FUNDAMENTAL ANALYSIS OF ARVIND TEXTILES LIMITED FOR 5 YEARS

A PROJECT SUBMITTED TO

University of Mumbai for partial completion of the degree

of

Bachelor in Commerce (Accounting and Finance)

Under the faculty of Commerce

By

VINITA PRAKASH SEWANI

Under the guidance of

Dr. Anu Bansal

VIVEKANAND EDUCATION SOCIETY’S COLLEGE OF

ARTS, SCIENCE & COMMERCE

SINDHI SOCIETY, CHEMBUR MUMBAI – 71

April 2020
 CERTIFICATE

This is to certify that Miss. Vinita Prakash Sewani has worked and duly completed his project work for the
degree of Bachelor in Commerce (Accounting and Finance – Sem VI) during the academic year 2019-2020
under the faculty of commerce in the subject of Financial Management and his project is titled
Fundamental Analysis of Arvind Textiles Limited for 5 years under the guidance of Dr. Anu Bansal.

This is to further certify that the entire work has been done by the learner and that no part of it has been
submitted previously for any Degree or Diploma of any University.

It is her own work and facts reported by his personal findings and investigation.

Course Coordinator Principal

Project Guide / Internal Examiner External

Examiner
 DECLARATION

I the undersigned Miss. Vinita Prakash Sewani here by, declare that the work embodied in this project
work titled, Fundamental Analysis Arvind Textiles Limited for 5 years forms my own contribution to the
research work carried out under the guidance of Dr. Anu Bansal is a result of my own research and has not
been previously submitted to any other University for any other Degree / Diploma to this or any other
University.

Wherever reference has been made to previous works of others, it has been clearly indicated as such and
included in the bibliography.

I, here by further declare that all information of this document has been obtained and presented in
accordance with academic rules and ethical conduct.

Vinita Prakash Sewani

Roll No. 138

 ACKNOWLEDGEMENT

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my Principal Dr. Anita Kanwar for providing the necessary facilities required for
completion of this project.

I take this opportunity to thank our coordinator CA. Shantilakshmi Mudaliar for her moral support and
guidance.

I would also like to express my sincere gratitude towards my project guide Dr. Anu Bansal whose guidance
and acre made the project successful.

I would like to thank my college library, for having provided various reference books and magazines related
to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of
the project especially my Parents and Peers who supported me throughout my project.
 INDEX

Chapter Title of the Chapter Page

Number Number

1 Introduction

2 Research Methodology

3 Review of Literature

4 Data Analysis & Interpretation

5 Conclusion & Suggestions

Bibliography

Annexure
 LIST OF TABLES

Table Number Topic Page Number

1 Current Ratio
2 Quick Ratio
3 Cash Ratio
4 Stock to Working Capital Ratio
5 Structure Ratio
6 Debt Equity Ratio
7 Proprietary Ratio
8 Capital Gearing Ratio
9 Net Worth Turnover Ratio
10 Capital Turnover Ratio
11 Fixed Assets Turnover Ratio
12 Working Capital Turnover Ratio
13 Inventory Turnover Ratio for Finished Goods
14 Inventory Turnover Ratio for Raw Materials
15 Debtors Turnover Ratio
16 Creditors Turnover Ratio
17 Returns on Net Worth
18 Net Profit Ratio
 LIST OF GRAPHS

Graph Number Topic Page Number

1 Current Ratio
2 Quick Ratio
3 Cash Ratio
4 Stock to Working Capital Ratio
5 Structure Ratio
6 Debt Equity Ratio
7 Proprietary Ratio
8 Capital Gearing Ratio
9 Net Worth Turnover Ratio
10 Capital Turnover Ratio
11 Fixed Assets Turnover Ratio
12 Working Capital Turnover Ratio
13 Inventory Turnover Ratio for Finished Goods
14 Inventory Turnover Ratio for Raw Materials
15 Debtors Turnover Ratio
16 Creditors Turnover Ratio
17 Returns on Net Worth
18 Net Profit Ratio
 CHAPTER – 1

INTRODUCTION

FINANCIAL STATEMENT

Financial statements (or financial reports) are formal records of the financial activities and position of a
business, person, or other entity.

