View
217
Download
0
Category
Preview:
Citation preview
7/30/2019 Deep Singh Ratio Analysis
1/108
1
A
SUMMER TRAINING PROJECT REPORT
ON
RATIO ANALYSIS
IN FLEXITUFF INTERNATIONAL LTD
THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF
THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION
(2011-2013)
SUBMITTEDTO: SUBMITTED BY
SUKRITI HSA KULDEEP SINGHMBA III
rdSEM.
AMRAPALI INSTITUTE,SHIKSHA NAGER, KALADHUNGI
ROAD, HALDWANI (NAINITAL) UTTRAKHAND
7/30/2019 Deep Singh Ratio Analysis
2/108
2
ACKNOWLEDGEMENT
We take this opportunity to express our deep gratitude to the management of FLEXITUFF
INTERNATIONAL LIMITED A&R Division, Pipalgao Road,Near Idgaha Mahuakhera Gang,
KASHIPUR U.S Nager (UTTARAKHAND) for providing us the opportunity to get an exposure
of their esteemed unit.
We are sincerely thankful to the HRD Deptt. Which co-ordinate our training and WE
especially express our thanks to Mr. SNJAY SINGH BHAR DY. MANAGER (A/C.D.)
D.N. UPDHYA, DY.MANAGER (H.R) for their continued help and guidance during our stay
here.
We wish to express our sincere gratitude to HOD & personnel of Account Office where we
had detailed interaction & inspiring guidance and motivation from them.
Last but not the least we express our deep gratitude to our respective Training & Placement
Officers for sending us to such a large integrated industry for summer training and giving us a
chance to acquire an experience of my life time.
We also express our sincere indebt ness to our parents and family members for
providing their continued moral support during our training period.
KULDEEP SINGH
MBA III SEM.
AMRAPALI GROUP OF
INSTITUTES, HALWANI
7/30/2019 Deep Singh Ratio Analysis
3/108
3
PREFACE
This is more than one factor at work, while which can ensure the true completion of the
project. It is not an idea held on certain topic that matter, but it is complete knowledge attaining
process and therefore requires an in depth knowledge of the topic of the project.
The project includes an overview of Ratio analysis in FLEXITUFF INTERNATIONAL
KASHIPUR UNIT.
The varies and varied aspects of the problems has logically discussed and systematically
presented in a simple language.
7/30/2019 Deep Singh Ratio Analysis
4/108
4
S.NO. CONTENTS PAGE NO
1 Acknowledgements 2
2 Preface 3
3 Industry Profile 6-11
4 Company Profile 12-43
5 Theoretical Background 44-81
6 Objectives and Scope 82-83
7 Research Methodology 84-87
8 Data Presentation And Analysis 88-99
9 Summery of Findings 100-101
10 Suggestions and Recommendations 102-103
11 Conclusions 104-105
12 Annexure
Limitations and scope106
13 Bibliography 107-108
7/30/2019 Deep Singh Ratio Analysis
5/108
5
HISTORY OFORGANISATION
7/30/2019 Deep Singh Ratio Analysis
6/108
6
HISTORY OF THE ORGANISATION
The flexible intermediate bulk container popularly nomenclature as FIBCs is said to have
been first manufactured in the late 1950s / early 1960s in the United States, Europe and Japan.
The FIBCs manufactured with polyolefin fabrics were experimented in Uk, Canada and the US
around late 1960s and early 1970s.The growth of the flexible intermediate bulk bags that are
universally used today is however spurned with the development of the high strength lightweight
fabric (polypropylene). The FIBCs are giant size bags in drum or box shapes, with capacities
ranging from 250-2000 kg depending on the bulk density of the product. Whereas the basic
material is polypropylene (PP), high-density Polyethylene (HDPE) or polyamide (Nylon) are
also used. The FIBCs can be custom built to meet specific requirement and also UV stabilized.
The concept of bulk packaging revolves around environmental aspects apart from reducing
the cost of packaging and faster handling. They also facilitate to minimize losses in spillage and
pilferage and create better working atmosphere.
India witnessed the introduction of FIBCs during early 1990s and has since grown to be
frontline manufacturers in the world. Although the domestic market growth is still at a slow
pace, the converting industry has found export acceptance and nearly ninety percent of
production is exported providing the exchequer an excellent FE earning. Both the domestic
demand and exports are envisaged to record excellent growth potential.
7/30/2019 Deep Singh Ratio Analysis
7/108
7
ABOUT FLEXITUFF
Flexituff International Ltd, a company promoted by the renowned Kalani group from
Indore. Flexituff has the largest capacity in India (2nd largest in the World) to produce PP woven
based products. It has the most modern Plant & Equipments under one roof to convert PP
granules to tapes, fabric, printing, extrusion lamination & bag making.
Flexituff is the first company to start BOPP printed & laminated pp woven bags in India about
seven years back. It is the leader in Jumbo bags, Big bags and container liners. Due to continuous
support and strength derived from its own R& D and the international quality set & maintained
by its team of scientists, engineers & professionals, today, Flexituff is exporting to more than 40
countries in the world and has been receiving Best export awards year after year. Flexituff is the
first and only Asian company now successfully audited and certified by AIB (American Institute
of Food Bakers, USA) and BRC (British Retailers Consortium UK) to make direct food contact
bags for supplies to American and European companies. It is also certified for ISO 9001: 2008,
ISO 14001:2004, ISO 22000:2005 and HACCP. In addition to three Units at Pithampur near
Indore, they are coming up with another most modern Unit at Kashipur at Uttarakhand.
Flexituff caters to different sectors like; Agriculture produce-vegetables, fruits, rice, wheat,
atta, besan, salt, spices, as well as to other sectors like; fertilizer, chemicals, cement, etc.,. It also
has the experience & expertise to produce any type of PP / HDPE bags to customer
specifications. Flexituff offers packaging solutions of their products right from 1 KG to 20, 000
KG.
7/30/2019 Deep Singh Ratio Analysis
8/108
8
GLOBAL FIBC PRODUCTION & CONSUMPTION
7/30/2019 Deep Singh Ratio Analysis
9/108
9
7/30/2019 Deep Singh Ratio Analysis
10/108
10
ADVANTAGES OF FIBC
Each FIBC can carry up to 1000 times its own weight.
Each FIBC has integral lifting loops, eliminating the need for pallets.
Excellent printability.
Efficient use of space with Specific Designs
Simple to use
Cost effective
Very strong yet flexible
Low per mt packaging cost
Variety of dimensions available
Variety of filling, discharging and lifting facilities
Can be used for hazardous chemicals as specified in the UN Chapter 6.5
recommendations.
7/30/2019 Deep Singh Ratio Analysis
11/108
11
COMPANY PROFILE
Be it polywoven products (like FIBCs, geotextiles, BOPP bags) or thermo-formed FLEXITUFF
INTERNATIONAL LIMITED, worlds largest poly-woven packaging company, occupies the
enviable status of being the sparkling jewel in the diverse Kalani Industrial Enterprise - one of
the leading and respected business Groups of Central India.
With 4 multi-locational manufacturing plants, combined annual capacities of over 40,000 MT
and dedicated distribution footprints in more than 40 countries, Flexituff, with its 6000 strong
work-force, has emerged as worlds most preferred one-stop-shop for bulk packaging products
and solutions.
Set up to fulfill the demanding bulk packaging and transporting requirements of a host of
industries across the globe, Flexituff has an enviable number of attributes working for its most
discerning buyers. Economies of scale, the edge of attitude, 100% integration under one roof,
global foot print, nearly 2 decades of being in the industry, global manufacturing standards and
cost advantage of Asia.
Its state of the art manufacturing facilities at SEZ Indore (M.P.), Kandla (Gujarat) and
Kashipur (Uttranchal) measure up to the exacting global norms of GMP, AIB and BRC-IoP.
Flexituffs ISO-9001-2000 certified facility with its integrated manufacturing base permits
scaling the throughput to match demanding deadlines.
7/30/2019 Deep Singh Ratio Analysis
12/108
12
articles (food trays, boxes, punnets) or retail packagings (leno/net bags for vegetables),
Flexituffs products find ready acceptability in all continents. A pro-active customer-centric
approach has helped Flexituff gain a larger global market share. A fact acknowledged by the
Government of India with the highest FIBC Exporter Award for past seven years in a row.
Since its inception in the year 1993, Flexituff core values of commitment to Safety,
Health and the Environment, high ethical standards and respect for people have been the
cornerstone of its existence and what it stands for. At Flexituff workforce is assumed to be the
stake holders of its efficiency. A people driven enterprise, it makes every effort to nurture a team
that can grow with the organization. A team that shares the responsibilities and rewards, fairly
and squarely.
