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RATION ANALYSIS
INDUSTRY PROFILE
In modern fashion technology, the demand for perfection begins right at the
birth of the raw materials, permeates through every single process, till the highly
discerning customer dons the finished garment. It is this demand for perfection that
has spurred the growth of and organisation and its corporate philosophy.
Those who can furnish clients with the best quality, competitive price,
excellent customer services and prompt delivery can only survive in the market. Super
Spinning Mills Limited takes immense pride in perceiving its role as the
comprehensive architect of every single yarn and garment that its produces.
SARA ELGI is a multi-unit, multi-interest business group with a wide range of
industrial activity, an organisation that has founded its evolution on value-based
commercial practice. Super Spinning Mills Limited was established in 1962 with an
initial capacity of 12,000 spindles.
Over its four decades of chequered growth it has expanded to 1,30,000 spindles
spread over 3 operational units. The company commenced operations with the
manufacture grey, mercerized and dyed cotton yarn. Today, the company has carved a
niche for itself on the textile map of the country.
Group Companies:
ELGI Electric & Industries Ltd.
ELGI Software & Technologies Ltd
ELGI Building Products Ltd
SARA Trading & Industrial
Services Ltd
SARA Envirotech Ltd
SARA ELGI Industrial Research &
Development Ltd.
SARA ELGI Insurance Advisory
Services Pvt. Ltd.
SARA ELGI Arterious Ltd.
ELGI Equipments Ltd
ELGI Treads ( I Ltd.
L. G. Balakrishnan & Bros. Ltd.
ELGI Ultra Industries Ltd.
Precot Mills Ltd.
Meridian Industries Ltd.
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RATION ANALYSIS
Each company in the Group specializes in a specific area, thus enabling us to
better meet the diverse needs of the industry. Our companies are focused on meeting
our customer’s individual needs. We exist to provide superior customer satisfaction –
developing solid, long-term relationships with our customers.
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COMPANY PROFILE
AN OVERVIEW OF SUPER SPINNING GROUP OF MILLS
Super spinning mills is one of the largest group of spinning mills of south India. The
super spinning mills limited was incorporated on 6th June of the same year 1962. the
corporate office of Super spinning group of mills is located at coimbatore, Tamilnadu.
The corporate manager takes all financial decisions of the super-spinning group of
mills. It enjoys taking crucial decisions of these super-spinning mills. It has authority
to appoint to various auditors managers etc. and also deals with export spinning group
of mills managers flow top to bottom to top. The company mangers and auditors must
be responsible to the all activities of super spinning group of mills. The must submit
quarterly and annual reports to the corporate office.
Super spinning group of mills constitutes four units:
1 Super-A Unit at Kirikera, Hindupur —established on 6th June 1962.
2. Super-B Unit at Kotnuur, Hindupur —established in 1983.
3. Super-C Unit at Gudalur, Tamil Nadu —established on 6th June 1992.
4 Super Sara Unit at M .Beerapalli, Hindupur established in 2007.
A Unit:
The first unit, Super–A is situated at Kirikera in the Bangalore—Anantapur state
Highway near Hindupur in Anantapur District of Andhra Pradesh. This mill was
register in 1962 and commenced production in 1964. This is located in an area of
around 13 acres. The unit initial capacity of this unit is 12096 spindles. The present
capacity of this unit is 59520 spindles manufacturing. Yam 24 hours a day and 7 days
a week spinning hosiery yam, ware yam and 2ply in counts ranging from 10s to 140s
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RATION ANALYSIS
of cotton varieties. All are ring-spun yams only. This unit produces one of the finest
yams in the country.
The Unit—A is capable of producing yam in counts raging between 10s and
140s in both carded and combed in single and 2ply varities to suit different end users.
This mills user’s cotton and viscose as raw material. The selection. Purchase and
supply of raw material is done by its central office at Coimbatore. One of the
important joys for success of the mill is the very careful selection and purchase of raw
materials, which is done with meticulous care under the able super vision of the
Managing director. The wastage of cotton in the production process of the mill is
negligible. The mill has provision permission to store the cotton much enough to 4
months and to store this material, it has 3 godown with a capacity of 8000 bales each
for identification in godown, colored cards with indication of materials details like
variety, count a lot number etc.,
The yarn producers in the mill is used to produce Banians, T-Shirts, Dhotis, Lunges,
Sarees, Curtains etc. The yarn of the mill has wide market all over India and abroad.
The customer for the yam of the mill are spread all over India, in Tripura, Kolkatta,
Mumbai, Varanaisi, Delhi, Mangalgiri, Chirala, Gadag, Bangalore, Tka, Koppel,
Hubli and Guellerguda, etc., this unit has exporting yam to the other countries like
Japan, Singapore, Malaysia, U. K. Italy, Germany, Bangaladesh, Switzerland, etc.
This unit produces fines yarn for:
Domestic Market Yarn : 50’s 60’s, 2/100’s 80’s 84’s—combed
Export Market Yarn : 60’s 62/1 Combed Yarn 80/2 Combed Yam.
B-Unit
This second unit, Super-B was established in the year 1983 at Kotnur, near Hindupur
in Anantapur dist of Andhra Pradesh. This is located in an area of around 12 acres.
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Another 8 acres around the factory is beautifully grown with green culture. This unit
initial capacity was 28800 spindles. And its installed capacity is 51840 spindles. This
mill is spinning hosiery yarn’s warp yarns, 2ply an 3ply yam in counts ranging from
30’s 100’s both carded and combed varieties. All area ring spun yarns only. This mill
produced the finest quality yarn.
Super spinning mills ltd., B-Unit is capable of producing yarn in counts ranging
between 20’s and 100’s in both carded and combed varieties to suit different and re
used. The mill daily production in around 15000 kgs and cotton conception is around
20000 kgs. This is one of the leading spinning mills in India, noted for its progressive
out look and technical excellence. The excel in every other endeavors for the quality.
This mill manufactures yarn of fine quality supplying to different regions in India.
They also producer cotton swing thread to cater to the needs of hosiery market there
are some local centers of sales of these yarn and sewing threads in thirupura,
Calcutta, Delhi, Mumbai, Varanasi, Thenali and Mangalore. At present, the yarn
produced from the mills in being widely used for banyans, knit wae, doti, sarees,
curtains, Zari, the mill produces the high quality ot yarn. This super-B unit has
experience in exporting yarn to countries like Singapore, Malasia, U K, South Africa,
Canada, Dubai, South Coria, USA, China, etc.,
This unit Produces finest yarn for:
Domestic Market 40’s 60’s 2/60’s 74’s combed yarn and 2/30’s DL
And 2/36’s and 2/40’s both grey and mercerizing
Export Market : 38’s and 4’s 36/2, 40/2, 60/2 cotton knitting and weaving.
The mill has very good generators so that they can continue the production of the mill
with out any interruption even during the power- cut period. This mill is having fully
equipped quality continuous modernization and timely expansion has given us
competitive edges and over the companies. As a result of this, the company gas
established itself as a leaser of its products.
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According to the survey conducted by the South India Textile Research Association
(SITRA), the performance of this company has been maintained consistency in
production and quality over the past.
C-Unit
This Unit, SUPER-C, is situated at D-gudlaur, vendasandur taluk, dinddugal Anna
Dist, Tamilnadu. This is located in an area of around 25 acres, build up in an area of
9600 sq.m
Present spindles of the mills is 16128 those are manufacturing yarns 24 hours a day
and 7 days a week and spinning yarn in counts ranging between 20’s NE to 34’s NE in
both carded combed varieties to suit different and users.
Super Spinning mill Ltd. C-UNIT is capable of producing yarn in counts ranging
between 18’s NEW to 100’s NE in both carded and combed varieties to suit different
end users. This unit is producing yarn for 20’s 24’s, 30’s cotton knitting yarn. It has
experience in exporting an to countries like Israel, Singapore, Malaysia, Mauritius,
Hong cong, Bangladesh, Argentina, Philippines, etc.
Super garment units started from 2002. Now they are having three garment units at
Thirupur, Arasure, and heckler. Super Spinning Mills has started opened spinning at
SUPER-A and SUPER-C to reuse their cotton waste and to produce cotton yarn
counts ranging from 6’s to 10’s
Super Sara
This Unit, SUPER-SARA, is situated at M Beerapalli, Hindupur ATP Dist; Andhra
Pradesh This is located in an area of around 100 acres, build up in an area of 16000-
sq.m and unit turnover approximately 40 Cores.