Relevant financial information is presented in a structured manner and in a form which is easy to understand.
They typically include four basic financial statements accompanied by a management discussion and
analysis.

 A balance sheet or statement of financial position, reports on a company’s assets, liabilities, and
owners equity at a given point on time.
 An income statement or profit and loss report or statement of comprehensive income or statement of
revenue & expense reports on a company’s income, expenses, and profits over a stated period of
time. A profit and statement provides information on the operation of the enterprise. These includes
sales and the various expenses incurred during the stated period.
 A statement of changes in equity or equity statement, or statement of retained earnings, reports on the
changes in equity of the company over a stated period of time.
 A cash flow statement reports on a company’s cash flow activities, particularly its operating,
investing and financing activities over a stated period of time.

For large corporations, these statements may be complex and may include an extensive set of footnotes to
the financial statements and management discussion and analysis. The notes typically describe each item on
the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements
are considered an integral part of the financial statements.

Features of Financial Statements

1. The Financial Statements should be relevant for the purpose for which they are prepared.
Unnecessary and confusing disclosures should be avoided and all those that are relevant and material
should be reported to the public.
2. They should convey full and accurate information about the performance, position, progress and
prospects of an enterprise. It is also important that those who prepare and present the financial
statements should not allow their personal prejudices to distort the facts.
 3. They should be easily comparable with previous statements or with those of similar concerns or
industry. Comparability increases the utility of financial statements.
4. They should be prepared in a classified form so that a better and meaningful analysis could be made.
5. The financial statements should be prepared and presented at the right time. Undue delay in their
preparation would reduce the significance utility of these statements.
6. The financial statements must have general acceptability and understanding. This can be achieved
only by applying certain “generally accepted accounting principles” in their preparation.
7. The financial statements should not be affected by inconsistencies arising out of personal judgements
and procedural choices exercised by the accountant.
8. Financial Statements should comply with the legal requirements if any, as regards form, contents,
and disclosures and methods. In India, companies are required to present their financial statements
according to the Companies Act, 1956.

IMPORTANCE OF FINANCIAL STATEMENT

The importance of financial statements lies in their utility to satisfy the varied interest of different categories
of parties such as management, creditors, public, etc.

1. Importance to management
Increase in size and complexities of factors affecting the business operations necessitate a scientific and
analytical approach in the management of modern business enterprises.
The management team requires up to date, accurate and systematic financial information for the purposes.
Financial statements help the management to understand the position, progress and prospects of business vis-
a-vis the industry. Comparative analysis of financial statements reveals the trend in the progress and position
of enterprise and enables the management to make suitable changes in the policies to avert unfavourable
situations.
2. Importance to the Shareholders
Management is separated from ownership in the case of companies. Shareholders cannot, directly, take part
in day-to-day activities of business. However, the results of these activities should be reported to
shareholders at the annual general board meeting in a form of financial statements.
3. Importance to Lenders/Creditors
It is through a critical examination of the financial statements that these groups can come to know about the
liquidity, profitability and long-term solvency position of the company. This will help them to decide about
their future course of decision/action.
4. Importance to Labour
Workers are entitled to bonus depending upon the size of profit as disclosed by audited profit and loss
account. Thus P & L a/c becomes greatly important to the workers. In wages negotiations also, the size of
profits and profitability achieved are greatly relevant.
5. Importance to the Public
Business is a social entity. Various groups of society, though directly not connected with business and they
are interested in knowing the position, progress and prospects of a business enterprise. This is the only
through these published financial statements, people can analyse judge and comment upon business
enterprise.
6. Importance to National Economy
The rise and growth of corporate sector, to a great extend, influence the economic progress of a country.
Unscrupulous and fraudulent corporate managements shatter the confidence of the general public in joint
stock companies, which is essential for economic progress and retard the economic growth of the country.

