *or the proDect the pro*it and loss aLcs> 8alance sheet are !sed *or
comparative anal&sis and interpretation o* the st!d&9
1H Balance sheet-
Balance sheet is the statement o* *inancial position o* a 8!siness
concern as on speci*ied date9 It represents all the assets o;ned 8& the *irm and
lia8ilit& o;ed to others9 In other ;ords> it contains the vario!s assets> lia8ilities
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
and o;ners eC!it& as on partic!lar date9 The 8alance sheetis prepared on the
8asis o* *ollo;in3 eC!ation9
ASSETS Q E4.ITIES
;AH Q ;E2
4r 'ssets Q 4;ners eC!it& R creditors eC!it&
4r 'ssets Q GShare capital R "eserves R s!rpl!s-6ossesH Ro!tside lia8ilities
/2Income statementGProfit and loss a realization principle and also on the 8asis o*
matchin3 principle9 The realized reven!es are matched a3ainst its related
e5pired cost9 The res!lt is net pro*it or loss *or the &ear9
The eC!ation is as !nder2
#e=enues > ains ? ;E@penses A Losses2 > net profit or loss.
T"E FINAN!IAL ANAL)SIS AN* INTE#P#ETATION.
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
The si3ni*icance o* *inancial statement not lies in their preparation
8!t in their anal&sis and interpretation9 There*ore anal&sis and interpretation is
an attempt to determine the importance o* *inancial statements9 It increases the
meanin3 o* acco!ntin3 data9 To provide more !nderstandin3 in la&manAs
lan3!a3e9 That helps to *orecast the *!t!re earnin3s> a8ilit& to pa& dividend
polic& etc9 the anal&sis and interpretation are 2 terms complementar& to each
other9 @or interpretation anal&sis is necessar&9 'nd anal&sis ;itho!t
interpretation is meanin3less9
ANAL)SIS - c!rrent assets to c!rrent
lia8ilities> cost o* sales to inventor&> *i5ed assets to capital etc9
INTE#P#ETATION2
To interpret means to p!t the meanin3 o* data in simple and
!nderstanda8le manner to a la&man9 Interpretation can 8e made onl& a*ter
anal&sis9 It is the e5planation o* the concl!sion dra;n *rom anal&sis in simple
terms9 The interpretation involves the *ollo;in39
1H St!d& o* relationship amon3 the o* items o* *inancial
statements9
2H St!d& o* trend over a period or act!al data ;ith the standard
data !sed *or comparison
3H Concl!sions or in*erences are p!t in simple terms *or eas&
and more !nderstandin3 *or a common man9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
.SES O# A*(ANTA,ES OF ANAL)SIS OF FINAN!IAL STATE+ENTS.
1H It helps to determine *inancial stren3th or ;ea%ness o* the 8!siness *irm9
2H It hi3hli3hts the si3ni*icant *acts and relations ;hich cannot 8e
!nderstood 8& mere readin3 o* *inancial statements9
3H It is 8ased on some lo3ical and scienti*ic method and is !se*!l *or
decisions9
4H It is !se*!l to !nderstood m!ltidirectional relationships o* the vario!s
items o* *inancial statements9
5H It minimizes the threat o* ;ron3 or dela&ed decisions9
6H It helps to eval!ate correctness and acc!rac& o* the decisions9
TOOLS OF FINAN!IAL ANAL)SIS O# TE!"NI4.ES OF ANAL)SIS
1H Comparative @inancial statements
2H Common size statement
3H "atio 'nal&sis
4H Trend 'nal&sis
!omparati=e statements
Comparative *inancial statements are those statements ;hich s!mmaries and present
related acco!ntin3 data *or n!m8er o* &ears9 It is an arran3ement o* the *inancial
statements in s!ch a manner that each element o* the *inancial statement is
compara8le ;ith same element o* the *inancial statement o* another period9 (enerall&
the *inancial statements o* t;o periods are !sed *or compara8le st!d&9 Ehile pre-
parin3 comparative statements one sho!ld %eep in mind that the acco!ntin3 principles>
policies sho!ld 8e same9 'n& material chan3e in s!ch principles policies etc9
comparative statements !seless9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
A comparati=e statement pro=ides the folloBin.