Team Flexituff is committed to serving all your FIBC requirements. The
commitment stems less from the mammoth manufacturing facilities they possess and more from
theirr 2000 strong work force. Nothing defines Flexituff better than its people. Young in outlook
and rich in experience, Team Flexituff strives for total customer satisfaction, continuous
improvement in quality and delivering ever larger value to its buyers.
Despite the over arching team spirit that prevails at Flexituff, we believe, commitment
to customers begins with the individual. Although, our 2000 member team works like a well
greased machine, it is the individuals - the cogs, who fuel its driving commitment to quality and
responsiveness.
7/30/2019 Deep Singh Ratio Analysis
13/108
13
100% customer orientation has helped Flexituff gain wide global market share. A fact,
acknowledged by the Govt. of India with this highest FIBC exporters award, for last 6
years in a row.
Awards, citations, growing volumes, expanding product range and satisfied customers
are achievements we now take in our stride. But nothing fails to tickle us more than the idea of
an impossibility.
Throw us a challenge and you have us hooked. Team Flexituff nurtures its hunger to hit
the ball out of the park. We like to be known as partners who can rise to the moment, who can be
counted upon to meet a crisis head on...
Flexituff has an enviable number of attributes working for you. Economies of scale, the
edge of attitude, 100% integration under one roof, global footprint, a decade of being in the
industry and the cost advantages of Asia.
7/30/2019 Deep Singh Ratio Analysis
14/108
14
FACT SHEET
Year of Establishment : 2002
Nature of Business : Manufacturer, Exporter
Number of Employees : 501 to 1000 People
Turnover : US$ 10-25 Million (or Rs. 40-100 Crore Approx)
MISSION:- is to function clean, safe, environment friendly and provide packaging solutions to
its customer with the best quality products and service.
VISION :- is to continue to invest in its human resources, state of art equipments, technology
and to stand as reputable, vibrant, innovative, honest, reliable organization and to provide quality
product & services at competitive price to its customer
VALUES:-
a) Meeting commitments made to customer.
b) Faster learning creativity and speed of response.
c) Respect of dignity and potential of individual.d) Loyalty and pride in the company.e) Team playing.f) Zeal to excel.g) Integrity and fairness of all matters.
GROWTH:- To ensure the steady growth by enhancing the competitive edge in existing
business, new Areas and international operations areas fulfill the nationals expectations
from Flexituff International Ltd.
7/30/2019 Deep Singh Ratio Analysis
15/108
15
PRIMARY COMPETITIVE ADVANTAGES:-
It is gained by focusing on three main features:
Modern technology. Traditional craftsmanship. Best quality with experience.
PROFITABILITY:To provide a reasonable and adequate return on capital , capacity
utilization and productivity and generalization of adequate internal resources to finance the
companys growth .
CUSTOMER FOCUS:To build a high degree of customer confidence by providing
increased value for money through international standards of product quality , performance
and superior customer .
PEOPLE ORIENTATION:To enable each employee to achieve his potential improve
his capabilities , perceive his role and responsibility and participate and contribute
positively to the growth and success of company to invest in human resource
continuously.
TECHNOLOGY: To achieve technological excellence in operations by the development
of indigenous technologies to suit business need and provide a competitive adequate to
the company .
IMAGE: To fulfill the expectations which stockholder like government as owners,
employees customers (buyers) and country at large have from Flexituff International Ltd.
7/30/2019 Deep Singh Ratio Analysis
16/108
16
INTEGRATED PLANT - ALL FACILITIES UNDER ONE ROOF
Flexituff International Limited is one of the very few fully integrated plants is the world.
Its 100% integration permits us to deliver our products in multiple options while retaining
100% control over the manufacturing process. Needless to say, Flexituff is fully independent
from the vagaries of outsourced material or workmanship.
Last minute change in specifications, add on orders can be quickly and comfortably accom-
modated at Flexituff. We are able to maintain full traceability of material and workmanship
in our Quality Assurance systems.
Total Quality Control.
Enhanced customization, last minute changes, faster sampling and lower turn
around delivery time are the winning advantages of our vertical integration.
The Power of Integration
Quoted at 1st World FIBC Congress,
Amsterdam, Netherlands.
" We are highly concerned with the quality of bags and give credit to those suppliers
who are vertically integrated and thus able to keep 100% control of every step of the manufactur-
ing process from the moment you qualify the virgin resin, extrude and weave the fabric, to sewin
-g and finishing."
Dr. Thomas Gerdau Head of Procurement, International Packaging Hoechst Procurement
International, GMBH, Germany.
7/30/2019 Deep Singh Ratio Analysis
17/108
17
Flowchart showing the Integrated Plant of Flexituff.
7/30/2019 Deep Singh Ratio Analysis
18/108
18
EXTRUSION
Microprocessor controlled extrusion ensure excellent input for the subsequent
operations. Extrusion plants at Flexituff - the very life blood of the manufacturing process, are
state-of-the-art Starlinger. This ultimate extrusion technology comes alive in the experienced
hands of our workforce to process over 60,000 kgs. of virgin polymer everyday. Producing
impeccable high tensile strength tapes with optimum elongation - a pre requisite for perfect
fabric. Precision winding being the key to weave fine fabrics, all tapes are wound by new
generation inverter controlled winders to produce even bobbins. Quality checks begin from the
very initial stages of Tape-making. Every lot produced is checked for its Denier, Strength,
Elongation and Color.
3 layer co extruded liner plant.
7/30/2019 Deep Singh Ratio Analysis
19/108
19
If 3 layer co-extruded liner plant is a luxury, so be it. Our buyers deserve this luxury. This over
qualified plant ensures that we produce liners with zero pinholes, fish eyes or any other
extrusion flaw. At Flexituff, microprocessor controlled Form-fit Liner Machine cuts, seals and
form-fits the liner in a dust-free clean room environment conforming to ISO Level-7 (< 10,000
PPM). Be it Glued, Tabbed or Flanged-in, well executed process eliminates liner twisting inside
the bag.
The vital facility of coatingthe essential prerequisite for making FIBCs is a 2.4
meter wide coating plant laminating both circular and flat fabric in thicknesses ranging from 15
to 80 microns. A unique fabric cleaning device, designed and developed in-house, is mounted on
the coating machine to avoid any foreign particle going in-between fabric and the coating.
The quality is free.
As the foremost manufacturer of FIBC in the world, they are sensitive to
decoding customer needs. Their design and development team is committed to evolving bulk
packaging solutions for your specific requirements. Infact, they try to preempt them.
Form fit liner sealing.
7/30/2019 Deep Singh Ratio Analysis
20/108
20
Extrusion coating.
FABRIC
Flawless weaving, off the floor stacking of stretch wrapped rolls and unsurpassed
6 color printing.
7/30/2019 Deep Singh Ratio Analysis
21/108
21
Fine and consistently even fabric is the face of our FIBCs. Over 3 million square feet of high
quality fabric is woven everyday on an array of wide width Starlinger looms. Computerized
weaving machines with the help of skilled hands produce consistent quality fabric. In the end
what you have from this state-of-the-art facility is an amazing collection of poly woven fabric,
ranging 60 GSM to 300 GSM ready to be turned into burly jumbo bags for stringent end
applications.
Flexituff's R&D initiatives are amply reflected in its ultrasonic slitting and sealing technology
which makes our fabric comparable to tuck in fabric of a Sulzer loom.
Flexituff recognizes that for a critical food contact application, its not enough to mere make a
high quality fabric, the fabric also needs to be contamination-free, carrying no foreign particle or
even a speck of dirt. To achieve this high level of fabric cleanliness, fabric is stretch-wrapped on
looms itself. Raising the bar on cleanliness, the stretch sealed fabric rolls never touch the ground.
4 color printinga rare facility with others is pass at Flexituff. For, we utilize a 6 color flexo
-graphic printing machine of a kind, which makes the fabric come alive. This excellence finds it's
match in the fabric's evenness to create sharp, even, non-fading printsrepeats after repeats.
7/30/2019 Deep Singh Ratio Analysis
22/108
22
Off the floor stacking.
The quality mantra.
At Flexituff, we hardly believe that quality is what clients demand. Out here,we believe, quality is what you live. And breathe. Quite simply, the cost of making a quality
product is seldom more than that of a sub standard product. But its value, far higher.
ZERO OUTSOURCING OF CRITICAL AUXILLARIES
For consistency in quality and schedules, even the smallest auxillary is
manufactured in-house. Genuine quality, is a chain without a weak link. Any FIBC, therefore, is
as good as the quality of input that goes into making it. Recognizing that even a small leak can
sink a ship, Flexituff rather chose to invest in establishing facilities for making every FIBC input
in-house. It has paid rich dividends in terms of customer satisfaction.