OBJECTIVES OF FINNCIAL STATEMENTS

1. Knowing Profitability of Business
Financial statements are required to ascertain whether the enterprise is earning adequate profit and to know
whether the profits have increased or decreased as compared to the previous years, so that corrective steps
can be taken well in advance.
2. Knowing the Solvency of the Business
Financial Statements help to analyse the position of the business as regards to the capacity of the entity to
repay its short as well as long term liabilities.
3. Judging the Growth of the Business
Through comparison of data of two or more years of business entity, we can draw a meaningful conclusion
as regard to growth of the business. For example, increase in sales with simultaneous increase in the profits
of the business, indicates a healthy sign for the growth of the business.
4. Judging Financial Strength of Business
Financial Statements help the entity in determining solvency of the business and help to answer various
aspects viz., whether it is capable to purchase assets from its own resources and/or whether the entity can
repay its outside liabilities as and when they become due.
5. Making Comparison and Selection of Appropriate Policy
To make a comparative study of the profitability of the entity with other entities engaged in the same trade,
financial statements helps the management to adopt sound business policy by making intra firm comparison.
6. Forecasting and Preparing Budgets
Financial Statements provides information regarding the weak-spots of the business so that the management
can take corrective measures to remove these short comings. Financial statements help the management to
make forecast and prepare budgets.
7. Communicating with Different Parties
Financial Statements are prepared by the entities to communicate with different parties about their financial
position. Hence, it can be concluded that understanding the basic financial statements is a necessary step
towards the successful management of a commercial enterprise.

LIMITATIONS OF FINANCIAL STATEMENTS

Most of the limitations are mainly due to the cumulative effect of recorded facts, accounting conventions and
personal judgement on financial statements. Unless they are prepared specially they fail to reflect the current
economic picture of business. As such, financial statements have a number of limitations.
1. Information is Incomplete and Inexact
The financial statements are interim reports usually prepared for an accounting period. Hence, the financial
information as revealed by them is neither complete nor exact.
The true financial position or ultimate gain or loss, can be known only when the business is closed down.
2. Qualitative Information is Ignored
Financial statements depict only those items of quantitative information that are expressed in monetary
terms. But, a number of qualitative factors, such as the reputation and prestige of the management with the
public, cordial industrial relations and efficiency of workers, customer satisfaction, competitive strength,
etc., which cannot be expressed in monetary terms, are not depicted by the financial statements.
However, these factors are essential for understanding the real financial condition and the operating results
of the business.
3. Financial Statements Mainly Show Historical Information
As the financial statements are compiled on the basis of historical costs, they fail to take into account such
factors as the decrease in money value and increase in the price level changes.
Since these statements with the past data only, they are of little value in decision-making.
4. Financial Statements are based on Accounting Concepts and Conventions
Accounting concepts and conventions used the preparation of financial statements make them unrealistic.
For example the income statement prepared on the basis of the convention of conservatism fails to disclose
the true income, for it includes probable losses and ignores probable income. Similarly the value of fixed
asset is shown in the balance sheet on the ‘going concern concept’. This means that the value of the asset
rarely represents the amount of cash, which would be realized on liquidation.
5. Personal Judgement Influence Financial Statements
Many items in the financial statements are left to the personal judgement of the accountant.
For example, the method of inventory valuation, the method of depreciation the treatment of deferred
revenue expenditure, etc., depend on the personal judgement of the accountant.

FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis is a method of reviewing and analysing a company’s accounting reports
(financial statements) in order to gauge its past, present or projected future performance. This process of
reviewing the financial statements allows for better economic decision making.
Globally, publicly listed companies are required by law to file their financial statements with the relevant
authorities. For example, publicly listed firms in America are required to submit their financial statements to
the Securities and Exchange Commission (SEC). Firms are also obligated to provide their financial
statements
in the annual report that they share with their stakeholders. As financial statements are prepared in order to
meet requirements, the second step in the process is to analyse them effectively so that future profitability
and cash flows can be forecasted.
Therefore, the main purpose of financial statement analysis is to utilise information about the past
performance of the company in order to predict how it will fare in the future. Another important purpose of
the analysis of financial statements is to identify potential problem areas Here, we will look at 1) the users of
financial statement analysis, 2) the methods of financial statement analysis, 3) key accounting reports (the
balance sheet, income statement, and statement of cash flows) and how they are analysed, 4) other financial
statement information, and 5) problems with financial statement analysis.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

1. Comparative Income Statement

2. Comparative Balance Sheet
3. Trend Ratios or Trend Analysis.
4. Ratio Analysis.

1. Comparative Income Statement

Three important information are obtained from the Comparative Income Statement. They are Gross Profit,
Operating Profit and Net Profit. The changes or the improvement in the profitability of the business concern
is found out over a period of time. If the changes or improvement is not satisfactory, the management can
find out the reasons for it and some corrective action can be taken.
2. Comparative Balance Sheet
The financial condition of the business concern can be finding out by preparing comparative balance sheet.
The various items of Balance sheet for two different periods are used. The assets are classified as current
assets and fixed assets for comparison. Likewise, the liabilities are classified as current liabilities, long term
liabilities and shareholders’ net worth. The term shareholders’ net worth includes Equity Share Capital,
Preference Share Capital, Reserves and Surplus and the like.
3. Trend Analysis
The ratios of different items for various periods are find out and then compared under this analysis. The
analysis of the ratios over a period of years gives an idea of whether the business concern is trending upward
or downward. This analysis is otherwise called as Pyramid Method.
4. Ratio Analysis
A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.
Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance such
as its efficiency, liquidity, profitability and solvency.The term “ratio analysis” refers to the analysis of the
financial statements in conjunction with the interpretations of financial results of a particular period of
operations, derived with the help of ‘ratio’. Ratio analysis is used to determine the financial soundness of a
business concern. Ratio analysis is the most important tool of analysing these financial statements. It helps
the reader in giving tongue to the mute heaps of figures given in financial statements. The figures then speak
of liquidity, solvency, profitability etc. of the business enterprise. It refers to the numerical and quantitative
relationship between two items or variables. This relationship can be exposed as
 Percentages
 Fractions
 Proportion of numbers

Ration analysis is defined as the systematic use of ratios to interpret the financial statements. So that the
strength and weakness of a firm, as well as its historical performance and current financial condition can be
determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment.

LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

The limitations of financial statements are those factors that a user should be aware of before relying on
them to an excessive extent. Knowledge of these factors could result in a reduction of invested funds in a
business, or actions taken to investigate further. The following are all limitations of financial statements

Dependence on historical costs. Transactions are initially recorded at their cost. This is a concern when
reviewing the balance sheet, where the values of assets and liabilities may change over time. Some items,
such as marketable securities, are altered to match changes in their market values, but other items, such as
fixed assets, do not change. Thus, the balance sheet could be misleading if a large part of the amount
presented is based on historical costs.

Inflationary effects. If the inflation rate is relatively high, the amounts associated with assets and liabilities
in the balance sheet will appear inordinately low, since they are not being adjusted for inflation. This mostly
applies to long-term assets.

Intangible assets not recorded. Many intangible assets are not recorded as assets. Instead, any
expenditures made to create an intangible asset are immediately charged to expense. This policy can
drastically underestimate the value of a business, especially one that has spent a large amount to build up a
brand image or to develop new products. It is a particular problem for start-up companies that have created
intellectual property, but which have so far generated minimal sales.