19'8sol!te chan3e in amo!nt or *i3!res9
29'8sol!te chan3e in percenta3es9
39Increase or decrease in *i3!res and percenta3es9
Ad=antaes of comparati=e statements.
%. It is help*!l *or inter period comparison9
/. It is help*!l *or inter *irm comparison9
39 It is !se*!l to st!d& the trends o* vario!s elements o* *inancial statements9
Types of comparati=e statements.
@or the p!rpose o* comparative anal&sis the *inancial statements are classi*ied into
2 t&pes namel&>
1H !omparati=e balance sheet.
2H !omparati=e income statement.
%2!omparati=e balance sheet.
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
.nder this techniC!e the 8alance sheet o* t;o di**erent dates or 8alance
sheets o* one *irm to another *irm ma& 8e !sed *or comparative st!d&9 an
item or 3ro!p o* item o* one 8alance sheet is compared ;ith the same item
or 3ro!p o* item o* another 8alance sheet9 The comparative 8alance sheet
is help*!l to st!d& the liC!idit& position> *inancial stat!s> lon3 term
*inancial position etc9 *ollo;in3 are the steps *or pre-pare comparative
8alance sheet9 IH "edra*t the 8alance sheet in vertical *orm9
IIH )re-pare t;o additional col!mns one *or a8sol!te chan3e
and and another *or percenta3e chan3e9
IIIH St!d& the trend Gincrease or decreaseH and *orm the
opinions9
I/H Interpret the same9
/2!omparati=e income statements-
The comparative income statement is pre-pared to st!d& 3ro;th rate in
pro*ita8ilit&> e5penses> cost o* 3oods sold etc9 !s!all& t;o &ears income statements
are compared9 @or this p!rpose t;o additional col!mns are prepared *or recordin3 the
a8sol!te chan3e and percenta3e chan3e9 The *acts and *i3!res in the *inancial
statements i9e9G Balance sheet )B6 aLc "eports B also some notes Hcan 8e
trans*ormed into meanin3*!l and !se*!l *i3!res thro!3h a process called 'nal&sis and
Interpretation9
Comparative Income Statements *or the &ear 2##8-#
Particulars 2##7-#8 2##8-# '8sol!te
increaseLd
ecrease in
"s
'8sol!te
increaseL
decrease
in O
'H +et sales
6ess 2 cost o*
3oods sold
2742533489 25673185 -17514163 -6938O
18522474 18#37814 -41428# -2965O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
G4p9stoc%Rp!rch
ase-clo9stoc%H
0aterial
cons!med
6ess2
man!*act!rin3
e5pensesGcost o*
prod!ctionH
Cost o* 3oods
sold
(ross pro*it
6ess 2 operatin3
e5penses
'dministration
e5penses
'dd 2 +on
operatin3
Incomes
4peratin3 pro*it
6ess2 Interest
+et )ro*itLloss
9
78144336 72311126 -583321# -7946O
926343681#9
1#8165378
2526832#
4#4865
-1#7474#
-6766673
-49#7O
-62955O
8484195
6811
1277673#
1374484897
25525
444324
1#67#21
-617156
3#12462
-3#464
26#31
-13165#13
11186#2
-764268
-1764513
-352#-
176143#7
11935O
-76942O
128944O
-#937O
35988O
T7, ('='( C4-4),"'TI/, T,-TI6, 0I6696T=- 7.6:4TI
Comparative Balance Sheet 's on 31-3-2##8-#
)'"TIC.6'"S
C!rrent 'ssets
Cash in hand
S9 de8tors
4ther C9 'ssets
Gcash at 8an% >
advances> other
2##7-#8 2##8-# I+C",'S,L=,C",'S,
I+ "s
I+C",'S,L=,C",'S,
I+ O
4#46#935
517#43
868#448698
27#4
51##3132
7584337
-13366
-7#6811
-1#61##
-33O
-194O
-13O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
receiva8les
>closin3
stoc%9etcH
'H Total c!rrent
assets
6ess 2 c!rrent
lia8ilities
4thers pa&a8les
BH Total c!rrent
lia8ilities
Eor%in3 capital
CH Q G'-BH
=H @i5ed assets
,H capital
emplo&ed
,H QGCR=H
Share capital
"eserve *!nd
4ther @!nds
6on3 term loans
6ess2 loss
Gprevio!s &earH
1385548# 126873623 -11678267 -894
453559
1831776
52486226
2#127#7
282631
36#31
598
198
6425372 7267833 3253561 497
612518 54146# -1434828 - 21
18#66#46# 181211834 551374 #93