7/30/2019 Deep Singh Ratio Analysis
23/108
23
Take for example high tenacity sewing yarn for FIBCs. Flexituff commissioned state-of-the-art Fare multifilament plant which produces 7 GPD UV stabilized sewing thread in the
deniers ranging 420 to 5200. Also set up in-house is the facility of twisting the filament yarn into
sewing thread to required specifications. Or take the all important webbing.
A battery of needle looms make 75 million metres of webbings required to produce bags at
Flexituff. In-house production not only ensures required level of UV stability and the strength
but also customizing of webbing to colours and weaving required by the client. The list is quite
exhaustive. Be it filler-cord for sift proofing, Tie-tape, rope and B-lock bag for closure,
document pouch, identification labels, printing stereosall inputs get made in-house.
ASSEMBLING THE FINAL PRODUCT
An intelligent, skilled and trained workforce assembles the components into efficient bulk
containers.21,000 FIBCs a day in addition to Builder bags and single loop bags make Flexituff
the largest production facility in the world. Be it Form-stable Q-bag, U.N. Certified Hazmat bag
or Type-C/D bag, Flexituff offers the most cost-effective solutions for carrying bulk
commodities up to 2500 kgs. Every Flexituff FIBC design is certified by NEL, UK.
The assembly section is planned for neat and clean environment, smooth workflow and
strict adherence to Clean Room Specifications. The specially trained work force, qualified for
basic intelligence parameters and quality orientation works as a team to deliver consistent
product quality. Full scale production for any bag starts only after the first prototype bag has
been certified by the QC in all respects, including Load Test. Each and every bag is inspected for
all critical and aesthetic parameters.
7/30/2019 Deep Singh Ratio Analysis
24/108
24
Metal detection.
To ensure contamination-free bag, every bag is cleaned on pneumatically-operated cleaning
machine where double action blowers with alternating blowing and suction cycles eliminate the
smallest loose particles from the bag. All food contact application bags essentially pass through a
Metal Detector unit eliminating any chance of metal no matter how light or small to slip in
the bag.
Appreciating the need to be 100% right every time, as an abundant precaution, Flexituff has
instituted additional layer of quality audit. Where a team of professionals randomly draw 10%
bags for inspection from duly baledready to go bags. Any minor deviation in the drawn sample
leads to entire lot to go back for re-inspection and segregation. Packaging these packages is an
art in itself at Flexituff. Each batch is packed in compact cuboid bales which are duly stretch-
wrapped and marked for easy readability and stackability at clients place. The new European
and the U.S. Pallet Norms ISPM-15 are followed as every individual pallet is treated and marked
7/30/2019 Deep Singh Ratio Analysis
25/108
25
Eager to reach out.
Flexituff is keen to forge a business relationship with you. Our capacities can smoothly
tackle your most demanding requirements. No challenge, in terms of quantity or quality is too
large to keep us from catering to your need.
Dual action bag cleaning
7/30/2019 Deep Singh Ratio Analysis
26/108
26
A responsible corporate in worlds largest integrated clean room
FIBC manufacturing facility.
People Focus
Dreams are what drive us. We respect people and value their individual differences
and this has led to a free, vital corporate culture that encourages creativity.
We are fortunate to have so many talented people with different backgrounds, interests
and skills who come together to create offerings for the future.
Flexituff is a place where teamwork is essential. Yet our employees also maintain the
freedom to work on their own, be creative and make their own decisions. And most of all,
grow both personally and professionally.
Equal Opportunity & Meritocracy:
Recruitment and promotions in Flexituff are all based strictly on merit.Equal opport -
unities are provided to all without regard to race, caste, religion, colour, ancestry, marital
status, gender, age or nationality.
The Company believes that people accept meritocracy as a just and equitable system,
and contribute best under optimum challenges and opportunities & differential rewards
commensurate with performance.
7/30/2019 Deep Singh Ratio Analysis
27/108
27
CorporateGovernance
At Flexituff, our pursuit to achieve good governance is an ongoing process, thereby
ensuring truth, transparency, accountability and responsibility in all our dealings with our
employees, shareholders, consumers and communities. We aim to develop capabilities
and identify opportunities that best serve the goal of value generation, thereby creating an
outstanding organization.
Environment, Health and Safety:
Since its inception, the Flexituff core values of commitment to safety, health and the
environment, high ethical standards and respect for people have been the cornerstone of
who we are and what we stand for.
Well communicated EHS policies ensure that production targets never override the
safety of a person and that as a responsible corporate, we remain an environmentally
responsible neighbor in the communities where we operate, acting promptly and surely to
correct incidents or conditionsthat endanger health, safety or the environment.
7/30/2019 Deep Singh Ratio Analysis
28/108
28
PLASTIC INDUSTRY AT A GLANCE
Globalization has become the most important message for the development of the
industrial sector in India which means the industries have to become both competitive
and cost effective. During 2001 Flexituff acquired two large units: Special Economic
zone Pithampur and A&R Devision, Mahuakhera Gang. Flexituff worlds Largest
Integrated Clean Room FIBC Manufacturing facilities.turiye is the worlds second
Largest Exporter of FIBC.
Today, modern Turkiye ranks 17th among the largest economies in the world
and 7th in Europe with its GDP reaching almost US $ 500 billion in 2007. The
Turkish economy is growing during the last 22th quarters, averagely 7 percent in
the last five years. As a result of the eminent change of Turkiyes economic and
trade policies in the early 80s, its foreign trade has constantly boosted, reaching a
value of 270 billion dollars in 2007.
Flexituff is the worlds largest integrated Clean-Room FIBC manufacturing
facility. We produce over 11 million FIBCs every year which get exported to over
30 countries across all the continents.
7/30/2019 Deep Singh Ratio Analysis
29/108
29
Flexituff, besides being the largest integrated manufacturer, also have
qualitative edge substantiated by :-
1. Food-grade certification from American Institute of Baking i.e. AIB(USFDA),
USA with highest ranking i.e. Superior Grade. We have this certification for past
three years.
2. Europes most-coveted certification, BRC-IoP i.e. British Retail Consortium and
Institute of Packaging for direct food contact packaging for past three years.
3. ISO9001:2000 certification from TUV, Germany.
4. HACCP certification i.e. Hazard Analysis Critical Control Points.
Flexituff also has a fully established Research & Development (R&D) Wing
with 12 Design Engineers who continuously work on offering cost-efficient and
safe packaging solutions. To support the R&D function, we have also employed
chemical scientists and microbiologists. We have the most modern in-house Test
Laboratory equipped with Load Test Rig, UV Weatherometer, MFI Tester, and all
other required Test Equipment.
This well equipped and state of art manufacturing facility helps us in
maintaining a vast product range. Our team of design engineers are working day in
7/30/2019 Deep Singh Ratio Analysis
30/108
30
and day out to increase our offerings to niche markets. Till date we have some
patented product listed with our name, along with being licensee of some others.
We are not confined to the existing product range only, but do take over R & D on
any new project of viability. Our design engineers and scientists are dedicated to
manufacture new products to come up to customers expectation.
In the end with we take pride in informing you that we have received "The
Top Exporters Award" for our products from government of India continuously for
last 6 years.
7/30/2019 Deep Singh Ratio Analysis
31/108
31
ORGINAZATION STRUTURE
Flexituff International Limited
CHAIRMAN
PRESIDENT
VICE PRESIDENT
(UNITHEAD)
SENIOR GENERAL MANAGER
GENERAL MANAGER
DY. GENERAL MANAGER
MANAGER
7/30/2019 Deep Singh Ratio Analysis
32/108
32
DY. MANAGER
ASST. MANAGER
OFFICER
ASST. OFICER
GRADED STAFF
7/30/2019 Deep Singh Ratio Analysis
33/108
33
RAW MATERIALS:-
Companies main raw materials are:
1. Polypropylene2. Films and Fabrics3. Plastic Dana4. Printing Chemical5. Waste Plastic6. High polyethylene:HMHDPE, HDPE Blow moulding grade
COMPANIES MARKETING POLICY:-
Companies marketing policy is targeted to meet customers need and
satisfaction. Presently the company is also exporting its items to various countries.
The head office of the Company is at Dhar.
MARKET FOOTPRINT
GERMANY; FRANCE; IRELAND; NETHERLANDS; SPAIN; MEXICO; UNITED
KINGDOM; BELGIUM; ITALY; PORTUGAL; GREECE; BRAZIL; USA; UAE; RUSSIA;
7/30/2019 Deep Singh Ratio Analysis
34/108
34
KENYA; RWANDA; CHILE; ERETRIA; CANADA; SWITZERLAND; AUSTRALIA;
ALGERIA; JAPAN; NEW ZEALAND; CHINA; EGYPT; SINGAPORE; SWEDEN; ISRAEL;
AUSTRIA.