Based on specific time period. A user of financial statements can gain an incorrect view of the financial
results or cash flows of a business by only looking at one reporting period. Any one period may vary from
the normal operating results of a business, perhaps due to a sudden spike in sales or seasonality effects. It is
better to view a large number of consecutive financial statements to gain a better view of ongoing results.

Not always comparable across companies. If a user wants to compare the results of different companies,
their financial statements are not always comparable, because the entities use different accounting practices.
These issues can be located by examining the disclosures that accompany the financial statements.

Subject to fraud. The management team of a company may deliberately skew the results presented. This
situation can arise when there is undue pressure to report excellent results, such as when a bonus plan calls
for pay-outs only if the reported sales level increases. One might suspect the presence of this issue when the
reported results spike to a level exceeding the industry norm.

No discussion of non-financial issues. The financial statements do not address non-financial issues, such
as the environmental attentiveness of a company's operations, or how well it works with the local
community. A business reporting excellent financial results might be a failure in these other areas.

Not verified. If the financial statements have not been audited, this means that no one has examined the
accounting policies, practices, and controls of the issuer to ensure that it has created accurate financial
statements. An audit opinion that accompanies the financial statements is evidence of such a review.

No predictive value. The information in a set of financial statements provides information about either
historical results or the financial status of a business as of a specific date. The statements do not necessarily
provide any value in predicting what will happen in the future. For example, a business could report
excellent results in one month, and no sales at all in the next month, because a contract on which it was
relying has ended. Financial statements are normally quite useful documents, but it can pay to be aware of
the preceding issues before relying on them too much.

USERS OF FINANCIAL STATEMENT ANALYSIS

There are different users of financial statement analysis. These can be classified into internal and external
users. Internal users refer to the management of the company who analysis financial statements in order to
make decisions related to the operations of the company. On the other hand, external users do not necessarily
belong to the company but still hold some sort of financial interest. These include owners, investors,
creditors, government, employees, customers, and the general public. These users are elaborated on below

1. Management
The managers of the company use their financial statement analysis to make intelligent decisions about their
performance. For instance, they may gauge cost per distribution channel, or how much cash they have left,
from their accounting reports and make decisions from these analysis results.
2. Owners
Small business owners need financial information from their operations to determine whether the business is
profitable. It helps in making decisions like whether to continue operating the business, whether to improve
business strategies or whether to give up on the business altogether.

3. Owners
People who have purchased stock or shares in a company need financial information to analyse the way the
company is performing. They use financial statement analysis to determine what to do with their investments
in the company. So depending on how the company is doing, they will either hold onto their stock, sell it or
buy more.
4. Creditors

Creditors are interested in knowing if a company will be able to honour its payments as they become due.
They use cash flow analysis of the company’s accounting records to measure the company’s liquidity, or its
ability to make short-term payments.

5. Government
Governing and regulating bodies of the state look at financial statement analysis to determine how the
economy is performing in general so they can plan their financial and industrial policies. Tax authorities also
analyse a company’s statements to calculate the tax burden that the company has to pay.
6. Employees
Employees need to know if their employment is secure and if there is a possibility of a pay raise. They want
to be abreast of their company’s profitability and stability. Employees may also be interested in knowing the
company’s financial position to see whether there may be plans for expansion and hence, career prospects
for them.
7. Customers
Customers need to know about the ability of the company to service its clients into the future. The need to
know about the company’s stability of operations is heightened if the customer (i.e. a distributor or procurer
of specialized products) is dependent wholly on the company for its supplies.
8. General Public
Anyone in the general public, like students, analysts and researchers, may be interested in using a company’s
financial statement analysis. They may wish to evaluate the effects of the firm on the environment, or the
economy or even the local community.
 INTRODUCTION OF TEXTILE INDUSTRY

The term ‘Textile' is a Latin word which cones from the word ‘texere ' which means ‘to weave'. Textile
originally referred to a woven fabric but latter on the term textile as well as the plural textiles refers to
fibers, filaments and yarns. Textile industry occupies a significant position in our country. In India, this
industry enjoys a rich past.