24787 2354#6524 -14383455 -5975
817733##
124556#
18#562312
664####
243113
817733##
124556#
18323387#
63#5####
1#5562#6
-
-
2671558
-38#####
13165#13
-
194
-598
14
Capital
emplo&ed
24787 2354#6524 -14383455 -5975
'+'61SIS2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
19 The a8ove Income statement realize that there is decrease in cost
o* 3oods sold G49#7OH>net salesG6938OH and also (ross )ro*it
compare to 2##7-#89 There is 62955O decrease in 3ross pro*it i9e9
"s967666739 It is more than 5#O decrease in 3ross pro*it9
29 In the statement ;e can realize that *or 27>42>53>348 net sales the
man!*act!rin3 e5penses is 7>81>44>366 in the &ear 2##8> 8!t
compare to present &earG2##8-#H the man!*act!rin3 cost is more
i9e9 *or 25>67>3>185 net sales the m9 e5penses are "s9 7>23>11>126
39 There is also increase in operatin3 cost "S9 11186#2 i9e9 11935O in
the &ear 2##8-# compare to 2##7-#8
49 There is an decrease in +on-operatin3 Income i9e9 76942O9 These
all res!lts in +et loss d!rin3 the &ear 2##8-# o* "s9 13165#139
59 The a8ove comparative 8alance sheet sho;s the lia8ilities are
more compare to previo!s &ear9
I+T,")",T'TI4+2
The compan&As *inancial per*ormance is not apprecia8le 8eca!se there is heav& loss
in the &ear 2##8-#9 There is need o* control on man!*act!rin3 e5penses and also
other e5penses and lia8ilities9
Comparative Income Statements *or the &ear 2##7-#8
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Particulars 2##6-#7 2##7-#8 '8sol!te
increaseLdecrease
in "s
'8sol!te
increaseLdecrease
in O
'H +et sales
6ess 2 cost o*
3oods sold
4penin3 stoc%
R p!rchases
-closin3 stoc%
0aterial
cons!med
6ess2
man!*act!rin3
e5pensesGcost
o* prod!ctionH
Cost o* 3oods
sold
(ross pro*it
6ess 2
operatin3
e5penses
'dministratio
n e5penses
'dd 2 +on
operatin3
Incomes
4peratin3
pro*it
6ess2 Interest
+et )ro*it
25465586695 27425334891 15748196 796O
46274537
15353635
5588767
5588767
18#187848
5#785141
61523#
2665148
-51#4626
2#977O
17935O
-913O
11#73472795 886#87491 -2177385394 -1966O
83442868924
227364##792
78144336914
26343681#91
-52853291
36#728#29
-6934O
15986O
27218693
11365#295
158536698
26168395
1885735#975
1143612797
7421222978
1#8165378
8484195
6811895
1277673#947
1374484897
255259#4
44432398
-1647533193
-1548#83
-142724893
-1684253948
-51125#1978
-214#6#293
-2718898
-6#936O
-13958O
-39#O
-56986O
-27911O
-18971O
-4#O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T7, ('='( C4-4),"'TI/, T,-TI6, 0I6696T=- 7.6:4TI
Comparative Balance Sheet 's on 31-3-2##7-#8
)'"TIC.6'"S
C!rrent 'ssets
Cash in hand
S9 de8tors
4ther C9 'ssets
Gcash at 8an% >
advances> other
receiva8les
>closin3
stoc%9etcH
'H Total c!rrent
assets
6ess 2 c!rrent
lia8ilities
4thers pa&a8les
BH Total c!rrent
lia8ilities
Eor%in3 capital
CH Q G'-BH
=H @i5ed assets
,H capital
emplo&ed
,H QGCR=H
Share capital
"eserve *!nd
4ther @!nds
6on3 term loans
6ess2 loss
Gprevio!s &earH
2##6-#7 2##7-#8 I+C",'S,L=,C",'S,
I+ "s
I+C",'S,L=,C",'S,
I+ O
2#53#
4732#434
16#4851
4#46#935
517#43
868#448698
13#
4385#
-48##3649#2
7O
9#O
-5924O
13845815 1385548# -3#2497 -#928O
584622479#1
18872865
453559
1831776
-8868651911
58119#5
-15916O
59#8O
77335112 6425372 -7#74#9#5 -1#923O
6161#7#3 612518 751881594 1292#O
18#4#1#7 18#66#46# 51385#94 #928O
242#1261# 24787 777736 3921O
817727##
124556#
177234868
664####
688#517
817733##
124556#
18#562312
664####
243113
6##
-
3327444
-444324
-
1987O
495O
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
Capital
emplo&ed
242#1261# 24787 777736 3921O
'+'61SIS2
