CHAPTER-1

INTRODUCTION

1
 INTRODUCTION

Liberty Group, come a long way since it began its operations a little over 50
years ago in the city of Karnal, Haryana. The emphasis since the very
beginning has been to offer “great products at value for money or affordable
prices”. This led to the development of Liberty Patented “HUMANTECH”
approach which synergize traditional workmanship which state of the art
technology to provide the best quality at the most competitive price.

Liberty Group companies, set various benchmarks in Footwear

Manufacturing within the Group’s Production facilities and also to Industry.

Liberty as a brand is constantly evolving to keep pace with the changing

trends, styles, beliefs and aspirations of people while maintaining the
sanctity of certain traditions like workmanship and good value.

2
 CHAPTER-2
LITERATURE REVIEW

3
 LITERATURE REVIEW
Footwear is made various types of material. Materials are very different in
their nature and source. Some of these materials are very environmental
friendly, again some of these are sourced by artificial processing which are
not environmental friendly. To understand the eco friendliness of the
product, it is very necessary to gain an understanding of as many processes
as possible about the product origin, processing methodology, and consumer
utilization and disposal method.
At the juncture the researcher should undertake extensive Literature survey
connected with the problem. For this purpose, the abstracting and indexing
journals and published or unpublished bibliographies are first place to go
academic journal conference, proceeding, govt. report, books etc. must be
tapped depending on the nature of the problem. In this process, it should be
remembered that one source will lead to another. The earlier studies, if any
which are similar to the study in hand should be carefully studied. A good
library will be great help to researcher at this stage.
During this project, I have to go through the previous data related to this
project. So I start my project from very beginning. As a old source, I take the
website, books, business, magazine & web article etc. which help me a lot in
completion of the project.
As my study is totally based on secondary data, so, I have to depend on
difference sources of data from where I got information for completion of
my project. For this, I searched for different websites which helped me a lot
in continuing my research regarding my project.

4
 CHAPTER-3

RESEARCH
METHODOLOGY

5
 OBJECTIVE OF THE STUDY

The main objective of the study is to make a comparative study of the

company’s financials with that of the competitors: -

• To assess the liquidity of the concern.

• To know the efficiency in the business operations.
• To evaluate the solvency of the business.
• To measure the profitability and overall performance of the concern.

RESEARCH
Research refers to search for knowledge. It is said as the systematic and
objective process of gathering, recording, and analyzing data for the aid
in making business decisions.

Redman & Mory defines research, “Systemised effort to gain new

knowledge”.

RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research
problem. It consists of various steps that are generally adopted by the
researcher in studying his research problem along with the logic behind
it.

6
RESEARCH DESIGN
A research design is a framework or the blue print for conducting the
research project. It gives the details of procedures necessary for obtaining
needed to solve a problem. In other words, it is the arrangement of
condition for the collection and analysis of data in a manner that aims to
combine relevance to the research purpose with economy in procedure.

TYPES OF RESEARCH DESIGN

• Exploratory Research Design

• Descriptive Research Design
• Experimental Research Design

Exploratory Research Design

In this a problem is formulated for precise investigation and working and

hypothesis are developed. Exploratory research can be done through case
studies, secondary data analysis, pilot studies or experience surveys.
Descriptive Research Design
In descriptive research design, those studies are taken which are
concerned with describing the characteristics of a particular individual or
a group.
Experimental Research Design

Under this cause and effect relationships between the variables are tested.
It is also known as hypothesis testing research design.

7
The research design in the present project is exploratory in nature. It is of
flexible nature. It is based on secondary data. Data is adjusted according
to the need.

SAMPLE DESIGN

A sample design is definite plan for obtaining a sample from a given

population. It refers to the technique or the procedure for selecting items
for a sample.
Sampling techniques can be categorized into two broad categories
namely:
• Non – Probability Sampling
• Probability Sampling

Non – Probability Sampling

Non-probability Sampling is that sampling where sample is selected

deliberately by researcher, by using his own judgment. Here every item
of universe does not have equal chances of being included in the sample.

It can be of following types:

• Convenience Sampling
• Judgment Sampling
• Quota Sampling

Probability Sampling

It is also known as ‘Random Sampling’ or ‘Chance Sampling’. Here

each population element has equal chance of selection.

8
It can be of following types:
• Simple Random Sampling
• Stratified Sampling
• Cluster Sampling
• Multistage Sampling

In this present project, non-probability sampling has been used because

sample i.e. companies are selected deliberately and each of them in the
universe do not have equal chances of being selected. Under non -
probability sampling, convenient sampling has been used because
sample has been selected according to own convenience.

DATA COLLECTOIN
The data can be of two types:
• Primary Data
• Secondary Data
Primary Data

Primary Data are those data, which is originally collected afresh and for
the first time. It is original in nature.
Secondary Data

Secondary Data are those data which have already been collected by
someone else and which has been passed through statistical research.
In this project, secondary data has been collected from following source:
• Annual Reports
• Books
• Other material and reports published by companies and Internet.

9
 LIMITATIONS OF THE SYUDY

Although every effort has been made to collect the relevant information
through the sources available, still some relevant information could not be
gathered.

• The time duration could not provide ample opportunity to study every
detail of management in the company.
• There are restrictions not to visit some specific areas.
• The concerned executives were having very busy schedule.
• As some figures have not been disclosed by the company on account
of confidential report.

10
 SCOPE AND RATIONALE OF THE
STUDY/RESEARCH

Financial analysis is the process of identifying strengths and weaknesses

of the firm by properly establishing relationship between the items of the
balance sheet and profit & loss account.

In this report ‘Ratio Analysis’ has been used as a tool for financial
analysis.

For making the competitive study financial statements of three

companies i.e Liberty Shoes Ltd., Bata India Ltd. and Relaxo Footwears
for the year 2007-2008 have been taken into consideration.

Following ratios will be calculated:-

• Liquidity Ratios
• Efficiency Ratios
• Solvency Ratios
• Profitability Ratios
These ratios will help in analyzing the relative position and performance
of the company.

11
 CHAPTER-4
INDUSRTY PROFILE

12
 INTRODUCTION TO FOOTWEAR INDUSTRY

Footwear is a man made outer covering of foot. It is genially made out of

leather but the same can be made with synthetic material. When the human
being came into existence, they were needed to protect themselves from
heat, cold dampness, dust and roughness of ground while walking, standing,
or even running. So they innovate shoes for the protection of their feet.

The importance of footwear is highly recognized in western and other

advanced countries, so the footwear industry grew in full swing that
originated big companies like Nike, Reebok, Gucci, and Addidas etc. But
the scenario in India is somewhat different and regretfully as the industry
could not develop itself despite the fact that India being second largest
populated country in the world, surplus manpower and resource of raw
material, whatever the reason being.

Till the mid of 20th century, the bulk of shoe industry was in cottage sector.
Professional cobblers were responsible for production of every type of
shoes. But in the past one decade the situation has completely changed
because new generation of professionals did not adopt this line as
shoemaker and preferred to join white-collar jobs.

It resulted in the diversification from schedule caste to other class of people

as industrial workers. Up to eighties, Bata was the main source of supply of
footwear to the cites and towns with higher standard of living. But taking
into consideration the growing standard of living and demand, many new

13
footwear companies came into light like Liberty,Corona, Action, Lakhani
etc. Production of footwear at this movement is mainly at Agra, Karnal,
Faridabad, Delhi, Kolkatta, Kanpur, Mumbai, Madras, and Banglore etc.

Footwear industry in India can never be a heavy industry in general and

small entrepreneurs with small investments in machinery and capital could
remain for all purposes the backbone of industry. It is the ideal industry for
entrepreneurs without much of investment in the industry assuring growing
demand and profits. Availability of raw material and manpower is not a
problem. So the small sector has to play a vital role in industry
development.

