1. COMPANY PROFILE

1.1 Introduction of the Company

Garden Vareli group of companies, one of the leading industrial

groups in India, plays a leading role in the field of fashion fabrics. With

annual sales exceeding U.S $ 90 million, they sell their products under a

single banner of quality ‘Garden’.

Garden Silk Mills Ltd. is one of the leading & oldest manufactures

of synthetic in India. Garden Silk Mills Ltd. has been exporting their

products to European markets since late 1970s. The company has made

vertical & horizontal integration from its establishment.

The company has three production plants: one at Village Vareli,

near Kadodara junction, N.H.No.8, the second at Village Jolva, near

Bardoli, and another at Garden Mill’s Complex, Sahara Gate, Surat.

Today the company has total 293 its own retail and authorized outlets all

over India.

The company has achieved a very good brand name in Indian &

International Market of Sarees & Dress Materials.

The company has achieved sales during financial year 1997-1998

of Rs.58,871.04 lacs & Rs.46,044.16 lacs during 1998-1999.

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1.2 History of the Company

The origins of the business go back to 1920 when Mr.Amichand

Shah installed the first Hattersley looms in Surat. Since 1920 the

company expanded not only by increasing the production capacity and

workforce of the business but also by pioneering new material and

processes.

The present Chairman and Managing Director of Garden Silk

Mills Ltd., Mr.Praful Shah is the youngest son of Mr. Amichand Shah.

Mr.Praful Shah taken qualification in USA in 1965 after which he joined

the company, up to that date Garden Silk Mills Ltd. had activities of the

Company to include processing cloth by introducing dying, printing and

finishing processes. As a result of this, the company was able to supply

finished textiles for the first time.

In the 1970s, the company recruited fine arts graduates from

leading institutions. An art studio was set up. The company started

introducing its own design and supplying these designs to the market.

Prior to this, the designs produced had been a function of customer

demand and from this manufacturer. This was the first step in building a

vertically integrated synthetic textile manufacturer and designer.

This move in the early 1970s coincided with the opening of

the first retail shop in Surat. The extension of the policy of vertical

integration into the retailing sector had advantages of uniform pricing,

close market monitoring, improving communication between

manufacturer and consumer, and above all exerting downward pressure

on the final selling price. The dedicated retail network now extends to

some 293 authorized outlets.

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In the late 1970s, the company started exporting its product

to European Markets, Given the size of the domestic market; the

proportion of products that are exported remains low at approximately

two percent. The company is in the process of further developing markets

in Africa, Central and Eastern Asia.

In 1980, the company developed a new site, Vareli, some 12

kilometers away from Surat. This has become the main manufacturing

plant and investment of more than Rs.2.0 billion has been made. Most of

this expenditure has been targeted at the expansion and modernization of

plant and equipment, particularly in the weaving and yarn preparatory

sections. As a result, the Company today has one of the most modern and

sophisticated textile plants in India.

In 1995 the company had decided to further its policy of

vertical integration by setting up a new plant, also near Surat, from

which, manufacturing of polyester filament yarn, one of its principal raw-

materials, from polyester chips, is going on. This plant had become on

stream at a cost of approximately 655 million rupees.

1.3 Activities of the Company

The company is primarily engaged in the manufacture of

synthetic textile, sarees and dress materials mainly made of polyester

yarns and certain intermediate products. Garden Silk Mills Ltd. has been,

and continues to be, the initiator of the majority of new textile varieties

woven and processed in Surat, is at present, the consumer of

approximately 50 percent of polyester yarn in India. The company

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believes that designs are a key factor in its market and used to produce

some 200 different printed designs each month.

The company’s lead in different and improved fabric

construction and the emphasis it places on design together with its

modern and efficient plant is key to its future success. The company

operates in a highly fragmented market where no individual manufacturer

has a material market share. It is also the leading integrated textile

manufacturer house, which undertakes all processes from yarn

manufacture to the retailing of dress materials and sarees.

The company, and its wholly owned subsidiary, Garden

Finance are also engaged in providing to the Indian corporate sector trade

and asset finance including the discounting of Bills of exchange.

The company also has a small engineering division, which

assembles a limited range of textile manufacturing machines.