Present spindles of the mills is 30576 those are manufacturing yarns 24 hours a day
and 7 days a week and spinning yarn in counts ranging between 30’s NE to 60’s NE in
both carded combed varieties to suit different and users.
Super Spinning mill Ltd. SUPER-SANAUNIT is capable of producing yarn in counts
ranging between 18’s NEW to 100’s NE in both carded and combed varieties to suit
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RATION ANALYSIS
different end users. This unit is producing yarn for 20’s 24’s, 30’s cotton knitting
yarn. It has experience in exporting an to countries like Bangladesh, etc
Machinery
Super Spinning Mills is equipped with following to meet the customer requirements to
make them satisfied with its products.
1. Lakshmi Rieter make blow room, carding silver lap machines, ribbon lap
machines, combers speed frames, ring frames
2. Elitist Spinning Machine
3. AERO feed blow room lines with CI/2 A, CI/3, CROSROL&DK803 carding
machines
4. RIETER unilap and RIETER combers
5. HARA-Cherry, RSB, RIETER & Zinser make with and with out auto leveler
drew frames.
6. RIK cone winders fixed with electronic yarn cleaners and micro 2000 cleaners
7. VMM make doubling machines veejay TFO and veejay heavy doubles and
assembling winder.
8. PS melter singeing machines, SSM gassing machine
9. Scholfhorest-220and 338 Mutate CBF SAVIO & MURATEE autoconers
equipped with UPM& LOCPP6 PP6 FR-900 clnears
10. Quality assurance department with necessary testing equipotent like AFIS, hair
ness tests and UT3, etc
11. Planned maintenance system for machinery, electrical system and generators
12. 130% power generators capacity to run the factory
13. 100% RITEIR Machine working first time in India.
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POLICIES
1. Quality Policy:
Quality leading to customer satisfaction shall be to priority. This shall be
achieved by complying to the requirements of the quality management systems
and continually improve its effectiveness.
Employees shall be trained and motivated to enhance to quality of their work,
competence and skills.
2. TPM Policy (Total Productive Manufacturing):
We are committed to maximizing over all plant effectiveness to make super
spinning mills a world-class company through.
Total Productive Manufacturing
1 promoting autonomous maintain culture
2 Involving employees and buildings ownership
3 Encouraging continuous improvement through small group activities
4 Minimizing the losses are reducing cost.
3 Environmental Policy:
We at super spinning mills Ltd are involved in the manufacturing of cotton
yarn and are committed to implement environmental management system and
improve on continual basis by
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Comply with relevant environmental legislations, regulation and other
requirements.
5 Conservation of natural resources
6 Prevention of pollution of environmental impacts by suitable
7 Controlling significant environmental impacts by suitable measure
8 Promoting environmental awareness among all the employees
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Process details of super spinning group of mills:
The manufacturing process of yarn from raw and synthetic cotton in all the three mills
is almost one and the same the process so briefly explained hereby under.
Mixing
The first step in the process of production begins with mixing. In this process various
components bales are opened-up, spread out evenly, in the form of a stock with
preliminary loosening of the matted cotton besides, cotton is highly compressed and
stored for a long time before they are opened. Cotton fiber is hygroscopic and requires
certain amount of moisture for proper processing this is achieved by mains of
installing spot humidifiers, which inject moisture to cotton while putting the stock
mixing in this process, reusable waste is also mixed.
Blow-room
The cotton taken form mixing room is fed into blue room. After suitable opening and
rolled completely on to what is called lap. The function of opening and cleaning is
done by various types of beaters. By making use of the centrifugal force at these
revolving beaters by making use of the air current, trash sand particals, fragments of
seeds, heavier impurities, etc, are separated. The waste percentage that is normally
removed here depends on trash content in cotton all the machines are carefully
adjusted so that they clean the cotton without damaging the fiber.
Carding
In carding process the most important function is cotton spinning viz.,
individualization of fiber is performed. All the spinning is familiar with an adage to
card will is to spin well. The cotton in the lap form that is produced in the blue room,
thought opened up has to be further opened for individualization of fibers. The lap
passes through a saw toothed revolving ‘hickerin’ which open out the cotton into
very small tufts and eliminated seeds bits, leafy bmatter, hucks, etc the open cotton
transferred to a cylinder, which is clothed with small metallic wire points. The cotton
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RATION ANALYSIS
is carried further by means of a cylinder and further intensive opening of the cotton
take place between the flats which are moving slowly on cylinder. Due to the
difference in speed, the close proximity (10/1000) and design of the wire point
between flats and cylinder fibers are fully individualized. These fibres are then
transfer to doffer and then on to crust rolled, which completely pulverize the foreign
matter.
The cotton is deliver in the form of a thin web, which is condensed into rope from
called ‘silver’ and is collected in a can. Here also about 4 to 5 persons of waste is
removed.
Drawing
The fibers emerging out of the cards are all-individual but laid in criss-cross fashion
alon the axis the silver. Since spinning mainly on attention process for carding
onwards, the fibers, in this silver are to be perfectly parallel to each other. The draw
frame fulfills this objective by doubling and drafting the doubling of the ends also
ensures a through blend of the various pairs of roller, each successive pair of roller
revolving faster than the preceding ones this draw one of the fibres and arranges them
in a parallel fashion. 8 ends of cards of silver are doubled and drafted 8in times to
obtain silver of similar weight per unit length normally two passages of draw frames
are employed. Beside the with per unit length of the silver is also improves an amount
of the doubling of the silver.
Combing
Combing is an additional process employed whenever yarn of good quality is
required. As mentioned previously, cotton, consists of fibers of various length. The
short-fibers present in the cotton are a nuisance and will result in poor evenness, high
imperfection such as thick and thin places in the yarn and result in lower yarn
strength. Hence by removing the short, fibers the quality of yarn can be substantially
improved. The process of eliminating the short fibers done by means of combers.
Normally first passage draws frames cans fed ton super lap former, which is
preparatory machine for combing.
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Super lap
About 36 to 48 ends of silver are combed to gather giving a slight draft and are
converted into suitable for feeding at combers.
Combers
The combers perform the removing of shirt fibers in the cotton. This is done by means
of combs mounted into half lap the cotton fibers of a definite feed are helpful firmly
by means of nippers. The short fibers, which are not held by the nipper, are not
combed, removed and collected at the back of the machine. This process is done
continuously on the comber. The waste percentage extracted at comber depends on the
short fibre percentage extracted at comber depends on the short fibre percentage and
the quality of the yarn required.
Fly frames
The materials in the form of silver are fed into this machine. This is drafted down on
attended by about 10 to 15 times by means of pairs of recover as explained earlier.
The issuing stand is very thin. Hence, certain amount of twice is imparted to the
strained to within stand by and is would into a package called bobbin. Normally each
bobbin contains 0.9 to 1.0 kg. Of the material, which is called roving. This is now
ready for feeding at the ring frames.
Ring frames
This ring frames converts the roving into final yarn. The roving is drafted or thinned
down about 15 to 30 times. The issuing strained if fibers are twisted is then wound on
to ring frame. The twist inserted depends on the quality of the cotton and the end use
of the yarn, the factors controlling the production at the ring frames are the twist
inserted and spindle speed. The twist is inserted at the yarn by means of the ring
traveler, which is moving on the ring. This traveler lags behind the spindle and hence
the yarn on the behind the spindle and hence the yarn on to the bobbins.
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Doubling
When yarn of a better uniform and higher strength is required, doubling is resorted to.
The feed package of the doubling frame is cheeses, which is produced at the doublers
winding. The doubler winder joints two ends together and winds them into a cheese
form.
The doubling frame inserts the required amount of twist and winds the double yarn on
to bobbin.
Winding
The yarn deliver at spinning or doubling is in the form of small package called cops.
This cannot be directly delver to the customers of yarn. Besides the consumers require
the yarn in different types to suit requirements. Because of this, the yarn is converted
either to cones or honk form.