The Textile Sector in India ranks next to Agriculture. Textile is one of India’s oldest industries and has a
formidable presence in the national economy in as much as it contributes to about 14 per cent of
manufacturing value-addition, accounts for around one-third of our gross export earnings and provides
gainful employment to millions of people. The textile industry occupies a unique place in our country. One
of the earliest to come into existence in India, it accounts for 14% of the total Industrial production,
contributes to nearly 30% of the total exports and is the second largest employment generator after
agriculture.

Textile Industry is providing one of the most basic needs of people and the holds importance; maintaining
sustained growth for improving quality of life. It has a unique position as a self-reliant industry, from the
production of raw materials to the delivery of finished products, with substantial value-addition at each
stage of processing; it is a major contribution to the country's economy. This paper deals with structure,
growth and size of the Indian textile industry, role of textile industry in economy, key advantages of the
industry, textile industry export and global scenario and strength, weakness, opportunities and treats of the
Indian textile industry.

Definition of Textile Industry

The textile industry is the industry which involves the sections like research, design, development,
manufacturing and distribution of textiles, fabrics and clothing.

The Indian textile industry has a significant presence in the economy as well as in the international textile
economy. Its contribution to the Indian economy is manifested in terms of its contribution to the
industrial production, employment generation and foreign exchange earnings. It contributes 28% of
industrial production, 13 % of excise collections, and 25 % of employment in the industrial sector, nearly 28
% to the country’s total export earning and 6% to the GDP.

CONTRIBUTION OF TEXTILE INDUSTRY IN ECONOMY

GDP
Industrial
Production
country's
total
export
earning

excise
collections
employme
nt in the
industrial
sector

In human history, past and present can never ignore the importance of textile in a civilization
decisively affecting its destinies, effectively changing its social scenario.

EVOLUTION AND EVALUATION OF TEXTILE INDUSTRY

The ‘RAG TRADE’, as it is referred to in the UK and Australia is the manufacture, trade and distribution of
textiles.

There were various stages - from a historical perspective - where the textile industry evolved from being a
domestic small-scale industry, to the status of supremacy it currently holds.

The ‘cottage stage’ was the first stage in its history where textiles were produced on a domestic basis.
During this period cloth was made from materials including wool, flax and cotton. The material depended on
the area where the cloth was being produced, and the time they were being made.

In the later half of the medieval period in the northern parts of Europe, cotton came to be regarded as an
imported fiber. During the later phases of the 16th century cotton was grown in the warmer climates of
America and Asia.

A number of new innovations led to the industrialization of the textile industry. In the initial phases, textile
textiles were located in and around the rivers since they were powered by water wheels. After the
steam engine was invented, the dependence on the rivers ceased to a great extent. In the later phases of the
20th century, shuttles that were used in the textile industry were developed and became faster and thus more
efficient.

Today, modern techniques, electronics and innovation have led to a competitive, low-priced textile industry
offering almost any type of cloth or design a person could desire. With its low cost labour base, China
has come to dominate the global textile industry.

SEGMENTS IN TEXTILE INDUSTRY

Our textile industry constitutes the following segments

 Readymade Garments – denims, made-ups, shirts, etc.

 Cotton Textiles including Handlooms (textiles made / Power loom / Handloom)
 Man-made Textiles
 Silk Textiles
 Woollen Textiles
 Handicrafts including Carpets
 Coir
 Jute

INDIAN TEXTILE INDUSTRY

The Indian textile is one of the largest segments of the Indian economy accounting for over one-fifth of the
total industry production. The industry has a complex structure marked by presence of large scale production
units as well as small-scale units. The industry is manufacture driven with spinning having large-scale
operation retailing as weakest link.

