Ratio_analysis_OF Nahar Industrial Enterprises Ltd

8/11/2019 Ratio_analysis_OF Nahar Industrial Enterprises Ltd.

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INTRODUCTION

MEANING OF RATIO ANALYSIS

MEANING:

The ratio analysis is one of the most useful and common method of analyzing financial

statements. As compared to other tools of financial analysis, the ratio analysis provides very

useful conclusions about various aspects of the working, like financial position, solvency,

stability, liquidity and profitability of an enterprise.

The term Ratio refers to the numerical or quantitative relationship between two

items!variables.

NATURE:

Ratio analysis is a powerful tool of financial analysis. "n financial analysis, a ratio is used as a

benchmark. #or evaluating the financial position and performance of a firm. The relationship

between two accounting #igures, e$pressed mathematically, is known as a financial ratio.

Ratios help to summaries large quantities of financial data and to make qualitative %udgment

about the firm&s financial performance.

This relationship is an inde$ or yardstick, which permits a qualitative %udgment to be formed

about the firm&s ability to meet its current obligations. "t measures the firm&s liquidity .The

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greater the ratio, the (reater the firm&s liquidity and vice)versa. The point to note is that a ratio

reflecting a quantitative relationship helps to form a qualitative %udgment. *uch is the nature of

all financial ratios.

ROLE OF RATIO ANALYSIS:

'+ Aid in financial forecastingRatio analysis is very helpful in financial forecasting. Ratios

relating to past sales, profits and financial position form the basis for setting future trends.

-+ Aid in comparisonith the help of ratio analysis, ideal ratio can be composed and they

can be used for comparing a firm&s progress and performance. "nter firm comparison or

comparison with industry averages is made possible by the ratio analysis.

/+ #inancial solvency of the firmRatio analysis indicates the trends in financial solvency of

the firm.

*olvency has two dimensions) long)term solvency 0 short)term solvency. 1ong term solvency

refers to the #inancial viability of a firm. *hort)term solvency is the liquidity position of the

firm.

2. 3ommunication value4ifferent financial ratios communicate the strength and financial

standing of the form to the internal and e$ternal parties. They indicate the over all profitability

of the firm.

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5.6ther uses#inancial ratios are very helpful in the diagnosis and financial health of a firm.

They highlight the liquidity, solvency, profitability and capital gearing etc. of the firm. They

are useful tool of analysis of financial performance.

USERS OF RATIO ANALYSIS

' Trade creditors are interested in firm&s ability to meet their claims over a very short period

of time.

-. *uppliers of long)term debts are concerned with the 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.

/. "nvestors, who have invested their money in the firm share , are most concerned about the

firm&s earning.

2. 7anagement of the firm would be interested in every aspect of the ratio analysis. "t 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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FINANCIAL RATIOS AND UTILITY

A ratio may be defined as a fied re!ations"i# in de$ree or n%mber bet&een t&o n%mbers'

In finan(e) ratios are %sed to #oint o%t re!ations"i#s t"at are not ob*io%s from t"e ra&

data' Some %ses of ratios are fo!!o&in$: +

'. To compare different companies in same industry.Ratios can highlight the factors

associated with successful and unsuccessful firms. They can reveal strong firms and weak

firms, overvalued undervalued firms.

-. To compare different industries.8very industry has its own unique set of operating and

financial characteristics. These can be identified with the help of ratios.

/. To compare performance in different time periods.6ver a period of years, a firm or a

industry develop certain norms That may indicate future success or failure. "f relationship

changes in firm9s data over different time periods, the ratio may provide clues and trends of

future problems.

FINANCIAL ANALYSIS

#inancial analysis is the process of identifying the financial strengths and

weaknesses of the firm and establishing relationship between the items of the balance sheet and

profit 0 loss account.

#inancial ratio analysis is the calculation and comparison of ratios, which are

derived from the information in a company&s financial statements. The level and historical

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trends of these ratios can be used to make inferences about a company&s financial condition, its

operations and attractiveness as an investment. The information in the statements is used by

Trade creditors, to identify the firm&s ability to meet their claims i.e. liquidity position

of the company.

"nvestors, to know about the present and future profitability of the company and its

financial structure.

7anagement, in every aspect of the financial analysis. "t is the responsibility of the

management to maintain sound financial condition in the company.

RATIO ANALYSIS

T"e term ,Ratio- refers to t"e n%meri(a! and .%antitati*e re!ations"i#

bet&een t&o items or *ariab!es' T"is re!ations"i# (an be e#osed as

:ercentages

#ractions

:roportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the

financial statements. *o that the strengths and weaknesses of a firm, as well as its historical

performance and current financial condition can be determined. Ratio reflects a quantitative

relationship helps to form a quantitative %udgment.

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STE/S IN RATIO ANALYSIS

The first task of the financial analysis is to select the information relevant to the

decision under consideration from the statements and calculates appropriate ratios.

To compare the calculated ratios with the ratios of the same firm relating to the pas;t or

with the industry ratios. "t facilitates in assessing success or failure of the firm.

Third step is to interpretation, drawing of inferences and report writing conclusions are

drawn after comparison in the shape of report or recommended courses of action.