FIBC USER SEGMENTS:
1-Chemicals
2-Fertilisers
3-PHARMACEUTICALS
4-Polymers
5-HAZARDOUS GOODS
6-Minerals
7-Cement
8-Agri Produce
9-Building Materials
.
7/30/2019 Deep Singh Ratio Analysis
35/108
35
CARE FOR ENVIRONMENT
Preserving and Protecting the Environment is a top priority at Century. We always
sensitive to our bio-diversity of the soil, water and Air around us. Flexituff power plant
maintains an efficient system for reducing air emissions. Electrostatic Precipitators have been
installed to remove particulates form recovery boilers, coal fired boilers and lime kiln flue gases.
In strict adherence to the standards & guidelines, the effluents are treated in a modern
ETP, which is recognized as a model plant for its efficiency & performance.
Companys adoption of a systematic approach to the environment matters including waste
minimization, water recycling & re-use programs of by products has facilitated the company in
getting the ISO-14001:2004 certification for its Environment Management System.
Companys friendship with Environment has also reflected in its Bagasse based plastic
being licensed for Eco labeling, a distinct honor to be attained.
CARING OF THE COMMUNITY
Flexituff cares for the community at large & strives to be a good corporate & social
citizen. We actively contribute to the community development of the areas in our surroundings &
regularly conduct medical camps, undertake construction work of schools, drinking water
facilities, self-employment schemes etc.
7/30/2019 Deep Singh Ratio Analysis
36/108
36
PROCESS DESCRIPTION
A process for bag manufacture of a bag having a first dimension from a sealed bottom of
the bag to an open top of the bag, the bag being fabricated from a continuous tube of plastic film
bag material.
The process includes the steps of providing a continuous tube of plastic film bag material.
The side edges of the bat material are folded between a front bag panel and a rear bag panel to
form gussets. A sealing station having apparatus for placing two parallel and spaced apart seals
and a knife for cutting the continuous tube of the plastic film bag material between the two
parallel and spaced apart seals; First adjacent double seals are formed across the front bag panel
and the rear bag panel, the double seals in parallel side-by-side relation with one another with the
plastic film bag material there between.
The continuous tube of plastic film bag material is at least twice the first dimension from
the sealed bottom of the bag to the open top of the bag. This forms second adjacent double seals
across the front bag panel and the rear bag panel, the second adjacent double seals in parallel
side-by-side relation with one another. By cutting the continuous tube of plastic film bag
material between the second adjacent double seals, a double bag unit is formed and severed
having single seals at opposite ends of the double bags.
7/30/2019 Deep Singh Ratio Analysis
37/108
37
PRODUCTS
OFFERED
7/30/2019 Deep Singh Ratio Analysis
38/108
38
PRODUCT RANGE
Flexituff manufactures one of the widest range of FIBCs in the world. Whatever be your
packaging and bulk transportation requirement, you will find a suitable product in our
comprehensive range. Moreover, with our in house Design & Development Center, any
packaging requirement can be aptly developed, tested and offered as sample very quickly. Some
of the standard designs at Flexituff are as under:
1. TYPE C & D.
2. ASSORTED.
FIBCs (coated/uncoated)
Form Stable Baffle Bags
Form Fitted Liner Bags
Glued Liner bags
Conductive Type C Bags
Dissipative Type D Bags
Type C +D Bags
Sling Bags
Drum Bags
Asbestos bags
Container Liner Bags
7/30/2019 Deep Singh Ratio Analysis
39/108
39
Food Grade Bags
Tunnel Lift Bags
Builder Bags
PP / Paper Sandwich Bags
Sand Bags
BOPP Printed Bags
Garden Waste Bags
Carry Bags
TYPE C & D
Safely managing the occurrence of static electricity during FIBC filling and emptying
operations is a critical concern in the chemical process industry. Static discharges from an FIBC
can range from operator shocks to those capable of igniting flammable gases, vapors and dust.
By using an FIBC with static protective properties, the risk of a hazardous static discharge is
significantly reduced.
STATIC DISSIPATIVE TYPE-D FIBC:
Flexituff offers static dissipative FIBC using static protective yarn. Static protective yarn
protects from hazardous electro static discharges by safely dissipating charge into the
atmosphere.
7/30/2019 Deep Singh Ratio Analysis
40/108
40
STATIC GROUNDABLE TYPE-C FIBC:The conductive Type C bag from Flexituff uses conductive threads in a woven grid
structure. These threads are grounded to avoid accumulation of charge.
Left : Static Dissipative type-D
Right : Static Groundable type-C
ASSORTED
Garden Waste Bags:
Your way to a better and cleaner environment... versatile garden waste bags for County
Councils, Collection Services, Farms and Individual Residences:
Ideally suited for:
Grass cutting
Hedge trimming Woody waste
Kitchen waste
Leaves & Shrubs
7/30/2019 Deep Singh Ratio Analysis
41/108
41
Garden Waste Bag.
BOPP Printed Bags:
Be different! Do away with monotony and dullness of your bags. Style them with our high
quality 6 color magic printing.
7/30/2019 Deep Singh Ratio Analysis
42/108
42
RATIO ANALYSIS
Ratio Analysis is the most commonly used analysis to judge the financial strength of a
company. A lot of entities like research houses, investment bankers, financial institutions
and investors make use of this analysis to judge the financial strength of any company.
This analysis makes use of certain ratios to achieve the above-mentioned purpose. There are
certain benchmarks fixed for each ratio and the actual ones are compared with these benchmarks
to judge as to how sound the company is the type of ratio analysis that is most effective dependsupon who needs the information. Credit analysts are concerned with risk evaluation, and they
therefore will concentrate of ratios that measure whether a company can pay its financial
obligations and how much debt is involved in capital structure. On the opposite end of the
spectrum, analysts looking at a business in terms of an investment opportunity will employ ratios
that determine if a company is efficient and how great is its potential profitability.
For example, knowing that a company has a particular profit margin as determined by a
corresponding ratio is meaningless by itself. Financial analysts know it's more important to determine
how that ratio looks in terms of other similar companies, or even how that ratio looks compared to priorprofitability levels of that same company. In addition, these ratios must be studied over a proper time
period, allowing for major changes within the company to be taken into consideration.
Balance sheet ratio analysis is useful in determining the solvency of a business and the amount of
reliance it has on its creditors. Specific ratios included in this group are current ratio, which measures
financial strength by dividing a company's assets by its liabilities, and quick ratio, which takes the essence
of the current ratio but excludes inventory. By focusing on the liquid assets of a business, a quick ratio
can measure its strength even in a worst-case scenario whereby all of its funding was suddenly removed
A ratio is a mathematical relationship between two related terms expressed in quantitative form.
An accounting ratio is defined as quantitative relationship between two or more items of the
financial statements connected with each other. The quantitative relationship may be expressed
in either of the following ways:-
http://www.wisegeek.com/what-is-profit-margin.htmhttp://www.wisegeek.com/what-is-a-balance-sheet.htmhttp://www.wisegeek.com/what-is-liability.htmhttp://www.wisegeek.com/what-is-a-quick-ratio.htmhttp://www.wisegeek.com/what-is-inventory.htmhttp://www.wisegeek.com/what-are-liquid-assets.htmhttp://www.wisegeek.com/what-are-liquid-assets.htmhttp://www.wisegeek.com/what-is-inventory.htmhttp://www.wisegeek.com/what-is-a-quick-ratio.htmhttp://www.wisegeek.com/what-is-liability.htmhttp://www.wisegeek.com/what-is-a-balance-sheet.htmhttp://www.wisegeek.com/what-is-profit-margin.htm7/30/2019 Deep Singh Ratio Analysis
43/108
43
TYPES OF RATIOS
Normally, ratios are used for the purpose of assessing the profitability, activity or operating
efficiency and position of a business concern. Thus ratio according to the purpose, which they
serve, may put into the following groups.
1-Profitability Ratio
2-Activity Ratio
3-Liquidity Ratio
4-Leverage Ratios or Long Term Solvency Ratios.
PROFITABILITY RATIOS:-
The profitability ratios are used to measure how well a business is performing in terms of
profit. The profitability ratios are considered to be the basic bank financial ratios.
In other words, the profitability ratios give the various scales to measure the success of the firm.
The profitability ratios can also be defined as the financial measurement that evaluates the
capacity of a business to produce yield against the expenses and costs of business over a
particular time period. If a company is having a higher profitability ratio compared to its
competitor, it can be inferred that the company is doing better than that particular competitor.
The higher or same profitability ratio of a company compared to its previous period also
indicates that the company is doing well. The return on assets, profit margin and return on equity
are the examples of profitability ratios
7/30/2019 Deep Singh Ratio Analysis
44/108
44
One of the most common profitability ratios is the profit margin. This can be expressed as the
gross profit margin or net profit margin, and it can be expressed by company, by sector, by
product, or by individual unit. The information reported on the income statement will enable you
to determine the overall profit margin. If additional breakdowns are provided, more detailed
margins can be calculated.