India’s textile is second largest in the world, next to china, with annual shipments of USD 20 billion and a
work force of 20 million people. It generates 7% of India’s GDP, 20 % of its industrial output and 38 % of
its export earnings. The competitive position of Indian textile largely reflects its vast domestic fiber
base, low cost and skilled work force, established allied industries, significant yarn and fabrics capacity and
manufacturing flexibility. India also produces a fabulous range of men-made fibers, polyester cotton and
polyester-viscose blended fabrics. India offers an alluring range of made up item like scarves and stoles in
exotic, intricate patterns and magical finishes.

The Indian industry is pre-dominantly cotton based with 70 percent of the raw Materials consumed
being cotton. It is composed of the three major sectors, namely the mill, also called the organized sector; the
handloom and power loom sectors both being classified as decentralized sectors and; the garments sector.
 GUJRAT TEXTILE INDUSTRY

Gujarat is one the leading industrial states in India and textile industry in India in particular had
contributed in big way to the industrialization of the state. In fact, development of the many industries
like dyestuff, chemicals Engineering/foundry and cotton farming is solely dependent on these sectors. The
state is well known for development of hybrid cotton, ginning, power looms, composites textiles, spinning
units and independent processing houses.

In Gujarat, textile manufacturers use cotton based fabrics in mill sector, major reason being the availability
of the basic raw materials in the state, i.e. cotton. Similarly many spinning units producing more
conservative yarns were established in the state. The state happened to be more conservative with cotton
textile products mainly in the organized sector, weaving and synthetic textile in decentralized sector.
Seurat art silk manufacturers are only exception. Similarly, independent processing units process synthetic
blended and cotton fabrics. Clusters of processing units are located in Seurat, Ahmedabad and Jaipur,
though these production units have good capacity of processing wide range of fabric.

Ready-made Garment manufacturing and hosiery knitwear unit also exists in SSI categories. In early
1990’s Gujarat saw dramatic change in its textile industry scenario where quite a few textile textiles started
manufacturing Denim. The Arvind Textiles, Ashima Textiles, Soma Textiles, Modern Denim, and
Arvee denim started manufacturing denim. So many textiles at a time fetched a new name for Ahmedabad
“Denim city of India” whereas city of Surat became “Silk city of India”.

TEXTILE INDUSTRY KEY FACTORS

 The Indian textile industry is second largest industry in terms of providing vast employment
opportunities and employs around 35 million people in country after agriculture sector and
contributes 14% to industrial production of the country.
 Textile Industry contributes around 6% of GDP, 13% of excise collections, 25% of employment in
industrial sector, and has 28% share in country’s export.
 Industry has direct and strong linkage with rural and agriculture sector, therefore it is estimated that,
one of every six households in country is directly or indirectly dependent on this industry contributes.
 12% of world production of textile fibers and yarn.
 25% share in the world trade of cotton yarn.
 23% of the world’s spindle capacity.
 6% of global rotor capacity.
 61% in world loom age.
 Including textiles and garments, 30% of India's export comes from this sector.
  Large and potential domestic & international market, large pool of skilled and cheap labour, well-
established industry, promising export potential etc. are few strengths of Indian Textile Industry.
 Highly Fragmented, High dependence on cotton sector, Lower productivity, and Unfavourable
Labour Laws are few drawbacks of the industry which it has to overcome.
 After the elimination of quota restrictions and implementation of National Textile Policy 2000, it is
estimated that the industry will grow with rapid rate and help to strengthen the Indian economy.