0ASIS OR STANDARDS OF COM/ARISON

Ratios are relative figures reflecting the relation between variables. They enable

analyst to draw conclusions regarding financial operations. They use of ratios as a tool of

financial analysis involves the comparison with related facts. This is the basis of ratio analysis.

The basis of ratio analysis is of four types.

:ast ratios, calculated from past financial statements of the firm.

3ompetitor&s ratio, of the some most progressive and successful competitor firm at the

same point of time.

"ndustry ratio, the industry ratios to which the firm belongs to

:ro%ected ratios, ratios of the future developed from the pro%ected or pro forma financial

statements

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NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial

statements. "t is the process of establishing and interpreting various ratios for helping in

making certain decisions. "t is only a means of understanding of financial strengths and

weaknesses of a firm. There are a number of ratios which can be calculated from the

information given in the financial statements, but the analyst has to select the appropriate data

and calculate only a few appropriate ratios. The following are the four steps involved in the

ratio analysis.

*election of relevant data from the financial statements depending upon the ob%ective of

the analysis.

3alculation of appropriate ratios from the above data.

3omparison of the calculated ratios with the ratios of the same firm in the past, or the

ratios developed from pro%ected financial statements or the ratios of some other firms or

the comparison with ratios of the industry to which the firm belongs.

INTER/RETATION OF T1E RATIOS

The interpretation of ratios is an important factor. The inherent limitations of

ratio analysis should be kept in mind while interpreting them. The impact of factors such as

price level changes, change in accounting policies, window dressing etc., should also be kept in


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mind when attempting to interpret ratios. The interpretation of ratios can be made in the

following ways.

*ingle absolute ratio

(roup of ratios

=istorical comparison

:ro%ected ratios

"nter)firm comparison

GUIDELINES OR /RECAUTIONS FOR USE OF RATIOS

The calculation of ratios may not be a difficult task but their use is not easy.

#ollowing guidelines or factors may be kept in mind while interpreting various ratios are

Accuracy of financial statements

6b%ective or purpose of analysis

*election of ratios

>se of standards

3aliber of the analysis

IM/ORTANCE OF RATIO ANALYSIS

Aid to measure general efficiency

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Aid to measure financial solvency

Aid in forecasting and planning

#acilitate decision making

Aid in corrective action

Aid in intra)firm comparison

Act as a good communication

8valuation of efficiency

8ffective tool

LIMITATIONS OF RATIO ANALYSIS

4ifferences in definitions

1imitations of accounting records

1ack of proper standards

@o allowances for price level changes

3hanges in accounting procedures

uantitative factors are ignored

1imited use of single ratio

Background is over looked

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1imited use

:ersonal bias

CLASSIFICATIONS 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. Darious accounting ratios can be classified as follows+

'. Traditional 3lassification

-. #unctional 3lassification

/. *ignificance ratios

2'Traditiona! C!assifi(ation

"t includes the following.

Balance sheet EorF position statement ratio+ They deal with the relationship between two

balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the

items must, however, pertain to the same balance sheet.

:rofit 0 loss account EorF revenue statement ratios+ These ratios deal with the

relationship between two profit 0 loss account items, e.g. the ratio of gross profit to

sales etc.,

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3omposite EorF inter statement ratios+ These ratios e$hibit the relation between a profit

0 loss account or income statement item and a balance sheet items, e.g. stock turnover

ratio, or the ratio of total assets to sales.

-. #unctional 3lassification

These include liquidity ratios, long term solvency and leverage ratios, activity

ratios and profitability ratios.

3' Si$nifi(an(e ratios

*ome ratios are important than others and the firm may classify them as primary

and secondary ratios. The primary ratio is one, which is of the prime importance to a concern.

The other ratios that support the primary ratio are called secondary ratios.

IN T1E 4IE5 OF FUNCTIONAL CLASSIFICATION T1E RATIOS ARE

'. 1iquidity ratio

-. 1everage ratio

/. Activity ratio

2. :rofitability ratio

2' LI6UIDITY RATIOS

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1iquidity refers to the ability of a concern to meet its current obligations as 0

when there becomes due. The short term obligations of a firm can be met only when there are

sufficient liquid assets. The short term obligations are met by realizing amounts from current,

floating EorF circulating assets The current assets should either be calculated liquid EorF near

liquidity. They should be convertible into cash for paying obligations of short term nature. The

sufficiency EorF insufficiency of current assets should be assessed by comparing them with

short)term current liabilities. "f current assets can pay off current liabilities, then liquidity

position will be satisfactory.

To measure the liquidity of a firm the following ratios can be calculated

3urrent ratio

uick EorF Acid)test EorF 1iquid ratio

Absolute liquid ratio EorF 3ash position ratio

7a8 CURRENT RATIO:

3urrent ratio may be defined as the relationship between current assets

and current liabilities. This ratio also known as orking capital ratio is a measure of general

liquidity and is most widely used to make the analysis of a short)term financial position EorF

liquidity of a firm.