What Does Profitability Ratios Mean?
Classes of financial metrics that help investors assess a business's ability to generate earnings
compared with its expenses and other relevant costs incurred during a specific period. Whenthese ratios are higher than a competitor's ratio or than the company's ratio from a previous
period, this is a sign that the company is doing well.
The profitability ratio should be compared with the relevant time period. The profitability ratio
of the industries that experience operations on the seasonal basis should be compared properly.
For example, in case of the retail industry, high revenue is earned during the Christmas season.
Hence comparing the profit margin of the 4th quarter with the 1st quarter of a retailer will not
give clear picture of the profitability of the retail business. Hence in order to judge the
profitability of the retailer perfectly, the profit margin of the 4th quarter of a retailer should be
compared with the profit margin of the 4th quarter of the previous year.
7/30/2019 Deep Singh Ratio Analysis
45/108
45
The measures of profitability ratios are:
1.Gross Profit Ratio (GP Ratio):
Definition of gross profit ratio:
Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a
percentage. It expresses the relationship between gross profit and sales.
Components:
The basic components for thecalculation of gross profit ratioare gross profit and net sales. Net
sales means that sales minus sales returns. Gross profit would be the difference between net sales
and cost of goods sold.Cost of goods sold in the case of a trading concern would be equal to
opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases.
In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials,
wages, direct expenses and all manufacturing expenses. In other words, generally the expenses
charged to profit and loss account or operating expenses are excluded from the calculation of
cost of goods sold.
Formula:
Following formula is used to calculate gross profit ratios:
[Gross Profit Ratio = (Gross profit / Net sales) 100]
Example:
Total sales = $520,000; Sales returns = $ 20,000; Cost of goods sold $400,000
Required: Calculate gross profit ratio.
Calculation:
Gross profit = [(520,00020,000)400,000]
= 100,000
Gross Profit Ratio = (100,000 / 500,000) 100
= 20%
http://www.accountingformanagement.com/cost_of_goods_sold_definition.htmhttp://www.accountingformanagement.com/cost_of_goods_sold_definition.htmhttp://www.accountingformanagement.com/raw_materials_definition.htmhttp://www.accountingformanagement.com/cost_of_goods_sold_definition.htmhttp://www.accountingformanagement.com/cost_of_goods_sold_definition.htmhttp://www.accountingformanagement.com/raw_materials_definition.htmhttp://www.accountingformanagement.com/cost_of_goods_sold_definition.htmhttp://www.accountingformanagement.com/cost_of_goods_sold_definition.htmhttp://www.accountingformanagement.com/cost_of_goods_sold_definition.htm7/30/2019 Deep Singh Ratio Analysis
46/108
46
Significance:
Gross profit ratio may be indicated to what extent the selling prices of goods per unit
may be reduced without incurring losses on operations. It reflects efficiency with which a firm
produces its products. As the gross profit is found by deducting cost of goods sold from net sales,
higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from
business to business. However, the gross profit earned should be sufficient to recover all
operating expenses and to build up reserves after paying all fixed interest charges and dividends.
Causes / reasons of increase or decrease in gross profit ratio:
It should be observed that an increase in the GP ratio may be due to the following factors.
1. Increase in the selling price of goods sold without any corresponding increase in the costof goods sold.
2. Decrease in cost of goods sold without corresponding decrease in selling price.3. Omission of purchase invoices from accounts.4.
Under valuation of opening stock or overvaluation of closing stock.
On the other hand, the decrease in the gross profit ratio may be due to the following factors.
1. Decrease in the selling price of goods, without corresponding decrease in the cost ofgoods sold.
2. Increase in the cost of goods sold without any increase in selling price.3. Unfavorable purchasing or markup policies.4.
Inability of management to improve sales volume, or omission of sales.
5. Over valuation of opening stock or under valuation of closing stockHence, an analysis ofgross profit margin should be carried out in the light of the information
relating to purchasing, mark-ups and markdowns, credit and collections as well as merchandising
policies.
7/30/2019 Deep Singh Ratio Analysis
47/108
47
This ratio measures the relationship between gross profit and net sales.
Objective:-the main objective of computing this ratio to determine the efficiency with which
Production and purchase operation are carried on .
GROSS PROFIT RATIO =(GROSS PROFIT/NET SALES )*100
2. NET PROFIT RATIO:-
Components of net profit ratio:
The two basic components of thenet profit ratio are the net profit and sales. The net profits are
obtained after deducting income-tax and, generally, non-operating expenses and incomes are
excluded from the net profits for calculating this ratio. Thus, incomes such as interest on
investments outside the business, profit on sales of fixed assets and losses on sales of fixed
assets, etc are excluded.
Formula:
[Net Profit Ratio = (Net profit / Net sales) 100]
Example:
Total sales = $520,000; Sales returns = $ 20,000; Net profit $40,000
Calculate net profit ratio.
Calculation:
Net sales = (520,00020,000) = 500,000
Net Profit Ratio = [(40,000 / 500,000) 100]
= 8
7/30/2019 Deep Singh Ratio Analysis
48/108
48
Significance:
NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The
ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a
satisfactory return on its investment.
This ratio also indicates the firm's capacity to face adverse economic conditions such as price
competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while
interpreting the ratio it should be kept in mind that the performance of profits also be seen inrelation to investments or capital of the firm and not only in relation to sales.
3. Operating Ratio:
Definition:
Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is
generally expressed in percentage.
Components:
The two basic components for the calculation ofoperating ratio are operating cost (cost of goods
sold plus operating expenses) and net sales. Operating expenses normally include (a)
administrative and office expenses and (b) selling and distribution expenses. Financial charges
such as interest, provision for taxation etc. are generally excluded from operating expenses.
Formula of operating ratio:
Operating Ratio = [(Cost of goods sold + Operating expenses) / Net sales] 100
Example:
Cost of goods sold is $180,000 and other operating expenses are $30,000 and net sales is
$300,000.
7/30/2019 Deep Singh Ratio Analysis
49/108
49
Calculate operating ratio.
Calculation:
Operating ratio = [(180,000 + 30,000) / 300,000] 100
= [210,000 / 300,000] 100
= 70%
Significance:
Operating ratio shows the operational efficiency of the business. Lower operating ratio shows
higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is
generally considered as standard for manufacturing concerns. This ratio is considered to be a
yardstick of operating efficiency but it should be used cautiously because it may be affected by a
number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, non-
operating expenses from a substantial part of the total expenses and in such cases operating ratio
may give misleading results.
4. Return on Shareholders Investment or Net Worth Ratio:
Definition:
It is the ratio of net profit to share holder's investment. It is the relationship between net profit
(after interest and tax) and share holder's/proprietor's fund.
This ratio establishes the profitability from the share holders' point of view. The ratio is generally
calculated in percentage.
Components:
The two basic components of this ratio are net profits and shareholder's funds. Shareholder's
funds include equity share capital, (preference share capital) and all reserves and surplus
belonging to shareholders. Net profit means net income after payment of interest and income tax
because those will be the only profits available for share holders.
7/30/2019 Deep Singh Ratio Analysis
50/108
50
Formula of return on shareholder's investment or net worth Ratio:
[Return on share holder's investment = {Net profit (after interest and tax) / Share holder's
fund} 100]
Example:
Suppose net income in an organization is $60,000 where as shareholder's investments or funds
are $400,000.
Calculate return on shareholders investment or net worth
Return on share holders investment = (60,000 / 400,000) 100= 15%
This means that the return on shareholders funds is 15 cents per dollar.
Significance:
This ratio is one of the most important ratios used for measuring the overall efficiency of a firm.
As the primary objective of business is to maximize its earnings, this ratio indicates the extent to
which this primary objective of businesses being achieved. This ratio is of great importance to
the present and prospective shareholders as well as the management of the company. As the ratio
reveals how well the resources of the firm are being used, higher the ratio, better are the results.
The inter firm comparison of this ratio determines whether the investments in the firm are
attractive or not as the investors would like to invest only where the return is higher.
5. Return on Equity Capital (ROEC) Ratio:
In real sense, ordinary shareholders are the real owners of the company. They assume the highest
risk in the company. (Preference share holders have a preference over ordinary shareholders in
the payment of dividend as well as capital.
