Nitesh Parihar

A project report
On
PROJECT ON RATIO ANALYSIS
FOR
RAYMOND
By
NITESH PARIHAR
PRAVIN BHOYAR
Under the guidance of
Mr. Subodh Sathe
Submitted to
BARKATULLAH UNIVERSITY, BHOPAL
In partial fulfilment of the requirement for the award of
the degree of Master of Business Administration (MBA)
Through
TIT COLLEGE BHOPAL (M.P.)

ACKNOWLEDGEMENT

It was golden opportunity and nice pleasure for me to pursuer summer training from Raymond
Ltd. (Textile Division Chhindwara) M.P

I Nitesh parihar & Pravin Bhoyar (TIT College, Bhopal) work on the Project on Management
Accounting Function & Ratio Analysis of Raymond Ltd.

I would like to express my sincere thank to Mr. Naresh Kadu who was my trainer in
charge in Raymond Ltd.

I would like to thankful to all staff of Account Department for the courtesy extended by them to
me.

I am very much thankful to complete my summer Training under Mr. Subodh Sathe (Sr.
Manager Account) and who was imparted a necessary guidance and Knowledge for the
fulfillment of the Project.

NITESH PARIHAR
PRAVIN BHOYAR

INDEX
Particulars

About the Project

Objectives of the Project

History and Background of Raymond

Board of Directors

Organization Setup-Finance

Short Resume of Chhindwara Plant

Raw Materials

Production Process

Foreign Export Earning and Outgo

Export Status in Raymond

Relationship of Finance with Management Accounting

Management Accounting Process
(Accounting Department)

Sales Accounting

sales and Order Details
Sales Procedure

Banking Transaction Details

Bill Discounting
Bill Passing
Bank Payment & Receipt

NEWS PAPER ARTICLE

Company Annual Report

Financial Analysis

a. Ratio analysis

PREFACE

I pleased to submit my study report on Raymond Limited (textile
division) Chhindwara carried out as a part of my syllabus. Raymond (THE
COMPLETE MAN) is one of the pioneers of textile industry India .As present
business scenario is very responsive to the changes created by
microenvironment I can strongly feel the changing dimension of the
dynamic filed Finance. This training report gives us a general idea about
day to day working of account department of the Raymond Limited.
Chhindwara. The decisions and action taken by finance people depend on
their practice knowledge besides their theoretical Knowledge. This justifies
the need of strong practical background.
Various experience gained by me in Raymond Limited Chhindwara
are presented in this report such that the practical obligation of theoretical
Knowledge perceived by me in 2
nd
SEM is justified.

HISTORY AND BACKGROUND OF
Raymond Limited

Raymond Limited was initially incorporated under the name of the WADIA
WOOOLEN MILLS and was then managed by E.D.SASSOON. Shri JUGGILAL SINGHANIA
of Kanpur took over the management was brought under the control of J.K Trust Mumbai (A
Public (charitable trust) in the year 1925. There after the name was changed to Raymond
Woolen Mills Limited.
In late 1994, the Raymond woolen mills was changed to Raymond Limited.
Traditional product line were discounting High quality become a member of the watchword and the
diversification program got a head start. Non traditional blend of natural and manmade fabric were
introduced back by sound research and development. This resulted in greater consumer satisfaction
both at home and abroad.

The idea of J&K was to develop an organization with a diversified product line. Over
the year the organization grew in structure and development. To facilitate batter involvement of the
top management in the organization effort, the J.K organization was divided into three zone i.e.
Western, central and eastern, the Raymond Limited in Chhindwara is a part of western zone.

The subsidiary companies of Raymond Limited are as follows:-
Raymond Apparel Limited
Pashmina Holding Limited
Raymond Info Tech Limited
Jaykeyorg AG
JK (ENGLAND) Limited
Regency Textile Limited Portuguese Limited
Textile Regency, Sociended Limited

A SHORT RESUME OF CHHINDWARA UNIT

Mill : RAYMOND LIMITED
(Textile division Chhindwara)
B-1A.K.V.N. Kailash Nagar
Tehsil - Sausar
District Chhindwara

Location : Raymond Limited is situated in Boregaon
This comes under M.P audhyogik viksa
Kendra nigam, Jabalpur

Head office : J.K Organization
J.K Bldg, N. Morarjee Marge, Ballard zadgaon
Mumbai 400038

Registered office : Raymond Limited
Plot no. 156/11, No.2 village zadgaon
Ratnagiri (M.H) 415612

Production commenced on : 1
st
April 1991

Work director : Mr. VINOD PADMAHABHAN

Product manufacture : Suiting polyester / wool, polyester/viscous
All wool, furnishing fabrics

Area of the plot : 100 acre

Turn over : 400 crore

Our output : 11 lacs meter per month

Power consumption : 165363 units per day

Water consumption : 45 lacs liters per day

Coal consumption : 55 metrics tones per day

Man power : Office-265, Staff-428, Sub staff-38
Workers-3145

Readymade brand : Park Avenue, Parx, Zapp

OVER VIEW OF CHHINDWARA UNIT

Raymond Limited Chhindwara is the flagship company of J.K groups (western
division). It produces high quality polyester wool fabric and polyester viscose blends
fabrics.
It began operation on 1
st
April 1991 to cater growing demand of premium suting. The
plant is at a distance of 57 kms from ORANGEB CITY Nagpur and 70 kms from
Chhindwara. The 100 acre plot stood as a pioneer in the socio economic development
of this region.

The factor behind the location of plant in Chhindwara.

Cheap land
Labour available at cheaper cost
Easy availability of power ,fuel & water
Availability of land for expansion
Easy transportation
Market proximity
Political stability

The plant is well equipped with the most modern machinery, which resulted in
high efficiency & productivity. Most important then machines are the manpower,
which is adequately skilled and competent. With in three year of starting they have
achieved over 90% efficiency level in the spinning and weaving department and they
are still maintaining it.
Most of their productions are export.

The present capacity of the plant after expansion, which has been concluded
recently, is 25,000 Mts. of fabric per day. Thus approximately 86 lacs Mtr. is produced
per annum at Chhindwara. The finishing department is the largest of its kind is Asia
with a capacity of 40,000 Mtr. Per day. This fact opens to the possibility of carrying out
finishing for other plants. As of now they process the complete production of
JALGAON.

A Wool washing and Grey combing unit has become operational recently which
has eliminated their dependency on Thane for scoured wool. Also the capacity of
dyeing department has been doubled with the commissioning of 11 new HTHP
machines with the commissioning of new P/W spinning the number of spindles has
now increased to 33240. The 56 latest technology looms that has been installed in the
new Weaving department has taken the total number of looms to 120. All this makes
Raymond Chhindwara unit the largest producer of P/W fabric among its sister
concerns.

With satisfied customer of its member companies the J.K Organization (western
division) b is today to name to reckon with in Indias corporate sector. The J.K
Organization, of which Raymond (Textile division Chhindwara) is the part, saw the
light of the day in 1886. The organization received its name J.K from the father son
duo of Sh. Juggilal Singhania and Sh Kamlapat Singhania. Their idea was to develop an
organization with a diversified product line. Over the year the organization has been
divided into three zones namely .The chairman of this zone is Dr. Vijaypath Singhania.

RAYMOND Ltd. was adjudged the best Indian company and was presented the
top corporate award by a ream of experts from the HARVARD BUSINESS SCHOOL and
THE ECONOMIC TIMES .THE BUSINESS WORLD-MARG survey (1993) placed it at sixth
position for overall performance the group was ranked very high in profitability and
innovativeness. According to DALAL STREET JOURNAL the groups are at No.3 at
National level and No.1 in Western Indian undoubtedly they are the Numero Uno in
the Indian Textile industry.

The combined operation of Raymonds is a staggering 160 lacs meters of such
Hi-quality fabric per year. It is not a matter of coincidence but a result of their quest
for excellence that they produced the finest fabric in India under the Microlite and
Super Microlite labels there all wool, extra fine high denier qualities can complete
with the best in the world....

They promote the Park Avenue brand of ready made suits and other mens
garments and accessories they are the suppliers at J.K Bombay. As a matter of habit
they have done very well.

ABOUT THE PROJECT

The main Focuses of the Project is to Understand Management Accounting
Functions ( Sales Accounting , cost Accounting ) , Production Process & Managerial
Tools ( Ratio Analysis & Schedule change in working capital) of the Raymond Limited
Textile division.

In this Period of Summer Training I was trained by Accounting Department. I am
presenting my Theoretical as well as my Practical Findings and Experience in most
appropriate Way to know or understand about the system and working of the
Accounting department. It was a grate experience for me

BOARD OF DIRECTORS

Name of Director Company of
Directorship
Directorship
in other
company ()
No. of Board
committees (other
then Raymond Ltd)
in which
chairman/member
Relationship
interse
Directors
Dr. Vijaypat singhania Promoter Non-
Executive

Shri Gautam Hari
Singhania Chairman
and Managing Director
Promoter Executive
Shri B.K Kedia (upto
may 22,2008
Independent ,Non-
Executive

Shri Nana Chudasama Independent ,Non-
Executive

Shri B.K Bhargava Independent ,Non-
Executive

Shri U.V Rao Independent ,Non-
Executive

Shri I.D Agarwal Independent ,Non-
Executive

Shri Nabankur Gupta Independent ,Non-
Executive

Shri P.K Bhandari
(Wholetime Director-
upto April 23,2008)
Non-Independent
,Non-Executive

ORGANIZATION SETUP-FINANCE

Planning and Control
Financial Controller
Vice President Production

Additional Funds

Raw materials

Wool:-The Merino brand of wool is imported from Australia, and supplied as
Topes by the wool scouring & Grey combing department.

Polyester: - A man made synthetic fiber which is in the form of staple fiber or
tow. There are three verities- Normal, Sparkle &Low pill.

Viscose:-A regenerated cellulosic fibre, which is made from wood pulp. Generally
it is dope dyed by suppliers and is in fibrous form.

GODOWN FOR RAW MATERIAL

Here is three section of godown for keeping raw material.

Raw material godown
Top godown
Waste godown.

RAW MATERIAL NORMS

PSF POLYESTER STAPLE FIBRE
VSF Viscose Staple Fiber
TOW Polyester Continuous Filament
GWL Greasy Wool
SWL Scoured Wool

PROCESS MATERIALTop is a bundle of silver conversion of wool or Polyester TOW is a
converted Top)

TOP-Polyester
TOP-Wool TOP

OTHER MATERIAL:-

FLEX TOP (Linen TOP)
SILK TOP
VISCOSE TOP
LENRING MODEL TOP
BLENDED TOP
LENRING MODEL TOP
ACRYLIC FIBRE
CASHMERE TOP
Raw material Godown receives the following material from the supplier:-
Supplier Name Material

RIL- Reliance Industries TOW-PSF
Ltd. Pataganga (M.S)
Surat (Gujrat)

FRL- Futura Fibers TOW-PSF-TOP
Chennai

GIL-Grasim Industries Ltd VSF-TOP
Nagda (M.P)

DAL-Dewavrin Australia P. Ltd Greasy Wool

CDDL-Compagnie Importin DeLaines Greasy Wool

BEAPL-BWK Elders Australia P. Ltd Greasy Wool

RSA-Rantax S.A Curuguay Greasy Wool

NV-NVJOS Vennestex (Belgium) Greasy Wool

SNSM-Socete Novvelle Textile Maclou FLEX TOP

France and many others Suppliers

From INDIA

AAT-Azad Agro Traders Kashmir Greasy Wool

ESL-East EndSilk Ltd. Silk TOP

(Malda)W.B

Raw Material Receipt and Consumption Per Day average

Per day Raw Material Receipt Average 30-40 Ton

Details of Raw Materials

Greasy Wool 8.90 Ton
TOW 3-5 Ton
PSF 3-10 Ton
VSF 1.70 Ton
Polyester Top in & outside 3.90+4.50 Ton
Wool Top in & outside 4.30+0.50 Ton

Per Day RM Consumption Average 25.90 Ton

Details of Raw Materials

Department Raw Material Weight

Combing Dept. Greasy Wool 7.00 Ton
Converter Dept . TOW 4.00 Ton
SVSPG Dept PSF+VSF 1.40+1.30(2.70 Ton)
Dyeing Dept. Wool Top+Poly Top+PSF 3.0+3.80+2.0(8
Ton)
Recombing Dept. Wool Top+Poly Top 1.50+1.90 (3.40 Ton)

Bill Passing of Raw Material

For Passing Bill of Raw Material Following Document are required.