C%rrent assets

C%rrent ratio 9

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C%rrent !iabi!ities

Com#onents of (%rrent ratio

CURRENT ASSETS CURRENT LIA0ILITIES

3ash in hand 6ut standing or accrued e$penses

3ash at bank Bank over draft

Bills receivable Bills payable

"nventories *hort)term advances

ork)in)progress *undry creditors

7arketable securities 4ividend payable

*hort)term investments "ncome)ta$ payable

*undry debtors

:repaid e$penses

7b8 6UIC RATIO

uick ratio is a test of liquidity than the current ratio. The term liquidity refers

to the ability of a firm to pay its short)term obligations as 0 when they become due. uick

ratio may be defined as the relationship between quick or liquid assets and current liabilities.

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An asset is said to be liquid if it is converted into cash with in a short period without loss of

value.

6%i(; or !i.%id assets

6%i(; ratio 9

C%rrent !iabi!ities

Com#onents of .%i(; or !i.%id ratio

6UIC ASSETS CURRENT LIA0ILITIES



Bills receivable Bills payable

*undry debtors *hort)term advances

7arketable securities *undry creditors

Temporary investments 4ividend payable

"ncome ta$ payable

7(8 A0SOLUTE LI6UID RATIO

Although receivable, debtors and bills receivable are generally more liquid than

inventories, yet there may be doubts regarding their realization into cash immediately or in

time. =ence, absolute liquid ratio should also be calculated together with current ratio and

quick ratio so as to e$clude even receivables from the current assets and find out the absolute

liquid assets.

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Abso!%te !i.%id assets

Abso!%te !i.%id ratio 9

C%rrent !iabi!ities

Absolute liquid assets include cash in hand etc. The acceptable forms for this

ratio is 5GH EorF G.5+' EorF '+- i.e., Rs.' worth absolute liquid assets are considered to pay Rs.-

worth current liabilities in time as all the creditors are nor accepted to demand cash at the same

time and then cash may also be realized from debtors and inventories.

Com#onents of Abso!%te Li.%id Ratio

A0SOLUTE LI6UID ASSETS CURRENT LIA0ILITIES



"nterest on #i$ed 4eposit Bills payable

*hort)term advances

*undry creditors

4ividend payable

"ncome ta$ payable

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S1ARE 1OLDERS FUND TOTAL ASSETS

*hare 3apital #i$ed Assets

Reserves 0 *urplus C%rrent Assets

3ash in hand 0 at bank

Bills receivable

"nventories

7arketable securities

*hort)term investments

*undry debtors

:repaid 8$penses

3' ACTI4ITY RATIOS

#unds are invested in various assets in business to make sales and earn profits.

The efficiency with which assets are managed directly effect the volume of sales. Activity

ratios measure the efficiency EorF effectiveness with which a firm manages its resources EorF

assets. These ratios are also called Turn over ratios because they indicate the speed with

which assets are converted or turned over into sales.

orking capital turnover ratio

#i$ed assets turnover ratio

3apital turnover ratio

3urrent assets to fi$ed assets ratio

7a8 5ORING CA/ITAL TURNO4ER RATIO

orking capital of a concern is directly related to sales.

5or;in$ (a#ita! 9 C%rrent assets + C%rrent !iabi!ities

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Cost of Sa!es 9 In(ome from Ser*i(es

Net Fied Assets 9 Fied Assets + De#re(iation

7(8 CA/ITAL TURNO4ER RATIOS

*ometimes the efficiency and effectiveness of the operations are %udged by

comparing the cost of sales or sales with amount of capital invested in the business and not

with assets held in the business, though in both cases the same result is e$pected. 3apital

invested in the business may be classified as long)term and short)term capital or as fi$ed

capital and working capital or 6wned 3apital and 1oaned 3apital. All 3apital Turnovers are

calculated to study the uses of various types of capital.

Cost of $oods so!d

Ca#ita! t%rno*er ratio 9

Ca#ita! em#!oyed

Cost of Goods So!d 9 In(ome from Ser*i(es

Ca#ita! Em#!oyed 9 Ca#ita! > Reser*es ? S%r#!%s

7d8 CURRENT ASSETS TO FI=ED ASSETS RATIO

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8arnings per share

6perating profit ratio

:rice J earning ratio

Return on investments

7a8 NET /ROFIT RATIO

@et profit ratio establishes a relationship between net profit Eafter ta$F and sales

and indicates the efficiency of the management in manufacturing, selling administrative and

other activities of the firm.

Net #rofit after ta

Net #rofit ratio9

Net sa!es

Net /rofit after Ta 9 Net /rofit 78 De#re(iation 78 Interest 78 In(ome Ta

Net Sa!es 9 In(ome from Ser*i(es

"t also indicates the firm&s capacity to face adverse economic conditions such as

price competitors, low demand etc. 6bviously higher the ratio, the better is the profitability.

7b8 RETURN ON TOTAL ASSETS

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:rofitability can be measured in terms of relationship between net profit and

assets. This ratio is also known as profit)to)assets ratio. "t measures the profitability of

investments. The overall profitability can be known.

Net #rofit

Ret%rn on assets 9

Tota! assets

Net /rofit 9 Earnin$s before Interest and Ta

Tota! Assets 9 Fied Assets > C%rrent Assets

7(8 RESER4ES AND SUR/LUS TO CA/ITAL RATIO

"t reveals the policy pursued by the company with regard to growth shares. A

very high ratio indicates a conservative dividend policy and increased ploughing back to profit.