Preference share holders get a fixed rate of dividend irrespective of the quantum of profits of the
company). The rate of dividends varies with the availability of profits in case of ordinary shares
7/30/2019 Deep Singh Ratio Analysis
51/108
51
only. Thus ordinary shareholders are more interested in the profitability of a company and the
performance of a company should be judged on the basis of return on equity capital of the
company. Return on equity capital which is the relationship between profits of a company and its
equity, can be calculated as follows:
Formula of return on equity capital or common stock:
Formula of return on equity capital ratio is:
Return on Equity Capital = [(Net profit after tax Preference dividend) / Equity share
capital] 100
Components:
Equity share capital should be the total called-up value of equity shares. As the profit used for
the calculations are the final profits available to equity shareholders as dividend, therefore the
preference dividend and taxes are deducted in order to arrive at such profits.
Example:
Calculate return on equity share capital from the following information:
Equity share capital ($1): $1,000,000; 9% Preference share capital: $500,000; Taxation rate:50% of net profit; Net profit before tax: $400,000.
Calculation:
Return on Equity Capital (ROEC) ratio= [(400,000 200,000 45,000) / 1000,000 ) 100]
= 15.5%
Significance:
This ratio is more meaningful to the equity shareholders who are interested to know profits
earned by the company and those profits which can be made available to pay dividends to them.
Interpretation of the ratio is similar to the interpretation of return on shareholder's investments
and higher the ratio better is.
http://www.accountingformanagement.com/retun_on_share_holders_investment_or_net_worth.htmhttp://www.accountingformanagement.com/retun_on_share_holders_investment_or_net_worth.htm7/30/2019 Deep Singh Ratio Analysis
52/108
52
6. Return on Capital Employed Ratio (ROCE Ratio):
The prime objective of making investments in any business is to obtain satisfactory return on
capital invested. Hence, the return on capital employed is used as a measure of success of a
business in realizing this objective.
Return on capital employed establishes the relationship between the profit and the capital
employed. It indicates the percentage of return on capital employed in the business and it can be
used to show the overall profitability and efficiency of the business.
Definition of Capital Employed:Capital employed and operating profits are the main items. Capital employed may be defined in
a number of ways. However, two widely accepted definitions are "gross capital employed" and
"net capital employed". Gross capital employed usually means the total assets, fixed as well as
current, used in business, while net capital employed refers to total assets minus liabilities. On
the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and
loss account balance), debentures and long term loans.
Calculation of Capital Employed:
Method--1. If it is calculated from the assets side, It can be worked out by adding the following:
1. The fixed assets should be included at their net values, either at original cost or atreplacement cost after deducting depreciation. In days of inflation, it is better to include
fixed assets at replacement cost which is the current market value of the assets.
2. Investments inside the business3. All current assets such as cash in hand, cash at bank, sundry debtors, bills receivable,
stock, etc.
4. To find out net capital employed, current liabilities are deducted from the total of theassets as calculated above.
7/30/2019 Deep Singh Ratio Analysis
53/108
53
Gross capital employed = Fixed assets + Investments + Current assets
Net capital employed = Fixed assets + Investments + Working capital*.
*Working capital = current assets current liabilities.
Precautions For Calculating Capital Employed:
While capital employed is calculated from the asset side, the following precautions should be
taken:
1. Regarding the valuation of fixed assets, nowadays it is considered necessary to value theassets at their replacement cost. This is with a view to providing for the continuing
problem of inflations during the current years. Under replacement cost methods the fixed
assets are to be revalued on the basis of their current market prices either by reference to
reliable published index numbers, or on valuation of experts. When replacement cost
method is used, the provision for depreciation should be recalculated since depreciation
charged might have been calculated on original cost of assets.
2. Idle assetsassets which cannot be used in the business should be excluded from capitalemployed. However, standby plant and machinery essential to the normal running of the
business should be included.
3. Intangible assets, like goodwill, patents, trade marks, rights, etc. should be excluded.However, if they have sale value or if they have been purchased they may be included.
Investments made outside the business should be excluded.
4. All current assets should be properly valued. Any excess balance of cash or bank thanrequired for the smooth running of the business should be excluded.
5. Fictitious assets, like preliminary expenses, accumulated losses, discount on issue ofshares or debentures, advertisement, suspense account, etc. should be excluded.
6. Obsolete assets which cannot be used in the business or obsolete stock which cannot besold should be excluded.
7/30/2019 Deep Singh Ratio Analysis
54/108
54
Method--2.Alternatively, capital employed can be calculated from the liabilities side of a balance
sheet. If it is calculated from the liabilities side, it will include the following items:
Share capital:
Issued share capital (Equity + Preference)
Reserves and Surplus:
General reserve
Capital reserve
Profit and Loss account
Debentures
Other long term loans
Some people suggest that average capital employed should be used in order to give effect of the
capital investment throughout the year. It is argued that the profit earned remain in the business
throughout the year and are distributed by way of dividends only at the end of the year. Average
capital may be calculated by dividing the opening and closing capital employed by two. It can
also be worked out by deducting half of the profit from capital employed.
Computation of profit for return on capital employed:
The profits for the purpose of calculating return on capital employed should be computed
according to the concept of "capital employed used". The profits taken must be the profits
earned on the capital employed in the business. Thus, net profit has to be adjusted for the
following:
Net profit should be taken before the payment of tax or provision for taxation because taxis paid after the profits have been earned and has no relation to the earning capacity of the
business.
If the capital employed is gross capital employed then net profit should be consideredbefore payment of interest on long-term as well as short-term borrowings.
7/30/2019 Deep Singh Ratio Analysis
55/108
55
If the capital employed is used in the sense of net capital employed than only interest onlong term borrowings should be added back to the net profits and not interest on short
term borrowings as current liabilities are deducted while calculating net capital
employed.
If any asset has been excluded while computing capital employed, any income arisingfrom these assets should also be excluded while calculating net profits. For example,
interest on investments outside business should be excluded.
Net profits should be adjusted for any abnormal, non recurring, non operating gains orlosses such as profits and losses on sales of fixed assets.
Net profits should be adjusted for depreciation based on replacement cost, if assets havebeen added at replacement cost.
Formula of return on capital employed ratio:
[Return on Capital Employed=(Adjusted net profits*/Capital employed)100]
*Net profit before interest and tax minus income from investments.
Significance of Return on Capital Employed Ratio:
Return on capital employed ratio is considered to be the best measure of profitability in order
to assess the overall performance of the business. It indicates how well the management has used
the investment made by owners and creditors into the business. It is commonly used as a basis
for various managerial decisions. As the primary objective of business is to earn profit, higher
the return on capital employed, the more efficient the firm is in using its funds. The ratio can be
found for a number of years so as to find a trend as to whether the profitability of the company is
improving or otherwise.
7/30/2019 Deep Singh Ratio Analysis
56/108
56
7. Dividend Yield Ratio:
Definition:
Dividend yield ratio is the relationship between dividends per share and the market value of the
shares.
Share holders are real owners of a company and they are interested in real sense in the earnings
distributed and paid to them as dividend. Therefore, dividend yield ratio is calculated to evaluate
the relationship between dividends per share paid and the market value of the shares.
Formula of Dividend Yield Ratio:
Following formula is used for the calculation of dividend yield ratio:
[Dividend Yield Ratio = Dividend Per Share / Market Value Per Share]
Example:
For example, if a company declares dividend at 20% on its shares, each having a paid up value of
$8.00 and market value of $25.00.
Calculate dividend yield ratio:
Calculation:
Dividend Per Share = (20 / 100) 8
= $1.60
Dividend Yield Ratio = (1.60 / 25) 100
= 6.4%
Significance of the Ratio:
This ratio helps as intending investor is knowing the effective return he is going to get on the
proposed investment.
7/30/2019 Deep Singh Ratio Analysis
57/108
57
8. Dividend Payout Ratio:
Dividend payout ratio is calculated to find the extent to which earnings per share have been
used for paying dividend and to know what portion of earnings has been retained in the business.
It is an important ratio because ploughing back of profits enables a company to grow and pay
more dividends in future.
Formula of Dividend Payout Ratio:
Following formula is used for the calculation of dividend payout ratio
[Dividend Payout Ratio = Dividend per Equity Share / Earnings per Share]
A complementary of this ratio is retained earnings ratio. Retained earning ratio is calculated by
using the following formula:
[Retained Earning Ratio = Retained Earning Per Equity Share / Earning Per Equity
Share]
Example:
Calculate dividend payout ratio and retained earnings from the following data:
Net Profit
Provision for taxation
Preference dividend
10,000
5,000
2,000
No. of equity shares
Dividend per equity share3,000
$0.40
Payout Ratio = ($0.40 / $1) 100
= 40%
Retained Earnings Ratio = ($0.60 /$1) 100
= 60%
7/30/2019 Deep Singh Ratio Analysis
58/108
58
Significance of the Ratio:
The payout ratio and the retained earning ratio are the indicators of the amount of earnings that
have been ploughed back in the business. The lower the payout ratio, the higher will be the
amount of earnings ploughed back in the business and vice versa. A lower payout ratio or higher
retained earnings ratio means a stronger financial position of the company.