Cone winding
In this department, the yarn caps are wounded on to bigger package, which is
normally one kg in weight, the package comes in the form of a cones. This is normally
resorted to where the total length of the yarn required is more has in the case of warp
yarn for weaving on automatic looms. While winding on to cones the yarn is passes
between two closely set combs, which remove foreign matter and thick places in the
yarn.
Reeling
When the yarn is to be used in hand looms or for dying before weaving, the yarn is
will on to hank from. In this department bathe spinning cops are related to hank form
on hank is 840 yards in length the yarn is passed through brushed which remove the
adhering foreign matter, etc. this hanks are converted into small bundles and then on
to bales for dispatching to the market.
In all departments the humidity conditions are properly maintained which is
made possible by installing humidification plants with recalculating facilitate, while
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the quality control division looks after the quality of the yarn, the maintained division
looks after the maintainers of the plant and machinery.
Products
The companies three units produced variety of yarn in count ranging between 201’s
and 100’s both carded and combed varieties to suit different end users. The company
products are high quality and are being appreciated globally.
The produced yarn productions of super spinning group of molls are as follows.
1. 20’s combed hosiery
2. 24’s combed hosiery
3. 30’s combed hosiery
4. 40’s combed hosiery diamond
5. 40’s ruby
6. 50’’s combed hosiery reel
7. 60’s combed special hosiery
8. 60/2 special hosiery
9. 94 combed hosiery
10. 60’s fine and cross plain red
11. 80’s & 50/1 grey combed
12. 2/30, 3/36, 2/40’s single mercerized and bleached.
Quality Policy
These group units of the company the top priority for quality and take meticulous
care in maintaining it at every stage of manufacture.
These three mills have been awarded ISO 9002 accreditation
The quality policy to super spinning mills is as follows
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“QULAITY LEADING TO CUSTOMER SATISFACTION WILL BE THEIR
TOP PRIORITY ALL EMPLOYEES SHALL BE SYSTMATICALLY TRAINED
DEVELOPED AND MOTIVATED CONTINIOUSLY TO IMPROVE THE
QUALITY OF THEIR WORK”
These three units have introduced tremendous changes in technology like
computerized production and fully computerized accounting system etc.
Export Market
The company is doing will in case of exports. It has very good sales in the past few
years and got eligible to be recording as export house in 1997. the company units
produces the finest quality of yarn garn aments for domestics well as export
market. The produces yarn of super spinning mills is used various products like
banians, knit wear, dhotis, sarees, curtains, zari, T-Shirt, etc.
Working hours of super spinning mills ltd:
1st Shift : 8.00am to 4.30pm with 30min’s interval
2nd Shift : 4.30pm to 1.00am with 30min’s interval
3rd Shift : 1.00am to 8.00am with 30min’s interval
General Shift : 8.00am to 5pm with one-hour interval
Attendance Procedure
Punching the code give to them in the computer network in HRD office marks
daily attendance. They have to punch their code number in the computer at two
times i.e. while coming for duty after interval.
Leave Details
There is no leave restriction for managerial staff. However, they are expected to
follow the norm applicable to another staff.
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Leave norms for non-managerial staff:
Casual and special leave: 18day’s per year
Earn leave : 18day’s per year (Unutilized leave excusable)
For availing leave, at least two days advance intimation should be given expect for
sudden illness and unforeseen circumstances leave for a period of more than 3
days should be intimated a week in advance
Retiral Benefits
For those who eligible for provident fund, the monthly recovery from the
individual and the company’s contribution together is deposits with the reasonal
provident fund commissioner, Kadapa. Gratuity and superannuation contribution
of managed by trustee the life insurance corporation of India.
Performance Appraisal
All the employees will be evaluated once in every 6 months i.e. June and
December every year. The appraisal system shall be used to identify needs, career
development, incremental and exgratia. The appraisal shall be done by the
immediate supervision as per performance appraisal system.
Promotion and Increment
The promotion and increment are not automatic. Increment is dividend in a year
and based on the performance of individual concerned. It is normally paid with
effect from 1st January every year, subject to suitability. An individual should at
least 6 months of service after confirmation to be eleigible for such increment.
Promotion is awarded entirely at the discretion of the management. Depending
upon the need to fill up the vacancy on based on merits, efficiency, ability to
shoulder, professional qualification, etc.
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Uniform and Identity Cards
The company will supply cloth material for two sets of uniform once in two years.
The stitching charges as may be decided my management will also be paid by the
company. The male worker should tuck in there shirts and wear shoos and female
workers should attend their work wearing sarees and blouses provided by the
company.
Identity cards will be given to each staff. In case of replacement the cost should be
borne by the individual concerned.
Infrastructure Facilities provided to the Staff
Canteen: The Company is running a canteen for all the employees on sustain rates
at different timings.
Staff Mess: The Company is running a staff Mess through contract. Breakfast,
Lunch and Dinner are available at the staff mess.
Tea: A Cup of tea at 10.00 am and at 2.30 pm will be served at the work place it
self so that the work does not get disturbed on the sustained rate by the mill
canteen.
Mails: ordinary mail is available if it does not jeopardize business interests of the
company. Courier can be used.
Family Planning Incentives: if any employees having tow or less children,
undergoes family planning operation an amount of Rs.1000/- shall be paid as an
incentive for small family norm.
Marriage Gifts: A gift article worth of Rs.1000/- and Rs.500/- will be presented
to the newly married staff and workmen respectively on behalf of the management.
Fair and Price: The Company is running a fair price shop for the convenience of
employees and their families. Interested staff may approach fair price shop and
purchased food grains and other provisions on the credit basis and the same
amount shall be deducted from the immediate monthly salary
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Telecommunications: Every office is provided with an intercom. The operator
will connect all in-coming calls to the reception office directly. These intercoms
are also useful for the communication within the mill premises.
Labor Relations: These units are maintaining very cordial relationship with their
worker unions. These units are successful in implementing productive-linked
wages. This Company also paying Bonus and exgratia to its workers.
Meeting and Conferences: Every meeting should be planned well and agenda
and detail of venue date and time should be circulated will in advance. Time
adherence and meeting arrangements are to be ensured.
Trade Unions: The management has one independent trade union consisting of
11 office bearers. Regular structures meetings with the union take place to resolve
problems, if any, and to maintain cordial relations.
R & D Department: R & D efforts of these units are directly towards quality
control and improved upgradition of existing products. The R & D Department
was established for the purpose of improving their quality and conservation of
energy. The R&D Department has established in these units to penetrate in the
export market centralize waste collection system were introduced to keep the
machinery. Clean and improve working environment and saving the energy and
reduction of labor cost.
Presenting an overview of super spinning group of mills, which are more known as
synonyms for efficient and effective management, in a few words, is indeed a
challenging task. However best it is written, there appears a great deal sill to be
written. Every attempt is made to present an overview of the three mills covering
almost all-important facts of the mills.
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AWARDS
The Company has received several awards for its continuous efforts in quality
production. A few as follows.
Best quality circle award at the national level competitions.
According to the survey of South Indian Textile Research Association (SITRA)
the company stands in top 5 textile units among 275 units surveyed for excellent
performance in productivity and quality.
RECOGNITION
ISO 9002 ACCREDITATION
By BVQL was awarded to super spinning in the year 1994. super has understood
the importance of ISO quality systems very early and is the first among its kind of
industry in Andhra Pradesh to attain this recognition.
The Award For Excellence
For quality management during 1997-98 conferred by ICMF-Birla Economic and
Textile Research Foundation also stands as a testimony for super spinning
importance towards quality,
Best Management Award
Was presented by Andhra Pradesh Government to super spinning Mills Ltd-‘B’
Unit at Hindupur. A P. During 1998-99 for its outstanding contribution towards
harmonious industrial relations and labor welfare.
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Consumer Profile
Domestic
Sri Annapurna dying works - Vijayawada.
Chundur obayya - Chirala.
Divila Subramanyam - Chirala.
Shanmugha Klayagarn - Chirala.
Ravi Yarn works - Machilipatanam.
T Narashimharao and Comp - Chirala.
Vijayalaxmi dying works - Mangalore.
Shyamala Sarees - Machilipatanam.
Radha yarn trading Comp - Padana.