1H In the &ear 2##7 increase in sales is amo!nted to "s915748196# that is 796O9
The openin3 stoc% and p!rchases has increased 8& 2#977OB 17935O and The closin3
man!*act!rin3 e5penses is decreased in the 2##8 to 51#4626 B 52853291G913O B
6934OH9 The cost o* 3oods sold is increased to "s9 36#728#29G15986OH9 =!e to
decrease in closin3 stoc% the (ross )ro*it is decreased to 1647533193G6#936H in the
&ear 2##89
2H The operatin3 e5penses have red!ced in the &ear 2##8 8& "s9 1548#83G13958OH9
This is 8eca!se o* control over administrative e5penses9
3H There is decrease in +on-operatin3 income in 2##8 to "s91684253948i9e9 56986O9
and +on-operatin3 ,5penses is red!ced to "s9 214#6#293 i9e9 18971O
The (ross )ro*it is red!ced in the &ear 2##8 to "s92718898G4#OH compare to the
&ear 2##79
4H B& seein3 the comparative Balance Sheet> there is sli3ht di**erence in capital
emplo&ed and also lia8ilities9
5H There is increase in ;or%in3 capital i9e91292#O compare to previo!s &ear9
I+T,")",T'TI4+2
The compan& Ns @inancial per*ormance in the &ear 2##8 is not apprecia8le 8eca!se o*
decrease in reven!e and control over cost res!lts into decrease in (ross )ro*it and the
+et )ro*it compare to 2##79
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'+'61SIS '+= IT,")",T'TI4+ 4@ @I+'+CI'6 ST'T,0,+TS2
29C4004+ SIS, ST'T,0,+TS2
The *inancial statements are prepared ;ith the a8sol!te *i3!res9 "eadin3 o*
a8sol!te *i3!res is not eas& *or C!ic% 3raspin3 or !nderstandin39 There*ore the& are
converted into simple *i3!res s!ch as percenta3es to their totals *or eas&
!nderstandin3s9 In case o* 8alance sheet each item o* the asset is e5pressed to the total
assets and each lia8ilit& to the total lia8ilit&9 Similarl& in case o* income statement
each item o* reven!e or e5penses are e5pressed to total sales9
Ehen the *inancial statements o* the same concern *or several &ears are
converted into percenta3es and presented *or the comparative st!d& are called
comparative statements9 The total size o* the *inancial statement is *i5ed as 1## 9
'll the items o* the statements are e5pressed as percenta3es to the total9
)"4C,=.",2
19Incase o* Balance Sheet total assets and total lia8ilities are considered as 1##9
29 ,ach item o* asset is e5pressed interms o* percenta3e to the total assets9 Similarl&
each lia8ilit& to total lia8ilities9
39 Incase o* Income statement total sales is treated as 1##9
49 ,ach item o* reven!e and e5pense is e5pressed as a percenta3e to the total sales9
59 St!d& o* these percenta3es to esta8lish relationship
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
69 Interpretation o* the relationship in simple terms9
T1),S 4@ C4004+ SIS, ST'T,0,+TS2
19 Common Size Income Statement
29 Common Size Balance Sheet
19Common Size Income Statements2
These statements are prepared to st!d& the proportion o* vario!s elements
o* income statement items to the total sales reven!e9The total sales items is
considered "s91## and all other items are e5pressed as a percenta3e to the total
sales9 In case o* increase in sales tends to increase in the e5penses directl&
related to sales9 This %ind o* anal&sis helps to st!d& the operational e**icienc&
and *inancial per*ormance o* the concern9
19 C4004+ SIS, B'6'+C, S7,,T2
Common Size Balance Sheet means the size o* the 8alance sheet o*
vario!s &ears or items or *irms is to 8ro!3ht to a common *i3!re9 That is the
totals o* the assets and lia8ilities are considered as 1## and all the items o*
assets and lia8ilities are e5pressed in terms o* percenta3es9 The relationships