1.4 Achievements of the Company

The company was first to setup a polyester filaments yarn

project in South Gujarat. The project is capable of producing multi-

filament & micro-filament yarn having a capacity of 5,000 Tones per

annum in collaboration with NON-VAL LEASINA AG of Switzerland.

This project has a special significance for the company, as polyester

filament yarn is the basic raw material for the product manufactured by

the company. The company was also first in producing of two-for-one

Twister in India.

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The company's production facilities boast of one of India's

most sophisticated textile plants at Vareli, Surat (Western India). Its

weaving plant comprising Nissan and Tsudakoma water jet looms - the

highest number of water jet looms under one roof in India - and rapier

looms, automatic shuttle change looms etc, high-tech yarn preparatory

machines viz, ziro-twist-sizing, draw-warping, texturising and twisting

machines, have a capacity of over 42 Lac meters/month of greige fabric.

The plant has an ISO 9002 certification by BVQI. The company also

markets high quality dyed and printed fabrics that it gets manufactured

from associated firms.

1.5 General Information of the Company

Board of Director

Praful A. Shah Chairman & Managing Director

Soly J. Bhesania Wholetime Director

Harshad F. Shah Wholetime Director

Shilpa P. Shah Wholetime Director

Sanjay S. Shah Wholetime Director

Rajen P. Shah

Arunchandra N. Jariwala

J.P.Shah

Alok P. Shah

Yatish Parekh

Sunil Sheth

Smita Shah

Madanlal Lankapati

Ravinder Singh Nominee of IFCI Limited

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Company Secretary

Kamlesh Vyas

Auditors

Natvarlal Vepari & Co.

Charted Accountants

Bankers

Bank of Baroda

Allahabad Bank

State Bank of Saurashtra

Bank of India

Registered Office

Garden Mills Compound,

Sahara Gate,

Surat-395010.

Corporate Office

Manek Mahal,

90, Veer Nariman Road,

Mumbai-400020.

Plants

i) Garden Mills Compound, Sahara Gate, Surat

ii) Village Vareli, Tal.Palsana, Dist.Surat

iii) Village Jolva, Tal.Palsana, Dist.Surat

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Registrars & Transfer Agents

MCS Limited,

Neelam Apartment,

88, Sampatrao Colony,

Behind Federation Building, Alkapuri,

Baroda 390005.

Categories of Shareholders

CategoryNo. of

Shares Held

Holding

Strength

Promoters 19423891 50.73

Mutual Funds & UTI 3186803 8.32

Bank Financial Ins. & Insurance

Co.639757 1.67

FIIs (including foreign bank &

GDR)275682 0.72

Private Bodies Corporate 2141945 5.59

NRI’s/OCB’s 910433 2.38

Indian Public 10248256 26.76

GDR 1360925 3.55

Others 102868 0.27

Total 38290560 100.00

(Table 1)

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1.6 Organization Structure

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Chairman & Managing Director

Finance

Director

General Manage

r Marketi

ng

Import & Export

Director

Production

Director

Head of the

Department

Staff

2. RATIO ANALYSIS

2.1 INTRODUCTION OF RATIO ANALYSIS: -

The relationship of these two figure expressed mathematically is

called a ratio. The ratio reefers to the numerical or quantities relationship

between two variables or times. A ratio is calculated by dividing one item

of the relationship with the other. The ratio analysis is one of the most

useful and common methods of analyzing financial statement. Ratio

enables the mass of data to be summarized and simplified. Ratio analysis

is an instrument for diagnosis of the financial health of an enterprise.

2.2 MEANING OF RATIO:-

A ratio is only a comparison of the numerator with the

denominator. The tern ratio reefers to the numerical or quantitative

relationship between two figures and obtained by dividing the former by

the latter.

Ratio analysis is an important and age old technique of financial

analysis. The data given in financial statements ratio are relative form of

financial data and very useful techniques to cheek upon the efficiency of

a firm. Some ratio indicates the trend or progress or downfall of the firm.

2.3 Importance of ratio:

Ratio analysis of firm’s financial statement is of interest to a

number of parties mainly. Shareholders, creditor, financial executives etc.

shareholders are interested with earning capacity of the firm: creditors are

interested in knowing the ability of firm to meet financial obligation and

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financial executives are concerned with evolving analytical tools that will

measures and compare costs, efficiency liquidity and profitability with a

view to making intelligent decisions.