Rate Approval Register

Good Received Report

Bill

Procedure for the Passing of a Bill of Raw Material.

Raw material is required for the Production Process

Requirement is send to PPD (Production Planning Department)

PPD Makes the Programme and the report copy is send to commercial department and
Raymond Thane.

The Raymond thane, send the PAN (PURCHASR APPROVAL NOTE)to the commercial
department.

Approval authority for the PAN is the preindent Thane unit

Commercial department enters the rate in to Rate Entry Register and it is Approved by the
EXECUTIVE DIRECTOR and WORKS DIRECTOR and then send to the Account Department.

G.R.R is prepared in the Yarn godown or Raw material godown.

If yarn is purchased then the G.R.R is prepared under the series of OYP (outside Yarn Process).

If the Yarn is received after the Process then the GRR is prepared under the series of
OYP (outside Yarn Process).

If the wool is received after the process it comes under OWP (outside wool Process)

GRR is prepared in FSG series for the material received after finishing.

In G.R.R Codes for taxes and other charges are mentioned as:

-Basic Price
Excise Duty
Tax Amount
Other Charges

G.R.R. will be approved by DGM production / DGM quality control.
Party sends the invoice to commercial department.
Bill Passing Voucher or PJV is prepared on receipt of G.R.R. PAN and invoice.

Production Process

The operations at our plant are co-ordinate by the production planning control
department. Its role is to gather information of all stock at various stages and
communicate with the different departments, so that production activities are
synchronize. We have six month order in advance and divide the production plan bi-
annually in unison with the market, and our Jalgaon and Thane division.

First in the sequence is the row materials go down whrer the basic inputs
procured are stored, acconted for and intimated to the Commercial Department. The
first stage of processing is Dyeing. According to dyeing plan set by the production
planners, the dyeing department is issued tops. Fabric and yarns produced at further
stages which are grey or not have the desired pigmentation are also dyed.

Some polyester is produced in the form of tows. These are cut and converted
into silver form and made into tops in the converter section. The material is send back
to the row material godown from where it is sent to the dyeing department. Only
after a perfect match with standard shades are the tops sent to the Recombing
Department.

In the Recombing department tops of polyester and wool in silver form are
blended and mixed to produce uniform silver 65%polyester and 35%wool. The
processing ensures that fiber is untangled, straightened and parallel. All these P/W
tops are sent for spinning in the Worsted spinning department. The function of
spinning is to form yarn fiber. The yarn made is wound on a bobbin and is called
cheese.

Tops-Roll of silver
Tow- Rolls of continuous film or filament of fiber.
Silver- Fiber in a rope like form.

Simultaneous polyester and viscose is dispatched from the dyeing department
and row material godown to the blow room or P/V spinning department where it is
mixed in proportion. The mixed is transferred into silver in the carding section which
further processes and produced a poly viscose yarn.

All yarn is stored for intermediate purpose in a Double Yarn room from here the
yarn is issued to warping section of weaving department. At this stage yarn is woven
into fabric. In the mending department this fabric is under scrutiny for any defects to
be identified and removed. Every meter of fabric produced is checked.

The next stage of processing is the finishing department. fabric is washed
cleaned and subject to mechanical / chemical operation with the aim of giving the
fabric a smooth regular texture, provide luster and anti-creasing effect in the folding
department, finished fabric is cut to proper length, and packed properly.

In addition to this we have a plush department where we manufacture
furnishing fabric by procuring yarn out side. The packed goods are stocked in the
warehouse from where it is dispatched as per sales note to respective dealers. This
transfer is communicated to the sales office.

EXPORT STATUS IN RAYMOND

Exports began in the year 1956 & accelerate up to 60% of total exports of
textile. The turnover of Raymond in 1980 was Rs. 50 crore & it rose to 750 crore till
date. Profits have been continuously improved with regular and growing dividends. In
the filed of export, it crossed Rs. 75 crores Raymond is net Foreign export earner and
the real proud is to create a premium brand in international competitive market with
other few companies of India.

The production of Fabric both Woolen and Blended was increased up to 190
lacs meter per year for the total three plants of India. A producer of blanket, few
decades ago, the company now produce wide variety of wools, wools blended fabrics
including very exquisite and delicate fabric under the microclinte in the country as
well as in the world.

The networks of exclusive Raymond retail shop are unique in country, nearly
160 in over 75 cities causing dread in the market. The retail shop is its own property.
Company also runs the shop. And for the first time Raymond has introduced the
concept of ready made suits under the brand name of Parx or Park Avenue.

MORTATA an Italian company is one of the largest manufacturer of suting in
the world helped Raymond to produce international quality fabrics for the domestic
as well as international market.

BILL DISCOUNTING

Sales:-
Raymond has three types of sales:-
Direct sale
Export sales
Bills discounting

Bill discounting
In this type of sales there are three parties
Seller
Buyer
Bank
It is a credit sale. This type of sale is generally found in big organizations. Because
of large amount seller wants money immediately after sales, so he take the help of
bank. In bill discounting there are again two type of sale:-
BCDA
BCDA
BCDA: - Bills collection document through presentation. The Process of BCDA is as
follow.
No credit period
Bank release the document after realization of amount from party
Buyer gets the goods after he make payment to the bank
As soon as the bank get the draft it credit seller (Raymond) account
Bank charge some commission & interest on Invoice price.
Some bank charge interest & commission during discounting some after
realization of amount
Bank retains the bill for 25 days.

BCDA: - Bills collection document through acceptance. The process of BCDA is as
follow.
Credit period like 30,45 or 60 days
Bank released the document just after discounting.
Buyer gets the goods without making payment.
Bank credit the seller (Raymond) account as it gets the draft.
Bank charges some commission and interest on invoice price.
Bank retain the bill for stipulated period plus seven days after due date.
In case of dishonors dank return the bill to initial bank and then initial
bank immediately debits the sellers account.
There are two bank through which Raymond discount its bill from
Chhindwara division.
State Bank of India
Central Bank of India

The Raymond has appointed 23 selling agent through the country. The duty of
agent is to get order from the dealers. During booking the agent make a
document known as buyer master data sheet. These sheets contain the detail
about bank through which they want to discount the bill. From the sheet
company bifurcate seller according to their bank. The head office at THANE has
account in many banks. So the discounting which cant be done from
Chhindwara division can do through Thane head office.

Procedure of Bill Discounting
We prepare the invoice along with LR copy and Hundi in sales
accounting.
Check commission and interest payable by us.
Fill up paying slip for the discount amount with respective banks.
After the discounting the bank gives us immediate credit.

COMMISSION CHARGES OF BILL AT BANKS

Central Bank of India Rs. 9 per Thousand

State Bank of India Rs. 10 per Thousand

Rate of Interest

Central Bank of India 14%

State Bank of India 14%

Postal Charges

Up to Rs. 50,000 Rs. 35/-

Rs. 50,000 or more than Rs.50/-

In case of dishonor of the bill, bank will return the dishonor bill received from
collecting branch and will debit our account with them and will in turn debit, Thane

After discounting of bill, we credit the sales ledger control account, Thane through
credit note.

BILL PASSING
Bill:-Bill is the document raised by suppliers against the material supplied by them.

Bill Passing:-it is a procedure of passing the bill in order to make the payments.

Bill Passing is Two Types
For store
For Raw Material
In bill passing P.V.J. (Purchase Journal Voucher) is prepared.

For Passing Store Bill Following Document are required
Purchase Order
G.R.R. (Goods Received Reports)

Purchase Order:-Purchase order is prepared by purchase department on the
basis of quotation placed by supplier. The basic contents of purchase order as
follows:
Name of the party. (supplier)
Order No. and Date
Material Description with item code
Rate and Quantity
Delivery ex (Place of Delivery)
Delivery period (as per schedule) immediate.
Payment (credit period)
Basic order value
Tax condition
C.S.T. No. (Central Sales Tax) &G.S.T (General Sales Tax)
Five copies of purchase order are to be made to be sent
Store department
Account department
Department which require the material
Supplier
Purchase department

APPROVING AUTHORITY FOR THE PURCHASE ORDRE IS WORKS DIRECTOR.

G.R.R (Goods Received Report):-It is prepared on the basis of terms and
condition of purchase order by store department. This G.R.R. is then sent to
concerned department along with the materials which is indented by them
mentioned in G.R.R. Then the department approves this approved G.R.R. is sent
to stores. The stores sent all such approved G.R.R. to accounts department for
the passing of the bill.

Procedure for BILL PASSING of general stores

Materials are required by all the departments
Required material is sent to the stores department and the department
makes three copy of it.
Indent material is approved by the top management.
Indent material is sent to purchase department.
Purchase department invites the quotation from the supplier and as per
the quality they place an order.
Purchase department send the order to the party who supplies the
material.
Stores department receives the material and check the material as per
the terms and condition of purchase order.
If material is not as per the order placed, store will reject the materials
and return to the party.
After the acceptance of the material by the concerned department stores
department will make G.R.R.

G.R.R. will be approved by the technical department engineering department, Quality
Control, Production & store department.

If there is shortage of material G.R.R. is made for the material receive
and shortage and excess reports.
If material are not as per the quality it will be rejected and returns to
the party.
In G.R.R. challan Quantity, Receipt quantity and acceptance quantity
are mentioned and G.R.R. prepared after acceptance.
After supply of material party sends the bill
PJV (PURCHASE JOURNAL VOUCHER) is prepared on receipt of G.R.R.
purchase order and invoice.

Accounting Treatment

BY THANE HADE OFFICE

At the time of sale they debit the buyer account by invoice price and
bank processing charges as per bank rule.
When bill is drown or discounted by bank, they credit the buyers
account.
When bill is discounted they debit bank account by invoice price and
credit it by commission & interest charges.
In case of dishonor they again debit the buyers account credit bank
account.

BY CHHINDWARA DIVISION

Here only one sale ledger account is maintained. So here we pass only
that is we credit THANE HADE OFFICE.

By bank
When bill is discounted bank immediately credit our account and
debit it by interest and commission.
When bill is discounted bank reserve the above entry.

RAYMOND LTD. IS USING THE SAP SOFTWARE FOR ALL COMPANY WORK, LIKE
PRODUCTION PLANNING AND CONTROL, PRODUCTION PROCESS, HUMAN
RESOURCES DEPARTMENT, MAKETING,
PURCHASING AND ALSO IN ACCOUNTING DEPARTMENT
SINCE FEB.2007 SAP
SYSTEMS, APPLICATION AND PRODUCTS IN DATA
PROCESSING

SALES ACCOUNTING INDEX

Fabric classification and codes.
Billing area wise invoice numbers.
Bank code no. and prefixes.
Regular transport name code and area.
Area wise station list with transport name.
Agents name and station list.
Types of dispatches.
Batch making procedure.
Invoicing records generation and updating.

SALES ACCOUNTING FABRICS CODE & DETAILS

Types of dealers and code (DISTRIBUTION OF CHHENNAL)

Sr. No. Customer Group Name Customer Code
1 Wholesaler 01
2 Retailer 02
3 Distributor 03
4 Company Shops 04
5 Franchise Shop 05
6 Defense 06
7 Airlines 07
8 Public Sector 08
9 Private Sector 09
10 Banks 10
11 Hospitality 11
12 Educational 12
13 Corporate Attire 13
14 Automobile 14
15 Converter 15
16 Tailor 16

BILLING AREA WISE INVOICE NO.