=igher the ratio better will be the position.

Reser*es? s%r#!%s

Reser*es ? s%r#!%s to (a#ita! 9

Ca#ita!

7d8 EARNINGS /ER S1ARE

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8arnings per share is a small verification of return of equity and is calculated by

dividing the net profits earned by the company and those profits after ta$es and preference

dividend by total no. of equity shares.

Net #rofit after ta

Earnin$s #er s"are 9

N%mber of E.%ity s"ares

The 8arnings per share is a good measure of profitability when compared with

8:* of similar other components EorF companies, it gives a view of the comparative earnings

of a firm.

7e8 O/ERATING /ROFIT RATIO

6perating ratio establishes the relationship between cost of goods sold and other

operating e$penses on the one hand and the sales on the other.

O#eratin$ (ost

O#eration ratio 9

Net sa!es

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O#eratin$ #rofit

O#eratin$ #rofit ratio 9

Sa!es

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7f8 /RICE + EARNING RATIO

:rice earning ratio is the ratio between market price per equity share and

earnings 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 EorF not to buy shares in

a particular company.

(enerally, higher the price)earning ratio, the better it is. "f the price earning

ratio falls, the management should look into the causes that have resulted into the fall of the

ratio.

Mar;et /ri(e #er S"are

/ri(e Earnin$ Ratio 9

Earnin$s #er S"are

Ca#ita! > Reser*es ? S%r#!%s

Mar;et /ri(e #er S"are 9

N%mber of E.%ity S"ares

Earnin$s before Interest and Ta

Earnin$s #er S"are 9

N%mber of E.%ity S"ares

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7$8 RETURN ON IN4ESTMENTS

Return on share holder&s investment, popularly known as Return on investments

EorF return on share holders or proprietor&s funds is the relationship between net profit Eafter

interest and ta$F and the proprietor&s funds.

Net #rofit 7after interest and ta8

Ret%rn on s"are"o!derBs in*estment 9

S"are"o!derBs f%nds

The ratio is generally calculated as percentages by multiplying the above with

'GG.

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O0ECTI4E ? SCO/E OF STUDY

O4ER4IE5 OF FINANCE FUNCTIONS

Ro!e of finan(e f%n(tions+

#inance function is the backbone of any organization. The finance function plays a very critical

role in the ma$imization of shareholders who provide the funds to the company. This ob%ective

is being achieved by the finance department, which provides the carious information on the

financial parameters such as cash flows, profitability, cost and margin, assets, working capital

and shareholder value for the purpose of efficient utilization of resources resulting in better

profitability of the company. The importance of the finance functions cannot be undetermined

in any organization as

many companies have perished not due to bad production management but due to poor

financial management function acts like radar of the ship, which guides the direction of the

ship and saves it from the perils of the sea. "n the same way finance department provides

timely and relevant information to various levels of management for the purpose of decision)

making.

The various activities undertaken by the finance department achieve the aforesaid ob%ectives,

may be summarized as follows)

7aintenance of account books, cost records.

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:reparation of salary bills and other related payment to employees+ ::, bonus, TA,

departmental advances of :# accounts etc.

:reparation of :rofit 0 1oss a!c and Balance *heet.

(eneration of various 7"Rs for management use+ 7"Rs relating to turnover, profitability,

cash requirements, inventory.

3oordination with company auditors, (ovt. auditors, cost auditors and ta$ auditors.

4ecisions relating to purchase and sales.

"nvestment decisions+ capital investment decisions and working capital management

decisions.

#inancing decisions+ decisions relating to financing)mi$ or capital structure or leverage.

4ividend policy decisions.

COST SECTION

3ost) section of the company is divided into following two sections viz,

:R64>3T 36*T 0 38@TRA1 36*T and these deals with the following functions+ )

EiF 4etermination of periodic profits including inventory valuation.

EiiF 4etermination of pricing policy of the company.

EiiiF ork related to capital e$penditures of the company.

EivF 4eveloping variance 7anagement "nformation report for different parts of management

for purpose of cost control and reduction.

EvF Daluation of work in progress and finished goods.

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EviF "nteraction with management of top management link for achieving cost control and

cost reduction and thereby improving bottom line of the company.

EviiF :reparation of cost sheet of different product and their analysis for future planning.

0OOS AND 0UDGET SECTION

This section deals mainly with the following+)

EiF :reparation of operating budget for the company as a whole.

EiiF 3o)ordination with various functions of organization with regard to generation and

submission of important 7"R9s to corporate office.

EiiiF :reparation of annual accounts of the company.

EivF 3oordination with company auditors with regard to company accounts.

EvF 7aintenance and accounting of fi$ed assets accounts.

EviF :reparation of long term profit plans based on broad ob%ectives of the company.

SALES SECTION

*ales accounts section will deal mainly with the following items +)

EiF *crutiny and vetting of estimates ! quotation for sale of products ! services, wherever

financial concurrence is required.

EiiF *crutiny and vetting of agreements for sales of products and services

EiiiF "nvoicing for sale ! advance or progressive payment ! erection income and other.

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EiiiF 7aintenance of accounts of advances to suppliers, claims recoverable, claims for short

suppliers, re%ections and rectifications of materials and sundry creditors.