Aid to measure general efficiency: Ratios enable the

mass of accounting data to be summarized and simplified

Aid to measure financial solvency: They point out

firm’s liquidity position to meet its short-tern obligation and

long-tern solvency.

Aid in forecasting and planning: ratio help to prepare

the future plan of action etc.

Facilitate decision-making: it throws light on the

degree of efficiency of the management and utilization of the

assets that is why it is called surveyor of efficiency.

Aid in corrective action: the highlight the factors

associated with successful and unsuccessful firms.

Aids in intrude firm comparison: inter firm

comparison are facilities. It is an instrument for diagnosis of

financial health of enterprise.

Evaluation of efficiency: ratio analysis is an effective

instrument which, when properly used is useful to assess

important characteristics of business liquidity, solvency,

profitability etc.

Effective tool: ratio analysis helps in making effective

control of the business measuring performance; control of cost

etc. ratio ensures secrecy.

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2.4 Limitation of ratio analysis

Ratio analysis is as already mentioned, a widely used tool of

financial analysis. It is because ratios are simple and easy to understand.

But they must be used very carefully. They suffer from various

limitations.

Some of the limitations of ratio analysis are given below:

Difference in definition: comparisons are made

difficult due to difference in definitions of various financial

terms.

Limitations of according records ratio: Ratio analysis

is based on financial statement, which are themselves subject to

limitations.

Lack of proper standards: it is very difficult to

ascertain the standard ratio in order to make proper comparison.

Because it differs from firm to firm, industry to industry.

Changes in accounting procedure: it different firms

for their valuation follow methods then comparison will

practically be of no use.

Limited use of single ratio: a single ratio would not be

able to convey anything. It too many ratio are calculated they

are likely to confuse instead of revealing meaningful

conclusions

Personal bias: Ratios have to be interpreted and different

people may interpret the same ratio in efferent ways. The

analyst has to carry further investigation and exercise. His

judgment in arriving at a correct diagnosis.

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2.5 Types of Ratio

LIQUIDITY RATIO:

Liquidity and short term solvency ratios are used to judge the

firm’s ability to meet such current obligations as its accounts payable and

the current position of its long term debt. Liquidity is defined as the

ability to realize value in money, the most liquid of assets. It refers to the

ability to pay in cash, the obligations that are due. The important ratios in

measuring about short term solvency are as under.

Current Ratio:

Current Ratio: Current Assets, Loans and Advances Current Liabilities & provisions

The current ratio is the traditional ratio used to measure a

company’s liquidity & is calculated by dividing the total current assets by

the total current liabilities. This ratio is designed to assist the decision

maker in determining a firm’s ability to pay its current Liabilities. The

higher the ratio, the greater the ability or the company to meet its

immediate financial obligations. A current ratio of 2:1 indicates a highly

solved position.

Quick Ratio or Liquid Ratio:

Quick Ratio = Current assets, Loans & advances – Inventories Current Liabilities & provision – Bank overdraft

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Quick ratio is used as a measure of the company’s ability to meet

its current obligations. Since Bank O.D. is secured by the inventories, the

other current assets must be sufficient to meet other current liabilities. A

quick ratio of 1:1 indicates highly solved position. This ratio is also called

acid test ratio.

PROFITABILITY RATIO:

The purpose of study & analysis of profitability ratios are to help

assessing the adequacy of profits earned by the company & also to

discover whether, profitability is increasing or declining. The profitability

of the firm is the net result of a large number of policies and decisions.

The firm profitability ratios are as under:

Gross Profit Margin:

GPM = Sales – cost of goods sold x 100 Sales

The ratio measures the GPN on the total net sales made by the

company. The GP represents the excess of sales proceeds during the

period under observation over their cost, before taking into account

administration, selling & distribution & financing charges. The ratio

measures the efficiency of the company’s operation & this can also be

compare with the previous year’s results to ascertain the efficiency

pastiness with respect to the previous years.

Net Profit Margin:

NPM = Net profit before Interest & Tax x 100 Sales

The ratio is designed to focus attention on the NP margin arising

from business operations before interest & tax is deducted. The

convention is to express profit after tax & interest as a percentage of

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sales. This ratio measures the efficiency of operation of the company. The

ratio could be compared with that of the previous years & with that of

competitions to determine the trend in NP margins of the co & its

performance in the industry.