9. Earnings Per Share (EPS) Ratio:
Definition:
Earnings per share ratio (EPS Ratio) is a small variation ofreturn on equity capital ratio and iscalculated by dividing the net profit after taxes and preference dividend by the total number of
equity shares.
Formula of Earnings Per Share Ratio:
The formula of earnings per share is:
[Earnings per share (EPS) Ratio = (Net profit after tax Preference dividend) / No. of
equity shares (common shares)]
Example:
Equity share capital ($1): $1,000,000; 9% Preference share capital: $500,000; Taxation rate:
50% of net profit; Net profit before tax: $400,000.
Calculate earnings per share ratio.
Calculation:
EPS = 1,55,000 / 10,000
= $15.50 per share.
Significance:
The earnings per share is a good measure of profitability and when compared with EPS of
similar companies, it gives a view of the comparative earnings or earnings power of the firm.
EPS ratio calculated for a number of years indicates whether or not the earning power of the
company has increased.
http://www.accountingformanagement.com/return_on_equity_capital.htmhttp://www.accountingformanagement.com/return_on_equity_capital.htm7/30/2019 Deep Singh Ratio Analysis
59/108
59
10.Price Earnings Ratio (PE Ratio):
Definition:
Price earnings ratio (P/E ratio) is the ratio between market price per equity share and
earning per share.
The ratio is calculated to make an estimate of appreciation in the value of a share of a
company and is widely used by investors to decide whether or not to buy shares in a particular
company.
Formula of Price Earnings Ratio:
Following formula is used to calculate price earnings ratio:
[Price Earnings Ratio = Market price per equity share / Earnings per share]
Example:
The market price of a share is $30 and earning per share is $5.
Calculate price earnings ratio.
Calculation:
Price earnings ratio = 30 / 5
= 6
The market value of every one dollar of earning is six times or $6. The ratio is useful in financial
forecasting. It also helps in knowing whether the share of a company are under or over valued.
For example, if the earning per share of AB limited is $20, its market price $140 and earning
ratio of similar companies is 8, it means that the market value of a share of AB Limited should
be $160 (i.e., 8 20). The share of AB Limited is, therefore, undervalued in the market by $20.
In case the price earnings ratio of similar companies is only 6, the value of the share of AB
Limited should have been $120 (i.e., 6 20), thus the share is overvalued by $20.
7/30/2019 Deep Singh Ratio Analysis
60/108
60
Significance of Price Earning Ratio:
Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares of a
particular company at a particular market price.
Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the management
should look into the causes that have resulted into the fall of this ratio.
I. ACTIVITY RATIO:-
This category of ratios includes those ratios, which highlight upon the activity and operational
efficiency ratios of the business concern. These ratios are also called efficiency ratios or assets
utilization ratios. The efficiency with which the assets are used would be reflected in the speed
and rapidity with which assets are converted into sales. The grater is the rate of turnover or
conversion the more efficient is the utilization\management other things are being are equal.
Turnover is the primary mode for measuring the extent of efficient employment of assets to
sales. An activity ratio may, therefore, be defined as a test of the relationship between sales and
the various assets of a firm.
1. Inventory Turnover Ratio or Stock Turnover Ratio (ITR):
Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet
the requirements of the business. But the level of inventory should neither be too high nor too
low.
A too high inventory means higher carrying costs and higher risk of stocks becoming obsolete
whereas too low inventory may mean the loss of business opportunities. It is very essential to
keep sufficient stock in business.
7/30/2019 Deep Singh Ratio Analysis
61/108
61
Definition:
Stock turn over ratio and inventory turn over ratio are the same. This ratio is a relationship
between the cost of goods sold during a particular period of time and the cost of average
inventory during a particular period. It is expressed in number of times. Stock turn over ratio /
Inventory turn over ratio indicates the number of time the stock has been turned over during the
period and evaluates the efficiency with which a firm is able to manage its inventory. This ratio
indicates whether investment in stock is within proper limit or not.
Components of the Ratio:
Average inventory and cost of goods sold are the two elements of this ratio. Average inventory is
calculated by adding the stock in the beginning and at the and of the period and dividing it by
two. In case of monthly balances of stock, all the monthly balances are added and the total is
divided by the number of months for which the average is calculated.
Formula of Stock Turnover/Inventory Turnover Ratio:
The ratio is calculated by dividing the cost of goods sold by the amount of average stock at cost.
(a) [Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost]
Generally, the cost of goods sold may not be known from the published financial statements. In
such circumstances, the inventory turnover ratio may be calculated by dividing net sales by
average inventory at cost. If average inventory at cost is not known then inventory at selling
price may be taken as the denominator and where the opening inventory is also not known the
closing inventory figure may be taken as the average inventory.
(b) [Inventory Turnover Ratio = Net Sales / Average Inventory at Cost]
(c) [Inventory Turnover Ratio = Net Sales / Average inventory at Selling Price]
(d) [Inventory Turnover Ratio = Net Sales / Inventory]
7/30/2019 Deep Singh Ratio Analysis
62/108
62
Example:
The cost of goods sold is $500,000. The opening stock is $40,000 and the closing stock is
$60,000 (at cost).
Calculate inventory turnover ratio
Calculation:
Inventory Turnover Ratio (ITR) = 500,000 / 50,000*
= 10 times
This means that an average one dollar invested in stock will turn into ten times in sales
*($40,000 + $60,000) / 2
= $50,000
Significance of ITR:
Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high
inventory turnover/stock velocity indicates efficient management of inventory because more
frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A
low inventory turnover ratio indicates an inefficient management of inventory. A low inventoryturnover implies over-investment in inventories, dull business, poor quality of goods, stock
accumulation, accumulation of obsolete and slow moving goods and low profits as compared to
total investment. The inventory turnover ratio is also an index of profitability, where a high ratio
signifies more profit, a low ratio signifies low profit. Sometimes, a high inventory turnover ratio
may not be accompanied by relatively a high profits. Similarly a high turnover ratio may be due
to under-investment in inventories.
It may also be mentioned here that there are no rule of thumb or standard for interpreting theinventory turnover ratio. The norms may be different for different firms depending upon the
nature of industry and business conditions. However the study of the comparative or trend
analysis of inventory turnover is still useful for financial analysis.
7/30/2019 Deep Singh Ratio Analysis
63/108
63
2. Debtors Turnover Ratio | Accounts Receivable Turnover Ratio:
A concern may sell goods on cash as well as on credit. Credit is one of the important elements of
sales promotion. The volume of sales can be increased by following a liberal credit policy.
The effect of a liberal credit policy may result in tying up substantial funds of a firm in the form
of trade debtors (or receivables). Trade debtors are expected to be converted into cash within a
short period of time and are included in current assets. Hence, the liquidity position of concern
to pay its short term obligations in time depends upon the quality of its trade debtors.
Definition:
Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt
collection of a firm. In simple words it indicates the number of times average debtors
(receivable) are turned over during a year.
Formula of Debtors Turnover Ratio:
[Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors]
The two basic components of accounts receivable turnover ratio are net credit annual sales and
average trade debtors. The trade debtors for the purpose of this ratio include the amount of Trade
Debtors & Bills Receivables. The average receivables are found by adding the opening
receivables and closing balance of receivables and dividing the total by two. It should be noted
that provision for bad and doubtful debts should not be deducted since this may give an
impression that some amount of receivables has been collected. But when the information about
opening and closing balances of trade debtors and credit sales is not available, then the debtors
turnover ratio can be calculated by dividing the total sales by the balance of debtors (inclusive of
bills receivables) given. and formula can be written as follows.
[Debtors Turnover Ratio = Total Sales / Debtors]
Example:
Credit sales $25,000; Return inwards $1,000; Debtors $3,000; Bills Receivables $1,000.
7/30/2019 Deep Singh Ratio Analysis
64/108
64
Calculate debtors turnover ratio
Calculation:
Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors
= 24,000*/ 4,000**
= 6 Times
*25000 less 1000 return inwards, **3000 plus 1000 B/R
Significance of the Ratio:
Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times thedebtors are turned over a year. The higher the value of debtors turnover the more efficient is the
management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio
implies inefficient management of debtors or less liquid debtors. It is the reliable measure of the
time of cash flow from credit sales. There is no rule of thumb which may be used as a norm to
interpret the ratio as it may be different from firm to firm.
3. Average Collection Period Ratio:
Definition:
The Debtors / Receivable Turnover ratio when calculated in terms of days is known as Average
Collection Period or Debtors Collection Period Ratio
The average collection period ratio represents the average number of days for which a firm has to
wait before its debtors are converted into cash.