EivF 6pening of letter of credit and arranging payments to foreign suppliers under foreign

credit ! differed payment agreements.

EvF :ayment of bills for ocean freight, port trust dues, custom duty, local agents

commission and clearing agents bills, transit insurance bills, bills of contractors for

transport !handling etc. and accounting of such payments are made at regional offices.

EviF 7aintenance of accounts of material issued on loan and materials issued to

subcontractors.

/AYROLL SECTION

This section deals mainly with the following functions+

EiF :reparation of monthly wage bills.

EiiF All account work related to personal payments and disclose profit and loss account of

the company.

EiiiF 4ealing with income ta$ authority with regard to personal ta$ation of employee.

EivF 4ealing with other statutory authority such as :.#. 3ommissioner, 8*" Eemployee state

insuranceF.

EvF To ensure correct payment of salary and wages and other benefits to employees in,

telephone and miscellaneous payments.

EviF :reparation of monthly wage bills.

EviiF All account work related to personal payments and disclose profit and loss account of

the company.

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EviiiF 4ealing with income ta$ authority with regard to personal ta$ation of employee.

Ei$F 4ealing with other statutory authority such as :.#. 3ommissioner, 8*" Eemployee state

insuranceF.

5ORS SECTION

orks section of the company is dealing with the following functions+

EiF :ayments of contractor&s bills including bills for advance.

EiiF 7aintenance of accounts of contractors with regard to security deposits, earnest money,

progressive payments.

EiiiF -'5 maintenance of accounts of materials issued on loans to contractors.

EivF All accounting work related to capital e$penditure in progress on erection of plant 0

machinery and building.

EvF All other miscellaneous work relating to hiring of various facilities.

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COM/ANY /ROFILE

Na"ar Ind%stria! Enter#rises Ltd'

ahar "ndustrial 8nterprises 1imited E@"81F was incorporated on -


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Board has the support of Technocrats, qualified 8ngineers, 3hartered Accountants, Business

7anagement e$perts and other e$perienced personnel, employed by the company to look after

production, marketing and finance etc., separately for their different units. 7r. K.1. 6swal is the

3hairman of the company, who has long and varied business e$perience and is also associated

with various other companies. The day to day affairs are looked after by Mr' ama! Os&a!

4i(e C"airman+(%m+Mana$in$ Dire(tor, who has a vast e$perience in business

LIST OF DIRECTORS

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3apacities

@"81 is a vertically)integrated te$tile manufacturer, with operations ranging from spinning,

weaving and processing. The 3ompany9s manufacturing facilities are spread at different

locations with latest world class technology. The installed capacity of the company as a whole

is as under+)

Yarn

Name of t"e Unit S#ind!es Rotors

Arham *pinning 7ills, Bhiwadi ERa%F 55;/- -GGG

*pinning >nit)", 1alru E:bF 2?;-2 'G?G

*pinning >nit)"", 1alru E:bF 222GG 2/-

*pinning >nit)""", 1alru E:bF -?--2 'G?G

*pinning >nit)"D, 1alruE:bF

#urther implementation of ';?GG spindles is in progress and shall

be completed by 4ecember, -G'/

25;C;

)

*ambhav *pinning 7ills, 7undian E:bF /'nit, 1alru E:bF ;G 7illion 7eters E5G; loomsF

@ahar #abrics J :rocessing " 0 "" ) >nits, 1alru E:bF 5?.2 7illion 7eters

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S%$ar Ca#a(ity

Name of t"e Unit 6%antity #er Ann%m

@ahar *ugar, Amloh E:bF -5GG Tonnes

CA/ACITY

:ower E3o)generationF

1ocation 3apacity

La!r% 7/b8 -C 7

Am!o" 7/b8 '; 7

/o&er 7Ca#ti*e8

0"i&adi 7Ra8 ? 7

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/RODUCT /ROFILE

2J Cotton Yarns

3arded yarn count range @8 G; to @8 /2. 3ombed yarn count range @8 G; to @8 2G 0 fine

counts up to @8 ?Gs both from premium "ndian 3otton and also (iza blends.

2J Cotton Dyed Yarns

4yed yarns in 'GGH cotton as per count range as above.

Com#a(t S#%n Yarns

3ompact spun yarns in 3ount @8 ';s and above 'GGH cotton yarns as above.

2J 0!ended Yarns

e manufacture cotton)blended yarns with blends of polyester and viscose in the count range

@8 'G to @8 2G in different ratios as per requirement. These yarns are available as

(rey and 4yed.

2J /o!yester Yarn

3ount range @8 G; to @8 -G.

Ind%stria! Yarns

1ike T#6 manufactured Tyre 3ord, 3arpet, Rugs Marns etc.

O#en End Yarns

3ount range @8 G5 to @8 -G.

O#en End S!%b Yarns

3ount range @8 G5 to @8 -G.

TFO Yarns

/?
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All product range is available in single, double and multiple plies also as per requirements. end

use eaving, 4enims ,Terry towels,Rugs,3arpets and =osiery.

S#e(ia!iKed Yarns

Ring *lub yarns. Also 7ulticount!7ulticount *lub yarns& count range is from @8 G5 to @8 5G.