Depending upon the styles, type and purpose, the footwear can be broadly
classified into three groups:

 Chappal or open type footwear.

 Sandal or strap attached footwear.
 Boot & shoe or closed type footwear covering most part of the
feet.

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 CHAPTER-5
COMPANY PROFILE

15
 HISTORY
Liberty Group started operation in 1954 and today comprises of five firms,
namely Liberty Footwear Company, Liberty Enterprises, Liberty Leathers,
Liberty Group marketing Division and Liberty Shoes Limited. The group
has an annual turnover of Rs.500 Crores approximately. Liberty has its own
studio for design and development of footwear. It manufactures footwear
both for export and domestic markets. The company has carved a name for
itself in the international market and is India’s largest exporter of footwear
to Germany.

Liberty Shoes Limited, the public company of the group started commercial
production in 1993 and is the country’s leading footwear manufactures
today. The company has state of the art production facilities at Libertypuram
to manufacturer high quality footwear and its contribution in Liberty
Group’s total sale is over 30% and it’s rising steadily.

THE CREDO

• To ensure that the method they use is the latest technology world-
over.
• To follow the highest standard of honest workmanship in whatever
they make.
• To walk that extra miles to ensure customer satisfaction worldwide, to
remain a true cosmopolitan to the spirit.

16
 • To remain a great corporation to associate with, to work for, to know
that:
“They Are About People”.
BRANDS OF LIBERTY

This family brand is style personified with something for every need. Be it
formal or casual, at office or at the beach, a conference or a science Liberty
fits in effortlessly.

• COOLERS
They’re cool and they’re hot. They’re hap and they’re
happening. Perfect for the hot summer days. When the
sun blisters and the heat strokes, they keep the feet cool
and comfortable. But why limit the pleasure to summers?
Here’s one brand of sandals that stays cozy and comfy all year round.

• FREEDOM
A new introduction in the safety footwear
segment in Nitrile PVC material, offering
customers with waterproof, fire retardant
and shock free product in economic range.
Safety footwear for industrial use.

• FOOTFUN
Something for those little feet as they learn to walk.
Airy,light and comfortable with lycra uppers and no

17
 laces. In fairy-tale colors and designs.

 FORCE-10
The flair, the style and ease that forces the
world to take notice. A happening range of
sports shoes in far out colors that provides
the perfect footnote to a head-turning
presence.

 FORTUNE
Genuine leather uppers and extra light poly
soles help complete the power dressing in
men with élan and panache.

• GLIDERS
Cool and comfortable, trendy and with it. A
range of stunning brogues and smart lace
ups that will be noticed and talked about
every step of the way. Unmistakably a part
of Generation You.

 SENORITA
Walk tall, walk light and walk with amazing
style. Rediscover the little girl that lurks not

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 far behind in every woman, laughing and
loving every moment of life.

• TIPTOPP
The brand offers women comfortable and fashionable
slip-ons, sandals and bellies with neat styling thrown
in,not bordering on the bizarre but acceptable across a wide
spectrum.

• WARRIOR
Smart, stylish professional gear crafted from
leather uppers and direct injection P.U. soles
with steel toe caps and offering the widest
range of styles in safety shoes. To master the
art of being confident and sure-footed on
slippery grounds and danger ones.

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 BUSINESS AND MARKETING STARTERGY

CORPORATE PHILOSPHY
Steeped in a philosophy that has at its core innovation, technology and
advancement, they, at Liberty, pride theirselves over and above everything
else on their healthy and heart-felt respect for the human ethos. That which
projects itself in the expectancy and excitement with which one greets the
arrival of the new combined with a sincere and deep regard for the old. That
which is appreciative of and adopts at every stage the unique balance
between modernization and tradition.
Liberty as a brand is constantly evolving to keep pace with the changing
trends, styles, beliefs and aspirations of people while maintaining the
sanctity of certain traditions like workmanship and good value.

CORPORATE SAGA
With people as its leitmotif, Liberty has for over 50 years stayed in touch
with the aspirations of every successive generation even as it developed the
largest range in the industry catering to every income bracket and age
segment. Using the patented ‘Humantech’ approach that combines the best
of talent with the latest in technology. From the price-concious, value for
seeking buyer to the trendy, global, price-indifferent customer, from the with

20
it all attitude teenager to the conservative seen it all adult just about
everybody today finds a good reason for being in Liberty.

Liberty is today consolidating and expanding its following from the fashion
allows to the sidewalls with styles that compliment the newest most
happening trends. And also by turning footwear selling into a byword for
personalized service in an ambience of five star comfort. This can be
experienced in the hundreds of Liberty five star showrooms and shoe
stations in India and abroad.

But beyond that lies another but equally significant involvement.

It’s all about making a difference in the lives of thousands of people all over
India by ensuring direct and indirect employment. Creating wealth, sharing
prosperity, and generating progress. For Liberty, there can be no greater
honour than that and no bigger reason for walking tall.

CORPORATE GOALS

• Liberty wants to develop a spirit of cooperation between individuals

and group within the company.

• Liberty wants to attain and maintain good relations between its union
and management.

• Liberty will endeavor to keep highly qualified employees by

appropriate training and thus raise their morale and competence.

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 • Liberty will try to practice management of highest standard of
competence and professionalism.

• Liberty will strive to remain or become the technological as well as

market leaders in footwear industry and leather product industry.

GROUP COMPANIES

Liberty Retail Revolution Limited

Liberty Retail Revolutions Limited, the company behind the Revolutions

store is a 100% subsidiary of Liberty Shoes Limited.

The company is producing more than 50,000 pairs of footwears a day

covering virtually every age group and income category. Products are
marketed across the globe through 150 distributors, 350 exclusive
showrooms and over 6000 multi-brands outlets, and sold in thousands every
day in more than 25 countries including fashion-driven, quality-obsessed
nations like France, Italy, and Germany.

Setting new benchmarks in the retail business in India Liberty Retail

Revolutions caters to the aspirations of the style-driven in India with an
exclusive chain of upmarket showrooms, Revolutions Concept Stores, at
fashion centres across India. It’s a concept that has opened new frontiers in
retail selling-never seen before fashion hubs, catering to individual styles

22
and looks, in an ambience as magical and exciting as the products lined up-a
world class range in footwear fashion and accessories.

Liberty Whiteware Ltd.

The newest member of the Liberty Group introduced a range of ceramic
sanitary ware and accessories of European design that’s inspired by a
lifestyle of sheer elegance. Where beauty and functionality achieve perfect
harmony. From compliments finesse. And tradition blends seamlessly into
innovation. Produced at a Rs. 50 crore state-of-the-art plant at Neemrana
Industrial Area of Rajasthan the Beach range of fine bathroom products and
accessories including WCs, bidets, washbasins, and shower trays,
comprising five distinctive collections each with definitive character and
style.

INNOVATIVE APPROACHES

Entire production units of liberty are interlinked by SAP, a unique ERP

Solution implemented for the first time in India in a Footwear Industry with
all modules related with finance, Logistics & supply chain.
It is rare to see much clean, state of the art production facility in India with
following management systems and tools.
• KAIZEN is implemented since 2000 and in practice throughout the
organization.
• 5 S Concept is introduced and in practice since 2001 and presently in
matured stage.The impact of 5 S implementation is visible in all dept.and
shop floprs of the organization. We may even consider these units are the
model units for any Footwear Industry.