EXPORT
Naseez fabrics - Dubai
Mantifal SPA - Italy
Anjun Union Corporation - Korea
Carolina fabrics - Dubai
Sumotoma Corporation - Japan
Subroma textiles - Bangladesh
Bosifil SPA - Italy
VENDOR PROFILE
o Cotton Corporation of India
o Siddivinayaka Cotton Traders
o Lakshmi Saraswati Cotton Traders
o Kalama Agro Ltd.
o Olum International
o Imported from America, Egyptian, and Russia.
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SALES
DOMESTIC
Tirupur
Kolkatta
Mumbai
Varanasi
Ichalkarangi
Tenali
Mangalagiri
Chirala
EXPORTS
England
Singapore
Malaysia
Italy
Switzerland
Japan
Bangladesh and it haslong
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PRODUCTS PROFILE
We believe that quality products are not only by promises but also by proven results.
Development of new textile products is done through – Innovation indefining
production processes of higher quality and making available modern technologies and
professionals with the highest level of competence.
The following advantages which have always been our ultimate goals:-
High Efficiency
The Most Competitive & Reasonable Price
Products Quality Guarantee
Prompt & Superior Service
Punctual Delivery
We Manufacture
100% Combed Cotton Yarn for Knitting and Weaving
NE 20s to NE 120s
Regular Grey Yarn
Single/Double (Ring Double / TFO)
Compact Single & Double, Elitwist
Gassed Yarns
Open-End Yarn
Crore-Spun Yarn
Slub-Yarn
Knitted Garments
(Specialised in single/double Mercerised Cotton Knit in Polo T-Shirts)
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Woven Fabrics
To meet out the customer requirements we have various options in raw materials
India Cotton
GIZA
GIZA Blends
Supima
PIMA Blends
Organic Cottons
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REVIEW OF LITERATURE
FINANCIAL RATIO ANALYSIS
Introduction: -
Financial Analysis is the process of identifying the financial strengths and
weaknesses of the firm by the properly establishing relationship s between he
items of the Balance Sheet and the Profit and Loss Account. ‘ Financial Statement
Analysis is managerial interpretation of financial statements for parties demanding
financial information.
Ratio Analysis
Meaning and Scope: -
Ratio Analysis is a widely used tool financial analysis. The term ratio in it
refers to the relationship expressed in mathematical terms between two individual
figures or group of figures connected with each other in some logical manner and
are selected from Financial Statements of the concern. A financial Ratio helps to
express the relationship between tow accounting figures in such a way that users
can braw conclusions about the performance, strength and weaknesses of a firm. A
ratio reflecting a quantitative relationship helps to from a qualitative judgment.
A single ratio does not convey much meaning and has to be compared with some
standard. Standard of comparison may consist of:
I. Past Ratios
II. Projected Ratio
III. Competitors Ratios
IV. Industry ratios
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Time Series Analysis:-
When financial ratios over a period are compared, it is known as the time series
analysis. The performance of a firm is evaluated by comparing its present ratios with
past ratios.
Cross-sectional Analysis:-
Comparing the ratios of one firm with some selected firms in the same industry at the
same pint in time is known as the cross-sectional analysis.
Pro Forma Analysis: -
The comparison of current (or) past ratios with future ratios is projected analysis or
pro forma analysis. It shows the firm’s relative strengths and weaknesses in the past
and future. Future ratios can be developed from the projected or pro forma, financial
statements.
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UTILITY OF RATIO ANALYSIS
The Ratio analysis is the most powerful tool of financial analysis with the help of
ratios one can determine:
The ability of the firm to meet its current obligations;
The extent to which the firm has used its long-term solvency by borrowing
funds;
The efficiency with which of the firm is utilizing its assets in generating sales
revenue, and
The overall operating efficiency and performance of the firm
Performance analysis:
A short-term creditor will be interested in the current financial position of the firm,
while a long-term creditor will pay more attention to the solvency of the firm. He
will also be interested in the profitability of the firm. The equity shareholders are
generally concerned with their return and also about the financial conditions only
when their earnings are depressed.
Credit Analysis:
In credit analysis, the analyst will usually select a few important ratios. He may
use the current ratio or quick-ratio to judge the firm’s liquidity or debt-paying
ability; debt-equity ratio to determine the stake of the owners in the business and
the firm’s capacity to survive in the long run and any one of the profitability ratios.
Security Analysis:
The ratio analysis is also useful in security analysis. The major focus in
security analysis is on the long-term profitability. The detailed analysis of the
earning power is important for security analysis.
Comparative Analysis:
The ratio of a firm by themselves do not reveal anything. For meaningful
interpretation, the ratios of a firm should be compared with the ratios of similar firms
and industry. This comparison will reveal whether the firm is significantly out of line
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with its competitors. If it is significantly out of line, the firm should undertake a
detailed analysis to spot out the trouble areas.
Trend Analysis:
Trend analysis of the ratios adds considerable significance to the financial analysis
because it studies ratios of several years and isolates the exceptional instances
occurring in one or two periods. Although the trend analysis of the company’s ratios
itself is informative, but it is more informative to compare the trends in the company’s
ratios with the trends in industry ratios.
Management has to protect the interest of all the conditional parties, creditors, owners,
and others. They have to ensure some minimum operating efficiency and keep the risk
of the firm at a minimum level. Their survival depends upon their operating
performance.
Objectives (or) Purpose of Ratio Analysis: -
The nature of analysis will differ depending on the purpose of the analyst. It can be
undertaken by management of the firm, or by parties outside the firm namely owners,
creditors, investors and others.
Trade Creditors: -
They are interested in firm’s ability to meet their claims over a very short
period of time. Hence their analysis is confined to evaluation of the firm’s
liquidity position.
Suppliers of long-term debt: -
They are concerned with firm’s long-term solvency and survival. They analyze
the firm’s profitability over time, its ability to generate cash to be able to pay
interest and repay principal and the relationship between various sources of
funds.
Investors: -
They are most concerned about the firm’s earnings. They are also interested in
every aspect of the firm’s financial structure to the extent it influences the
firm’s earnings ability and risk.
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Management: -
They would be interested in every aspect of Financial Analysis. It is their overall
responsibility to see that the resources of the firm are used most effectively and
efficiently, and that the firm’s financial condition is sound.
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CLASSIFICATION OF RATIOS
The use of Ratio Analysis is not confined to financial manager only. There are
different parties interested in the Ratio Analysis for knowing the financial position of
a firm for different purposes. In view of various users of ratios, there are many types
of ratios, which can be calculated from information given in the financial statements.
The particular purpose of the user determines the particular ratios that might be used
for financial analysis.
For example, a supplier of goods of firm, or a banker advancing a short term loan to
firm, is interested primarily in the short term paying capacity of the firm or say; its
liquidity. On the other hand, financial institution advancing a long-term credit to a
firm will be primarily interested in the solvency or long-term financial position of the
concern. Similarly, the interest of the owners (shareholders) and the management also
differ. The shareholders are generally interested in the profitability or dividend
position of firm while management requires information on almost all the financial
aspects of the firm to enable it to project the interest of all the parties.
Various accounting ratios can be classified as follows:
A Traditional Classification/ Statement Ratios
B Functional Classification / Classification to tests
C Significance Ratios/ Ratios according to importance
A Traditional Classification / Statement Ratios: -
Classification according to the financial statements from which these ratios are
calculated is traditional classification.
The following are different types of traditional classification.