*pecialized end use in 4enims, eaving and =osiery also

E!i T&ist Yarns

3ount range -!-G to -!?G combed weaving, hosiery yarns.'GGH 3otton and :olyster 3otton

blends

Core S#%n Yarn

e supply 3otton 3ore *pun yarn with 4upont lycra and spanda$. e also offer core spun

slub yarns also. count range @8 'G to @8 ;G. *pecialized end use in 4enims,

eaving and =osiery also

4orte Yarns

e supply various blends on Dorte$ 7D* . 'GGH Discose ,3otton Discose Blends, 'GGH

:olyster, :olyster Discose and :olyester)3otton Blends.

S#e(ia!ity Yarns

'GG H 6rganic, #air Trade E#16 3ertification "4 N 5-';, -/'/< 0 -25?


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FA0RICS

:iece 4yed, Marn 4yed and :rints

Blends

'GGH 3otton 0 3otton Blends E:oly)cotton, 3otton)*tretch etc.F

(*7

?G gms to //G gms

oven Dibrancy

Twills, 4obby *tructure, Broken Twills, Ripstop, 6ttoman, 3hinos, *atins, Tussors, Bedford

3ord, 3avallery Twill, 3anvas, (abardine

Marns >sed

*ingle 0 4ouble 3ount with different counts E


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P 7icrosanding

P Anti Bacteria

P #rost #ree

P rinkle #ree

P *tain (uard

P Teflon

S5OT ANALYSIS

STRENGT1S 7S8:

1ow cost producer of quality equipment due to cheap labour and fully depreciated plants.

#le$ible manufacturing set up.

8ntry barrier due to high replacement cost of its manufacturing facilities.

3omprehensive turnkey e$perience from product design to commissioning.

3ommitted and skilled work force.

Relatively stable industrial relationship.

Access to contemporary technologies with back up support from renowned collaborators.

3apabilities to manufacture 25GG 7 of thermal T( sets. 2GGG 7 of boilers, '/25 7

of =ydro sets and 'GGG ) -GGG 7 of (as Turbines annually.

Ability to set up power plants on turnkey basis, complete know)how for manufacture of

entire equipment is available with the company.

Ability to manufacture or procure to supply spares.

#ully equipped to take capital maintenance and servicing of power plants.

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1argest share of domestic business leading toQ ma%or presence and influence in the market.

"*6 CGG' international companies.

Ability to successfully overhaul and renovate power station equipment of different

international companies.

Regional centersfor services for easy accesses to customers.

5EANESSES 758:

=igh working capital requirement due to its e$posure to cash starved *8Bs E*tate

electricity boardsF.

"nability to provide pro%ects financing.

4ifficulty in keeps up commitments on products delivery and desired sequences of

supplies.

1onger delivery cycle in comparison with "nternational suppliers of similar equipment.

"nability to provide supplier&s credit, soft loans for financing of power pro%ect.

1ack of effective marketing infrastructures.

"nadequate banking infrastructure.

O//ORTUNITIES 7O8:

=igh)e$pected growth in power sectors E


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O//ORTUNITIES ? CONSTRAINTS

4uring this summer training " got the following opportunities 0 constraints+

O##ort%nities

P To work in #riendly 8nvironment.

P =elpful staff of the 3ompany.

P To interact with more 7BA&s guys of different "nstitutes.

P To enhance the knowledge.

P Team *pirit.

Constraints

orking hours for trainees were allotted from '.GG :7 to 2.GG :7 only, according to

Na"ar Ind%stria! Enter#rises Ltd'.. "ncrease in the allotted hours could have further

improved the quality of the pro%ect.

4ue to non)availability of concerned e$ecutives during the allotted hours the time of

interaction available was limited.

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CORRELATION OF T1E CONCE/TS OF MANAGEMENT 5IT1

REAL+LIFE SITUATION

There are so many important concepts of 7anagement, which are directly applicable on

real life situations such as+ )

LEADERS1I/

4uring my *ummer Training, " had found that what an effective leader could do for any

firm. =ow an effective leader with good communication skills and e$cellent motivation

techniques can improve the performance of the group leading to an overall development of the

organization.

" have also found that markets scenario the near participative style of leadership is the best one,

as it allows every staff member from top to bottom to lead.

COORDINATION

The coordination also plays an efficient role in the development of any organization.

Any organization is set to be successful when its entire staff coordinates together and work as

one. The coordination applied during my *ummer Training, students of different institutes

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shared their views in)group discussions. " have learnt so many concepts by them and the

coordination between us was really good.

MOTI4ATION

As we have learnt in the #irst *emester that 7otivation plays an important role in the

development of any organization. " was motivated with the sincerity and hard working of my

reporting officer *hri Divek (oel and other finance personnel. "n #inance 4epartment of

Na"ar Ind%stria! Enter#rises Ltd', everybody appreciated *hri Divek (oel for his e$cellent

role especially in 8conomic Dalue Added.