23
• LEAN awareness is existing in all production floors of the organization.
Value streams are standardized for most of the regularly produced
articles. Now the Group is in the process of integrating Lean Concept
with PP Module of SAP for controlling the flow.
• ISO 9001:2000 CERTIFICATION is awarded to QMS of one of its
units and Group is in the process of getting for other units. Group is
having an appointed MR exclusively for monitoring the Quality System.
DNV is the Certifying agency and auditors of the QMS.
• WASTE MANAGEMENT SYSTEM is established in one of their unit
and it is a pilot project. Wastage Identification, handling and disposal are
documented and monitored by frequent internal audits.
• WATER MANAGEMENT SYSTEM is existing in the group. Water
wastage is almost-nil-and water is recycled in most of their operations.
• ENERGY MANAGEMENT SYSTEM of Liberty is unique in
Footwear industry Liberty Units have got lot of incentives/discounts from
Haryana State Electricity Board for maintaining maximum power Factor.

LIBERTY RANGE
The family brand style personified with something for every need. Be it
formal or casual, at office or at the beach, a conference or a science –
Liberty fits in effortlessly.

 MANUFACTURING
What gives Liberty an edge is vertically integrated manufacturing
infrastructure on technology basis with completely in-house state of the
art production facilities which includes 8 DESMA machines for PU
Direct Injection, 15 Machines for PVC Direct Injection, 3 Machines for

24
EVA Injection, 3 PU Injection units for sole, six lines for cement lasted
injection and one machine for the latest TPU Injection. Above production
facilities are maintained with focus on environment cleanliness ISES
2000 norms, provide a complete range of family footwear of all seasons
and occasions; cover the entire domain of industrial safety and health
footwear requirements.
Liberty also has the ISO: 9001:2000 certification for its Quality,
Management System, a testimony to all the system and procedures in
place.
The group is a technology driven company ‘HUMANTECH’- Liberty’s
patented technology is combination of human craftsmanship and
technological excellence.

Liberty has production facilities at the following locations:

• Gharaunda, Haryana, (Approx. 95 K.M. from Delhi)
• LIbertypuram, Haryana (Approx. 102 K.M. from Delhi)
• Karnal, Haryana, (Approx. 124 K.M. from Delhi)
• Satiwala, Pounta sahib, Himachal Pradesh (Approx. 225 K.M. from
Delhi)
• Batamandi, Paunta Sahib, Himachal Pradesh (Approx. 229 K.M. from
Delhi)
• Dehradun, Uttranchal (Approx. 300 K.M. from Delhi)
• Roorkee, Uttranchal (Approx. 150 K.M. from Delhi

 RESEARCH AND DEVELOPMENT

25
Their 2 way Channel partners dig their feedback deep and constantly.
Hammering the string of creative workmen at the manufacturing centers to
produce not just faceless shoes down conveyer belts but shoes with
character. So the centers have poured 53 years of research and continuous
flow of emotions to redefine the R&D center at Libertypuram. Fusing
Technology with the sweat of sagacity. Some call it Research and
Development wing, some put a price to the investments in the “Emotional
Technology” that it comes out as. They call the process HUMANTECH and
it is priceless.

Liberty also very active in the area of Research & Development and has a
number of “firsts” to its credit like:

• Liberty pioneered the PU (Polyurethane) technology in India in footwear

industry in 1982 and today is the largest producers of footwear with this
technology in Asia.
• Liberty has developed new material TPE (Thermo-Plastic-Elastomer) for
high quality formal footwear.
• Liberty has developed a high quality Eva Compound for beach footwear.
• Liberty was the first company commissioning a latest CAD/CAM
system.
• Die Less Leather cutting machine which is directly attached with its
Design & Development Section for speedy process of development of
new models of footwear.

26
• Liberty is the only factory in India having water proofing technology
approved by SYMPATEX,a name known for water proofing technology
worldwide.
• Liberty Management is very thin in size comparing with a huge work
force in front line operation.

 DESIGN & DEVELOPMENT

Liberty has well established state of the art design centers which are
constantly engaged in designing and developing latest trend setting footwear
for the young fashions conscious Indian consumers. On an average 4000
new styles are developed every year out of which roughly 1200 styles are
selected and introduced in the market in two seasons i.e. spring or summer
and winter.

 DISTRIBUTION NETWORK

They have distribution network rivals the human arterial system. A reticulate
network of retailer showrooms and exclusive outlets with a reach like blue-
green marine octopus a structured 2-way feeder-feed back system that both
gives and receives an organization of their size would have gone out-of-orbit
without a firm support system. Thanks to the vision and drive of their
corporate think tank, they now have sales network that brings the breath-
taking world of super footwear right at our feet within seconds. A marketing

27
system that they have convinced and created, it is understandably, the envy
of competition.

MORE STORES FROM LIBERTY

Liberty group is expecting to add Rs. 70 Crores from its footwear retail
business. The company will invest Rs. 7 Crores towards expending
“Revolution”- its exclusive footwear showroom. This year company will add
10 more stores to take it to 25. The company has also entered the
manufacturing of white ware segment of sanitary and bathroom products.
Liberty is looking at introducing new design this season too. The company
has expending its retail presence in over 100 stores across small and big
cities.

LIBERTY PLANS TO EXPANDS GLOBAL PRESENCE

Liberty, is one of the country’s hundred most trusted brands. They will soon
be launching a very exclusive chain of footwear stores- Revolutions- in all
the metros that’ll cater to the premium segment of the market. The ambience
in these fine stores will be unmistakably international and they’ll set new
benchmark in terms of fashion trends, stylish displays, innovative
presentations and personalized service. Yes, these stores will spell an
exciting new future for retail business in India. It’s a future of which you are
invited to be a part.

COMPETITORS
• Bata India Ltd.

28
 • Mirza Tanners Group
• Relaxo (Footwear Ltd.)
• Sarup Taneries Ltd.
• Superhouse Leather Ltd

MANAGEMENT

CEO AND EXECUTIVE DIRECTOR:- MR.Adesh Gupta

BOARD OF DIRECTORS
Sr.
Director's Name Designation
No.
1. Adarsh Gupta Executive Director
2. Shammi Bansal Executive Director
3. Satish Kumar Goel Director
4. Sunil Bansal Non Executive Director
5. Amitabh Taneja Independent Director
6. Prem Chand Garg Independent Director
7. Raghu Dayal Independent Director
8. Siddharth Sanghi Independent Director
9. S K Arya Independent Director
10. Vivek Bansal Independent Director

VICE PRESIDENT AND COMPANY SECRETARY: - MR. Munish Kakra

29
 SWOT ANALYSIS

STRENGTHS

• Established brand name.

• Wide dealers network.
• Bondage between company and employees.
• Customer’s faith.
• Leaders in quality.
• Economies of scale.
• Infrastructure.

WEAKNESSES

• AFTER SALES services like replacement of shoe is very poor.

• Price of products offered is not satisfactory.
• Company representative doesn’t visit dealers frequently.
• Sustained growth rate.

OPPORTUNITIES

30
 • Have the opportunity of grabbing the market share through launching
of new and wide range of product with new designs.
• Wide market in low price shoes as most population is financially
weak in our country.
• Existing successful products of company.
• Increase sales by giving incentives to sales officers and dealers.
• Develop market sensitive product line.
• Globalization.

THREATS

• Cut throat competition.

• Due to lack of good design of products and after sale service the
company can lose their customer to other companies who provide
good quality of product and after sale service.
• Competition for resources.
• New entries in the market.
• Unforeseen conditions.

MISSION

• To set quality standards, as benchmarks to be overachieved everytime.

• To not deviate from the path of consumer-orientation.

31
 • To constantly be open to change in world of technology and
ideologies.