Revenue Ratios/ profit and loss accounting ratios / income statement
ratios: -
When two variables are taken from revenue statement the ratio is known as
revenue ratio for example,
1. Gross Profit Ratio
2. Operating Ratio
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3. Operating Profit Ratio
4. Net Profit Ratio
5. Expenses Ratio
Balance Sheet Ratios/Position Statement Ratios: -
When two variables are taken from the Balance sheet the ratios so computed is
known as balance sheet ratio; for example
1. Current Ratio
2. Liquid Ratio (Acid Test or Quick Ratio)
3. Absolute Liquid Ratio
4. Debt Equity Ratio
5. proprietary Ratio
6. Capital Gearing Ratio
7. Assets-Proprietor’s Ratio
8. Capital Inventory to Working Capital Ratio
9. Ratio of Current Assets to Fixed Asset
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MIXED RATIO/COMPOSITE/INTER-STATEMENT RATIOS: -
When one variable is taken from the Revenue Statement and other taken from the
Balance Sheet the ratios so computed are known as mixed ratios; for example
1. Stock Turnover Ratio
2. Debtors Turnover Ratio
3. Creditors Turnover Ratio
4. Fixed Assets Turnover Ratio
5. Return on Capital Employed
6. Return on Equity
7. Return on Shareholders
8. Capital Turnover Ratio
9. Working Capital Turnover Ratio
10. Return on Total Resource
11. Total Assets Turnover Ratio
B Functional Classification (or) Classification according to test ratios: -
In view of the financial management or according to the tests satisfied, various
ratios have been classified as follows
(a) Liquidity Ratios: -
These are the ratios, which measure the short-term solvency or financial position
of the firm. The various liquidity ratios are:
I. Current Ratio
II. Liquidity Ratio (Acid test or Quick Ratio)
III. Absolute Liquid Ratio
(b) Leverage Ratios: -
Long-term solvency ratios convey a firms ability to meet the interest costs and
repayments schedules of its long-term obligations. These ratios measure the
contributions of financing by owners as compared to financing outsiders. The
leverage ratios can further be classified as
I. Financial Leverage
II. Operating Leverage
III. Composite Leverage
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Eg
I. Debt Equity Ratio
II. Debt to Capital
(c) Activity Ratio: -
Activity Ratios are calculated to measure the efficiency with which the resources
of a firm have been employed. These ratios are also called Turnover Ratios
because these indicate the speed with which assets are being turned over into sales.
Eg.
I. Inventory Turnover Ratio
II. Debtor Turnover Ratio
III. Fixed Turnover Ratio
IV. Total Assets Turnover Ratio
V. Working Capital Turnover Ratio
VI. Payment Capital Turnover Ratio
VII. Capital Employed Turnover Ratio
(d) Profitability Ratios: -
These ratios measure the results of business operations or overall performance and
effectiveness of the firm. Generally profitability ratios are calculated.
I In relation to sales,
I. Gross Profit Ratio
II. Operating Ratio
III. Operating Profit Ratio
IV. Net Profit Ratio
V. Expense Ratio
II In relation to Investment
I. Return on Investment
II. Return on Capital
III. Return on Equity Capital
IV. Return on Total Resource
V. Earning Per Share
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VI. Price-Earning Ratio
Classification according to significance or importance
The ratios have also been classified according to the significance or
importance. Some ratios are more important than others and the firm may
classify them as primary and secondary ratios. The British Institute of
Management has recommended the classification of ratios according to
importance for inter-firm comparisons. For inter firm comparisons, the ratios
may be classified as primary Ratios and secondary ratios. The Primary Ratio is
one, which is of the prime importance to a concern: Return on Capital
Employed is named as primary ratios.
1 According to Usage: -
Geroge Foster of Stanford University has advocated the following seven
categories to financial ratios. They are
1. Cash Position
2. Liquidity
3. Working Capital/Cash Flow
4. Capital Structure
5. Profitability
6. Debt Service Coverage
7. Turnover
In view of the requirement of the various users of ratios we may classify
them into following four broad categories
I. Liquidity Ratio
II. Capital Structure/Leverage Ratios
III. Activity Ratios
IV. Profitability Ratios
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LIQUIDITY RATIOS
Liquidity Ratios measure the ability of the firm to meet its current obligations. A firm
should ensure that it does not suffer lack of liquidity, and also that it should not have
excess liquidity. The failure of a company to meet its obligations due to lack of
sufficient liquidity, will result in a poor creditworthiness, loss of creditor’s confidence,
or even in legal tangles resulting in the closure of the company. A very high degree of
liquidity is also bad; firm’s funds will be unnecessarily tied up in current assets.
The most common liquidity ratios are:
I. Current Ratio
II. Quick Ratio/Acid Test Ratio
III. Cash Ratio/Absolute Liquid Ratio
Other Ratios include interval measure and net capital ratio
a) Current Ratio: -
The Current Ratio may be defined as the relationship between current assets and
current liabilities. This ratio is a measure of general liquidity and is most widely
used to make the analysis of a short-term financial position or liquidity of a firm. It
is calculated as
Current Assets
Current Ratio= Current Liabilities
A Current Ratio of 2 to 1 or more is considered satisfactory
The following Components of Current Ratio
Current Assets Current Liabilities
Cash In Hand Outstanding Exp/ Accrued
Cash at Bank Expenses
Marketable Securities. Bills Payable
Short-term Investments Sundry Creditors
Bills Receivable Short-term Advances
Sundry Debtors Income-tax Payable
Inventories Dividends Payable
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A high current ratio may not be favorable due to the following reasons:
I. There may be slow moving stocks. The stocks will pile up due to poor sales.
II. The figures of debtors may go up because debt collection is no satisfactory
III. The cash or bank balances may be lying idle because may be laying idle
because of insufficient investment opportunities.
On the other hand, a low current may be due to the following reasons:
I. There may not be sufficient funds to pay off liabilities
II. The business may be trading beyond the capacity. The resources may not
warrant the activities.
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Important factors for reaching a conclusion
A number of factors should be taken into considerations before reaching a
conclusion about short-term financial position. Some of these factors are as such:
(a) Type of Business: the type of business influences Current Ratio. A business
dealing in goods whose demand charges fast will require a higher current ratio.
On the other hand a trading concern will require a high current ratio because t
has to pay its suppliers quickly.
(b) Type of Product: The type of products in which a business deals also
influences current ratio. A business dealing in goods whose demand changes fast
will require a high current ratio. On the other hand, if products have more
intrinsic value e.g. gold, silver, metals, etc. a lower current ratio may also do.
(c) Reputation of the Concern: A business with better goodwill and reputation
may afford small current ratio because the turnover is more and creditors also
allow credit for longer periods. A new concern or a concern, which has not
established its reputation, will need higher current assets to pay current liabilities
in time.
(e) Seasonal Influence: Current assets and current liabilities changes with the
season. In a peak season, current assets will be more and current ratio will be
high. On the other hand will go down when the season is off.
(f) Types of Assets Available: The type of current assets in the business also
influences interpretation of current ratio. If the current assets include large
amounts of slow moving stocks then even a high ratio may not be satisfactory.
All the above-mentioned factors should be taken into mind while interpreting
current ratio
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Significance and Limitations of Current Ratio
Current Ratio is a general and quick measure of liquidity of a firm. It represents
the margin of safety or cushion available to the creditors and other current
liabilities.
b) Quick Ratio: -
It is also called as Acid test ratio. It enables a relationship between quick, or liquid,
assets and current liabilities
Quick Assets
Quick Ratio = ————————
Current Liabilities
A quick ratio of 1 to 1 is considered to represent a satisfactory current financial
condition.
Like current ratio a reasonable standard for the acid test ratio varies from season
to season in company and from company in an industry
c) Cash Ratio/Absolute Liquid Ratio: -
The cash Ratio measure the absolute liquidity of the business. This ratio considers
only the absolute liquidity available with the firm. This ratio is calculated as;
Cash + Marketable Securities
Cash Ratio= ——————————————
Current Liabilities
Note
The current ratio and the quick ratio have not yet out lived their utility. They are still
important ratios in the financial analysis. However, the analyst must keep the note of
the following points:
1) The liquidity ratio should be subjected to quantitative tests. The major
components of current assets-receivable and inventory must be carefully
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announced to determine their quality, otherwise the ratio may grow and
mislead.
2) The liquidity ratios are subject to the influence of other financial forces,
which can improve or deteriorate the ratios in no time. These ratios will
not fluctuate because of the movement of the receivables and, but one
also affected by changes in fixed asset and profit and Loss account.
3) The 2 to 1 current ratio or the quick ratio of 1: 1 should not be relied
blindly. Each industry of firm has its own operating and financial
characteristics. A current ratio of 1.5 to 1 may be perfectly acceptable in
one line of business, where 3 to 1 ratio may be typical of another.
Terms related to Liquidity Ratios
a) Current Ratio
Current Assets include cash and those that can be converted into cash
within a year, such as marketable securities, debtors, prepaid expenses and
inventories.
b) Current Liabilities
Current Liabilities are those obligations maturing within a year. They
include creditors, bills payable, accrued expenses, short-term bank loan,
income tax liability and long-term debt maturing in the current year.
c) Quick Assets:
Quick Assets of only cash and near cash assets.