COMMUNICATION

#or being an effective leader the basic need is effective communication skills. " had

seen that our training in charge had e$cellent communication skills with top to bottom. The

3ommunication also helped me in communicating the senior officials and employees of Na"ar

Ind%stria! Enter#rises Ltd'. when " went for an "nteractive *ession regarding my :ro%ect

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RESEARC1 DESIGN: DESCRI/TI4E

4escriptive studies are well structured, they tend to be rigid and its approach can not be

changed every now and then. 4escriptive study can be divided in two categories+

EAF 3ross sectional

EBF 1ongitudinal

4escriptive study are undertaken in many circumstances+

'. when the researcher is interested in knowing the characteristics of certain groups such

as age , profession.

-. when the researcher is interested in knowing the proportion of people in given

population who have behaved in a particular manner, making pro%ection of certain

things.

The ob%ective of this kind of study is to answer the why, who, ,what ,when and how of the

sub%ect under consideration.

"t will be taking descriptive because my research includes the knowing the behavior of

customer towards advertisement. " will be working on to know how people of various age

group respond to different advertising or there perception towards advertisement.

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FINDIGN ? ANALYSIS

MAOR FINANCIAL RATIOS

A ratio is an arithmetical relationship between tow figures. #inancial ratio is a study of ratios

between various items or groups of items in financial statements. #inancial ratios have been

classified in several ways. #or our purposes, we divide them into five broad categories as

follows+ )

LI6UIDITY RATIOS

LE4ERAGE RATIOS

TURNO4ER RATIOS

/ROFITA0ILITY RATIOS

2C


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5G


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LI6UIDITY RATIO

2' CURRENT RATIO

7Amo%nt in Rs'8

C%rrent Ratio

Year Current Assets Current Liabilities Ratio


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GRA/1ICAL RE/RESENTATION

5-


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3' A0OSULTE LI6UIDITY RATIO

7Amo%nt in Rs'8

Abso!%te Cas" Ratio

Year Absolute Liquid Assets Current Liabilities Ratio


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5;


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LE4ERAGE RATIOS

@' /RO/RIETORY RATIO

7Amo%nt in Rs'8

/ro#rietory Ratio

Year Share Holders unds Total Assets Ratio


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ACTI4ITY RATIOS

H' 5ORING CA/ITAL TURNO4ER RATIO

7Amo%nt in Rs'8

5or;in$ Ca#ita! T%rno*er Ratio

Year !ncome rom Ser"ices #orkin$ Capital Ratio


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;G


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' FI=ED ASSETS TURNO4ER RATIO

7Amo%nt in Rs'8

Fied Assets T%rno*er Ratio

Year !ncome rom Ser"ices %et i&ed Assets Ratio


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GRA/1ICAL RE/RSENTATION

;-


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' CA/ITAL TURNO4ER RATIO

7Amo%nt in Rs'8

Ca#ita! T%rno*er Ratio

Year !ncome rom Ser"ices Capital 'mployed Ratio


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;2


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' CURRENT ASSETS TO FI=ED ASSETS RATIO

7Amo%nt in Rs'8

C%rrent Assets To Fied Assets Ratio

Year Current Assets i&ed Assets Ratio


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/ROFITA0ILITY RATIOS

GENERAL /ROFITA0ILITY RATIOS

' NET /ROFIT RATIO

7Amo%nt in Rs'8

Net /rofit Ratio

Year %et (rofit After Ta& !ncome from Ser"ices Ratio


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;?


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2' O/ERATING /ROFIT

7Amo%nt in Rs'8

O#eratin$ /rofit

Year )peratin$ (rofit !ncome rom Ser"ices Ratio


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22' RETURN ON TOTAL ASSETS RATIO

7Amo%nt in Rs'8

Ret%rn on Tota! Assets Ratio

Year %et (rofit After Ta& Total Assets Ratio


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2@' /RICE EARNINGS 7/E8 RATIO

7Amo%nt in Rs'8

/ri(e Earnin$ 7/E8 Ratio

Year *arket (rice (er Share 'arnin$s (er Share Ratio


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2H' RETURN ON IN4ESTMENT

7Amo%nt in Rs'8

Ret%rn on In*estment

Year %et (rofit After Ta& Share Holders und Ratio


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?G


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AD4ANTAGES OF RATIOS

The ratio analysis is one of the most powerful tools of financial analysis. "t is use as a device

to analysis and interprets the financial health of enterprise. Kust like a doctor e$amines his

patient by recording his body temperature, blood pressure etc. Before making his conclusion

regarding the illness and before giving his treatment, a financial analyst analyses the financial

statement with various tools of analysis before commenting upon the financial health or

weaknesses of an enterprise. 9A ratio is known as a symptom like blood pressure, the pulse rate

or the temperature of the individual.9 "t is with help of ratios that the financial statements can be

analyzed and decision made from such analysis.

2' 1EL/S IN DECISION+MAING:

#inancial statements are prepared primarily for decision)making. But the information provided

in financial statements is not an end in itself and no meaningful conclusions can be drawn from

these statements alone. Ratio Analysis helps in making decisions from the information

provided in these financial statements.


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3' 1EL/S IN COMMUNICATING:

The financial strength and weaknesses of a firm are communicated in a easier and

understandable manner by the use of ratios the information contained in a financial

statement is conveyed in a meaningful manner to the one for whom it is meant. Thus, ratios

help in communication and enhance the value of financial statements.