Return on Capital Employed:

ROCE = Net Profit x 100 Capital Employed

The strategic aim of a business enterprise is to earn a return on

capital. Ti in any particular case the return in the long run is no

satisfactory then the deficiency should be corrected on the activity be

abandoned for a more favorable one. Measuring the historical

performance of an investment centre calls for a comparison of the profit

that has been earned with capital employed. The rate of return on

investment is determined by dividing NP or income by the capital

employed on investment made to achieve that profit.

Earnings per Share (EPS):

EPS = Net profit after tax & preference dividend No. of equity shares

The performance of a corporation is better judged in terms of its

earnings per share. The EPS is one of the importance measures of

economic performance of a corporation entity. The flow of capital to the

companies under the present imperfect capital market conditions would

be made on the evaluation of EPS. Investors lacking inside & detailed

information would look upon the EPS as the best base to take their

investment decisions. A higher EPS means better capital productivity.

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Return on Shareholders fund or Return on Net Worth:

Return on Net worth = NP after Interest & Tax x 100 Net Worth

Where, Net worth = Equity + Reserves & surplus

This ratio expresses the NP in terms of the equity shareholders

funds. This ratio is an important yardstick of performance for equity

shareholders since it indicates the return on the funds employed by them.

This ratio is useful in measuring the rate of return as a percentage of the

book value of shareholders equity.

LONG TERM SOLVENCY RATIOS

The long term financial stability of the firm may be considered as

dependent upon its ability to meet all its liabilities, including those not

currently payable. The ratios which are important in measuring the long

term solvency is as follows:

Debt Equity Ratio:

Debt Ratio = Long term debt Shareholders Funds

This ratio indicates the relationship between loan funds and net

worth of the company. This is known as gearing. It the proportion of debt

to equity is low, a company is said to be low and vice versa. A debt

equity ratio of 2:1 is the boom accepted by financial institutions for

financing of projects. A debt equity ratio which shows a declining trend

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over the years is usually taken as a positive sign reflecting on increasing

cash accrual and debt repayment.

Proprietary Ratio:

It expresses the relationship between net worth & total asset.

PR = Net worthTotal Assets

Net worth = Equity share capital + preference share capital +

Reserve – Fictitious Assets

Total Assets = Fixed Asset + Current Assets

Reserves earmarked specifically for a particular purpose should not

be included in calculation of Net worth. A high proprietary ratio is

indicative of strong financial position of the business. The higher the

ratio, the better it is.

Interest Cover:

Interest Cover = Profit before Interest, depreciation & TaxInterest

The interest coverage ratio shows how many times interest charges

are covered by funds that are available for payment of interest. AN

interest cover of 2:1 considered reasonable by financial institutions. A

very high ratio indicates that the firm is conservative in using debt and a

very low ratio indicates excessive use of debt.

TURNOVER RATIO:

An activity ratio measures how effectively the firm employs its

resources. These ratios are also called turn over ratios which involve

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comparison between the level of sales and investment in various

accounts. Activity ratios are used to measure the speed with which

various accounts are converted into sales or cash.

Fixed Assets Turnover Ratio:

F. A. T. Ratio = sales Fixed Assets

This ratio will be analyzed further with ratios for each main

category of asset. This is a difficult set of ratios to interpret as asset

values are based on historic cost. An increase in the fixed assets figure

may result from the replacement of an asset at an increased price on the

purchase of an additional asset intended to increase production capacity.

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3. CALCULATION OF RATIO ANALYSIS

Classification of Ratio

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Classification of Ratio

Profit & Loss A/c Ratio

Balance Sheet Ratio

Inter-Statement Ratio

1. Gross Profit Ratio2. Net Profit Ratio3. Operating Ratio4. Stock Turnover Ratio1. Current Ratio2. Liquid Ratio3. Debt Equity Ratio4. Propritory Ratio5. Capital Gearing Ratio

1. Return on Investment Ratio2. Return on Propritory Fund Ratio3. Net Profit to Total Assets Ratio4. Creditors Turn Over Ratio5. Debtor Turnover Ratio

3.1 PROFIT & LOSS A/C RATIO

1. Gross profit ratio :-

This ratio establishes the relationship between gross profit on sales

and net sales i terms of percentage indicating the percentage of gross

profit earned on sales.