are esta8lished ;ith one item to its respective total and is compared ;ith
another &ears Balance Sheet9
'lternativel& capital emplo&ed ma& also 8e considered as 1## and all
other items o* the 8alance sheet are e5pressed in percenta3es9
This %ind o* 'nal&sis is help*!l to st!d& the @inancial )osition 6iC!idit&
Solvenc& etc9 o* the concern in vario!s &ears
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T7, ('='( C4-4),"'TI/, T,-TI6, 0I66-7.6:4TI9
C4004+ SIS, I+C40, ST'T,0,+T
@4" T7, 1,'" ,+=I+( 31-3-2##8-#
)artic!lars
2##8
"S O
2##
"S O
Sales
-cost o*
sales
(ross
pro*it
-operatin3
e5penses
-+on
operatin3
e5p
R+on
operatin3
Incomes
+et
pro*itLloss
274253348
26343681#
1#816538
84841
6811
25525
-83274#6
1277673#
444324
1##
6
49##
396
#94#
393
-
298
4965
1967
25673185
2526832#
4#4865
1#67#21
-617156
-26#31
-16177475
3#12462
-13165#13
1##
8
2
4927
-
2927
-
396#
-
5987
1917
-5
E4":I+( +4T,S2
19Calc!lation o* cost o* 3oods sold
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
4penin3 stoc%
Rp!rchases
-closin3 stoc%
0ateriacons!med
0an!*act!rin3 e5p
Cost o* sales
2##8
5588767
18#187848
5#785141
18522474
78144336
26343681#
2##
5#785141
16877141
3186#88
18#37814
72311126
2526832#
C4004+ SIS, B'6'+C' S7,,T2
)artic!lars "sG2##8H O "sG2##H O
6ia8ilities
Sharecapital
"eserves
4ther lon3
term loans
C!rrent lia8ilities
'ssets2
@i5ed assets
C!rrent assets
)B6aLcGlossH
817733##
124556#
2475#2321
68874222
18#15756
138252
243113
1978
3912
6#9##
179##
1##
4396#
33946
2298#
1##
81773##
124556#
24628387#
7267833
181211834
126873621
1#5562#6
197#
3912
5935
17958
1##
43985
3#957
25945
1##
'+'61SIS2
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
19B& seein3 the a8ove statement ;e come to %no; that there is sli3ht chan3es in
lon3 term lia8ilities> 8!t in c!rrent lia8ilities is increased to #958O in the &ear
2##9
29 In the 2## the c!rrent assets are less compare to the &ear 2##89 It sho;s that
the compan& is not !tilizin3 the ;or%in3 capital properl&9
39@rom the common size Income statement ;e can see that the operatin3
e5penses are increased compare to previo!s &ear9 It is 8eca!se o* not control over
on e5penses
49This increasin3 e5penses ;ill res!lts in the losses9
I+T,")",T'TI4+2
The a8ove statement reveals that the compan& is not !tilizin3 the *!nds properl&9 The
cost 3oods sold are increasin3 9 This ;ill res!lts in the loss o* the compan&9
39 T",+= '+'S61SIS2
The trend anal&sis is another tool o* *inancial anal&sis9 Trend means a tendenc&9
Trend anal&sis is revie; and appraisal o* tendenc& in acco!ntin3 varia8les9 This
anal&sis is more s!ita8le *or *orecastin3 or 8!d3etin39 This anal&sis a series o* trends
in*ormation9 It discloses the direction o* items in the *inancial statement either
!p;ard > do;n;ard on constant over a period o* time9
@or the p!rpose o* calc!latin3 trend percenta3es n!m8er o* &ears *inancial
statements are reC!ired9 Trend ratio are calc!lated on the 8asis o* 8ase &ear
in*ormation 9The trend ratios on pop!lar is statistics and are similar to inde5 n!m8ers9
Ehich indicate the movement or *l!ct!ation in vario!s elements *inancial o*
statements o* the 8!siness9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
)"4C,=.",2
19 'rran3ement o* &ears o* the *inancial statements in ascendin3 order9
29 Select a normal &ear as a 8ase &ear !s!all& *irst &ear ma& 8e considered as the
8ase &ear9
39 Consider all the *i3!res o* 8ase &ear as 1##
49 Conversion o* other &ears *i3!res on the 8asis o* 8ase &ear percenta3e9
59 St!d& the trend percenta3es 8& esta8lishin3 some relationship amon3 them9