INTERNATIONAL EXPERIENCE

1. Liberty has more than 25 years of experience in Export Business and

enjoying Status Holder status as “Recognized Export House” of India. In
80’s when Soviet Market was invaded by Indian Exporters, Liberty was
the Market Leader in USSR.
2. Liberty is having its own office in Russia and Hungary for more than 2
decades.
3. Liberty’s major operations are mainly with Europe, Middle East, East
African, South African countries and USA.
4. Major brands of Europe, SALAMANDER, JELA, DEICHMANN,
ROMIKA and USA brands like TODDWELSH are selling only Liberty
Shoes under their brand umbrella.

CONTRIBUTION TO INDUSTRY

1. Safety Shoes are brought to Indian Market for the first time and an
exclusive brand WARRIOR was launched by Liberty in Industrial

32
 Segment shoes. Their safety shoes are meeting all DIN or EN standards
in respective segments.
2. Liberty Enterprises is the model unit for above Standard and complete
testing facility is available only with Liberty in India after FDDI.
3. Liberty is the First Footwear Manufacturing facility in India awarded
with the latest ISO 9001:2000 Certification.
4. The first and only footwear Industry in India, having SAP and ERP with
all modules related to inward or outward supply chain, materials, finance
and costing.
5. Liberty has pioneered in bringing EVA technology for the first time in

ASIA in 1996 followed by it co-polymers production in house in 1998.

The footwear weights next to nothing and is very flexible providing
maximum comfort. Liberty’s Gliders U range is made with EVA
technology.
6. Liberty has pioneered blend of NITRILE Rubber with PVC in 1996 to
make it more versatile for cold countries usage.

33
 CHAPTER-6

INTRODUCTION
TO
“FINANCIAL
ANALYSIS”

34
 FINANCIAL STATEMENT

A Financial Statement is a collection of data organized according to logical

and consistent accounting procedures. Its purpose is to convey an
understanding of some financial aspect of a business firm. It may show a
position at a moment in time, as in the case of Balance Sheet, or may reveal
a series of activities over a given period of time, as in the case of income
statement.
According to Myres
“The Financial Statement provide a summary of the accounts of a business
enterprise, the Balance-Sheet reflecting the assets, liabilities and capital as
on a certain date and the income statement showing the result of operation
during a certain period”

FINANCIAL ANANLYSIS

Financial Statement Analysis is largely a study of relationships among the

various financial factors in a business, as disclosed by a single set of
statements and a study of the trends of these factors as shown in the series of
the statements.
Types of financial analysis
• Horizontal analysis

35
In such type of analysis, financial statements for a number of years are
received and analyzed. Figures of two or more years are contained in
such type of analysis and these figures are placed side by side to facilitate
comparison. Such analysis is also called ‘dynamic analysis’.

• Vertical analysis

In such type of analysis, financial statements for a single year or on a

particular date are reviewed and analyzed with the help of proper devices
like ratios. The items in the financial statements are expressed as a
percentage of the total and is taken as equivalent to 100. This analysis is
also called as ‘static analysis’.

OBJECTIVES OF FINANCIAL ANALYSIS

The purpose of financial analysis depends upon the needs of the person
who is analyzing these statements.

• To know the earning capacity of the firm.

• To know the solvency.
• To know the financial strength.
• To make a comparative study with the other firms.
• To know the capability of the firm to pay dividend and interest.
• To know the trend of the business.
• To know the efficiency of the management.
• To provide useful information to the management.

36
USERS OF FINANCIAL ANALYSIS
• Trade Creditors
They are interested in firm’s ability to meet their claims over a very
short period of time. Their analysis will, therefore, confine to the
evaluation of the firm’s liquidity position.
• Suppliers of Long-Term Debt
They are concerned with the firms long-term solvency and survival.
They analyse the firm’s profitability over time, the ability to pay
generate cash to be able to pay interest and repay the principal and the
relationship between various sources of funds (capital structure
relationships).

• Investors
They are the people who have invested money in the shares, are most
concerned about the firm’s earnings. They restore more confidence in
those firms that show steady growth in their earnings. They are also
interested in the firm’s financial structure to the extent it influences
the firm’s earnings ability and risk.

• Management
It would be interested in every aspect of the firm’s financial analysis.
It is their overall responsibility to see that the resources of the firm are
used most effectively and efficiently, and that the firm’s financial
position is good.

• Government

37
 It can judge whether the industry is progressing on the desired lines or
not, so that it can frame various policies.

• Stock Exchange Authorities

They analyse the financial statements of a company to determine its
price earning ratio and earning per share (E.P.S.). With the help of
such analysis, the market price of a company is determined.
TOOLS FOR FINANCIAL ANALYSIS

• Comparative Statement Analysis

This is a simple method for tracing changes in the financial performance

of a company. Comparative financial statements will contain items for
atleast two periods. Changes – increases and decreases – in income
statement and balance sheet over period can be shown in two ways:
(1) aggregate changes
(2) proportional changes
Drawing special columns for aggregate amount or percentage, or both, of
increase and decrease, can indicate aggregate changes. Recording
percentage calculated in relation to a common base in special columns,
on the other hand, shows relative, or proportional changes. An
investigation of the comparative financial statements help to highlight the
significant facts and points out the items which need further analysis.

• Trend Analysis

In financial analysis the direction of changes over a period of years is

of crucial importance. Time series or trend analysis of ratios indicate
the direction of change. This kind of analysis is particularly applicable

38
 to the items of profit and loss account. For the trend analysis, the use
of index numbers is generally advocated. The procedure followed is to
assign the number 100 to the items of the base year and to calculate
percentage changes in each item of other years in relation to the base
year. This procedures may be called as “Trend Percentage Method”.

• Inter- Firm Analysis

A firm would like to know its financial standing vis-à-vis its

competitors and the industry group. The analysis of the financial
performance of all firms in an industry and their comparison at a
given point of time is referred to as cross sectional analysis or the
inter-firm analysis. To ascertain the relative financial standing of a
firm, its financial ratios are compared either with its immediate
competitors or with the industrial average.

• Performa Analysis

Sometimes future ratios are used as the standards of comparison.

Future ratios can be developed from the projected, or proforma
financial statements. The comparison of the current or past ratios
shows the firm’s strengths and weaknesses in the past and the future.
If the ratios indicate weak financial position, corrective actions can be
initiated.

LIMITATIONS OF FINANCIAL ANALYSIS

• Limitations of financial statements

39
 Financial analysis is based on financial statements. But financial
statements themselves suffer certain limitations; hence the limitations
of financial statements are also the limitations of their analysis.

• Different Accounting Policies

If two firms adopt different accounting policies, the comparison
between the two will be unreliable.
• Effect of personal ability and bias of the analyst
Figures given in financial statements do not speak by themselves;
hence, any conclusion can be drawn from these figures. Conclusions
obtained from the analysis of these figures are affected to a great
extent by the personal ability and knowledge of the analyst.

• Difficulty in forecasting
Financial statements are a record of past events and historical facts. In
the fast changing and developing modern business, the analysis of
past information may not be of much use in future forecasting.
Continuous changes take place in the demand of the product, policies
adopted by the firm, the position of competition etc. As such, no
estimate based on the analysis of historical facts can be made for
future.

40
 FINANCIAL RATIO ANALYSIS
Financial ratio analysis groups the ratios into categories which tell us about
different facets of a company's finances and operations. An overview of
some of the categories of ratios is given below.

• Leverage Ratios, which show the extent that debt is used in a company's
capital structure.

• Liquidity Ratios, which give a picture of a company's short term

financial situation or solvency.

• Operational Ratios, which use turnover measures to show how efficient

a company is in its operations and use of assets.

• Profitability Ratios, which use margin analysis and show the return on
sales and capital employed.

• Solvency Ratios, which give a picture of a company's ability to generate

cash flow and pay it financial obligations.