Quick Assets=Current Assets-Inventories
d) Quick Liabilities
Quick Liabilities are that portion of current liabilities, which fall the
immediately.
Quick Liabilities= Current Liabilities-Bank Overdraft-cash Credit
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CAPITAL STRUCTURE/ LEVERAGE RATIOS
The capital structure/leverage ratios are defined as those financial ratios,
which measure the long-term stability and structure of the firm. These ratios
indicate the mix of funds provided by owners and lenders and assume the
lenders of long-term funds with regard to
I. Periodic payments of interest during the period of the loan and
II. Repayment of principal amount on maturity
Some of the Leverage ratios are
I. Debt-Equity Ratio
II. Debt-Assets Ratio
III. Equity Ratio/Proprietor’s Ratio
a) Debt-Equity Ratio: -
it helps in knowing the interest-bearing debt in the capital structure. The Debt
Equity ratio measures the long-term financial solvency of a business concern.
This ratio is also popularly known as “External-Internal Equity Ratio” This
ratio can be viewed as indicating the relative proportion of debt and equity in
financing the assets of the business unit. It is calculated as
Total Debt
Debt Equity Ratio = ——————————
Net Worth
Activity Ratios: -
Activity Ratios are also called “Turnover ratios”, since they relate to the use of assets
for generation of income through turnover. These ratios are used to measure the
effectiveness of the employment of resources. Activity ratios involve a relationship
between sales and assets. Several Activity Ratios can be calculated to judge
effectiveness of asset utilization. Some of them as follows..
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a. Debtors Turnover Ratio
b. Assets Turnover Ratio
c. Current Assets Turnover Ratio
d. Fixed Assets Turnover Ratio
e. Working Capital Turnover Ratio
f. Stock Turnover Ratio
a) Debtors Turnover Ratio:
Debtor’s turnover indicates the no of times debtors’ turnover each year. This
ratio measures the net credit sales of a firm to the recorded trade debtors. There
by indicating the rate at which cash is generated by turnover of receivables (or)
debtors. This is calculated as
Net Sales
Debtors Turnover Ratio= ———————
Total Debtors
Collection/conversion period: this indicates the extent to which the debts have
been collected in time. It is calculated as
Days in a Year
Collection/Conversion Period= ——————————
Debtors’ turnover
b) Assets Turnover Ratio: -
Assets are used to generate sales. Therefore, a firm should manage it’s assets
efficiently to maximize sales. The relationship between sales and assets turnover
ratio. This is calculated as
Sales
Assets Turnover Ratio = ——————————
Total Assets
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c) Current Assets Turnover Ratio
This ratio indicates the no of times current assets being turned over in a stand
period. It is calculated as
Sales
Current Assets Turnover Ratio = —————————
Current Assets
d) Fixed Assets Turnover Ratio: -
This Ratio indicates the no of times fixed assets are being tuned over in a stated
period. It is calculated as
Sales
Fixed Assets Turnover Ratio = —————————
Net Fixed Assets
This ratio is an indicator of the extent to which investment in Fixed assets contribute
to generate sales. The Fixed assets are to be taken net of depreciation.
e) Working Capital Turnover Ratio: -
This ratio shows the no of times working capital is turned over in a stated period.
This ratio is calculated as
Sales
Working Capital Turnover Ratio = ——————————
Working Capital
It indicates to what extent working capital fund have been employed in the business
towards sales.
f) Stock Turnover Ratio:-
The inventory turnover/stock turnover shows have rapidly the inventory is
turning into receivables through sales.
This ratio is an indicator of the efficiency of the use of investment in stock. It is
calculated as
Net Sales
Stock Turnover Ratio = —————————
Closing Stock
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PROFITABILITY RATIOS
The financial manager should continuously evaluate the efficiency of its company
in term of profits. A company should earn profits to survive and grow over a long
period of time. A measure of profitability is the overall measure of efficiency. In
general terms, efficiency of business is measured by the input and output analysis.
By measuring the output as a proportion of the input and comparing the result of
similar other firms or periods the relative change in its profitability can be
established. The income as compared to the capital employed indicates
profitability of firm. Thus the chief profitability ratio is:
Operating Profit (Net Margin)
—————————————— X 100
Operating Capital Employed
The main profitability ratio an all other sub ratios are collectively known as
‘profitability ratios’ Profitability ratio can be determined on the basis of either
investment or sales.
Some of the profitability ratios are as follows: -
a) Net Profit Ratio
b) Gross Profit Ratio
c) Return on Capital Employed
d) Return on shareholders’ investment
e) Return on Assets
Net Profit Ratio: -
Net Profit is obtained when operating expenses interest and taxes are subtracted
from gross profit. Net Profit margin ratio establishes a relationship between net
profit and sale sand indicates management’s efficiency in manufacturing
administering and selling the products. This ratio indicates the overall measure of
the firm’s ability to turn each rupee sales into net profit. It is calculated as
follows.
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Net Profit
Net Profit Ratio= ————————— X 100
Sales
Gross Profit Ratio: -
Gross Profit margin reflects the efficiency with which management produces each unit
product. This ratio indicates the average spread between the cost of goods sold and
revenue. This ratio indicates the relation between production costs and selling price. It
is calculated as
Gross Profit
Gross Profit Ratio = ————————— X100
Sales
Return on Capital Employed: -
This ratio is also known as ‘overall profitability ratio’. The income as compared to the
capital employed indicates the return on investment. It shows how much the company
is earning on its investment. This ratio is calculated by dividing the EBIT (Earnings
before Interest & Tax) with Capital Employed.
EBIT
Return Capital Employed = ———————————— X100
Net Capital Employed
Return on Shareholders Investments: -
This ratio shows the relationship between returns and the shareholders equity. In this
case it is desired to work out the profitability of the company from shareholders point
of view. The return on the shareholders equity measures return on the owner’s fund. It
is calculated as
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EBIT
Return on Shareholders Investment = —————— X100
Equity
Return on Assets: -
The profitability ratio is measured in terms in relationship between net profits and
assets employed to earn that profit. This ratio measures the profitability of the firm in
terms of assets employed in the firm. The R O A may measured as follows.
P A T
Return on Assets = ———————————— X100
Total Fixed Assets
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LIMITATIONS OF RATIO ANALYSIS
The ratio analysis is a widely used technique to evaluate the financial position and
performance of business. Yet it suffers from various limitations.
o It is difficult to decide on proper basis of comparison.
o The company is rendered difficult because of differences in situations of two
companies or of one company over years.
o The price level changes make the interpretation of ratios invalid.
o The differences in the definitions of items in the Balance Sheet and the Profit
and Loss Statement make the interpretation of ratios difficult.
o The ratios calculated at a point of time are less informative and defective as
they suffer from short-term changes.
o The ratios are generally calculated from past financial statements and, thus are
no indicators of future.
Standards of Comparison
Ratio of a company has meaning only when they are compared with some standards.
It is difficult to find out a proper basis of comparison. Usually, it is recommended that
ratios should be compared with industry averages. But the industry averages are not
easily available. In India, no systematic and comprehensive industry ratios are
complied.
Company Differences:
Situations of two companies are never same. Similarly, the factors influencing the
performance of a company in one year may change in another year. Thus, the
comparison of the ratios of two companies becomes difficult and meaningless when
they are operating in different situations.
Price Level Changes: -
The interpretation and comparison of ratios are also rendered invalid by the changing
value of money. The accounting figures, presented in the financial statements, are
expressed in the monetary unit, which is assumed to remain constant. In fact, prices
change over years, which affect accounting earnings.
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Different definitions of variables:
In practice, differences exist as to the meaning of certain terms. Diversity of views
exists as to what should be included in net worth or shareholders equity, current assets
or current liabilities.
Changing situations:
Trend analysis helps in analyzing the trends of ratios over years. But the analysis is
still static to an extent. The Balance Sheets prepared at different points of time are
static in nature. They do not reveal the changes, which have taken, place between
dates of two balance sheets.
Historical data:
The basis to calculate ratios is historical financial statements. The financial analyst is
more interested in what happens in future; while the ratios indicate what happened in
the past Management of the company has information about the company’s future
happening to certain extent. But the outside analyst has to rely on the past ratios,
which may not necessarily reflect the firm’s financial position and performance in the
future.