Formula of Average Collection Period:
Following formula is used to calculate average collection period:
[(Trade Debtors No. of Working Days) / Net Credit Sales]
Example:
Credit sales $25,000; Return inwards $1,000; Debtors $3,000; Bills Receivables $1,000.
http://www.accountingformanagement.com/debtors_or_receivable_turnover_ratio.htmhttp://www.accountingformanagement.com/debtors_or_receivable_turnover_ratio.htm7/30/2019 Deep Singh Ratio Analysis
65/108
65
Calculate average collection period.
Calculation:
Average collection period can be calculated as follows:
Average Collection Period = (Trade Debtors No. of Working Days) / Net Credit Sales
4,000* 360** / 24,000
= 60 Days
* Debtors and bills receivables are added.
**For calculating this ratio usually the number of working days in a year are assumed to be 360.
Significance of the Ratio:
This ratio measures the quality of debtors. A short collection period implies prompt payment by
debtors. It reduces the chances of bad debts. Similarly, a longer collection period implies too
liberal and inefficient credit collection performance. It is difficult to provide a standard collection
period of debtors.
4. Creditors / Accounts Payable Turnover Ratio:
Definition and Explanation:
This ratio is similar to the debtors turnover ratio. It compares creditors with the total credit
purchases.
It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include
both sundry creditors and bills payable. Same as debtors turnover ratio,creditors turnover ratio
can be calculated in two forms, creditors turnover ratio and average payment period.
Formula:
Following formula is used to calculate creditors turnover ratio:
[Creditors Turnover Ratio = Credit Purchase / Average Trade Creditors]
http://www.accountingformanagement.com/debtors_or_receivable_turnover_ratio.htmhttp://www.accountingformanagement.com/debtors_or_receivable_turnover_ratio.htmhttp://www.accountingformanagement.com/debtors_or_receivable_turnover_ratio.htmhttp://www.accountingformanagement.com/debtors_or_receivable_turnover_ratio.htm7/30/2019 Deep Singh Ratio Analysis
66/108
66
Average Payment Period:
Average payment period ratio gives the average credit period enjoyed from the creditors. It can
be calculated using the following formula:
[Average Payment Period = Trade Creditors / Average Daily Credit Purchase]
[Average Daily Credit Purchase= Credit Purchase / No. of working days in a year]
Or
[Average Payment Period = (Trade Creditors No. of Working Days) / Net Credit
Purchase]
(In case information about credit purchase is not available total purchases may be assumed to
be credit purchase.)
Significance of the Ratio:
The average payment period ratio represents the number of days by the firm to pay its creditors.
A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being
paid promptly. This situation enhances the credit worthiness of the company. However a veryfavorable ratio to this effect also shows that the business is not taking the full advantage of credit
facilities allowed by the creditors.
5. Working Capital Turnover Ratio:
Definition:
Working capital turnover ratio indicates the velocity of the utilization of net working capital.
This ratio represents the number of times the working capital is turned over in the course of year
and is calculated as follows:
Formula of Working Capital Turnover Ratio:
Following formula is used to calculate working capital turnover ratio
[Working Capital Turnover Ratio = Cost of Sales / Net Working Capital]
7/30/2019 Deep Singh Ratio Analysis
67/108
67
The two components of the ratio are cost of sales and the net working capital. If the information
about cost of sales is not available the figure of sales may be taken as the numerator. Net
working capital is found by deduction from the total of the current assets the total of the current
liabilities.
Example:
Cash
Bills Receivables
Sundry Debtors
Stock
Sundry Creditors
Cost of sales
10,000
5,000
25,000
20,000
30,000
150,000
Calculate working capital turnover ratio
Calculation:
Working Capital Turnover Ratio = Cost of Sales / Net Working Capital
Current Assets = $10,000 + $5,000 + $25,000 + $20,000 = $60,000
Current Liabilities = $30,000
Net Working Capital = Current assetsCurrent liabilities
= $60,000 $30,000
= $30,000
So the working Capital Turnover Ratio = 150,000 / 30,000
= 5 times
7/30/2019 Deep Singh Ratio Analysis
68/108
68
Significance:
The working capital turnover ratio measure the efficiency with which the working capital is
being used by a firm. A high ratio indicates efficient utilization of working capital and a low
ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of
sufficient working capital which is not a good situation.
6. Fixed Assets Turnover Ratio:
Definition:
Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures theefficiency and profit earning capacity of the concern
Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-
utilization of fixed assets. The ratio is calculated by using following formula:
Formula of Fixed Assets Turnover Ratio:
Fixed assets turnover ratio turnover ratio is calculated by the following formula:
Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets
II. LEVERAGE RATIOS OR LONG TERM SOLVENCY
RATIOS
Debt equity ratio
Proprietary or Equity ratio Ratio of fixed assets to shareholders funds Interest coverage or debt service ratio Capital gearing ratio
http://www.accountingformanagement.com/debt_equity_ratio.htmhttp://www.accountingformanagement.com/equity_ratio.htmhttp://www.accountingformanagement.com/fixed_assets_to_proprietors_fund_ratio.htmhttp://www.accountingformanagement.com/interest_coverage_ratio.htmhttp://www.accountingformanagement.com/capital_gearing_ratio.htmhttp://www.accountingformanagement.com/capital_gearing_ratio.htmhttp://www.accountingformanagement.com/interest_coverage_ratio.htmhttp://www.accountingformanagement.com/fixed_assets_to_proprietors_fund_ratio.htmhttp://www.accountingformanagement.com/equity_ratio.htmhttp://www.accountingformanagement.com/debt_equity_ratio.htm7/30/2019 Deep Singh Ratio Analysis
69/108
69
1.
Debt to Equity Ratio:Definition:
Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds
and the internal equities or shareholders funds.
It is also known as external internal equity ratio. It is determined to ascertain soundness of the
long term financial policies of the company.
Formula of Debt to Equity Ratio:
Following formula is used to calculate debt to equity ratio
[Debt Equity Ratio = External Equities / Internal Equities]
Or
[Outsiders funds / Shareholders funds]
As a long term financial ratio it may be calculated as follows:
[Total Long Term Debts / Total Long Term Funds]
Or
[Total Long Term Debts / Shareholders Funds]
Components:
The two basic components ofdebt to equity ratio are outsiders funds i.e. external equities and
share holders funds, i.e., internal equities. The outsiders funds include all debts / liabilities to
outsiders, whether long term or short term or whether in the form of debentures, bonds,
mortgages or bills. The shareholders funds consist of equity share capital, preference share
capital, capital reserves, revenue reserves, and reserves representing accumulated profits and
surpluses like reserves for contingencies, sinking funds, etc. The accumulated losses and
deferred expenses, if any, should be deducted from the total to find out shareholder's funds
7/30/2019 Deep Singh Ratio Analysis
70/108
70
Some writers are of the view that current liabilities do not reflect long term commitments and
they should be excluded from outsider's funds. There are some other writers who suggest that
current liabilities should also be included in the outsider's funds to calculate debt equity ratio for
the reason that like long term borrowings, current liabilities also represents firm's obligations to
outsiders and they are an important determinant of risk. However, we advise that to calculate
debt equity ratio current liabilities should be included in outsider's funds. The ratio calculated on
the basis outsider's funds excluding liabilities may be termed as ratio of long-term debt to share
holders funds.
Example:
From the following figures calculate debt to equity ratio:
Equity share capital
Capital reserve
Profit and loss account
6% debentures
Sundry creditors
Bills payable
Provision for taxation
Outstanding creditors
1,100,000
500,000
200,000
500,000
240,000
120,000
180,000
160,000
Required: Calculate debt to equity ratio.
Calculation:
External Equities / Internal Equities
= 1,200,000 / 18,000,000
= 0.66 or 4 : 6
It means that for every four dollars worth of the creditors investment the shareholders have
invested six dollars. That is external debts are equal to 0.66% of shareholders funds.
http://www.debtconsolidationcare.com/http://www.debtconsolidationcare.com/7/30/2019 Deep Singh Ratio Analysis
71/108
71
Significance of Debt to Equity Ratio:
Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the
firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation
of the firm. However, the interpretation of the ratio depends upon the financial and business
policy of the company. The owners want to do the business with maximum of outsider's funds in
order to take lesser risk of their investment and to increase their earnings (per share) by paying a
lower fixed rate of interest to outsiders. The outsiders creditors) on the other hand, want that
shareholders (owners) should invest and risk their share of proportionate investments. A ratio of
1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or
standard norm for all types of businesses. Theoretically if the owners interests are greater than
that of creditors, the financial position is highly solvent. In analysis of the long-term financial
position it enjoys the same importance as the current ratio in the analysis of the short-term
financial position.
2.
Proprietary Ratio or Equity Ratio:Definition:
This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net wor
Recommended