Although financial ratio analysis is well-developed and the actual ratios are
well-known, practicing financial analysts often develop their own measures
for particular industries and even individual companies. Analysts will often
differ drastically in their conclusions from the same ratio analysis.

41
As in all things financial, beauty is often in the eye of the beholder. It
pays to do your own work

RATIO
Ratio is simple arithmetical expression of the relationship of a number to
another number. It may be defined as the indicated quotient of two
mathematical expressions.
According to Accountant Handbook by Wixion, Kell and Bedford
“Ratio is an expression of the quantities relationship between two
numbers.”

Acc to Kohler
“A ratio is the relation of the amount, a, to another, b, expressed as the
ratio a to b; a:b(a is to b); or as a simple fraction , integer, decimal,
fraction, or percentage.”

For E.g.: if the current assets of a company on a particular date are rs

500000 and current liabilities on this date is Rs 250000
Current ratio is 2:1
Current ratio = 500000/250000 = 2:1

LIQUIDITY RATIOS

42
• Liquidity refers to the ability to pay its current obligation as and when
these become due
• The short term obligations are met by releasing amounts from current,
floating or circulating assets. These should be convertible into cash for
paying obligations of short –term nature.

1. Current ratio:-

Current ratio may be defined as the relationship between current assets and
current liabilities. This ratio also known as working capital ratio, is a
measure of general liquidity and is most widely used to make the analysis of
short –term financial position or liquidity firm.
Current Ratio = Current Assets/ Current Liabilities

Components of Current Ratio

Current Assets Current Liabilities
Cash in hand Bills Payable
Marketable Securities Outstanding Expenses
Short term Investments Sundry Creditors
Bills receivable Short Term Advances
Sundry debtors Income Tax Payable
Investments Dividends Payable
Work in process Bank Overdraft
Prepaid expenses
A relatively high current ratio is an indication that the firm is liquid and has
the ability to meet its current obligations in time as and when they become
due. An ideal ratio is 2:1.

43
 2. Quick Ratio/ Acid Test Ratio:-

The term liquidity refers to the ability of the firm to pay its short term
obligations as and when they become due
Quick ratio may be defined as the relationship quick acids and current
liabilities.

Quick Ratio = (current assets – inventories) / Current Liabilities

Significance of Quick ratio

• It is very useful in measuring the liquidity position of a firm
• It measures the firm capacity to pays it current obligation immediately
and is amore rigorous test of liquidity then the current ratio
• It is used as a complementary ratio to the current ratio.

3. Absolute Liquid Ratio / Cash Ratio:-

Absolute liquid assets include cash in hand and cash at bank and marketable
securities or temporary investment.
The acceptable norm for this ratio is 50% or 0.5: 1 or 1:2

Cash Ratio = Cash + marketable securities/Current Liabilities

ACTIVITY RATIOS

Activity ratios measure the efficiency or effectiveness with which a firm

manages it resources or assets. Theses ratios are also called ‘Turnover
Ratios’ because they indicate the speed with which assets are converted into
sales.

44
For example: inventory turnover ratio indicates the rate at which the funds
invested in inventories are converted into sales.
Depending upon the purpose, a number of turnover ratios are calculated

1. Inventory Turnover Ratio/Stock Turn Over Ratio:-

Inventory turnover ratio indicates whether inventory has been efficiently
used or not. Turnover ratio indicates the number of times the stock has been
turned over during the period and evaluates the efficiency with which a firm
is able to manage its inventory.

Inventory Turnover Ratio = (Cost Of Goods Sold)/Average Inventory

Average Inventory = (Opening Stock + Closing Stock) /2
Interpretation of Inventory Turnover Ratio
• A high inventory turnover ratio indicates efficient management of
resources.
• A high inventory turnover ratio does not necessarily imply higher
profits.

2. Debtor Turnover Ratio:-

Debtor turnover ratio indicates the velocity of debt collection of firm. In
simple words, it indicates the number of times average debtors are
turnover during a year.

Debtors turnover ratio = credit sales/average debtors

45
 Average debtors = (opening debtors + closing debtors)/2

Interpretation of debtor turnover ratio

• Higher the value of debtor turnover the more efficient is the
management of sales or more liquid are the debtors.

3. Creditors Turnover Ratio:-

The analysis for creditors turnover is basically the same as of debtors
turnover ratio.

Creditors Turnover Ratio = Net Credit Purchases/ Average Creditors

The ratio indicates the velocity with which the creditors are turnover in
relation to purchase. Generally, higher the creditor velocity the better it is, or
otherwise lower the creditor velocity, less favourable are the results.

4. Working Capital Turnover Ratio:-

It studies the relationship of net current assets to sales

Working capital = current assets – current liabilities

It indicates the velocity of the utilization of net working capital. This ratio
indicates the number of times the working capital is turnover in the course of
a year. This ratio measures the efficiency with which the working capital is
being is used by a firm.

Working Capital Turnover Ratio = Sales/ Net Current Assets

46
SOLVENCY RATIOS

The term solvency means ability of the firm to meet its long term liabilities.
The long term indebtedness includes debenture holders, financial institutions
providing long term and medium term loans and other creditors selling
goods on installment basis.

1. Debt Equity Ratio:-

Debt Equity Ratio also known as External – Internal Equity Ratio is

calculated to measure the relative claims or outsiders and the owners against
the firm assets.

Debt Equity Ratio = Total Debt/ Net Worth

A ratio of 1:1 is considered to be a satisfactory ratio although they cannot be

any rule of thumb or standard norm of all types of business. in some
business a higher ratio 2:1 or even more may even be considered
satisfactory.

2. Funded Debt To Total Capitalisation Ratio:-

47
The Ratio establishes a linked between the long term funds raised from
outsiders and long term funds available in the business.

Funded Debt To Total Capitalisation = funded debt / total capitalisation

if this Ratio is smaller , better it will be , 50% to 55% this ratio may be
tolerable and not beyond.
3. Fixed Assets To Net Worth Ratio:-
This ratio establishes the relationship between fixed assets and shareholders
funds; that is share capital plus reserves & surplus and retained earnings.

Fixed Assets To Net Worth Ratio = fixed assets (after depreciation)/ net
worth

The Ratio of fixed assets to net worth indicates the extent to which the
shareholder funds are some into fixed assets.

4. Fixed Assets To Long Term Funds :-

A variant to the ratio of the fixed assets to net worth is the ratio of fixed
assets to long term funds which is calculated as

Fixed Assets Ratio = Fixed Assets (After Depreciation)/ Total Long

Term Funds

The total of the fixed assets should be equal to the total of the long term
funds or, say the ratio should be 100%.

48
5. Interest Coverage Ratio:-
Net income to debt service ratio or simply debt service ratio is used to test
the debt servicing capacity of a firm. The ratio is also known as interest
coverage ratio or fixed charges cover ratio.

Interest Coverage Ratio = Net Profit (Before Interest and Tax)/ (Fixed
Interest Charges)
Higher the ratio, more safe is the long term creditor because even if
earnings of the firm fall, the firm shall be abler to meet its commitment of
fixed interest charges.

PROFITABILITY RATIOS

Profits to the management are the test of the efficiency and a measurement
of a control; To owners, a measure of worth of their investment ; to the
creditors the margin of safety ; to employees , a source of fringe benefits; to
government a measure of tax paying capacity and the basis of the legislative
action .

A) General Profitability Ratio

Gross Profit Ratio:-

It measures the relationship of gross profit to net sales.
Usually represented as a percentage: -

Gross Profit Ratio = (Gross Profit / Sales) x 100

49
It reflects the efficiency with which a firm produces its product. Higher the
gross profit ratio better the result

2. Operating Profit Ratio:-

This ratio is calculated by dividing operating profit by sales.