Even when the ratios are worked out correctly. It should be recommended that they
can best be used like a doctor uses symptoms indications that something is wrong
somewhere.
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STATEMENT OF THE PROBLEM:
The success of industry mainly depends on many factors viz., sales and
profit of a business concern, rate of return of the industry and the organization,
optimum inventory the industry carries, methods of long term and short term funding,
treasury management etc., and this could be achieved by observing good management
practices. It is in this context the study is initiated in SUPER SPINING PRIVATE
LIMITED to find out their financial management system of previous 4 years and find
out the problems if any and the performance of the S S MILLS with the help of ratios
and other techniques of financial analysis.
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NEED OF THE STUDY
It is known fact that the success of the every organization depends upon its financial
strengths & weakness of the firm and ratio analysis is used as tool to analyze the
financial performance of the company, in financial analysis a ratio is used an index or
yard stick for evaluating firms out financial performs post 4 years would give some
insights if there are among errors associated with budgeting which are subjective
elements.
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SCOPE OF THE STUDY:
The purpose of the study was to know the financial performance of the unit. For this
the ratio analysis tool was most suitable. This would reveal the solvency position of
the unit. The trend of sales and profitability for the past 4 years was calculated to
know if any deviations occurred and to know the reasons for it. However the study
had its own limitations like ratio analysis is a post-mortem analysis and the data
utilized were secondary in nature etc.
The scope of the present study is limited to the following aspects.
Ratio Analysis
Trend Analysis
Common Size Balance Sheet analysis
Comparative Balance sheet
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OBJECTIVES OF THE STUDY:
The overall objective of study is to appropriate the financial performance of SSM for
the period of 4 years from 2003-04 to 2006 -2007. However, the study is taken up
with the following objectives.
o To trace out the organizational profile of SSM, with a view to find out the
positive and negative aspects of the organizational arrangement.
o To appraise the performance of the company with regard to its working capital
maintenance.
o To analyze the solvency position of SSM with an aim of identifying, if any
loop holes are present in the administration of equity.
o To study the inventory management with the help of appropriate ratios
o To forward certain suggestions for the consideration of management of SSM.
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LIMITATIONS OF THE STUDY: -
The report confines itself to study a period of 4 years (2003-04 to 2006-
07)
To analysis takes into account only quantitative aspects. The qualitative
aspects are ignored. Hence, the conclusions may get distorted.
This study suffers the limitations of the statistical concepts such as
determination of proper standard for comparison, absence of the
homogeneity of the data and danger of fallacious conclusions.
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RESEARCH METHODOLOGY
Research Design: -
To analyze the working capital, trends and for the purpose of ratio analysis, Financial
Analysis has to be carried out. Financial analysis is the analysis and interpretation of
financial statements and a proper financial analysis can give the users better insight
about financial strengths and weakness of the firm. Financial analysis is the starting
pint for making plans, before using any sophisticated forecasting and planning
procedure.
For the purpose first the required information has to be collected like for ratio analysis
and owing capital management analysis, income statements, trading and profit and
loss accounts, balance sheet, funds flow statement, etc. are to be collected the, the data
in the statements is to be properly organized and arranged and then relationship is
established between financial statements and finally conclusions are drawn from the
interpreted information and presented in the form of reports.
Research Methodology: -
Research involves getting tools, ideas from texts, journals, books, records, Websites.
The collection of data is an important aspect of Research.
The sources of information fall under two categories.
Internal Sources: -
Every company keeps certain records such as accounts, records, reports, etc. These
records provide sample information for research.
External Sources: -
When internal records are insufficient and required information is not available the
organization the organization depends on eternal sources. The external sources of data
are:
I. Primary Data
II. Secondary Data
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Primary Data: -
The data collected for a purpose in original and for the first time is known as primary
data. The data collected by the researcher himself to study a particular problem.
The primary data of the study is collected through interaction and discussion with the
officials and the staff at SSM, Hindupur.
Secondary Data: -
The data which is collected from the published sources that is for the first time is
called secondary data.
The secondary data for the study is collected from the annual reports of SSM from
2003-04 to 2006-07.
Data Analysis: -
Data analysis is done by implementing various tools like ratio analysis, trend analysis,
etc.
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1.Current ratio: -
Current assets
Current ratio = --------------------------
Current liabilities
Years Current assets Current liabilities ratio
2003-04 20966.47 6925.63 3.02
2004-05 19468.76 7501.51 2.59
2005-06 24792.71 6989.21 3.54
2006-07 24907.61 8765.61 2.84
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Interpretation:
As a conventional rule, a current ratio of 2:1 or more is considered satisfactory.
The SSML current ratios in the year 2003-07 are 3.02, 2.59, 3.54, and 2.84
respectively.
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2.Quick ratio: -
Quick assets
Quick ratio= -------------------
Current liabilities
Years Quick assets
Current liabilities
Ratio
2003-04 7549.81 6925.63 1.09
2004-05 11431.99 7501.51 1.52
2005-06 12923.39 6989.21 1.85
2006-07 11431.99 8765.61 1.30
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Interpretation:
Quick ratio is a widely accepted ratio this ratio universal standard is 1:1 except
2003-04 year company had excess liquid assets rest of years ratio was reasonable,
This indicates company extremely had good liquidity position.
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RATION ANALYSIS
3.Super quick ratio: -
Super quick assets
Super quick ratio = ------------------------
Current liabilities
years Super quick assets Current liabilities Ratio
2003-04 139.28 6925.63 0.02
2004-05 183.81 7501.51 0.02
2005-06 160.91 6989.21 0.02
2006-07 497.56 8765.61 0.05
Page 58
RATION ANALYSIS
Interpretation:
The universal standard is 1:2 companies almost all years had less super liquid
assets. This indicates company had huge in debtor besides their collection period was
very high so company was not easy to meet quick obligations immediately
Page 59
RATION ANALYSIS
4.Debt-equity ratio: -
Total debt
Debt-equity ratio= -------------------
Net worth
Year Total debt Net worth Ratio
2003-04 17124.51 8903.24 1.92
2004-05 16162.19 9774.99 1.65
2005-06 22257.95 11511.33 1.93
2006-07 26055.53 12616.69 2.06
Page 60
RATION ANALYSIS
Interpretation:
The universal standard is 1:2 here; company had excess net worth than
standard. This indicates heavy cost of debt to company so here profit maximization
was possible rather than wealth maximization of shareholders.
Page 61
RATION ANALYSIS
5.Debtors’ turnover ratio: -
Sales
Debtors turnover ratio = ---------------
Closing debtors
YearsSales Closing debtors Ratio
2003-04 33516.26 1517.28 22.09
2004-05 36752.25 1954.56 18.80
2005-06 36316.52 1887.56 19.24
2006-07 39419.28 2375.64 16.50
Page 62
RATION ANALYSIS
Interpretation:
Debtor turnover ratio measures the collection period of debtors, here sales were
so rapidly converting in to cash. This is good to company year 2003-04 was little bit
rather than rest of years.
Page 63
RATION ANALYSIS
6.Debtor collection period: -
Days in a year
Debtor collection period = --------------------
Debtor’s turnover ratio
Years
Days in a year Debtors turnover ratio Ratio
2003-04 366 22.09 16.59
2004-05 365 18.80 19.41
2005-06 365 19.24 18.97
2006-07 365 16.50 22.00
Page 64
RATION ANALYSIS
Interpretation:
This ratio is another devise to measure the quality of debtors. This ratio
represents the average number of days the company takes to convert its debtors in to
cash almost all years company had able to collect debtors quickly so liquidities
position was very good.
Page 65
RATION ANALYSIS
7.Asset turnover ratio: -
Sales
Assets turnover ratio = -----------------------
Total assets
Years SalesTotal assets Ratio
2003-04 33516..26 35087.94 0.96
2004-05 36752.25 35445.50 0.04
2005-06 36316.52 43244.30 0.84
2006-07 39419.28 49957.8 0.78
Page 66
RATION ANALYSIS
Interpretation:
This ratio shows the firms ability in generating sales from all financial
resources committed to total sales this decelined in the year 2003-04 so company sales
so progressive than total assets.