Gross ProfitGross Profit Ratio = ------------------- * 100

Net Sales

Years Gross profit

(a)

Net sales

(b)

Ratio (%)

(a/b)

98-99 3908.31 46044.16 8.49

99-00 3451.06 40347.01 8.55

00-01 4481.98 44459.79 10.08

01-02 6948.76 45167.17 15.38

02-03 8376.6. 52431.08 15.98

(Table 2)

(Graph 1)

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Interpretation :

The gross profit of the company is incresing day by day. It is

increase to 15.98 % in 2002-03 as comapre to 2001-02 i.e 13.38 %.

2. Net profit ratio :-

This ratio establishes the relationship between the amount of net

profit or net income and the amount of sales revenue.

Net Profit Net Profit Ratio = ------------------- * 100

Net Sales

Years Net profit

(a)

Net sales

(b)

Ratio(%)

(a/b)

98-99 837.40 46044.16 1.82

99-00 593.50 40347.01 1.47

00-01 2061.84 44459.79 4.63

01-02 2926.51 45167.17 6.48

02-03 3858.95 52431.08 7.36

(Table 3)

(Graph 2)

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Interpretation :

The net profit of the company is incresing day by day. In 1999-00

it was decrease to 1.47% but company take corrective action so that it

continuously increase from that time.

3. Operating ratio :-

This ratio takes into account the aggrerate of manufacturing cost of

goods sold and other operating expenses on the one hand, and the net

sales revenue on the other.

cost of good sold + Operating Expenses

Operating Ratio = ---------------------------------------------------- * 100 sales revenue

Years C O G S + O E

(a)

Sales revenue

(b)

Ratio (%)

(a/b)

98-99 45457.99 46044.16 90.49

99-00 40386.36 40347.01 83.57

00-01 42945.68 44459.79 82.43

01-02 41528.41 45167.17 76.11

02-03 48091.61 52431.08 91.72

(Table 4)

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(Graph 3)

Interpretation:

Sales revenue is increasing in 2002-03, lower operating ratio shows

the higher operating profit and vice versa. For manufacturing concerned

an operating ratio between 75% & 80% is expected.

4 Stock turnover ratio :-

Inventory turnover ratio which is also called stock turnover ratio or

stock velocity establishes the relationship between the cost of goods sold

during a given period and the average of the costs of openaing and

closing stocks.

Cost of goods soldStock Turnover Ratio = --------------------------

average inventory

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Years Cost of Goods Sold

(a)

Avg. Inventory

(b)

Ratio

(a/b)

98-99 42387.08 7186.88 5.90

99-00 37528.80 6546.48 5.73

00-01 40525.54 5530.16 7.33

01-02 37506.16 5653.43 6.63

02-03 43573.96 5500.88 7.92

(Table 5)

(Graph 4)

Interpretation:

A higher inventory turnover ratio is better than a lower inventory

turnover ratio. A higher ratio implies good inventory management and an

indication of under investment lower inventory turnover ratio indication

of excessive inventory and over investment in inventory.

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3.2 BALANCE SHEET RATIO

1. Current ratio :-

The ability of a company to meet its short-term commitment is

normally assessed by comparing current assets with current liabilities.

The current ratio establishes the relationship between the current assets

and the current liabilities. The ideal ratio is 2:1.

current assetsCurrent Ratio = --------------------------

curent liabilities

Years Current Assets

(a)

Current Liabilities

(b)

Ratio

(a/b)

98-99 14916.44 3630.93 4.11

99-00 13495.96 4008.77 3.37

00-01 10101.54 3178.01 3.18

01-02 13759.64 4093.50 3.37

02-03 9921.08 5721.94 1.73

(Table 6)

(Graph 5)

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Interpretation :

In last five years the current ratio is between 3.18 to 4.11 which

was very good for the company. But in the last year it was 3.37 while it

was highest in the 1998-99 i.e. 4.11 so compnay should take corrective

action for increase the ratio.