Operating Profit Ratio = (Operating Profit / Sales) x 100

Operating profit = net profit + non operating expenses

3. Expense Ratio;-
Expense ratio indicates the relationship of various expenses to net sales.

Particular Expense Ratio = (Particular Expense / Sales) x 100

The lower the ratio, the better is the profitability and higher the ratio, lower
is the profitability.

4. Net Profit Ratio:-

It establishes the relationship between net profits after interest and taxes a d
sales, sand indicates the efficiency of the management in manufacturing,
selling, administrative and other activities of the firm.

50
This ratio is the overall the measure of firm profitability

Net Profit Ratio = (Net Profit After Tax / Sales) x 100

Higher the ratio, the better is the profitability.

B) OVERALL PROFITABILITY RATIO:-

Profits are the measure of overall the efficiency.

1. Return On Investment:-

Return On Investment Popularly known as ROI or return on shareholders

funds. It is a relationship between net profit after interest & tax and the
proprietor’s fund.

Return On Investment = Net Profit (After Interest & Tax)/

Shareholder’s Funds

Ratio reveals how well the resources of the firm are being used, higher the
ratio betters the result.

Return on Equity Capital:-

Return on equity capital, is the relationship between profits of a company
and equity capital.

Return On Equity Capital = Net Profit After Tax – Preference Dividend

/Equity share capital

51
Higher the ratio, the better is.

3. Earning Per Share:-

EPS is the small variation of return on equity capital and is calculated by
dividing net profit after taxes and preference dividend by the total number
equity shares

Earning Per Share = Net Profit After Tax – Preference Dividend/ No. of
Equity Shares

4. Return on Capital Employed:-

It establishes the relationship between profits and capital employed. It is

primary ratio and it is widely ratio to measure the overall profitability ratio
and efficiency of business.

Return On Gross Capital Employed = (Adjusted Net Profit /Gross

Capital Employed) x 100

Return on Net Capital Employed = (Adjusted Net Profits/ Net Capital

Employed) x 100

5. Capital Turnover Ratio:-

Capital Turnover ratio is the relationship between Cost of goods sold or
sales and the capital employed.

52
This ratio is calculated to measure the efficiency of with which of firm
utilizes it resources or the capital employed.

Capital Turnover Ratio = Cost Of Goods Sold Or Sales/ Capital

Employed

As capital is invested in a business to make sales and earn profits, this ratio
is a good indicator of overall profitability of a concern.

C) MARKET TEST OR VALUATION RATIO

1. Dividend Yield Ratio:-

Dividend yield ratio is the calculated to evaluate the relationship between

dividend per share and the market value of the shares.

Dividend Yield Ratio = Dividend Per Equity Share/ Market Value Per
Share

Dividend Per Share = Dividend Paid To Shareholders/ No. Of Shares

2. Dividend Payout Ratio:-

It is calculated to find out the extent to which earning per share have been
retained in the business. It is an important ratio because ploughing back of
profits enables a company to grow and pay more dividends in future.

53
Dividend Payout Ratio = Dividend Per Equity Share/ Earning Per Share

3. Price Earning Ratio:-

It is the ratio between market price per equity share and earning per share.
This ratio is calculated to make an estimate of appreciation in the value of
share of accompany and is widely used by investors to decide whether or not
to by shares in a particular company
Price Earning Ratio = Market Price Per Equity Share/ Earning Per
Share

Generally higher the price earning ratio, the better is .

If the P/E ratio falls, the management should look into the causes that have
resulted into the fall of this ratio

LEVERAGE RATIOS

1. Capital Gearing Ratio:-

Capital gearing is used to describe the relationship between equity share

capital including reserve & surpluses to preference share capital and other
fixed interest bearing loans if the preference shares capital and other fixed
assets, fixed interest bearing loans exceeds the equity share capital including
reserves, the firm is said to be highly geared.

Capital Gearing Ratio = Equity +Reserves / Preference Share Capital +

Long Term Debt Bearing Fixed Interest

2. Total Investments to Long Term Investments:-

54
This ratio is calculated by dividing the total long term funds by long term
liabilities.
Total Investments to Long Term Investments
= Shareholders Funds + Long Term Liabilities / Long Term
Liabilities
Has a general rule proportion of long term liabilities should not be very high

3. Ratio Of Fixed Assets To Funded Debt:-

The ratio measures the relationship between the fixed assets and the funded
debt and is very useful to the long-term creditors.
Ratio Of Fixed Assets To Funded Debt = Fixed Assets/ Funded Debt

4. Ratio Of Current Liabilities To Proprietors Funds:-

The ratio of current liabilities to proprietors funds establishes the
relationship between current liabilities and the proprietors funds and
indicates amount of long term funds raised by the proprietor as against short
term liability
Ratio Of Current Liabilities To Proprietors Funds
= Current Liabilities/ Proprietors Funds

5. Ratio of Reserves to Equity Capital:-

This ratio indicates that how much profit is generally retained by the firm for
the future growth.
Ratio of Reserves To Equity Capital = (Reserves / Equity Share Capital)
X 100

55
 CHAPTER-7

FINDINGS
AND
DATA ANALYSIS

56
Table No1. CURRENT RATIO:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Current Assets 1805934193 441.63 64.97
Current Liabilities 1329132688 248.62 45.05
Current Ratio 1.36 1.78 1.44

Current Ratio

2
1.8
1.6
1.4
1.2
Ratio

1 Current Ratio
0.8
0.6
0.4
0.2
0
Liberty Bata India Relaxo
Shoes Ltd. Ltd. Footwears
Company

57
 Fig. No.1

Interpretation: -

The ideal Current Ratio is 2:1. Liberty Shoes Ltd. has the lowest current
ratio i.e. amongst the other companies. Bata India Ltd. has the highest
current ratio of 1.78 and Relaxo Footwears has 1.44.

Table No.2. QUICK RATIO:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Quick Assets 104406108 149.40 28.16
5
Current Liabilities 132913268 248.62 45.05
8
Quick Ratio 0.7 0.6 0.62
9

Quick Ratio

0.9
0.8
0.7
0.6
Ratio

0.5
Quick Ratio
0.4
0.3
0.2
0.1
0
Liberty Bata India Relaxo
Shoes Ltd. Ltd. Footwears
Company

58
 Fig. No.2

Interpretation: -

The graph shows that Liberty Shoes Ltd. has quick ratio 0.79 which is
higher than Bata India Ltd. with 0.6 and also than Relaxo Footwears with
ratio of 0.62. Liberty Shoes quick ratio is higher than Bata India and Relaxo
Footwears because of low level of inventories.

Table No3. CASH RATIO:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Cash and Bank Balance 4492677 8.8 2.85
7 0
Current Liabilities 132913268 248.6 45.05
8 2
Cash Ratio 0.0 0.0 0.06
3 4

Cash Ratio

0.07
0.06
0.05
Ratio

0.04
0.03 Cash Ratio
0.02
0.01
0
rs
d.
d.

ea
Lt

Lt
s

w
a
oe

di

ot
In

Fo
Sh

ta

xo
r ty

Ba

a
be

el
Li

Company
59
 Fig No.3

Interpretation: -

The cash ratio or absolute liquid ratio is lowest for Liberty Shoes Ltd. i.e.
0.03 when compared with Bata India Ltd. and Relaxo Footwears.