Sr. No. BILLING AREA INVOICE NO.
01 0 S00200001
02 1 S01200001
03 2 S02200001
04 3 S03200001
05 6 S06200001
06 7 S07200001
07 8 S08200001
08 11 S11200001
09 12 S12200001
10 14 S14200001
11 16 S16200001
12 17 S17200001
13 20 S20200001
14 23 S23200001
15 24 S24200001
16 25 S25200001
17 26 S26200001
18 27 S27200001
19 34 S34200001
20 35 S35200001
21 40 S40200001
21 41 S41200001
23 42 S42200001
24 47 S47200001
25 53 S53200001
26 55 S55200001
27 58 S58200001
28 PLUSH W86200001

NOTE: -
1
ST
Character S for Chhindwara unit code.
2
nd
& 3
rd
Character is 58 for area code.
4
th
character is 2 for year code.
Last five character is 00001Invoice running nos.

SALES PROCEDURE

Every year there is sales booking takes place and the booking is done for two seasons.

Summer booking (in the month of December)
Winter booking (in the month of June)

In the booking the dealers book their requirement for next season for which the
booking is being taken place and as per their booking , sales & marketing Department
prepare sale notes quality, wise for all the dealers those are given booking for the next
season. There is a three type of Sale Note are prepared.

1. Main Sale Note- The same is prepared buyer wise in this, the qualities and shed nos.
Are mentioned of the dealers which are to be produced by us to fulfill the
requirement in the required delivery period under instruction given to Production &
planning Department.

2. Additional Sale Notes The same is also prepared buyer wise and the same is issued
after completion of booking for delivery period of next two months having the quality
and shed nos. per requirement of the buyer.\

3. Mini Sale Notes- Mini Sale Notes can be issued in favors of buyer as per their
requirement received through phone or email or their personal visit.

AREAWISE STATION LIST WITH TRANSPORT NAME

AREA CODE STATION AREA TRANSPORT NAME

01 JAMMU &KASHMIR DELHI U.P., M.P., TPT & T.C.I.

02 PUNJAB DELHI U.P, M.P, TPT

03 HIMACHAL PRADESH DELHI U.P, M.P, TPT

04 CHANDIGARH DELHI U.P, M.P, TPT

05 HARYANA DELHI U.P, M.P, TPT

06 DELHI DELHI U.P, M.P, TPT

07 EASTERN U.P (GHAZIABAD) DELHI U.P, M.P, TPT

08 AGRA DELHI U.P, M.P, TPT

11 KANPUR, LUCKNOW R.I.T.CO.TRANSPORT

12 VARANASI, GORAKPUR R.I.T.CO.TRANSPORT

13 BIHAR RITCO, CARRYCO, N.E.C.C

14 KOLKATA (W.BANGAL) INLAND SURFACE SERVICE

15 ASSAM N.E.C.C

16 ORISSA CARRYCO

17 NEPAL N.E.C.C

20 EASTERN M.P NEW GOLDEN TPT.

21 NORTH MAHARASHTRA ARCO, BATCH, & HANDDEL

23 WESTERN M.P NEW GOLDEN TPT

24 RAJASTHAN NEW GOLDEN TPT

25 GUJRAT R.I.T.CO TRANSPORT

26 SAURASHTRA R.I.T.CO. & PATEL
TRANSPORT

27 GOA GHATGE PATIL TRANSPORT

34 SOUTH MAHARASHTRA A.R.C, G.P.T & R.I.T.CO

35 BOMBAY R.I.T.CO. TRANSPORT

40 ANDHRA PRADESH ASSOCIATED ROAD LINES

41 KARNATAKA PATEL, VIJAYNAND & G.P.T

42 TAMILNADU PATEL, VIJAYNAND & G.P.T

43 KERALA & PONDICHERRY PATEL, VIJAYNAND & G.P.T

47 R.R.SHOP BOMBAY R.I.T.CO. TRANSPORT

49 R.R. SHOP DELHI DELHI U.P, M.P, TPT..

BATCH MAKING PROCEDURE

The batch making procedure is done by Warehouse Department and finds
processing of Dispatch is done by I.T. Department.

Before batch making warehouse sorting the old packed bale challan and daily
packing challan which are ready for dispatch of goods and keeping separately for making
a batch.

On the basis of challan which are in hand and ready for dispatch the warehouse
punch the challan in the batch programme. Looking to the capacity of lorry a batch can
be made of maximum of 350 Bales or 150 bales. which covers 22 to24 thousands meters
respectively in every challan gross weight is feeded in the same programme after
punching all challan the batch programme show total numbers of bale and total meters
which are ready for submission to EDP department for processing the final dispatch.
After that one slip is prepared by warehouse department for submission of batch to EDP
department having the details of a batch.

Date of Dispatch

Total no. of bales

Total meters

Type of dispatch

Time

SALES ACCOUNTING

PROCESS:-At the time of processing, there is a possibility of rejection of few
bales due to some reasons like C&D buyer, exclusively quality or without rate
and when the EDP gives green signal that as per the batch, total mtrs and total
bales are getting tallied after processing the excise invoice, warehouse can start
the loading of bales which take 1-2 hours and for final processing of batch lorry
should go out from the premises within three hour.

The following documents are granted after processing of any batch for the
department as given below to fulfill the further formalities.

SHIPMENT SHADE CARD: - Shipment shade card are printed buyer no.
wise having detail of bale no, quality no & shad. For each bale one
shipment shade card is printed which goes to warehouse shipment
section for attachment of sample cutting with the shipment shade card.

EXCISE INVOICE:-It is printed only for excise dept. to require for lorry and
excise clearance.

LOADING SHETT:-It is printed for loading of lorry having total no. of bales
of batch.

DIRECT PARTY LETTER:-This statement showing made to the buyer. This
is called as DIRECT DISPATCH SCHEME.

TRANSPORT ADVICE:-This statement is generated for warehouse & sale
account. Transport advice generated transport wise showing the detail of
dispatch buyer no. Wise and area wise having LR no. and date bale no.
buyer no. and station.

DELIVERY CHALLAN:-It is printed for warehouse shipment section, which
are attached with shipment shade card having detail of bail no, total
quantity of bales quality wise and shade wise. For each bale one delivery
challan is printed and one DR No. is generated.

FINAL INVOICE COPY:-After giving DR No. EDP option of batch and on
completion of processing, final invoice copy generates, buyer no, buyer
name & date, invoice no, LR No & Date, description of qualities, ex-mill
rate total quantity, total gross weight, net value, total excise duty T C
Cess, insurance and final invoice value drawn.

DEMAND DRAFT:-It is bank document which are attached along with
bank party invoice to present the bill before respective bank showing
value of goods, invoice no, draft no, bank name, payment term, LR No,
and due date.

INSURANCE STAMENT:-This statement is printed for paying insurances
premium against goods dispatch having invoice no, LR No, and
declaration value.

DEHLI PARTY STATEMENT: - This statement shows party wise dispatch to
Dehli area showing LR No. &date, buyer name & no value of invoice.

BOMBAY PARTY STATEMENT: - This statement shows party wise dispatch
to Bombay area showing LR No. &date, buyer name & no value of
invoice.

FOEIGN WISE STATEMENT: - This statement shows party wise dispatch to
grind lays bank parties having LR No. &date, buyer name & no value of
invoice.

INDIAN BANK STAMENT:-It is also called as bank forwarding statement
which is printed bank document no. wise and bank code wise showing LR
No. & date bail, value of invoice.

COMPUTER MTRS:-According to printout of transport advice,
computerized motor transport receipt are printed. Transport wise
consisting LR No. & date, consignee name, consignor name, destination,
total no, buyer name and address & mode of dispatch.

POSTING STATEMENT:-This is generated for posting of document to
different destination through register pos, couriers or bank post.

BANK OUTWORD REGISTER:-It is generated only for Central Bank Of India
(SAUSAR) bank of India (NAGPUR), SBI (SAUSAR) Showing bank reference
no, branch no, bank commission and interest, buyer no & name, invoice
no & value. This is send along with bank invoice for discounting purpose.

TAB LISTING:-After final processing and updating of batch this list is
generated and showing total no of invoice are prepared.

REMITTANCE SCHEDULE:-This statement is generated against bank
parties which are also attached with the invoice before sending for bills
collection to respective bank. After getting the entire document the EDP
dept. final check of invoice are done by sales account. The computerized
MTR are signed by transporters which are attached along with the
invoice.

PREPARATION OF LORRY RECEIPT

Always the consignee will be the Raymond limited. The consignee can be the
following
If party is direct the consignee is self
If party is FOREIGN BANK, DELHI, BOMBAY the consignee is self.
If party is NUTAN SAHKARI BANK &UNION BANK OF INDIA the consignee
bank is self.
If party is other than above is a BANK PARTY the consignee is name of
the bank. The complete set of document will consist of
If require B/D, covering letter, direct party letter.
Two set of invoice namely consignee bank &direct.
Lorry receipt (consigner & consignee)
Shipment card (along with sample)

INVOICING

The complete set of document shall consist of
If required, bank draft/ covering letter / direct party letter.
Two sets of invoices namely consignee banks and direct.
Lorry receipt (CONSIGNOR AND CONSIGNEE)
Shipment card (along with sample)

CHECKING OF INVOICE

The delivery challan should be checked that the buyer no. and bale no. is same.
Check the name in the both challan and original invoice.
Check the consignee bank in the consignee copy (L.R.) and the invoice.

The following have to be checked with L.R. and the invoice
Transporters name
Destination
L.R. no.
4) Bale no.
5) Check meter ago bale wise. Check for flag (flag should not apper for
Chhindwara Rags total damaged & fents.)
6) Check Excise duty (No Excise for orient silk & sherwani)
7) No charges like S.T, C.S.T. and G.S.T.
8) If hand delivery parties, check octra for Nagpur delivary.
9) For Bank invoices check bank processing charges & draft no.
10) If feints are dispatched under ACD (14.05%), BCD (20%), ccd (25.7%) then
discount is to be checked.
11) Check whether Invoice is legible and in good condition.

Method of Depreciation And Amortisation

Depreciation on factory building, plant and machinery, electrical installations and
equipment and aircraft is provided on the straight line method (S.L.M.) by writing off
95% of the cost of the assets over the specified period of the assets in accordance with
the provision of section 205 (2)(b) of the Companies Act, 1956;

Depreciation on other fixed assets (other than Land, Live stock where is no
deprecation is provided), is provided on the Written Down Value Method (W.D.V.)
at the rates specified in schedule XIV to the Companies Act, 1956 from time to time.

Depreciation on all assets referred to in (i) above, acquired up to 31
st
March, 1987, is
provided at the rates of depreciation prevalent at the time of acquisition of the assets,
in pursuance of Circular no. 1 of 1986, (1.1/86-CL-V) dated 21
st
May, 1986, issued by
the Company Low Board;

Depreciation on additions to fixed assets after 1
st
April, 1987 is provided at the
relevant rates of depreciation in respect of S.L.M. and W.D.V. ,as specified in schedule
XIV to the companies Act, 1956 from time to time;

Depreciation on additions to fixed assets or on sale/ discardment of assets, is
calculated pro rate from the month of such addition or up to the month of such
sale/discardment, as the case may be;

Cost of Technical Know-how capitalized is amortised over a period of six years thereof;

Cost of Customized Software capitalized is amortised over a period of three to six
years thereof:

Cost of Leasehold Land is amortised over the period of lease.

TUFS fabric likely to get a double knit

INTEREST CLAIMS
Ministry has also urged the finmin to clear backlog of Rs. 1,400-crore interest
claims.