Page 67
RATION ANALYSIS
8.Current asset turnover ratio: -
Sales
Current asset turnover ratio = -----------------
Current assets
Yearssales Current assets Ratio
2003-04 33516.26 20966.47 1.60
2004-05 36752.25 19468.76 1.89
2005-06 36316.52 24792.71 1.46
2006-07 39419.28 24907.61 1.58
Page 68
RATION ANALYSIS
Interpretation:
This ratio measures the current assets capacity with turnover here current assets are so
heavy for production of goods however company should concentrate on more fixed
assets rather than current assets.
Page 69
RATION ANALYSIS
9.Fixed assets turnover ratio: -
Sales
Fixed assets turnover ratio= ------------
Fixed assets
YearsSales Fixed assets Ratio
2003-04 33516.26 11417.87 2.79
2004-05 36752.25 13326.67 2.76
2005-06 36316.52 15613.22 2.33
2006-07 39419.28 22445.79 1.75
Page 70
RATION ANALYSIS
Interpretation:
This ratio measures the fixed assets capacity with turnover hare fixed assets
sufficient for production of goods however company should concentrate on more
fixed assets rather than current assets.
Page 71
RATION ANALYSIS
10.Working capital turnover ratio: -
Sales
Working capital turnover ratio = ------------------
Working capital
Years Sales Working capital Ratio
2003-04 33516.26 14040.84 2.39
2004-05 36752.25 11967.25 3.07
2005-06 36316.52 17803.5 2.04
2006-07 39419.28 16142.00 2.44
Page 72
RATION ANALYSIS
Interpretation:
This ratio measures the effect of working capital gap on sales or amount of
sales generated its net current assets, the networking capital gap were properly utilized
in generating sales current assets turnover to sales.
Page 73
RATION ANALYSIS
11.Net profit: -
Net profit
Net profit = ----------------
Sales
YearsNet profit Sales Ratio
2003-04 1043.00 33516.26 3.11
2004-05 1122.00 36752.25 3.05
2005-06 2238.00 36316.52 6.16
2006-07 1427.35 39419.28 27.61
Page 74
RATION ANALYSIS
Interpretation:
Company had heavy operating expenses and interest rates so had company had
very less not profit Ratio Company should reduce their indirect expenses and interest
rates.
Page 75
RATION ANALYSIS
12.Return on shareholders ratio: -
EBIT
Return on shareholders ratio= ------------------
Equity
YearsEBIT Equity Ratio
2003-04 4186.00 550 7.61
2004-05 4269.00 550 7.76
2005-06 6618.00 550 12.03
2006-07 5981.31 550 10.87
Page 76
RATION ANALYSIS
Interpretation:
This ratio measures relationship between earnings and equity here every
shoulders get increasing dividend from year to year so shareholders wealth
maximizing year to year for ever 2005-06 was heavy return to shareholders rather than
rest of years.
Page 77
RATION ANALYSIS
13.Return on assets: -
PAT
Return on assets= --------------------
Total assets
Years PAT Total assets Ratio
2003-04 1042.71 35087.94 0.03
2004-05 1122.61 35445.50 0.03
2005-06 2238.05 43244.30 0.05
2006-07 1427.35 24960.87 0.05
Page 78
RATION ANALYSIS
Interpretation:
This ratio measures the how much return earned on total assets almost all years
company had very low return so company should decrease its current assets rather
than fixed assets
Page 79
RATION ANALYSIS
14.Return on capital: -
EBIT
Return on capital= ---------------------
Capital employed
YearsEBIT Capital employed Ratio
2003-04 4186.00 28162.31 0.15
2004-05 4269.00 27949.99 0.15
2005-06 6618.00 36255.09 0.18
2006-07 5981.31 41192.19 0.14
Page 80
RATION ANALYSIS
Interpretation:
This ratio measures the relationship between the capital employed I, e
shareholders equity plus debt and earnings this ratio was extremely less so company
should decrease their net worth rather than debt
Page 81
RATION ANALYSIS
15.Gross profit ratio: -
Gross profit
Gross profit ratio= ---------------------
Sales
Years Gross profit Sales Ratio
2003-04 3104.00 33516.26 9.26
2004-05 3110.00 36752.25 8.46
2005-06 5373.00 36316.52 14.79
2006-07 4524.80 39419.28 8.71
Page 82
RATION ANALYSIS
Interpretation:
Company had heavy gross profit in 2005-06 rather than rest of years so
company should concentrate on manufacturing expenses .it should be very less.
Page 83
RATION ANALYSIS
16. Return on investment:
PAT
Return on investment= ---------------------
Capital employed
Years PAT Capital employed Ratio
2003-04 1042.71 28162.31 0.03
2004-05 1122.61 27949.99 0.04
2005-06 2238.05 36255.09 0.06
2006-07 1427.35 41192.19 0.03
Page 84
RATION ANALYSIS
Interpretation:
The returns on investment ratios are 0.03,0.04,0.06,0.03 respectively. The return
on investment has increased in the year 2005-06 which is favorable position.
Page 85
RATION ANALYSIS
17. Earning per share:
PAT
Earning per share= ------------------------------
Number of shares
Years PAT Number of shares Ratio
2003-04 1042.71 550 1.89
2004-05 1122.61 550 2.04
2005-06 2238.05 550 4.06
2006-07 1427.35 550 2.59
Page 86
RATION ANALYSIS
Interpretation:
The earning per share obtained for four years are 1.89,2.04,4.06and 2.59
respectively, the earning per share have been rapidly increased. The ratio is favorable
in the year 2006,because it is highest ratio.
Page 87
RATION ANALYSIS
FINDINGS
1. The company sales have increased every year from Rs 33516.26 in the year
2003-04 to Rs: 39419.28 lakhs in the year, 2006-07, which reflects in
favorable position.
2. The profit of the company have increased from 1042.71 lakhs in the year 2003-
04 to 24960.87 lakhs in the year 2006-07 it reflects in favorable position.
3. The liquidity ratios have increased initially for one year but later they have
decreased but firm as enough current assets to meet the current liabilities
4. The debt equity ratio indicate that the claims of outsiders or more than those
owners debt equity ratio is 1.92 in the year 2003-04, and it has increased to
1.93 in the year 2005-06 due to increase to in total debt and it has further
increased to 2.06 in the year 2006-07.
5. The debtors turnover ratio have decreased the debtor turnover ratio of the
company for the years 2003-07 are 22.09, 18.80,19.24 and 16.59 respectively,
the collection period has gradually increased but the debtors collection period
is less than 22 days .
Page 88
RATION ANALYSIS
SUGGESTIONS
The company should concentrate on reducing operating and non-operating
expenses because the proportionate increase in expenses is nearly equal than
the proportionate increase in sales.
The company has concentrate on inventory management in order to reduce
inventory holding period.
Since debtor’s collection period is greater than15 days the company can
decrease this period for the development.
It is suggested that the form should have to increase its management efficiency
which increase it capacities to with stand the adverse economics conditions for
earning more profits to recover its loses
It is suggested that the firm should have to utilize it current assets and current
liabilities properly
Page 89
RATION ANALYSIS
CONCLUSIONS
Liquidity ratios, both current ratio and quick ratio are showing effectiveness in
liquidity as in all the years current ratio is greater than the standard 2:1 and
quick ratio is greater than the standard 1:1 ratio.
Debt equity, solvency ratio and interest coverage ratio are showing an average
increase in the long term solvency of the firm.
Fixed assets turnover ratio is showing that the firm needs lesser investment in
fixed assets to generate sales.
The gross profit ratio, net profit ratio is showing the increasing trends. The
profitability of the firm the increasing.
The interest that has to be paid is very less when compared to the sales. The
firm is not utilizing the debt conservatively.
The firm is relating much of the earnings ( based on dividend payout ratio. )
The company financial performance is very good and also they will increase
their business year by year by expanding their branches.
Page 90
RATION ANALYSIS
BIBLIOGRAPHY
I M Pandey., Financial Management, 9th Ed, Vikas publishing house Pvt.
Ltd., New Delhi, 2006.
M Y Khan and P K Jain, Financial Management, 4th Ed, Tata Mc Graw-Hill
publishing company Ltd., New Delhi, 2006.
Prasanna Chandra., Financial Management, 6th Ed, tata Mc Graw-Hill
publishing company Ltd, New Delhi, 2005.
WEBSITE :
www. superspinningmills.com
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