Table No. 4. STOCK TURNOVER RATIO:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Sales 2578934907 1012.82 305.66
Stock 761873108 292.23 36.81
Stock Turnover Ratio 3.38 3.47 8.30
(times)

60
 Stock Turnover Ratio

9
8
7
6
Ratio

5 Stock Turnover
4 Ratio (times)
3
2
1
0
Liberty Bata India Relaxo
Shoes Ltd. Ltd. Footwears
Company

Fig. No.4

Interpretation: -

The chart shows that stock turnover ratio for Liberty Shoes Ltd. is 3.38
times which is lower than that of Bata India Ltd. i.e. 3.47 times. It indicates
that Liberty Shoes is not using its inventory efficiently in generating sales in
comparison to Bata India Ltd.

Table NO. 5. ASSET TURNOVER RATIO:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Sales 2578934907 1012.8 305.66
2
Total Assets 2879398717 576.77 175.30
Asset Turnover Ratio 0.90 1.76 1.74
(times)

61
 Asset Turnover Ratio

2
1.8
1.6
1.4
1.2
Ratio

Asset Turnover Ratio

1
0.8 (times)
0.6
0.4
0.2
0
Liberty Shoes Bata India Ltd. Relaxo
Ltd. Footwears
Company

Fig. No.5

Interpretation: -

The chart shows that asset turnover ratio for the Liberty Shoes Ltd. is least
i.e. 0.90

When compared with the other companies.

This shows that the company’s assets are underutilised to generate sales.

Debt Equity Ratio

Table No.1.2
6. DEBT EQUITY RATIO:-
1
0.8
Ratio

Particulars 0.6 Liberty Shoes Ltd. Bata India Ltd. Ratio

Debt Equity Relaxo Footwears
Debt 331201007 44.65 69.47
0.4
Shareholder's Funds 1148189285 291.15 60.78
Debt Equity0.2Ratio 0.29 0.15 1.14
0
Liberty Bata India Relaxo
Shoes Ltd. Ltd. Footwears
Company
62
 Fig. No.6

Interpretation: -

The graph shows that the debt- equity ratio of Liberty Shoes Ltd. is 0.29 It is
lower than Relaxo Footwears.

Thus, it is in a better position as its dependence on external debt is less in

comparison to other companies.

Interest Coverage Ratio

Table No.7.6 INTERSET COVERAGE RATIO:-

5
4
Ratio

Particulars 3 Liberty Shoes Ltd. Bata IndiaInterest

Ltd. Relaxo Footwears
PBIT 244421752 Coverage
85.11 Ratio 26.21
Interest
2 133456945 17.30 9.47
1 Ratio
Interest Coverage 1.83 4.92 2.77
0
Bata India
Shoes Ltd.

Footwears
Relaxo
Liberty

Ltd.

63
Company
 Fig. No.7

Interpretation: -

The interest coverage ratio is higher for Bata India Ltd. i.e. 4.92. Liberty has
the lowest interest coverage ratio of 1.83. This indicates that profits are not
sufficient to cover up the fixed interest charges as compared to other
companies.

Table No. 8. OPERATING RATIO:-

Operating Profit Ratio
Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears
Operating Profit
14 329964549 53.32 30.59
Sales 12 2578934907 1012.82 305.66
Operating Profit
10 Ratio (%) 12.79 5.26 10.00
8
Ratio

Operating Profit
6 Ratio (%)
4
2
0
Liberty Bata India Relaxo
Shoes Ltd. Ltd. Footwears
Company
64
 Fig. No.8

Interpretation: -

The graph indicates that Liberty Shoes Ltd. has the operating profit ratio of
12.79. Bata India Ltd. has the lowest operating profit ratio of 5.26%.

This is because of lower operating cost as compared to other companies.

Table No. 9. NET PROFIT RATIO:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Net Profit 160513611 60.7 10.52
4
Sales 2578934907 1012.8 305.66
2
Operating Profit Ratio (%) 6.22 6.0 3.44
0

65
 Operating Profit Ratio (%)

7
6
5
4
Ratio

Operating Profit Ratio

3 (%)
2
1
0
Liberty Bata India Relaxo
Shoes Ltd. Ltd. Footwears
Company

Fig. No.9

Interpretation: -

The graph shows that Liberty Shoes Ltd. has the highest net profit ratio of
6.22% amongst the three companies. It implies that the company is in a
better position to survive in case of adverse economic conditions.

ROI

Table No.10.25RETURN ON INVESTMENT:-

20
Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears
Profit After Tax
15 160513611 60.74 10.52
RATIO

Shareholder's Funds 1148189285 291.15 60.78

ROI
ROI 10 13.98 20.86 17.31

0
Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears
66
Company
 Fig. No.10

Interpretation: -

The graph shows that return on investment is highest for Bata India Ltd. i.e.
20.86%

Relaxo Footwears Ltd. is next to it with 17.31% and Liberty Shoes Ltd.is
next to Relaxo Ltd., this indicates that Liberty Shoes Ltd. is able to earn a
satisfactory return and utilise the shareholder’s resources effciently.

Table No.11. RETURN ON CAPITAL EMPLOYED:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Adjusted Net Profits 295133046 85.11 26.21
Capital Employed (FA+ net CA) 2208331439 310.04 109.90

67
Return on Capital Employed (%) 13.36 27.44 23.85

Return on Capital Employed

30
25
20
Ratio

Return on Capital
15
Employed (%)
10
5
0
Liberty Shoes Bata India Relaxo
Ltd. Ltd. Footwears
Company

Fig. No.11

Interpretations: -

Liberty Shoes Ltd. has the lowest return on capital employed with 13.36%
when compared to Bata India Ltd. with 27.44% and Relaxo Footwears with
23.85%. This indicates that business is not being operated efficiently.

Table No. 12. EARNING PER SHARE:-

Particulars Liberty Shoes Ltd. Bata India Ltd. Relaxo Footwears

Profit After Tax 160513611 60.74 10.52
No. of Shares (lakhs) 170.4 642.64 120.01
E.P.S 9.42 9.45 8.77

68
 E.P.S

9.6
9.4
9.2
Ratio

9 E.P.S
8.8
8.6
8.4
Liberty Shoes Bata India Ltd. Relaxo
Ltd. Footwears
Company

Fig. NO.12

Interpretation: -

Liberty Shoes Ltd. earning per share of Rs.9.42 when compared to Bata
India Ltd. with Rs. 9.45 and Relaxo Footwears with Rs. 8.77. This shows
that profitability of the firm on per share basis is the good.

69
 CHAPTER-8
CONCLUSION

CONCLUSION

Liberty Shoes Ltd. is the only Indian company that is among the top 5
manufacturers of leather footwear in the world with a turnover exceeding
U.S. $100 million. With 50 years of excellence, today Liberty produces
footwear for the entire family and is a trusted name across the world. In the

70
domestic market it is one of the most admired footwear brands and holds the
largest market share for leather footwear

On comparing various ratios of the company with its peers it is concluded

that the liquidity of Liberty Shoes Ltd. is satisfactory as the difference
between current ratio and quick ratio is not much.

The asset utilisation and inventory management is not efficient since the
turnover ratios are very low. Also there is dependence on the external debt
but it is satisfactory which is a good indicator for long term solvency of the
business. The profits have increased but in relation to sales they have
decreased over the years. However the company is highly profitable as it is
able to earn a good return on investment. Liberty Shoes Ltd. is a diversified
concern and is doing well in the area of retail and exports besides
manufacturing

71
 CHAPTER-9

SUGGESTIONS
AND
RECOMMENDATIONS

SUGGESTIONS AND RECOMMENDATIONS

• It is necessary to prepare the cash budget and try to achieve the actual
target and budgeted figures.