THE textile ministry has approached the finance ministry with a proposal to double the fund
allocation of a scheme that provides funds to the industry at benign interest rates. The finance
ministry is deliberating doubling the technology up gradation fund scheme (TUFS) funds from Rs.1,
090 crore in 2008-09 to 2,000 crore this year, a textile ministry official said. The scheme, which
helps textile companies modernize their equipment, was conceived after the government saw
many units still dependent on traditional and less efficient ways of production. Under TUFS, the
government reimburses 5% interest charged by the financial institutions and banks for loans to
textile units. With 16 banks acting as nodal agencies, the scheme implemented through 250 other
banks. A decision on the amount is yet to be taken, the official said, requesting anonymity.
The finance minister is sensitive to the needs of the industry. We are hoping that the allocation
would go up in the forthcoming Budget.

The textile ministry has also urged the finance ministry to clear the backlog of about Rs. 1, 400
crore interest interest claims. Textile firms are facing trouble in getting TUFS reimbursements for
2008-09. The ministry recently released Rs. 600 crore to settle claims up to September 2008. The
official pointed out that many companies were still interested in availing the benefits of the
scheme. To meet their demand, it was estimated that the annual interest claims could be over Rs.
2000 crore.
The government has to honour its commitment of reimbursing interest paid on loans taken by
the sector for modernization. If there is a high demand for such loans, then adequate provisioning
has to be made in the Budget to ensure that the reimbursement claims are dealt with on time.

THE ECONOMIC TIMES

MONDAY 29 JUNE 2009

Rescuing textiles

NREGA Extension Better Than Protectionism

The global meltdown has hit the textile industry hard. Global demand for garments and cloth
has dried up, so over a lakh workers are unemployed. Competition between developing
countries for the reduced global market has shrunk profit and led to dumping below cost in
some cases. A lazy response to the crisis will be protectionism, where an active response will
convert the crisis into an opportunity for radical reform. Textile minister Dayanidhi Maran
seems inclined towards a lazy protectionist response. Faced with cheap Chinese textile
imports, he wants to channel all such imports through just ports to check their volume. If
imports are allowed at all the entry points it becomes extremely difficult for the customs
department to police them. Maran seems to equate imports with criminal activity, which
should be police. In fact only smuggling should be policed, no imports. Far from being a crime,
imports are blessing that keep domestic price low, induce Indian producers to raise their
productivity, and so benefit Indian customers. Ministers want the flexibility whereby the
industry competes globally, and simultaneously provides work to a lakh unemployed workers.
They instinctively want to subsidise exports and ban imports, part of the old licence-permit
mentality that ruined Indian for so many decades. In fact we need entry of imports at all
possible points precisely because that serves consumers best.
Economic theory says if government insists on promoting a specific industry, this should be
through a specific subsidy or benefit, not protectionism. Going by this logic, the right way to
help Indian textile will be to extend the National Rural Employment Guarantee Act to textile
production. Textile producer should be allowed to hire workers at up to 100 days a year, who
will be paid the minimum wage by state governments.
This will provide textile producers with free labour, so they should be asked to supplement the minimum
wage by 50%. This will make the Indian textile industry highly competitive, give it labour flexibility, and
employ idle workers. The scheme should automatically lapse after 12 months by which time the recession
should be over. This is the way to help the industry, not protectionism.

BALANCE SHEET AS AT 31
ST
MARCH, 2003,2004,2005

2002-03
(Rs.in lack)
2003-04
(Rs. In
lack
2004-05
(Rs. In
lack
SOURESES OF
FUND

Shareholders fund
Share capital 6138.08

6138.08

6138.08

Reserves & surplus 89297.33

98717.37

104255.5

95435.41

104855.45

110393.53
LOAN FUND

Secured Loan 27179.69

22928.24

39333.3

Unsecured Loan 20960.2

24722.05

17944.5

48139.89

47650.29

57277.8
Deferred tax

4912.83

5701.71

5402.35
liability (net)
148488.13 158207.45 173073.68

APPLICATION OF
FUNDS:
Fixed Assets:

Gross block 90893.54

97952.73

114069

Less Depreciation 51465.77

57309.49

62798.1

Net Block 39427.77

40643.24

51270.86

Capital work in
progress 1112.25

1478.85

6291.96

Technical know-how
& Software 61.85

40601.87 42122.09 57562.82
Investment 61231.64 71586.85 73427.48

Current Assets,
Loan and Advn.
Inventories 27734.83

29490.66

28756.59

Sundry Debtors 29070.82

24614.52

22627.67

Cash and Bank
Balance 1494.35

2675.92

1324.83

Other Current
Assets 2516.56

1887.79

2277.72

Loan and Advances 12863.63

12122.14

12206.35

73680.24

70791.03

67193.16

Less:

Current Liabilities
and Provision
Current Liabilities 20217.82

18037.24

19504.61

Provisions 6839.76

8373.15

5605.17

27057.58 26410.39 25109.78
Net Current Assets 46622.66 44380.64 42083.38

TOTAL

148488.13

158207.45

173073.68
BALANCE SHEET AS AT 31ST MARCH, 2006, 07, 08.

2005-06
(Rs. In
lack
2006-07
Rs.in
Lack
2007-
08
Rs.in
Lack
SOURESES OF
FUND

Shareholders
fund


6138.08

6138

Reserves &
surplus 112856.45

123477.9

2087

Share Warrants

133690

118994.53 135615.94 141915
LOAN FUND

123003.5

50498


56686.05

38203

76787.84

78761.01

88701
Deferred tax
liability (net)

6402.73

5587.73

5967

202185.1 219964.68 236583
TOTAL

APPLICATION
OF FUNDS:
Fixed Assets:

123003.5

134540

Less
Depreciation 67765.8

55397.84

62587

Net Block 68907

67605.64

71952

Capital work in
progress 15604.81

8568.51

1358

Technical know-
how & Software - - - - - -

84511.81

76174.15

73310
Investment

73660.28

98447.5

104730

Current Assets,
Loan and Adv


28366.36

32974


26877.07

28988

Cash and Bank
Balance 2503.17

2561.4

2182

Other Current
Assets 3315.06

2969.9

5775

Loan and
Advances 14442.06

21715.86

24421

77011.19 82490.59 94340
Less:

Current
Liabilities and

Provision
Current
Liabilities 26227.34

29083.9

28245

Provisions 6770.84

8063.66

7553

32998.18 37147.56
35799

Net Current
Assets 44013.01 45343.03 58543

TOTAL 202185.1 219964.68 236583

BALANCE SHEET AS AT 31
ST
MARCH, 2009.

2008-09
Rs.in Lack
SOURESES OF FUND
Shareholders fund


Share Warrants 2086.95

Reserve & Surplus 106560.29

114785.32
LOAN FUND


134506.66
Deferred tax liability (net)

2837.2
TOTAL

252129.18

APPLICATION OF FUNDS:
Fixed Assets:

Less Depreciation 70159

Net Block 99904.55

Capital work in progress 6210.69

Technical know-how & Software - -
106115.24
Investment 88859.46

Current Assets, Loan and Adv



Cash and Bank Balance 4679.94

Other Current Assets 5066.34

Loan and Advances 23931.08

98165.33

Less:

Current Liabilities and Provision
Current Liabilities 35044.23

Provisions 5966.62

41010.85

Net Current Assets

57154.48
TOTAL

252129.18

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH,2003

Year ended
31st March,2003
(Rs. In Lack)
INCOME

Sales, Services and Export incentives 102058.56
other Income 7529.25

109587.81
Increase/(Decrease) in finished

and process stock -17.23
109570.58

EXPENDITURE

Material Cost 23926.31
Manufacturing & Operating Cost 21321.94
Employment Cost 16803.66
Excise Duties 8448.83
Administration, Selling & General Expenses 17316.96
Finance Charges & Variation 2727.11
Depreciation 5779.72
Miscellaneous Expenditure written off 127.03
96451.56
PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 13119.02
Add / (Less): EXCEPTIONAL ITEMS 194.59
PROFIT FOR THE YEAR BEFORE TAX 13313.61
Provision for Income Tax

Current Tax 3600
Deferred Tax 520.26
Provision for Wealth Tax 50
PROFIT FOR THE YEAR AFTER TAX 9143.35
Add / (Less): Prior period adjustments (net) -117.87
Excess provision for tax written back

Balance brought forward 4140.68
BALANCE AVAILABLE FOR APPROPRIATION 13166.16
APPROPRIATION

Debenture Redemption Reserve 375
General Reserve 6700
Dividend paid 0.38
Proposed Dividend 2762.14
Tax on proposed dividend 353.9

10191.42
Balance carried to Balance sheet 2974.74

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31
ST
MARCH, 2004, 05.

Year ended
31st March,2004
(Rs. In Lack)
Year ended
31st March,2005
(Rs. In Lack)
INCOME
Sales, Services and Export incentives 102393.56 114382.74
other Income 14459.52 8256.28
Total 116853.08 122639.02
EXPENDITURE

Material Cost 31134.16 34683.24
Manufacturing & Operating Cost 22932.1 25816.24
(Increase)/Decrease in finished and process stock -417.46 1009.29
Employment Cost 18042.16 20287.69
Administration, Selling & General Expenses 18120.12 19943.38
Finance Charges & Variation 2308.94 2883.14
Depreciation & Amortisation 6337.85 6376.72
Miscellaneous Expenditure written off 82.44

98540.31 110999.7
Less: Trial Run Expenditure Capitalized

-10.96

110988.74
PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 18312.77 11650.28
Add / (Less): EXCEPTIONAL ITEMS 345.65 -2467.99
PROFIT FOR THE YEAR BEFORE TAX 18658.42 9182.29

Current Tax++ 4660 1775
Deferred Tax 788.88 -299.36
Provision for Wealth Tax 26 25
PROFIT FOR THE YEAR AFTER TAX 13183.54 7681.65

-146.98 -43.66
Excess provision for tax written back 192.38 676.55
Balance brought forward 2974.74 6144.78
BALANCE AVAILABLE FOR APPROPRIATION 16203.68 14459.32
APPROPRIATION
Debenture Redemption Reserve 250 250
General Reserve 6000 831.45
Dividend paid 0.41 0.36
Proposed Dividend 3375.95 2455.23
Tax on proposed dividend 432.54 320.87

10058.9 3857.91
Balance carried to Balance sheet 6144.78 10601.41

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH,2006

Year ended
31st March,2006
(Rs. In Lack)
INCOME

140637.42
EXPENDITURE
(Increase)/Decrease in finished and process stock -510.89
Depreciation & Amortisation 7271.16
124530.83
Less: Trial Run Expenditure Capitalized -70.75
Finished and process stock transferred on

divestment of Carded Woollen business -1187.81

123272.27
Add / (Less): EXCEPTIONAL ITEMS -994.67
Current Tax 2750
Deferred Tax 1000.38
Fringe Benefit Tax 358
Add / (Less): Prior period adjustment (net) -110.63
Excess provision for tax written back -18
APPROPRIATION

General Reserve 1210.05
Dividend paid


5984.52
PROFITAND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2007

Year ended
31st March,2007
(Rs. In Lack)
INCOME

Less: Excise Duties -1543.4
128419.35

137497.17
EXPENDITURE
(Increase)/Decrease in finished and process stock 791.45
Depreciation & Amortisation 6305.51
125317.83
Less: Trial Run Expenditure Capitalized -51.04
Finished and process stock transferred on

divestment of Carded Woollen business -3468.26
Continuing operations 15172.47
Divested Denim business 526.17

15698.64
Add / (Less): EXCEPTIONAL ITEMS

Surplus on divestment of Denim business 8809.32
Others -684.68

Current Tax 4210
Deferred Tax -815
Fringe Benefit Tax 275
Add / (Less): Prior period adjustment (net) 88.05
Excess/Short provision for tax written back -1.3
APPROPRIATION

General Reserve 4000

9040.62

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2008 & 09.