2. Liquidity ratio :-

A liquidity ratio is also known as acid-test ratio, therefore, used as

a complementary ratio to the current ratio. The ratio is concerned with the

establishment of relaionship between the liquid assets and the liquid

liabilities. The ideal ratio is 1:1

Liquidity AssetsLiquidity Ratio = ------------------------

Curent Liabilities

Years Liquidity Ratio

(a)

Current Liabilities

(b)

Ratio

(a/b)

98-99 7455.46 3630.93 2.05

99-00 7863.99 4008.77 1.96

00-01 4673.20 3178.01 1.47

01-02 7881.12 4093.50 1.93

02-03 4797.84 5721.94 0.84

(Table 7)

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(Graph 6)

Interpretation :

Liquidity ratio from 1998-99 to 2001-02 it is satisfied because it is

greater than 1:1 but last year i.e. 2002-03 there is 0.84 it was less than

satisfactory level. So company should take corrective action for the

improve this ratio.

3. Debt equity ratio :-

This ratio is calculated to measure the relative proportion of

outsiders’s funds invested in the company. This ratio determined to

ascertain the soundness of long term financial policies of that company

and is also known as external-internal equity ratio.

Long term debtDebt Equity Ratio = --------------------------------

shareholder fund

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Years Long term debt

(a)

Shareholder fund

(b)

Ratio

(a/b)

98-99 5238.49 35284.66 0.15

99-00 7417.12 32682.88 0.23

00-01 8304.24 34053.66 0.24

01-02 8846.48 30482.55 0.29

02-03 9645.26 30908.01 0.31

(Table 8)

(Graph 7)

Interpretation :

In last five years the debt equity ratio is between 0.15 to 0.31

which shows that the claim of creditors are less than that of owners but

the claims of creditors is increases in last five years.

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4. Propritory ratio :-

This ratio shows the relationship between shareholder’s fund and

total assets. The result clearly shows the share of owners in the total

assets of the company. When the proprietary ratio is substracted from

one, the resultant figure represents the share of outsider’s claim on the

assets of the company.

shareholder fundPropritory Ratio = --------------------------

total assets

Years Shareholder fund

(a)

Total assets

(b)

Ratio

(a/b)

98-99 35284.66 50676.34 0.70

99-00 32682.88 46590.91 0.70

00-01 34053.66 46828.82 0.73

01-02 30482.55 52184.81 0.58

02-03 30908.01 58004.16 0.53

(Table 9)

(Graph 8)

Interpretation :

In last five years the propritory ratio is between 0.58 to 0.73.

It was almost stable during last four years but in 2002-03 it was

0..53 which shows a greater risk to creditors.

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5. Capital gearing ratio :-

The term capital gearing is used to describe the relationship

between fixed interest bearing securities, and the equity shareholder’s

funds. Therefore this ratio establishes a meaningful relationship between

the funds bearing fixed interest on the one hand, and the equity

shareholder’s funds on the other.

Fixed interest bearing fund Capital Gearing Ratio = ---------------------------------------

equity share capital

Years Fixed int. Fund

(a)

Equity capital

(b)

Ratio

(a/b)

98-99 5238.49 3829.06 1.37

99-00 7417.12 3829.06 1.94

00-01 8304.24 3829.06 2.17

01-02 8846.48 3829.06 2.31

02-03 9645.26 3829.06 2.52

(Table 10)

(Graph 9)Interpretation :

The capital gearing ratio is between 1.37 to 2.52 during last five

years. In 2002-03 it was 2.52, the capital gearing is said to be high, this

position is under capitalisation.

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3.3 INTER-STATEMENT RATIO

1 Return on investment ratio :-

This ratio is an indicator of the earnign capicity of the capital

employed in the business. This ratio reflects the overall efficiency with

which capital is used.

PATI Return on Investment Ratio = -----------------------

capital employed

Years Profit after tax & interest

(a)

Capital employed

(b)

Ratio

(a/b)

98-99 837.40 33771.26 2.48

99-00 593.50 31193.36 1.90

00-01 2061.84 31445.76 6.56

01-02 2926.51 38007.83 7.70

02-03 3858.95 41543.08 9.29

(Table 11)

(Graph 10)

Interpretation :

The return on investment is higher in last year i.e 7.70 times which

is good sign for the company but it was very low in 1999-00 which is

increase in couple of years.

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2 Return on propritory fund ratio :-

This is an important ratio as it shows the amount of profit available

to the shareholders which determines the rate of dividend.