@' 1EL/S IN CO+ORDINATION:

Ratios even help in coordination, which is utmost importance in effective business

management. Better communication of efficiency and weakness of an enterprise results in

better co)ordination in the enterprise.

H' 1EL/S IN CONTROL:

Ratio analysiseven helps in making effective control of thebusiness. *tandard ratios can

be based upon :erforma financial statements and variance or deviations, if any, can be

found by comparing the actual with the standards so as to take corrective action at the right

time. The weaknesses or otherwise, if any, come to the knowledge of the management

which helps in effective control of the business.

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USES OF FINANCIAL STATEMENTS TO DIFFERENT

/ARTIES

The analysis and interpretation of financial statements is an important accounting activity. The

end users of business statements are interested in these statements primarily as an aid to

determine the financial position and the results of the operations. There are different parties

interested in the financial analysis of their statements and their aims and their ob%ectives also

differ significantly. The following are the use of statement analysis to different parties+

TO T1E FINANCIAL E=ECUTI4ES: +

The first party interested in the financial statement analysis is the finance department of the

business concern itself to the financial managers such analysis provides a deep insight into the

financial condition of the enterprises and the view of the past performance which helps in

future decision making. The financial statements give vital information concerning the

position of the enterprise as well the result of the operations.

TO T1E TO/ MANAGEMENT: +

The top management of the concern is also increased in the analysis of these statements

because it helps them reaching conclusions regarding+

:erformance appraisal of overall business activities.

8nquiry about current financial position and long term strategic planning.

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ueries concerning the relationships of earnings to trends in sales etc.

ueries concerning the relationships of earnings to investment.

TO T1E CREDITORS: +

The analysis of these statements is very essential to the creditors. Also some aspects of

enterprise operations are of interest to creditors in regard to liquidity of funds, soundness of

financial structure, profitability of the operations, effectiveness of working capital

management etc.

TO T1E IN4ESTORS AND OT1ERS: +

"nvestors& presents as well as prospects are also interested in the measurement of earning

capacity of the securities. "nvestors have been increasingly concerned with the cash

generation capability of an enterprise, primarily in terms of the fle$ibility available to such

enterprises to acquire other business and new assets on an advantage basis for this purpose.

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4ARIATIONS IN ACCOUNTING /OLICIES: +

Business firms have some latitudes in accounting treatment like depreciation, valuation of

stocks research and development e$penses, foreign e$change transactions, installment

sales, preliminary and preoperative e$penses, and provision of reserve and revaluation of

assets. 4ue to diversity of accounting practices found in practice, comparative financial

statement analysis may be vitiated.

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CONCLUSION

6n seeing the leverage position of the Na"ar Ind%stria! Enter#rises Ltd'" conclude that it

is very good as the stake of owners in company is continuously increasing and its long)term

debt continuously decreasing it means that company is paying its debt promptly and creditors

will not face any risk in investing in Na"ar Ind%stria! Enter#rises Ltd'as also Na"ar

Ind%stria! Enter#rises Ltd'is giving assured R6".

6n seeing turnover, fi$ed assets and current assets turnover of company goes on increasing

which is a good indicator as it brings commensurate gain and also the average collection

goes on decreasing but management should take more efficient steps to reduce it.

6n seeing the profitability of the Na"ar Ind%stria! Enter#rises Ltd'overall performance

is very good. A continuous increase in the values of 8:* Ee$cept year 'CCCF and 4:*

results, investors feel safe to invest money in Na"ar Ind%stria! Enter#rises Ltd'

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SUGGESTIONS

" have obtained some weak and strong points of the company during the analysis of financial

statements, which are as follows+ )

As %ust only the analysis financial statement is not only mean to reach at conclusions we cannot

substitute it for sound %udgment. #urthermore good %udgment depends upon the intelligence

and ability of the analyst.

6n seeing the liquidity position of Na"ar Ind%stria! Enter#rises Ltd'. " conclude that it is not

very good as the current assets are in the form of inventories and debtors. The debt collection

period is high and inventories are least liquid current assets. *o maintaining the inventories are

relatively costly affair for the company and the management must have to investigate properly.

"t is very necessary so that fund should not be blocked unreasonably. 8fficient inventory

management is required in Na"ar Ind%stria! Enter#rises Ltd'

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LIMITATIONS

There may be limitations to this study because the study duration Esummer placementF is very

short and it&s not possible to observe every aspect of financial management practices.

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0I0LIOGRA/1Y

0OOS:

#inancial 7anagement by *.@. 7aheshwari

7anagement Accounting by *.@. 7aheshwari

Lothari 3.R Research 7ethodology *econd 8dition, ishwa :rakashan.

MAGAINES

6utlook

Business orld

"ndia Today

NE5S/A/ERS

The =indu

The Time of "ndia

8conomics Times

5E0LIOGRA/1Y :

http:/ www.ori&india.com/aboutus.asp

OT1ER

Na"ar Ind%stria! Enter#rises Ltd'.) Annual Report

Na"ar Ind%stria! Enter#rises Ltd'BA1A@38 *=88T

CG


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ANNE=URE

A//ENDI=

0a!an(e s"eet as on 32st Mar("


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Documents

Ratio_analysis_OF Nahar Industrial Enterprises Ltd