Year ended
31st
Year ended
March,2008 31st March,2009
(Rs. In Lack) (Rs. In Lack)
INCOME

Sales, Services and Export incentives 133756.33 139325.37
Less: Excise Duties -1505.18 -1405.99
132251.15 137919.38
other Income 12080.89 9860.4
144332.04 147779.78
EXPENDITURE
Material Cost 46855.29 44290.85
Manufacturing & Operating Cost 26467.16 27030.47
(Increase)/Decrease in finished and process stock -3792.31 -2904.95
Employment Cost 23315.98 26100.26
Administration, Selling & General Expenses 30437.68 32845.78
Finance Charges & Variation 6010.34 8500.86
Loss/(Gain)on Variation In Foreign

Exchange Rates (Net) -1683.66 8910.27
Depreciation & Amortisation 8106.71 8881.35
135717.19 153654.89
PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 8614.85 -5875.11
Add / (Less): EXCEPTIONAL ITEMS -445.19 -23879.95
PROFIT FOR THE YEAR BEFORE TAX 8169.66 -29755.06
Current Tax 780.08

less/MAT Credit -642.08

Deferred Tax 1015.49 -3130.38
Fringe Benefit Tax 342 315
Provision for Wealth Tax 62 100
PROFIT FOR THE YEAR AFTER TAX 6612.17 -27039.68
Add / (Less): Prior period adjustment (net) 1.03 -65.41
Tax in Respect of earlier year (Net) 629.1 -50.04
Balance brought forward 27888.77 32674.54
BALANCE AVAILABLE FOR APPROPRIATION 35131.07 5519.41
General Reserve 661.22 -
Proposed Dividend 1534.52 -
Tax on proposed dividend 260.79 -

Balance carried to Balance sheet 32674.54 5519.41

PROFIT AND LOSS A/C FOR THE YEAR ENDED 31.03.09 SHOWS LOSS OF RS
5519.41 Lacs.
A

ANALYSIS AND INTERPRETATION OF FINANACIAL STATEMENTS

INTRODUCTION

There are various methods or techniques used in analyzing Financial Statement. Such as
comparative statement, trend analysis, common-size statement, schedule of change in working
capital, fund flow and cash analysis, cost-volume-profit analysis. The Ratio Analysis is one of
the most powerful tools of Financial Analysis. It is the process of establishing and interpreting
various ratios (quantitative relationship between figures and groups of figures). It is with the help
of ratio that the financial statement can be analyzed more clearly and decision made from such
analysis.

MEANING OF RATIO

An absolute figure dose not conveys much meaning. It, therefore, become necessary to study a
certain figure in relation to some other relevant figure to arrive at certain conclusion. A ratio is a
simple arithmetical expression of the relationship of one number to another. It may de defined as
the indicated quotient of two mathematical expressions.
If the two figures are not all connected with each other, their ratio will serve no useful purpose.

The ratio is calculated by dividing one figure by the other figure. It may be expressed in any of
the three way- TIMES, PROPORTION, PERCENTAGE according to the convenience or
suitability. When value is divided by the other, the quotient obtained indicates TIME. If the
quotient is multiplied by 100, we get the percentage. If we take proportion between the two
figures, we get the proportion or ratio.

A ratio is an arithmetical relationship between two figures in statement of accounts states either
as proportion, rate or percentage, for Ex percentage of net profit to capital, ratio of current
assets and current liabilities, Stock Turnover Ratio indicating number of times the stock is
replaced during the year.

INTERPRETATION OF THE RATIOS

The interpretation of ratio is an important factor. Though calculation of ratio is also important
but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness.
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 mind when attempting to interpret ratio.

1. Based on Single Ratio and Group of Ratio: The interpretation may be based on individual ratio
for example: - if a current ratio persistently falls and goes below one. It can be interpreted as an
indication of short-term insolvency. However, one cannot guess the position correctly by
studying individual ratio in isolation. It is, therefore a common practice to study and interpret a
set of several related ratio e.g. for short-term solvency both the ratio viz. Current Ratio and Acid
Test Ratio must be studied. The ratios, whose significance is not fully understood, are made
more meaningful by the computation and study of additional relevant ratio.

2. Compassion Overtime: Ratio analysis is primarily useful for studying tends, indicating rise,
decline or stability over a period of time, for this purpose, ratio by themselves are of no
particular significance. For revealing such trends, the same ratio or a group of ratio is studied
over a period of year. Thus, the movements in the ratio, rather then the ratio themselves, are
important.

3. Inter-firm Comparison : Ratio of the undertakings is compared with the respective ratio of
other firms in the same industry and with the industry in average. An immense benefit is likely to
flow from such comparison as the concerns similarly situated are, as a matter of fact, to sail in
the same boat.

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS

The calculation of ratios may not be difficult task but their use is not easy. The information on
which these are based, the constraints of financial statements, objective for using them, the
caliber of analyst, etc. are important factors which influence the use of ratios. Following
guidelines or factors may be kept in mind while interpreting various ratios.
Accuracy of financial statements- The ratios are calculated from the data available in financial
statements. The reliability of ratios is linked to the accuracy of information in these statements.
Before calculating ratios one should see whether proper concepts and conventions have been
used for preparing financial statements or not. These statements should also be properly audited
by competent auditors. The precautions will establish the reliability of data given in financial
statements.
Objective or purpose of analysis- The type of ratios to be calculated will depend up on the
purpose for which these are required. If the purpose is to study current financial position then
ratio relating to current assets and current liabilities will be studied. The purpose of user is also
important for analysis of ratios. A creditor, a banker, an investor, a shareholder, all has different
object for studying ratios.
Selection of ratios Another precaution in ratio analysis is the proper selection of appropriate
ratios. The ratios should match the purpose for which these are required. Calculation of large
number of ratios without determining their need in the present context may confuse the things
instead of solving them. Only those ratios should be selected which can throw proper light on the
matter to be discussed.
Use of standards The ratios will give an indication of financial position only when discussed
with reference to certain standards. Unless otherwise these ratios are compared with standards
one will not be able to reach at conclusions. Theses standards may be rule of thumb as in case of
current ratios (2:1) and acid test ratio (1:1), may be industry standard.
Calibre of the analyst The ratios is only the tools of analysis and their interpretation will
depend up on the caliber and competence of the analyst. The utility of ratios is linked to the
expertise of the analyst.

USE AND SIGNIFICANCE OF RATIO ANALYSIS

The ratio analysis is one of the most powerful tools of financial analysis. It is used as a device to
analyze and interpret the financial health of enterprise. Just like a doctor examines his patient by
recording his body temperature, blood pressure etc. before making his conclusion regarding the
illness and before giving his treatment, a financial statements with various tools of analysis
before pressure, the commenting up on the financial health or weaknesses of an enterprise.
The use of ratio is not confined to financial mangers only; there are different parties interested in
the ratio analysis for knowing the financial position of a firm for different purposes. The supplier
of goods on credit, banks, financial institutions, investors, shareholders and management all
make use of ratio analysis as a tool in evaluating the financial position and performance of a firm
for granting credit, providing loans or making investments in the firm. With the use of ratio
analysis one can measure the financial condition of a firm and can point out whether the
condition is strong, good, questionable or poor. The conclusions can also be drawn as to whether
the performance of the firm is improving or deteriorating. Thus, ratios have wide applications
and are of immense use today.
Managerial Usage of Ratio Analysis
Helps in decision making- Financial statement are prepared primarily for decision making. But
the information provided in financial statement is not an each in itself and no meaningful
conclusion can be drawn from these statements alone. Ratio analysis helps in making decisions
from the information provided in these financial statements.
Helps in financial forecasting and planning- Ratio analysis is of much help in financial
forecasting and planning is looking ahead and the ratios calculated for a number of years work as
a guide for the future. Meaningful conclusion can be drawn for future from these ratios. Thus,
ratio analysis helps in forecasting and planning.
Helps in communicating- The financial strength and weakness of a firm are communicated in a
more easy and understandable manner by the use of ratios. The information contained in the
financial statements is conveyed in a meaningful manner to the one for whom it is meant. Thus,
ratios help in communication and enhance the value of the financial statements.
Helps in co-ordination- Ratios even help in co-ordination which is of utmost importance in
effective business management. Better communication of efficiency and weakness of an
enterprise results in better co-ordination in the enterprise.
Helps in control- Ratio analysis even helps in making effective control of the business. Standard
ratio can be based up on proforma financial statement and variances or deviations, if any, can be
found by comparing the actual with standards so as to take a corrective action at the right time.

Utility to shareholders/Investors

Investors in the company will like to assets the financial position of the concern where he is
going to invest. His first interest will be the security of his investment and then a return in the
form of dividend or interest. For the first purpose he will try to asses the value of fixed assets and
the loans rose against them. The investor will feel satisfied only if the concern has sufficient
amount of assets. Long-term solvency ratios will help him in assessing financial position of the
concern. Profitability ratios, on the other hand, will be useful to determine profitability position.
Ratio analysis will be useful to the investor in making up his mind whether present financial
position of the cocern warrants further investment or not.
c. Utility to Creditors
The creditors or suppliers extend short-term credit to the concern. They are interested to know
whether financial position of the concern warrants their payments at a specified time or not. The
concern pays short-term creditors out of its current assets. If current assets are quite sufficient to
meet current liabilities then the creditors will not hesitate in extending credit facilities. Current
and acid-test ratios will give an idea about the current financial position of the concern.
d. Utility to Employees
The employees are also interested in the financial position of the concern especially profitability.
Their wage increase and amount of fringe benefits are related to the volume of profits earned by
the concern. The employees make use of information available in financial statements. Various
profitability ratios relating to gross profit, operating profit, net profit etc. enable employees to put
forward their viewpoint for the increase of wage and other benefits.

Utility to Government
Government is interested to know the overall strength of the industry. Various financial
statements published by industrial units are used to calculate ratios for determining short-term,
long-term and overall financial position of the firm. Profitability indexes can be prepared with
the help of ratio. Government may base its future policies on the basis of industrial information
available for various units. The ratio may be used as indicators of overall financial strength of
public as well as private sector. In the absence of the reliable economic information, government
plans and policies may not prove successful.

Tax Audit Requirements
Section 44AB was inserted in the Income Tax Act by the Finance Act.1984. Under this
section every assesses engaged in any business and having turnover or gross receipts exceeding
Rs. 40 lakh is required to get the accounts audited by a charted accountant and submit the tax
report before the due date for filing the return of income under Section 139(1) . In case of a
professional, a similar report is required if the gross receipt exceed Rs.10 lakh. Clause 32 of the
Income Tax Act required that the following accounting ratios should be given.
Gross Profit
Net Profit /Turnover
Stock-in-trade/Turnover
Material Consumed/Finished Goods Produced.

Further, it is advisable to compare the accounting ratios for the year under consideration with
accounting ratios for the earlier two years so that auditor can make necessary enquiries, if there
is any major variation in the accounting ratio.

LIMITATION OF RATIO ANALYSIS

The ratio analysis is one of the most powerful tools of financial management. Through ratio are
simple to calculate and easy to understand, they suffer from some serious limitation:

Limited use of a single Ratio: - A Single ratio, usually, does not convey much of a sense. To
make a better interpretation a number of ratios have to be calculated which is likely to confuse
the analyst then help him in making any meaningful conclusion.

Lack of Adequate Standard: - There are no well accepted standards or rules of thumb for all
ratios which can be accepted as norms. It renders interpretation of the ratio difficult.

Inherent Limitation Standards: - There are no well accepted standards or rules of thumb for all
ratios which can be accepted as norms. It renders interpretation of the ratio difficult.

Change of Accounting Procedure:- Change in accounting procedure by a firm often makes ratio
analysis misleading, For example a change in the valuation of methods of inventories, from
FIFO to LIFO increases the cost of sales and reduces considerably the value of closing stocks
which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio.

Window Dressing: - Financial statements can easily be dressed to present a better picture of its
financial and profitability position to outsider. Hence, one has to be very careful in making a
decision from ratios calculated from such financial statements. But it may be very difficult for an
outsider to know about the window dressing made by a firm.