72
• Companies should control, review and improve their discount policy so
as to improve company’s image.
• More attention should be paid to customer’s complaints and efforts
should be made to remove them.
• For scientific study of working capital and ratio analysis problems, a
mathematical model should be developed thus resulting in more accurate
forecasts.
• Funds should be available in smooth and steady flow so that construction
at the site is not affected and proper balance is maintained if more than
one site is going on in the same time.
• Terms and conditions with the suppliers should be decided in advance in
order to get rid of the future problems.
• Stock should be verified more frequently to avoid differences between
book figures and actual figures.
• Every department should be made cost conscious to increase profitability.
• Management of inventories is necessary to avoid heavy losses occurring
due to leakage, theft or wastage of raw material.
• Employ more equity funds than debt funds to decrease cost.
• New designs and colours to differentiate products from that of
competitors in order to increase sales.
• More marketing efforts should be undertaken to enhance profitability.
• Assets should be utilized properly to improve efficiency.

73
 CHAPTER-10
BIBLIOGRAPHY

BIBLIOGRAPHY

BOOKS

74
 • Pandey, I.M., “Financial Management”, Ed. 2007, VIkas Publishing
House Private Ltd., New Delhi.
• Gupta, Shashi K., “Management Accounting”, Ed.2007, Kalyani
Publishers, New Delhi.
• KOthari, C.R., “Research Methodology”, Ed.2007, New Age
International (P) Limited, Publishers, New Delhi.

MANUAL
• Annual Reports

WEBSITES
• www.liberyshoes.com
• www.moneycontrol.com
• www.libertyfreedom.com

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CHAPTER-11

APPENDIX

LIBERTY

BALANCE SHEET AS AT 31st MARCH,2008

76
 PARTICULARS
FUNDS EMPLOYED
Shareholder's Funds
Share Capital 17,04,00,000
Reserves and Surplus 97,77,89,285 1,14,81,89,285
Loan Funds
Secured Loans 1,03,31,65,873
Unsecured Loans 17,49,91,716 1,20,81,57,589
Deferred Tax
Deferred Tax Laibility 7,08,75,737
2,42,72,22,611
APPLICATIONS OF FUNDS
Fixed Assets
Gross Block 1,26,06,40,151
Less: Depreciation 40,60,66,799
Net Block 85,45,73,352
Add: Capital Work in Progress 1,54,92,360 87,00,65,712
Investments 20,33,98,812
CURRENT ASSETS,LOANS AND ADVANCES
Inventories 76,18,73,108
Sundry Debtors 72,41,47,983
Cash and Bank Balance 4,49,26,777
Loans and Advances 27,49,86,325
1,80,59,34,193
Less: Current Liabilities 42,93,74,450
Provisions 2,28,01,656
Net Current Assets 1,35,37,58,087
2,42,72,22,611

PROFIT AND LOSS ACCOUNT

For the year ended 31st March, 2008
(Amount in Rs.)
PARTICULARS

77
INCOME
SALES 578934907
less: Excise Duty 100427026
2478507881
Other Income 50711294
Increase/ (Decrease) in Stocks 69857067 2599076242
EXPENDITURE
Raw Material Consumed and Finished Goods Purchased 1319594764
Manufacturing Expenses 189559879
Payments and Benefits to Employees 226092498
Administration, Selling and Miscellaneous
Expenses 509261505
Interest & Financial Charges 133456945
Excise Duty -4362344
Depreciation 63796894 2437400141
Profit before tax 161676101
Provision for Taxation
Current Tax 18589712
MAT Credit Entitlement -18317902
Fringe Benefit Tax 3049250
Deferred Tax -2158570
Profit after tax 160513611
add/(less): Taxation adjustments of previous years(net) -5284920
Earlier year adjustment 4,387,989
Net Profit for the year 159616680
Add: Opening balance 229043097
Net Profit available for appropriations 388659777
APPROPRIATIONS
Tranfer to General Reserve 6,00,00,000
Balance carried over to Balance Sheet 328659777
Earning Per Share of Rs.10/- each 9.42

BATA INDIA LTD.

BALANCE SHEET AS AT 31st MARCH,2008

PARTICULARS in Rs. Cr.
FUNDS EMPLOYED

78
Shareholder's Funds
Share Capital 64.26
226.8
Reserves and Surplus 9 291.15
Loan Funds
Secured Loans 35.93
Unsecured Loans 8.72 44.65
335.80
APPLICATIONS OF FUNDS
Fixed Assets
349.3
Gross Block 4
232.3
Less: Depreciation 1
117.0
Net Block 3
Add: Capital Work in Progress 0.86 117.89
Investments 17.25
CURRENT ASSETS,LOANS AND ADVANCES
292.2
Inventories 3
Sundry Debtors 25.89
Cash and Bank Balance 8.80
114.7
Loans and Advances 1
441.6
3
194.3
Less: Current Liabilities 6
Provisions 54.26
Net Current Assets 193.01
Miscellaneous Expenditure 7.65
335.80

79
 BATA INDIA LTD.

PROFIT AND LOSS ACCOUNT

for the year ended 31 st March,2008
PARTICULARS In Rs.Cr.

INCOME
SALES 1012.82
less: Excise Duty 22.86
Net Sales 989.96
Other Income 1.63
Increase/ (Decrease) in Stocks (10.69) 980.90
EXPENDITURE
Raw Material Consumed and Finished Goods Purchased 458.74
Manufacturing Expenses 49.68
Payments and Benefits to Employees 173.22
Administration, Selling and Miscellaneous Expenses 195.15
Interest & Financial Charges 17.30
Depreciation 19.00 913.09
Profit before tax 67.81
Extra ordinary items 4.03
PBT ( Post extra ordinary item) 71.84
Tax 11.10
Reported Net Profit 60.74
Total value addition 418.05
Equity Dividend 16.07
Corporate Dividend Tax 2.73
Per Share Data (annualized)
Shares in issue (lakhs) 642.64
Earning Per Share ( Rs.) 9.45
Equity Dividend (%) 25.00
Book Value (Rs) 39.44

RELAXO FOOTWEARS

80
 BALANCE SHEET AS AT 31st MARCH,2008
PARTICULARS in Rs. Cr.
FUNDS EMPLOYED
Shareholder's Funds
Share Capital 6.00
Reserves and Surplus 54.78 60.78
Loan Funds
Secured Loans 45.24
Unsecured Loans 24.23 69.47
130.25
APPLICATIONS OF FUNDS
Fixed Assets
133.4
Gross Block 0
Less: Depreciation 43.42
Net Block 89.98
Add: Capital Work in Progress 20.29 110.27
Investments 0.06
CURRENT ASSETS,LOANS AND ADVANCES
Inventories 36.81
Sundry Debtors 15.63
Cash and Bank Balance 2.85
Loans and Advances 9.68
64.97
Less: Current Liabilities 41.35
Provisions 3.70
Net Current Assets 19.92
109.67

RELAXO FOOTWEAR

81
 PROFIT AND LOSS ACCOUNT
for the year ended 31st March,2008
PARTICULARS in Rs.Cr.

INCOME
SALES 305.66
less: Excise Duty NIL

Other Income 1.06

Increase/ (Decrease) in Stocks 9.13 315.85
EXPENDITURE
Raw Material Consumed and Finished Goods Purchased 192.51
Manufacturing Expenses 17.69
Payments and Benefits to Employees 26.16
Administration, Selling and Miscellaneous Expenses 43.94
Interest & Financial Charges 9.47
Depreciation 9.34 299.11
Profit before tax 16.74
Extra ordinary items 0.07
PBT ( Post extra ordinary item) 16.81
Tax 6.28
Reported Net Profit 10.52
Total value addition 87.79
Equity Dividend 0.90
Corporate Dividend Tax 0.15
Per Share Data (annualized)
Shares in issue (lakhs) 120.01
Earning Per Share ( Rs.) 8.77
Equity Dividend (%) 15.00
Book Value (Rs) 50.65

82