69 Interpretation o* the trend series in simple terms9
@4"0.6' @4" C'6C.6'TI4+ 4@ T",+= ),"C,+T'(,S9
1## T+e5t &ears *i3!res
Base &ear *i3!res
T#EN* ANAL)SIS-
The *ollo;in3 *i3!res are e5tracted *rom the ann!al repots o* the (9C9T90
)artic!lars 2##5 2##6 2##7 2##8 2##
Sales
Cost o*
3oods sold
)ro*it
2632512
26736134
-773358
2313#442
215622553
-228728
254655866
227364##7
7421223
274253348
26343684#
444324
25673185
2526832#
-13165#13
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T",+= "'TI4S2GBase &ear is 2##5H
partic!lar
s
2##5 2##6 2##7 2##8 2##
Sales
Cost o*
3oods
sold
)ro*it
1##
1##
1##
85961
8#942
-295
4922
84981
595
1#1947
8926
57953
49
4925
-17#922
ANAL)SIS-
%. The sales is increased constantl& e5cept 2##69The cost o* 3oods sold is
increasin3 as compare to sales9 i9e9 in the &ear 2##7 the sales are 4922> the
cost o* 3oods sold is 84981 8!t in the &ear 2##6 the sales are 85961 the cost o*
3oods sold is 8#9429 8& seein3 this ;e come to %no; that the cost o* sales are
increase9
/. The Trend 'nal&sis sho;s that there is loss in the &ear 2##6 and 2##9
3. The a8ove statement reveals that the sales are decreased 8!t the costs are same
compared to all &ears9
6. @rom the a8ove 'nal&sis ;e come to %no; that there is a pro*its in the &ear
2##7 B #89 ,5cept these &ears the compan& is !nder loss9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
8. The a8ove statement reveals that the cost o* 3oods are increased compare to
sales9
IT,")",T'TI4+2
The a8ove statements reveals that the compan& sales is less in the present &ear9 It
indicates that the prod!ction is less compare to previo!s &ear9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
#ATIO ANAL)SIS2
INT#O*.!TION-
The *inancial statement o* a compan& contains a lot o* in*ormation a8o!t
the *inancial per*ormance o* the compan&9 @inancial statements mainl& consist o* the
Balance Sheet and )ro*it and 6oss 'cco!nts9 These statements 3ive the overall
pict!re o* the compan&> 8!t to anal&se each aspect o* 8!siness e5tensivel&> *inancial
ratios are !sed9 The Balance Sheet and the Statement o* Income are essential> 8!t the&
are onl& the startin3 point *or s!ccess*!l *inancial mana3ement9 @inancial "atio
'nal&sis derived *rom @inancial Statements anal&ses the s!ccess> *ail!re> and
pro3ress o* 8!siness9
"atio 'nal&sis is a ver& po;er*!l anal&tical tool !se*!l *or meas!rin3 the
per*ormance o* an or3anization9 The ratio anal&sis concentrates on the
interrelationship amon3 the *i3!res appearin3 in the mentioned *inancial statements9
The ratio anal&sis helps the mana3ement to anal&ze the past per*ormance o* the *irm
and to ma%e *!rther proDections
's the or3anization emplo&s capital on *i5ed assets *or the p!rpose o* eC!ippin3 itsel*
;ith the reC!ired man!*act!rin3 *acilities to prod!ce 3oods and services ;hich are
salea8le to the c!stomers to earn reven!e> it is necessar& to meas!re the de3ree o*
s!ccess achieved in this 8earin39 This ratio esta8lishes the relationship 8et;een the
amo!nt o* sales reven!e and the amo!nt o* capital emplo&ed on *i5ed assets9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
"atio re*ers to the esta8lishment o* relationship 8et;een an& t;o inter-related
varia8les 9@or e5ample> 8oth the amo!nt o* pro*it and the amo!nt o* sales reven!e
earned are inter-related as one is in*l!enced 8& another9
'cco!ntin3 "atios sho;s the inter-relationships that e5ist amon3 vario!s
acco!ntin3 data9 'cco!ntin3 "atios e5press the relationships> in the mathematical