Personal Bias:- Ratio are only means of financial analysis and not an end in itself, Ratio have to
be interpreted and different people may interpret the same ratio in different ways

Incomparable:-Not only industries differ in their nature but also the firm of the similar business
widely. Differ in their size and accounting procedure, etc, it makes comparison of ratio difficult
and misleading. Moreover, comparisons are made difficult due to differences in definitions of
various financial terms used in the ratio analysis.

Absolute Figures Distortive: - Ratios devoid of absolute figures may prove distortive as ratio
analysis is primarily a quantitative analysis and not qualitative analysis.

Price Level Changes: - While making ratio analysis, no consideration is made to the changes in
price levels and this makes the interpretation of ratio invalid.

Ratio no Substitutes:-Ratio analysis is merely a tool of financial statement. Hence, ratio become
useful if separated from the statement from which they are computed.

PROCEDURE OF ANALYSIS

First of all the depth. Objective and extent of analysis must be determined, so that necessary
information can be collected.

The analyst is required to go through various financial statement of the business and collect other
required information from the management.

The analyst is required to go rearrange the date given in the financial statement in a manner,
which will help him to analyse the statement easily and conveniently.

After analyzing the statement the interpretation is made and the conclusions are drawn.

Classification of ratios

Classification of ratios is done in two ways viz. (1) according to nature of items and (2)
according to purpose or function.
According to Nature of Items: (i) Balance Sheet Ratios: The ratios exhibiting the relation sheep
between two items or groups of items in the balance sheet e.g. relation between current assets
and current liabilities.
(ii) Revenue Statements or Profit & Loss A/C Ratios: The ratios disclosing the relationship
between two items or group of items in the profit & loss A/C e.g. relationship between sales and
Gross Profit or Net Profit.
(iii) Inter-Statement or Composite Ratio: The ratios indicating the relationship of certain
items in the balance sheet with some figures in the revenue statements e.g. net profit and capital
or sales and fixed assets.
Functional Classification: (i) Liquidity Ratios: These ratios measure the liquidity position of the
enterprise i.e. whether the current assets are sufficient to pay off current liabilities as and when
they mature. Thus, these ratios indicate short-term solvency of the business.
(ii) Leverage Ratios: They indicate the relative use of debt and equity in financing the assets
of the firm. The extent, to which the practice of trading on equity can be carried on safely, can be
known through these ratios.
(iii) Activity Ratios: These ratios measure the efficiency in the employments of funds in the
business operations. They reflect the companys level of activities in relation to its turn over.
(iv)Profitability Ratio: These ratios measure overall performance and profit earning capacity of
the business. They reveal the total effect of the business transactions on the profit position of the
enterprise.

However, the classification according to the following will be effective for analyzing and
interpreting the financial statements.
Profitability Ratios
Turnover Ratios
Financial Ratios
leverage Ratios
These ratios are explained below in detail.

Profitability Ratio:
These ratios give an idea about the profitability of a business firm. Profit and profitability differ
from each other as profit is the difference between income and expenditure while profitability is
measured by comparing the profit with some other parameter like sales, capital employed, and
total assets etc. The ratio following under this category is usually expressed in percentage. The
following are the ratio under this category:

Gross Profit Ratio
Net Profit Ratio
Operating Net Ratio
Operating ratio
Return On Capital Employed
Return on Equity
Return On Total Assets
Price Earning Ratio
Dividend Payout Ratio
Dividend Yield Ratio

Turnover Ratio:
These ratios are also known as activity ratio or asset management ratio. These ratios are very
important for a business concern to find out how well the facilities at the disposal of the concern
are being used. These ratios are usually calculated on the basis of sales or cost of goods sold.
High turnover ratio indicates better utilization of resources. The important turnover ratios are
discussed below.

Working Capital Turnover Ratio
Debtors Turnover Ratio
Creditor Turnover Ratio
Inventory / Stock Turnover ratio
Fixed Assets Turnover Ratio
Sales To Capital Employed

Financial Ratio:
As the name suggests, these ratios are calculated to judge the financial position of a business
firm from the long-term as well as the short-term angle. The following ratios are included in this
category.

Current Ratio
Liquid / Quick /Acid Test Ratio
Debt-Equity Ratio
Proprietary Ratio
Current Assets to Fixed Assets

Leverage Ratios:
In this category, the following ratio is significant.

Capital Gearing Ratio

Chart Showing The Important Ratios

Name of Ratio Formula for Calculating Ratio
Type of Ratio According
to
Nature Function

1. Current Ratio or Current Assets / Current Liabilities Balance Liquidity
2:1 Ratio

sheet Short-term

solvency
2. Acid Test Ratio or
Quick or Liquid Assets / Quick or
Liquid Liabilities " "
Quick Ratio or

" "
Liquid Ratio

3. Inventory to Working Closing Stock / Working Capital " "
Capital Ratio

4. Inventory Turnover Cost of Goods Sold / Average Inventory Composite Activity
Ratio

5. Debtors Turnover Credit Sales / Average Debtor " "
Ratio

6. Fixed Assets Turnover Sales / Net Fixed Assets " "
Ratio

7. Total Assets Turnover Sales / Total Assets " "
Ratio

8. Gross Profit Ratio Gross Profit / Net Sales * 100 Revenue Profitability

9. Net Profit Ratio Net Profit (after tax) / Net Sales * 100 " "

10. Operating Ratio
Cost of Goods Sold + Operating
Expenses " "

* 100 / Net Sale

11. Return on Shareholders'
Net Profit (after tax) * 100 /
Shareholders' Fund " "
Investment Ratio

12. Return on Capital
Net Profit (after tax & interest) * 100 /
Capital Composite Activity
Employed or Net Profit to / Capital Employed

Assets Ratio or Return

on Total Assets

13. Return on Equity
Net Profit (after tax & Pref. Dividend) *
100 " "
Capital Ratio / Equity Capital

14. Earning Per Equity Net Profit (after tax & Pref. Dividend) " "
Share Ratio / No. of Equity Share

15. Interest Coverage Ratio or
Net Profit Before Deduction of Interest
& Income Revenue "
Fixed Charges Cover Tax / Fixed Interest Charges

Ratio or Debt Service Ratio

16. Price Earning Ratio
Market Price per Equity Share / Earning
per Revenue Profitability
or P/E Ratio Equity Share

17.Earning Price Ratio or Earning per Equity Share * 100 " "
EPS Ratio / Market Price Ratio

18. Dividend Yield Ratio Dividend per Equity Share *100 " "

/ Market Price per Equity Share

19. Pay Out Ratio Dividend per Equity Share *100 " "

/ Earning per Equity Share

20. Proprietary Ratio Proprietors Fund / Total Assts Balance Leverage

Sheet

21. Fixed Assets Ratio (Depreciated value of) " "

Fixed Assets * 100 / Proprietors Fund

22. Current Assets to
Current Assets * 100 / Proprietors
Fund " "
Proprietors Fund

23. Debt to Equity Ratio or Total Debt i.e. long & Shirt-term " "
Total Liabilities to / Net Worth or Owners' Equity

Proprietors' Fund Ratio

24. Capital Gearing Ratio
Equity Share Capital + Reserves &
Surplus " "

/ Preference Share Capital & Loan
Capital

SOME IMPORTANT TERMS

Capital Employed : This term used in different meanings by different accounts as given
below :
Sum-total of all assets i.e. fixed current assets, excluding profit & loss A/c debit
balance, preliminary expenses, brokerage, underwriting commission, discount on
debentures or share etc.
It can also be stated as Share Capital + Reserves & Surplus + Long-term & short-term
liabilities.
Sum-total of fixed assets only.
Sum-total of long-term funds i.e. (Share Capital + Reserve and Surplus + Long term and
loans) (Non-business assets and fictitious assets).
Operating Profits: It means Gross Profit less Operating Expenses. In other words, it
means profit before charging interest on long-term loans, such as debentures and tax.
Similarly, non-trading incomes such as interest on govt. securities, amount received or
profit earned on sale of fixed assets etc. are to be excluded. Non trading losses and
expenses such as loss on sale of fixed assets, loss on account of fire etc. are also to be
excluded.
Current Liabilities: These are the liabilities to be paid within 12 months from the date of
Balance Sheet. On the basis of this concept, the debentures, the preference share and
the instalments of long-term loans which are repayable during the 12 months are
included in current liabilities. But the concept of current liabilities has not been
changed. The mere facts that the liability is to be discharged within the period of 12
months dose not make it a current liability. For example, if the preference shares are to
be redeemed during the year out of the proceeds of fresh issue of shares, they cannot
be considered as current liability. However, if the debentures are to be repaid during the
year from the cash and bank balance available, they are to be treated as current
liabilities.
The current liabilities generally include Sundry Creditors, Bills Payable, Outstanding
expenses, Short-term borrowings, Proposed dividend, Unclaimed dividend, provision for
taxation etc.
Current Assets: These assets include those assts which will either be based up or
converted into cash within 12 months or normal operating cycle of the business. They
thus, include cash and bank balance, marketable securities, other short-term high
quality investments, bills receivables, prepaid expenses, advance payment of tax, work-
in-progress, sundry debtors and inventories.
Investment in subsidiaries, debtors outstanding for more than 6 months, and
loose tools are not to be included in current assets.
Liquid Assets or Quick Assets: Current assets excluding stocks and prepaid expenses.
Liquid Liabilities: Current Liabilities excluding Bank Overdraft and Accrued Expenses.
Equity, Net Worth or Proprietors Fund: Preference Share Capital + Equity Share Capital
+ Reserve & Surplus less Losses and Fictitious Assets.

I. Profitability ratios

1. Gross Profit Ratio: This ratio reflects the efficiency with the management procedure
each unit of product. The ratio is calculated as under.
Gross Profit Ratio = Gross Profit / Sales X 100

Gross Profit is the difference between the net sales and the cost of goods sold.
This ratio shows the margin left after meeting the purchases and manufacturing costs.
It measures the efficiency of production as well as pricing. A higher gross profit ratio
means a high margin for covering other expenses like administrative, selling and
distribution expenses, i.e. other than the cost of goods sold. Therefore, higher the
ratio, the better it is. It is also important for a business to maintain this ratio on a
higher side; otherwise it will be difficult to cover other expenses. A firm should
compare its gross profit ratio with the industry average to find out where it stands. A
firm can also compare its own ratio of the past with the current years ratio to find out
its performance. This is known as inter-firm comparison.

The reasons for increase or decrease of gross profit percentage over the preceding
period may be any of the following.

The reasons for increase
Higher sales price, cost price remaining unchanged
Lower cost of
goods, sales
price remaining
constant.
A combination
of variation in
sales price and
cost, the
margin
widening
Change in the method of valuation of stock resulting in over-valuation of closing
stock.
Omission of
some of the
purchases.
Some sales
might have
been entered
more then
once.
The goods which have been sold but not delivered might have been included in
closing stock.

The reasons for decrease
Undervaluation of Stock
Higher
cost,
price
sales
price
remainin
g same.
Lower
sales
price,
cost price
remainin
g
unchange
d.
Pilferage
of Stock.
Some
purchase
s might
have
been
entered
more
than
once.

INTERPRETATIONS: - Raymond cos Trading A/C is confidential, thats why I cannot
find the amount of Gross profit and cost of goods sold.

Net Profit Ratio: Net profit is that proportion of net sales which remains to the owners or
shareholders after all cost, charges and expenses including income tax have been
deducted. It is calculated as under.
Net Profit Ratio = Net Profit (after taxes) / Net Sales X 100

It measures overall efficiency of all the functions of a business firm like production,
administration, selling, financing, pricing tax management etc. This ratio is very useful
for prospective investors because it reveals the overall profitability of the firm. Higher
the ratio, better it is because it gives an idea of overall efficiency of the firm.