EATReturn on Propritory Fund Ratio = ------------------------x 100

shareholder fund

Years Earning after tax

(a)

Shareholder fund

(b)

Ratio

(a/b)x100

98-99 837.40 35284.66 2.37

99-00 593.50 32682.88 1.82

00-01 2061.84 34053.66 6.05

01-02 2926.51 30482.55 9.60

02-03 3858.95 30908.01 12.48

(Table 12)

(Graph 11)

Interpretation :

The return on propritory fund ratio of last five years shows that

sharholders gate 12.48 profit which is very good for company’s image.

But it was very low in 1999-00 i.e. 1.82.

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3 Net profit to total assets ratio :-

This ratio establishes the relationship between the net profit and

otal assets. This ratio tries to findout how efficient the company was in

utilizing the funds to generate or earn profit.

Net profitNet Profit to Total Assets Ratio = ------------------

total assets

Years Net profit

(a)

Total assets

(b)

Ratio

(a/b)

98-99 837.40 50676.34 0.02

99-00 593.50 46590.91 0.01

00-01 2061.84 46828.82 0.04

01-02 2926.51 52184.81 0.06

02-03 3858.95 58004.16 0.07

(Table 13)

(Graph 12)

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4 Creditors turnover ratio :-

This ratio, also known as payable turnover ratio establishes the

relationship between the net credit purchases and the average trade

creditors.

CreditorsCreditors Turnover Ratio = ------------------------- * 365

net credit purchase

Years Creditors

(a)

Credit purchase

(b)

Ratio

(a/b)

98-99 2322.75 26805.11 31.63

99-00 2631.58 19599.14 13.43

00-01 1696.07 24158.08 7.02

01-02 2575.36 23612.85 10.91

02-03 2473.88 29673.28 8.33

(Table 14)

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(Graph 13)

Interpretation :

Creditor turnover ratio was 8.33 times in 2002-03 which shows that

the disbursment of money is faster in the company. It was very slow in

1998-99when ratio was 31.63 times.

5 Debtors turnover ratio :-

Debtor turnover ratio, also known as receivables turnover ratio or

debtors velocity establishes the relationship between the net credit sales

of the year and the average receivable.

DebtorsDebtors Turnover Ratio = ----------------------- * 365

Net credit sales

Years Debtors

(a)

Credit sales

(b)

Ratio

(a/b)x365

98-99 6673.30 46044.16 52.90

99-00 6532.28 40347.01 59.09

00-01 3120.00 44459.79 25.61

01-02 3423.73 45167.17 27.67

02-03 3797.57 52431.08 26.43

34

(Table 15)

(Graph 14)

Interpretation :

Debtor turnover ratio was 26.43 times in 2002-03 which shows

speady collection of money. But it was lower in 2000-01 i.e. 25.6. so

company should take corrective measures.

FINDINGS

In last five year the current ratio is between 1.73 to 3.37 which was

very good for company .

In last five year, the claim of creditors are less than that of owner,

but the claims of creditors is decrease in last year.

The propritory ratio was almost stable during last four year.

The capital gearing ratio in 2002-03 was 2.52, the capital gearing is

said to be high, this position is under capitalisation.

35

The return on propritory fund ratio of last five years shows that

sharholders get 12.48 profit which is very good for company’s

image.

In last five years the net profit is between 1.47 to 7.36 which was

very good for the company.

In last five year, the return on investment ratio is between 1.90 to

9.29, which was very good for the company.

Debt equity ratio is determine to acertain the soundness of long

term financial policy of the company. In case the ratio is lower than

1.

SUGGESTIONS

In last years, the current ratio was 1.73, while it was highest in

1998-99 i.e. 4.11, so company should take corrective action for

incease the ratio .

In last, liquidity ratio was 0.84 while it was highest in 1998-99 i.e.

2.05 so company should take corrective action for increase the ratio

The propritory ratio in 2002-03 was 0.53 which show a greater risk

to creditor. So company should take care to increase ratio.

36

The capital gearing ratio shows that the position is under

capitalisation. Company should use its capital effectively.

As for as cash managemant is concerned,cash inflow is efficiently

undertaken,but improvement in cash outflow i.e. payments and

disbursment of cash requires considurable attention .

Company should try to increase the debt equity ratio.