terms> 8et;een t;o or more itemsGo* *inancial statements and othersH ;hich have a
ca!se and e**ect relationship or ;hich are connected ;ith each other in one ;a& or
the other9
Since the 'nal&sis and Interpretation o* @inancial Statements is made ;ith the
help o* ratios it is called "atio 'nal&sis9 The ratio anal&sis is > an e**ective tool or a
device to dia3nose the *inancial and operational diseases o* 8!siness enterprises9 The
"atio 'nal&sis o* @inancial Statements stands *or the p!rpose o* arran3ement o* data>
comp!tation o* ratios> interpretation o* the ratios so comp!ted and proDections
thro!3h ratios9
ST,)S I+ "'TI4 '+'61SIS2
1H Collect all the data reC!ired *or comp!tin3 the necessar& ratios ;hich
in t!rn depends !pon the p!rpose o* calc!latin3 the ratios
2H Eith the help o* a8ove in*ormation> comp!te the necessar& acco!ntin3
ratios9
3H Compare the ratios so comp!ted either ;ith the ratios o* the same
compan& *or the previo!s &earLs9
4H Interpret the ratios in the li3ht o* the comparison> dra; in*erences> and
prepare reports9
(arious Accountin #atios ;Functional Bise classification2
• 6iC!idit& "atios
• T!rnoverLactivit& "atios
• )ro*ita8ilit& "atios
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
LI4.I*IT) #ATIOS-
6iC!idit& re*ers to the a8ilit& o* the or3anization to 3enerate cash internall&
*rom 8!siness operations or to raise cash e5ternall& *rom the *inancial
instit!tions so that it can meet all its cash reC!irements and dischar3e all its
c!rrent o8li3ations9 It is not an e5a33eration 8!t a *act that liC!idit& is ver&
essential *or the ver& s!rvival o* the or3anization9
The liC!idit& ratios meas!re the *irmAs a8ilit& to meet its short-term Gless than
one &earH o8li3ations as and ;hen the& 8ecome d!e9 6iC!idit& ratios esta8lish a
relationship 8et;een cash and other c!rrent assets to provide a meas!re o* then
liC!idit& o* the or3anization9
The corporate liC!idit& has t;o dimensions namel&> C!antitative and
C!alitative concepts9 The C!antitative concept incl!des the C!ant!m> str!ct!re and
!tilizations o* liC!id assets and in C!alitative concepts> it is the a8ilit& to meet all
present and potential demands on cash *rom an& so!rce in manner that minimizes cost
and ma5imize the val!e o* the *orm9 Th!s corporate liC!idit& is vital *acto in 8!siness
e5cess liC!idit&> thro!3h a 3enerator o* solvenc& ;o!ld re*lect lo;er pro*ita8ilit&>
deteriorations in mana3erial e**icienc& increased spec!lation and !nD!sti*ied
e5pansion> e5tension o* too li8eral credit and dividend policies9 Too little liC!idit&
then ma& lead to *r!strations o* 8!siness o8Dections> red!ced rate o* ret!rn> 8!siness
opport!nit& missed and ;ea%enin3 o* morale9 The important ratios to meas!re the
liC!idit& o* a *irm are2
'H C!rrent "atio
BH $!ic%L'cid Test "atio
'H C!rrent "atio2 The a8ilit& o* a compan& to meet its short-term commitment
is normall& assessed 8& comparin3 C!rrent 'ssets ;ith C!rrent 6ia8ilities9 's
the Eor%in3 Capital is eC!ivalent to the di**erence 8et;een C!rrent 'ssets and
C!rrent 6ia8ilities> or as the Eor%in3 Capital is the e5cess o* C!rrent 'ssets
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
over C!rrent lia8ilities> this ratio is called Eor%in3 Capital "atio9 This ratio
esta8lishes the relationship 8et;een C!rrent 'ssets and C!rrent 6ia8ilities
C311E.& *SSE&S &O C311E.& I*-II&IES 7
Current *ssets 8 current liabilities
)ear Current
assets
Current
*ia+ilities
,atio
-../0
-..1
223-424
.-
3-./56-
1
2.5-
-..10
-..5
224754
621
684671 2.36
-..50
-..3
2674/47
21
3366122
-
2.34
-..30
-..7
26711/7
4.