NET PROFIT RATIO
YEAR NET PROFIT NET SALE N P RATIO (%)
2002 8363.76 97512.31 8.58
2003 9143.35 102058.56 8.96
2004 13183.54 102393.56 12.87
2005 7681.65 114382.74 6.71
2006 12229.1 134459.99 9.09
2007 20125.28 129962.75 15.48
2008 6612.17 133756.33 4.94
2009 -27039.68 139325.37 -19.40

INTERPRETATION:- In year of 2007 net profit ratio indicate 15.48 % & in year 2008 net profit
shows 4.98 % net profit, but in year of 2009 shows net profit in minus (-19.40) .

Operating Net Profit Ratio: This ratio establishes the relationship between the net sale
and the operating net profit. The concept of operating net profit is different from the
concept of net profit. Operating net profit arising out of the business operations only.
This is calculated as follows:

Operating Net Profit = Net Profit + Non-operating expenses non-operating income

Operating Net Profit Ratio = Operating Net Profit / Sales X 100

INTERPRETATION:- There is no availability of non-operating expenses in companys
Profit & Loss A/C, thats why I am unable to calculate Operating Net Profit Ratio.

Operating Ratio: This ratio is reciprocal to the operating net profit to sales. The cost of
goods sold + operating expenses are compared to net sales. The calculation of this
ratio is as follows.
Operating Ratio = Cost of goods sold + Operating Expenses / Net Sales X 100

INTERPRETATION:- Raymond cos Trading A/C is confidential, thats why I cannot find
the amount of cost of goods sold. Thats why I am unable to calculate Operating Ratio.

Naturally higher the ratio, the less favorable it is, because it would leave a small
margin to meet interest, dividends and other corporate needs. The ratio is an index of
the operating efficiency of the enterprise. It is advisable to study the ratio over a
number of years so as to view the direction of the operating efficiency.

Return on Capital Employed: This ratio indicates the percentage of net profits before
interest and tax to total capital employed. The capital employed is calculated as
follows.

Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long-
term Debt-Fictitious Assets.

This Ratio is calculated as follows:
Return on Capital Employed = Net Profit (before tax & interest) / Cap. Emp.
X 100

The ratio is an index of the operating efficiency of enterprise. It is advisable to study
the ratio over a number of years so as to view the direction of the operating
efficiency.
Return on Capital Employed (%)
(Rs. In Lacs)
YEAR
NET
PROFIT
Eq.
Cap. Pref.Cap. Reserve &
Long
Term Capital
Return on
Capital

Surplus Debt Employed
Employed
Ratio (%)
2002 11061.08 6138.08 - 83388.27 14243.87 97632.14 11.33
2003 13313.61 6138.08 - 89297.33 27179.69 116477.02 11.43
2004 18658.42 6138.08 - 98717.37 22928.24 121645.61 15.33
2005 9182.29 6138.08 - 104255.5 39333.3 143588.75 6.39
2006 16370.48 6138.08 - 112856.5 54667.56 167524.01 9.77
2007 23823.28 6138.08 - 129477.9 56686.05 186163.91 12.79
2008 8169.66 6138.08 - 133690.4 50204.16 183894.58 4.44
2009 -29755.06 6138.08 - 106560.3 86884.81 193445.1 -15.38

INTERPRETATION: - In year 2007 the capital employed ratio indicates 12.79 %
In year 2008 ratio shows 4.44 % & in year 2009 ratio goes minus side because due to recession, -15.38 %

6.Return on Equity:-This ratio , also known as return on shareholders funds or
return on proprietors fund or return on net worth, indicates the percentage of
net profit available for equity shareholders to equity shareholders fund , In
other words this ratio measures the return only on equity shareholders fund
and not on total capital employed like ratio number(5). The formula for
calculation is as follows:
Return on equity = Net profit after interested, income tax and preference dividend if
any / Equity shareholders fund * 100

Note: Equity shareholders funds = Equity capital + Reserves and surplus
This ratio indicates the productivity of the owned funds employed in the firm
However, in judging the profitability of a firm, it should not be overlooked that during
inflationary periods, the ratio may show an upward trend because the numerator of
the ratio represent current values whereas the denominator represents historical
values.
Return On Equity
(Rs. In Lacs)
Year Net Profit Equity Reserve
Equity
Share- Return On

(After Tax) Capital & Surplus
holders
fund
Equity
Ratio (%)
2002 8363.76 6138.08 83388.27 89526.35 9.34
2003 9143.35 6138.08 89297.33 95435.41 9.58
2004 13183.54 6138.08 98717.37 104855.45 12.57
2005 7681.65 6138.08 104255.45 110393.53 6.96
2006 12229.1 6138.08 112856.45 118994.53 10.28
2007 20125.28 6138.08 129477.86 135615.94 14.84
2008 6612.17 6138.08 133690.42 139828.5 4.73
2009 -27039.68 6138.08 106560.29 112698.37 -23.99

INTERPRETATION: - In year 2007 the return on equity ratio indicates 14.84 %
In year 2008 ratio shows 4.73 % & in year 2009 ratio goes minus side because due to recession,
-23.99 %

7. Return on Total Assets: This ratio compares the net profit after tax with the total
assets. The formula for calculation of this ratio is as follows:

Return on Total Assets = Net Profit (after Tax) / Total Assets X 100

RETURN ON TOTAL ASSETS.
Rs.(In lacks)
YEAR
NET
PROFIT FIXED CURRENT TOTAL RETURN ON

(after tax) ASSETS ASSETS ASSETS
TOTAL
ASSETS. (%)
2002 8363.76 37430.1 76977.28 114407.38 7.31
2003 9143.35 40601.87 73680.24 114282.11 8.00
2004 13183.54 42122.09 70791.03 112913.12 11.67
2005 7681.65 57562.82 67193.16 124755.98 6.15
2006 12229.1 84511.81 77011.19 161523 7.57
2007 20125.28 76174.15 82490.59 158664.74 12.68
2008 6612.17 73310.87 93282.09 166592.96 3.97
2009 -27039.68 106115.24 98165.33 204280.57 -13.24

INTERPRETATION: - In year 2007 the return on total assets ratio indicates 12.68 %
In year 2008 ratio shows 3.97 % & in year 2009 ratio goes minus side because due to recession,
-13.24 %

8. Earning Per Share: This is one of the important indicators of performance of a
company. Earning per share indicates the amount of profit available for
distribution amongst the equity shareholders. This ratio calculated as shown
below:
Earnings per Shares = Net Profit after Interest, Income tax and Preference Dividend /
Number of Equity Share

As mentioned above, EPS is one of the important criteria for meaning the
performance of a company. If EPS increases, the possibility of a higher dividend per
share also increases. However, the dividend payment depends on the policy of the
company. Market price of shares of a company may also show an upward trend if
the EPS is showing a rising trend. However, it should be remembered that EPS of
different companies may very from company to company due to the following
different practices by different companies regarding stock in trade, depreciation,
source of raising finance, tax-planning measures etc.

Earning Per Share

Year Net Profit Number of Earning per

(after tax) Equity Share Share(Rs.)
2002 836300000 61380857 13.62
2003 914300000 61380857 14.89
2004 1318300000 61380857 21.47
2005 768100000 61380857 12.51
2006 1222900000 61380857 19.92
2007 2012500000 61380857 32.78
2008 661200000 61380857 10.77
2009 -2703900000 61380857 -44.05

INTERPRETATION:- In year 2007 EPS was increases but in year 2008 it decreases % in year 2009 it goes
in minus side.

9. Price Earning Ratio: The ratio indicates the time the earning per share is covered by
its market price. The ratio is useful in financial forecasting. The higher the ratio the
better it is. If the ratio is high the additional larger amount of capital can be raised by
issuing smaller number of shares. It helps the management to decide the extent of
capital appreciation.

PER or P /E Ratio = Market Price per Equity Share / Earning Per Equity Share

Price Earning Ratio

Year *Market Price Per Earning Per PE Ratio (Rs.)
Equity Share(Rs.) Equity Share(Rs.)
2002 126.25 13.62 9.27
2003 245 14.89 16.45
2004 355.95 21.47 16.58
2005 555 12.51 44.36
2006 652 19.92 32.73
2007 474 32.78 14.46
2008 303.95 10.77 28.22
2009 91 -44.05 -2.06
* Highest Share Price in BSE

INTERPRETATION:- PE ratio highest in 2005 (Rs.44.36) But in year 2009 it goes in minus (
-2.06)

Earning-Price Ratio:-This ratio is reciprocal of PER

EPS = Earning Per Equity Share / Market Price per Equity Share * 100

A low percentage may reflect a high rate of growth in the past.

Earnings Price Ratio
Year Earning Per
Market Price
Per EPS (%)

Equity
Share(Rs.)
Equity
Share(Rs.)

2002 13.62 126.25 10.79
2003 14.89 245 6.07
2004 21.47 355.95 6.03
2005 12.51 555 2.25
2006 19.92 652 3.05
2007 32.78 474 6.91
2008 10.77 303.95 3.54

INTERPRETATION:- In year 2002 Earning price ratio indicates high (10.79 %) & in 2005 it indicates
low (2.25 %).

10. Dividend Pay out Ratio: - EPS describe above indicates the amount of
profit available for equity shareholders. Dividend Payout Ratio indicates the
percentage of profit distribution as dividends to the shareholders. A higher
ratio indicates that the organization is following a liberal policy regarding the
dividend while a lower ratio indicates a conservative approach of the
management towards the dividend. The ratio is calculated as shown below:

Dividend Payout Ratio = Dividend per Share / EPS * 100

Dividend Payout Ratio
Year Proposed Number of Dividend EPS Dividend

Dividend Equity Share
Per
Share

Payout (%)
2002 276200000 61380853 4.49 13.62 33.03
2003 276200000 61380853 4.49 14.89 30.22
2004 337500000 61380853 5.49 21.47 25.60
2005 245500000 61380853 3.99 12.51 31.97
2006 306900000 61380853 4.99 19.92 25.10
2007 306900000 61380853 4.99 32.78 15.25
2008 153400000 61380853 2.49 10.77 23.20

INTERPRETATION:- In year 2002 Dividend payout ratio indicates high (33.03 %) & in 2007 it indicates
low (15.25 %).

II. TURNOVER RATIO

1. Working capital Turnover Ratio: This ratio compares the net sales with net
working capital of the business firm. The indication given by this ratio is the number
of times working capital is turned around in a particular period. The ratio is
calculated with the help of the following formula:
Working capital Turnover Ratio = Net Sales / Net Working capital *

* Net Working capital = Current Assets - Current Liabilities.

The higher the ratio, the better is the utilization of the working capital and also
indication of lower working capital. However, a very high working capital turnover
ratio is a sign of over trading and a firm may face shortage of working capital.

Working Capital Turnover Ratio
Year Net Sales Current Current
Net
Working Working Capital

Assets Liabilities Capital Turnover(times)
2002 97512.31 76977.28 26287.82 50689.46 1.92
2003 102058.56 73680.24 27057.58 46622.66 2.18
2004 102341.11 70791.03 26410.39 44380.64 2.30
2005 114382.74 67193.16 25109.78 42083.38 2.71
2006 134459.99 77011.19 32998.18 44013.01 3.05
2007 129962.75 82490.59 37147.56 45343.03 2.86
2008 133756.33 94342.3 35799.26 58543.04 2.28
2009 139325.37 98165.33 41010.85 57154.48 2.43

INTERPRETATION: - Working capital turnover ratio maintain in-between 2 to 3 times but it
goes high in year 2006 above 3 times.

Debtors Turnover Ratio: Since sundry debtors constitute an important item of
current assets, the amount of the accounts receivable at any particular time
should not exceed a reasonable proportion of net sales. This proportion is
expressed as a ratio, which is computed as follows:
Debtors Turnover Ratio = Credit Sales / Average Account Receivables.*

* Average Account Receivables = Opening Balance of Debtors and Bills
Receivable + Closing Balance of Debtors and Bills Receivable/ 2.

It is an enabling device to find out as to how many days avg. sales are tied up in
the value of amount owing by debtors according to the balance sheet. It is also
an excellent supplementary check to be used for judging the adequacy of
current ratio.