BIBLIOGRAPHY

Books

Management accounting

By J.made gowda

Management accounting

By Bhagavati & pillai (second edition)

Financial management

By m.y.khan & p.k.jain

37

Financial Management and Policy

By V. K. Bhalla

Annual report of garden silk mills limited

Websites

www.gardenvareli.com

www.corporateinformation.com

Annexure – A : Profit & Loss A/c

Particulars 1998-99 1999-00 2000-01 2001-02 2002-03IncomeSales & Job Charges

46044.16 40347.01 44459.79 45167.1752431.08

-Excise Duty-------- --------- 1930.04 1776.57

1285.80

Income From Financial Operation 119.62 474.02 352.57 337.77

360.47

Other Income 131.61 158.83 195.16 726.55 444.81Total 46295.39 40979.86 43077.48 44454.92 51950.56

38

ExpenditureConsumption Of RM 26335.24 19543.91 24079.43 23611.85 296673.28(Increase)/Decrease In Stock

(364.91) 1658.33 273.70 424.70 307.73

Purchases 1327.39 3488.50 3698.66 3093.56 2216.49Mfg.& Other Expenses

15089.36 12798.06 10543.71 11225.45 13376.46

Total 42387.08 37528.80 40525.54 37506.16 43573.96Profit Before Financial Charges, Depreciation & Tax

3908.31 3451.06 4481.98 6948.768376.80

- Financial Charges 1798.41 1446.27 906.26 787.05 1243.84Profit before Dep. & Tax

2109.90 2004.79 3575.72 6161.717132.76

- Depreciation 1263.44 1408.29 1511.38 2245.21 2707.81Net Profit Before Tax 846.46 596.50 2064.34 3916.5 4724.95- Provision For Tax Current Deferred Earlier Years

9.060.000.00

3.000.000.00

2.500.000.00

3.00986.01

0.98

163.00703.00

0.00

Net Profit After Tax 837.40 593.50 2061.84 2926.51 3858.95+ Balance B/F 3822.86 4129.29 4147.37 76.27 28.42Balance For Appropriation 4660.26 4722.79 6209.21 3002.78 3887.37

Annexure – B : Balance Sheet

Particulars 1998-99 1999-00 2000-01 2001-02 2002-03Sources Of Fund1. Shareholder Fund Share Capital 3829.06 3829.06 3829.06 3829.06 3829.06 Reserve & Surplus 31455.80 28853.62 30224.60 26653.49 27078.95

35284.86 42682.68 34053.66 30482.55 30908.01

39

2. Loan Funds Secured Loan 8772.48 9645.37 9512.75 9336.48 9939.26 Unsecured Loan 2988.07 254.09 84.40 4764.55 7224.22

11760.55 9899.46 9597.15 14101.03 17163.48Total 47045.41 42582.14 43650.81 44583.58 48071.49Application Of Fund1. Fixed Assets Gross Block 35272.73 37178.21 39640.88 43320.78 55686.81 Less : Depreciation 14580.72 15891.57 16594.55 18783.39 21000.06 Net Block 20692.01 21286.64 23046.33 24537.39 34686.12 Less : Lease Adjs. A/C 69.50 122.47 6.89 6.89 0.00 Capital Wip 1863.24 542.00 1482.79 3811.19 2657.82

22485.75 21706.17 24522.23 28341.69 37343.942. Investment 3049.86 3400.28 5760.96 4070.30 3284.613. Current Assets Inventories 7460.98 5631.97 5428.34 5878.52 5123.24 Sundry Debtors 6673.30 6532.28 3120.00 3423.73 3797.57 Cash & Bank Balance 655.97 1248.23 1553.20 4457.39 1000.27 Loan & Advances Other Current Assets

10169.44126.19

7936.4283.48

6390.400.00

5915.060.00

7352.9800.00

25085.88 21432.38 16491.94 19674.70 17274.06 Less : Current Liabilities 2886.68 3214.35 2323.87 3325.99 4292.90 Provision 744.25 794.42 854.14 761.51 1429.04

3630.93 4008.77 3178.01 4093.50 5721.9421454.95 17423.61 13313.93 15581.20 11552.12

4. Deferred Tax Liability 0.00 0.00 0.00 -3507.73 4210.735. Misleading Expenses 54.85 52.08 53.69 98.12 101.55

47045.41 42582.14 43650.81 44583.58 48071.49

40