54/-163
-
2.4
4
-..70
-..4
2-57365
-2
3-53746
6
2.3
/
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'+'61SIS2
19 The a8ove chart sho;s that there is a sli3ht *l!ct!ations in the c!rrent assets
and c!rrent lia8ilities9
29 In present &ear the c!rrent ratio is less i9e9 1974 compare to previo!s &ear9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
39 The a8ove chart reveals that the c!rrent ratio is increasin3 &ear 8& &ear e5cept
2##
I+T,")",T'TI4+2 The c!rrent ratio is not satis*actor& ;ith a standard i9e92219so
compan& as to maintain standard c!rrent ratio9 In the present &ear the c!rrent ratio is
not satis*actor&9
4uicC ratio-
$!ic% ratio is also %no;n as liC!id ratio or acid test ratio or near mone& ratio9
It is the ratio 8et;een C!ic% or liC!id assets and C!ic% lia8ilities9 's pointed o!t> the
c!rrent ratio in the st!d& o* solvenc& ma& 8e sometimes misleadin3 d!e to hi3h ratio
o* stoc% to c!rrent assets9
4uicC ratio> 4uicC assets
4uicC liabilities
$!ic% assets Q c!rrent assets- inventories
$!ic% lia8ilit&Q c!rrent lia8ilit&- 8an% over dra*t
1ear 4uicC assets 4uicC
liabilities
#atio
2##4-2##5 64343512 54888 19#8
2##5-2##6 66826151 684671 #96
2##6-2##7 765335 77335112 #9
2##7-2##8
8#4831
35 6425372
1916
2##8-2##
8#5844
7267833
1911
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
'+'61SIS2
19 The a8ove chart sho;s that there is sli3ht *l!ct!ation in $!ic% assets and
$!ic% lia8ilities9
29 In the &ear 2## the C!ic% ratio is less i9e9 1911 compare to 2##8 C!ic% ratio
i9e9 19169 there is sli3ht di**erence in C!ic% ratio i9e9 G#9#5H
39 The C!ic% ratio is hi3hest in the &ear 2##4-#5 i9e9#967 comparin3 to all ne5t
&ears
49 The a8ove chart reveals that there is not m!ch di**erence in liC!id ratios o* the
compan&9
IT,")",T'TI4+2 In the present &ear the C!ic% ratio is not satis*actor& 8eca!se
the C!ic% assets is less than the C!ic% lia8ilities9
*.*/SIS *.0 I.&E1P1E&*&IO. O( (I.*.CI* S&*&EME.&S 2C&M "34O&I
T."+4/,"L 'CTI/IT1 "'TI4S2
'nother important dimension o* liC!idit& or the short term *inancial position is the
comp!tation o* the rates at ;hich di**erent short-term assets are converted into cash
and ho; promptl& the lia8ilities have 8een dischar3ed9 The important ratios !sed *or
this p!rpose are Stoc% T!rnover "atio> @i5ed 'ssets T!rnover "atio> and Eor%in3
Capital T!rnover "atio9
1H In=entory so the compan& have to !tilize *!nds properl& i9e9 there is
a need o* control on e5penses
6. According to comarati!e Statements ;e come to kno; that the
sales :ross ro8t are declining comare to re!ious year