A rule of thumb is that the collection period should not exceed 1/
Times the regular payment period e.g. if regular payment period is 30days,
then avg. collection period should not exceed 40 days.
The lower the ratio is with reference to usual credit terms, the less likely is the
receivable account to contain old and valueless amounts. Where this ratio is
high, the grater must be allowance for loss of value in the liquidation of
receivables and the higher must be the current ratio in order to protect
creditors.

Debtors Turnover Ratio

Year
*Credit
Sales.
Opening
Debtors
Closing
Debtors
Avg.
Debtors
Drs.Turnover
(times)
2003 102058.56 32744.55 29070.82 30907.685 3.30
2004 102393.56 29070.82 24614.52 26842.67 3.81
2005 114382.74 24614.52 22627.67 23621.095 4.84
2006 132473.91 22627.67 24846.74 23737.205 5.58
2007 129962.75 24846.74 26877.07 25861.905 5.02
2008 133756.33 26877.07 28988.56 27932.815 4.78
2009 139325.37 28988.56 30447.61 29718.085 4.68
* Net Sales assume to be Cr. Sales.

INTERPRETATION: - In year 2006 company sold goods on credit basis was high .

Creditors Turnover Ratio: - Debtors turnover ratio as described above, indicates
the credit period allowed by the firm to its customers. Creditors Turnover Ratio
indicates the credit period allowed by the creditors to the firm. In other words, it
is exactly opposite the ratio. The formula for calculation is as follow:
Creditors Turnover Ratio = Credit Purchase / Average Accounts Payable*

* Average Accounts Payable = Opening Balance of Creditors and Bills Payable +
Closing Balance of Creditors and Bills Payable / 2

A high turnover ratio indicates that the payment to creditors is quite prompt but it
also implies that the firm is not taking full advantage of the credit allowed by the
creditors. A lower ratio indicates that there is not much promptness in the
payment made to creditors and needs to be improved.

Creditor Turnover Ratio

Year
*Credit
Purchase
Opening
Creditors
Closing
Creditors
Avg
Creditors
Crs.Turnover
(Times)
2003 25308.61 10392.77 11361.8 16073.67 1.57
2004 32739.74 11361.8 10491.99 16607.795 1.97
2005 36432.06 10491.99 11009.37 15996.675 2.27
2006 42361.5 11009.37 16427.41 19223.075 2.20
2007 40587.69 16427.41 17722.89 25288.855 1.60
2008 47894.23 17722.89 17043.24 26244.51 1.82
2009 45070.62 17043.24 22005.18 28045.83 1.60

* Purchases (Raw Material, Merchanting Goods) assume to be Credit Purchases.

INTERPRETATION: - Creditors turnover ratio was high in 2005 (2.27) & low in 2003 (1.57 ).

4. Inventory / Stock Turnover Ratio: - This ratio establishes a relationship between
the cost of goods sold during a given period and the average amount of inventory
held during that period .The indication given by accounting period. The ratio is
calculated in the manner given below
Inventory / Stock Turnover Ratio = Cost of Goods Sold / Average Inventory during that
period *

Average Inventory = Opening Inventory + Closing Inventory / 2
Significance: It is an indication of the velocity with which merchandize moves through the business.
This is a test of inventory to discover possible through in the form of over-storing or over valuation. It
assists the financial manager in evaluating inventory policy. It is used for measuring profitability.

A low inventory turnover may reflect dull business, over investment in inventory or accumulation of
absolute and unsaleable goods.
Inventory Turnover Ratio

Year Net Sales Opening Stock Closing Stock
Avg.
Inventory
Stock
Turnover(times)
2003 102058.56 25883.75 27734.83 39751.165 2.56
2004 102341.11 27734.83 29490.66 42480.16 2.40
2005 114382.74 29490.66 28756.59 43868.955 2.60
2006 134459.99 28756.59 31904.16 44708.67 3.00
2007 129962.75 31904.16 28366.36 46087.34 2.81
2008 133756.33 28366.36 32974.18 44853.45 2.98
2009 139325.37 32974.18 34040.36 49994.36 2.78

INTERPRETATION: - Stock turnover ratio maintain by company 2 to 3 times in last 7 years.

Fixed Assets Turnover Ratio: This ratio indicates the amount of sales realized
per rupee of investment in fixed assets. Fixed assets are those assets, which
are not acquired for re-sale. In other words, they are meant for utilization in
the business for the purpose of improving its earning capacity.

The ratio measures the efficiency in the utilization of fixed assets. This ratio
indicates whether the fixed assets are being fully utilized. It is an important
measure of the profit earning capacity of the business. A high ratio is an index
of overtrading while a low ratio suggests idle capacity and excessive
investment in fixed assets.
Fixed Assets Turnover Ratio = Sales / Net Fixed Assets = No. of times.

Fixed Assets Turnover Ratio
Year Net Sales
Net Fixed
Assets
Fixed Assets Turnover
(Times)
2003 102058.56 39489.62 2.584440164
2004 102341.11 40643.24 2.518035226
2005 114382.74 51270.86 2.23095029
2006 134459.99 68907 1.951325555
2007 129962.75 67605.64 1.922365501
2008 133756.33 71925.51 1.859650769
2009 139325.37 99904.55 1.394584831

INTERPRETATION: - The Company maintains a fixed assets turn over ratio at same rate

Sales to Capital Employed: This ratio is also known as Capital Turnover Ratio
and indicates sales per rupee of capital employed. The formula for this ratio is
as given below:

Sales to Capital Employed = Net Sales / Capital Employed*

*Capital Employed = Shareholders fund + Long Term Liabilities.

Higher the ratio, the better it is, as it will indicate better utilization of capital
employed, which will result in higher amount of turnover. However, a low
turnover ratio will indicate lower utilization of capital employed in making
sales.

Sales to Capital Employed

Year Net Sales Eq. Cap.
Long Term
Debt
Cap.
Employed
Sales to Cap.
Employed(times)
2002 97512.31 6138.08 14243.87 20381.95 4.78
2003 102058.56 6138.08 27179.69 33317.77 3.06
2004 102341.11 6138.08 22928.24 29066.32 3.52
2005 114382.74 6138.08 39333.3 45471.38 2.51
2006 134459.99 6138.08 54667.56 60805.64 2.21
2007 129962.75 6138.08 56686.05 62824.13 2.06
2008 133756.33 6138.08 50204.16 56342.24 2.37
2009 139325.37 6138.08 86884.81 93022.89 1.49

III. FINANCIAL RATIO

1. Current Ratio: It is a ratio of current assets to current liabilities. The ratio is calculated
by dividing the current assets by current liabilities.
Current Ratio = Current Assets / Current Liabilities

Certain authorities have suggested that in orders to ensure solvency of a concern,
current assets should be at least twice the current liabilities and therefore, this ratio is
known as 2: 1 ratio. This ratio is also named as Working Capital Ratio as it represents
the working capital being the excess of the current assets over current liabilities.

Significance: This ratio indicates the solvency of the business i.e. ability to meet the
liabilities of the business as and when they fall due. The current assets are the sources
from which the current liabilities have to be met. It is also a measure of the margin of
safety that management maintains in order to allow for the inevitability unevenness in
the flow of funds through the current assets and current liabilities accounts.

Though 2:1 ratio is considered desirable, it is not must- it depends upon the nature of
the industry. What is important is not the size of the current ratio but the distribution
and characteristic of current assets and current liabilities and their relation to the
prospective sales volume.

CURRENT RATIO

Year
Current
Assets.
Current
Liabilities Current Ratio ( -:1 )
2002 76977.28 26287.82 2.92
2003 73680.24 27057.58 2.72
2004 70791.03 26410.39 2.68
2005 67193.16 25109.78 2.67
2006 77011.19 32998.18 2.33
2007 82490.59 37147.56 2.22
2008 94342.3 35799.26 2.63
2009 98165.33 41010.85 2.39

2. Liquid / Quick / Acid Test Ratio: The current ratio fails to serve as a realistic guide to the
solvency of the cocern, as the major portion on the current assets may comprise of such assets
which cannot be converted immediately in cash (e.g. stock) to meet the immediate liabilities.
Liquid Ratio = Liquid Assets / Liquid Liabilities

The Quick Ratio indicates the relation of quick assets with quick liabilities. Quick assets
include all current assets, except stock and pre-paid expenses whereas liquid liabilities include
all current liabilities except overdraft and accrued expenses.

If the ratio 1:1, it is considered that all claims will be met when they arise.

Significance: It is a measure of the extent to which liquid resources are immediately available
to meet current obligations. In so far as it eliminates inventories as part of current ratio, this
ratio is a more rigorous test of liquidity than the current ratio and when used in conjunction
with it, gives a better picture of the firms ability to meet its short term debts out of short-
term assets.

LIQUID RATIO
Year
Current
Assets. Inventories
Liquid
Assets
Current
Liabilities
Bank
Overdraft
Accrued
Exp.
Liquid
Liabilities
Liquid
Ratio(-
:1)
2002 76977.28 25883.75 51093.53 26287.82 118.13 772.25 25397.44 2.01
2003 73680.24 27734.83 45945.41 27057.58 234.78 364.95 26457.85 1.74
2004 70791.03 29490.66 41300.37 26410.39 186.6 315.87 25907.92 1.59
2005 67193.16 28756.59 38436.57 25109.78 484.16 477.2 24148.42 1.59
2006 77011.19 31904.16 45107.03 32998.18 1125.67 528.05 31344.46 1.43
2007 82490.59 28366.36 54124.23 37147.56 1815.07 149.28 35183.21 1.53
2008 94342.3 32974.18 61368.12 35799.26 1525.21 486.52 33787.53 1.81
2009 98165.33 34040.36 64124.97 41010.85 1363.69 793.97 38853.19 1.65

BIBLIOGRAPHY

1. FINANCIAL MANAGEMENT
2. SHASHI.K GUPTA AND R.K SHARMA
3. WWW.GOOGLE. COM
4. WWW.RAYMOND LTD.IN.COM

Raymond to open 100 stores

Economic Times March 06, 2009

Big potential seen for retail business

tradingmarkets.com February 24, 2009

RIYADH, Feb 25, 2009 (Arab News - McClatchy-Tribune Information Services via COMTEX) --
RYWLF | Quote | Chart | News | PowerRating -- Despite the economic downturn, the retail
sector in the Middle East is projected at $500 billion by 2010 with the GCC accounting for more
than 60 percent of the total retail in the region, said Gautam Hari Singhania, chairman and
managing director of Raymond Ltd. Singhania added that a major share of the market would be
held by Saudi Arabia. With the strong presence of Indian, European and American expatriates,
the region provides unparalleled business prospects in the retail market, Singhania said at a
press conference held to unveil Raymond's Middle East Vision for 2012 at the company
showroom in Olaya Street yesterday.
He added that his company came to the Middle East some 25 years ago with a showroom in
Muscat. Raymond has 24 showrooms in the Middle East, including seven in the Kingdom.
Singhania said that although the economic crisis has affected the export market in India, major
brands would continue to prosper as people converge toward popular brands for value for
money. In view of the crisis, they have become careful in spending and want to invest in a single
suit than going for many cheap ones, he said.
Describing the global financial crisis as a transitional phase, he said he could not foresee a
definite period for the recession, which many countries are struggling to overcome. He,
however, added that good quality products would always have a regular market in a country like
Saudi Arabia.
We opened our first shop in the Kingdom and still want to expand our network here, he said,
adding that Raymond produces 500 quality suits each day in India for export to the Japanese
market. Singhania said he has plans to increase the Raymond Shop network from the existing
35 in the Middle East and SAARC region to 50 by 2012 with presence in malls like the Mall of
Emirates, Dubai Mall, Burjuman, Villagio Mall and Pearl Mall.

Celebration of corporate excellence
The Economic Times January 20, 2009

Raymond

Nitesh Parihar

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