MAJOR PLAYERS IN THE TEXTILE INDUSTRY IN INDIA

 ARVIND LIMITED:
Arvind textiles is one of the major and fully vertically integrated composite textiles players in India. It
has large production in denim, shirting and knitted garments. It is now adding value by manufacturing
denim apparel. Its sales are around US$ 300 million.
 RAYMOND’S:
Raymond’s has the large, diversified integrated business model, which is spread across the value
chain from yarn to retail. It is specialized in Diversified woolen textiles. It already supplies to some
US retailers.
 RELIANCE TEXTILES:
Reliance Textiles is one of the major textiles Company that is in business of fully integrated man-made
fiber. It has capacity of more than 6 million tons per year. It has joint venture partners like, DuPont,
Stone & Webster, Since (Italy) etc.
 VARDHMAN SPINNING:
Vardhman deals in spinning, weaving and processing segment of the industry. It is planning to double
its fabric processing capacity to 50 million meters. It is an approved supplier to global retailers like Gap,
Target and Tommy Hilfiger. Its sales are little over US$ 120 millions
 WELSPUN INDIA: (Manufactures terry towels)
 BIRLA GROUP DORMEFUL BIRLA VXL LIMITED: (Fully integrated woollen textiles)
 SHARDA TEXTILE MILLS: (Man-made fiber)
 INDIAN RAYON: (Man-made fiber)
 NATIONAL RAYON CORP: (Man-made fiber)
 BSL LIMITED: (Textiles)
 ASHIMA SYNTAX: (Man-made fibres)
 MODERN GROUP: (Diversified, producer of denims, syntax and thread)
 INTRODUCTION OF ARVIND LIMITED

COMPANY PROFILE:

The aim was to indigenously produce fine and superfine cotton fabric as well as traditional material
for vast potential Indian market. At this juncture, Arvind Textiles was set up with the pioneering effort of
three brothers, Kasturbhai, Narrotambhai and Chimanbhai Lalbhai becoming World’s largest exporter
and Asia’s largest producer of denims. During 1980s several textiles in Ahmedabad closed down as a result
of competition from cheaper cloth produced by small power loom enterprises. Militancy spurred by textile
labour unions prevented the shutdown of several loss- making textiles, and in the mid 1980s
Ahmedabad was a city of industrial strives. ARVIND TEXTILES has risen like a phoenix from the
ashes of Ahmedabad textile mills. In just eight years it has successfully implemented a turnaround strategy.
Established in 1930, Arvind Limited is the flagship company of $ 498 million. Lalbhai Group has now
focused its attention on few selected core product groups. Arvind today is a one-stop shop for all cotton
fabric requirements, where product range spans the entire gamut of cotton fabric. It is also a rapidly
expanding manufacturer of garments such as jeans and shirts. With the best technology and business acumen
Arvind Textiles became the true multinational producing the finest fabric available in the country that
rivalled imported fabric. Since then, there has been no looking back. Having established itself as India’s
largest denim manufacturer, Arvind Textiles is confident that in the near future it will become the fifth
largest denim producer in the world.

FABRIC PRODUCTION

In the 1980s the growing threat from small power loom operators forced Ahmadabad’s composite mills to
shift their focus to product areas in which they could compete. In order to better address newer and
wider business opportunities, the company shifted perspective from domestic to international markets.
At a time when the local textile industry was declining, Arvind’s management devised a turnaround
strategy called “Reno vision”. It represented an open-minded approach that would seek out new
opportunities.

In 1987 Arvind Textiles made a conscious strategic decision to change its production emphasis from a
portfolio of traditional domestic textiles to high quality cotton fabrics. This required a level of
technological expertise, which small power loom operators could not compete with. Arvind identified
denim as a key fabric. International consultants McKinsey & Co. Helped to frame company’s business
strategy formulate its organizational restructuring and establishing international alliances.
Today the company is engaged primarily in the manufacturing of indigo-dyed denim fabrics, fine and
superfine cotton shirting and bottom weights, and conventional domestic fabrics such as sarees and
voiles. In 1995 Arvind textiles held an 80% share of India's domestic market for denim.

ORGANISATION STRUCTURE

Arvind defines its operations in terms of Strategic Business Units (SBUs). Each product line - such as
denim, shirting, knits, voiles, etc - is designated as an SBU. Each unit is headed by a president who is
able to make independent decisions on finance and marketing. The president is assisted by vice-
presidents who look after functional divisions.

The concept of SBUs, which was implemented in spring 1995, was adopted on the advice of McKinsey;
mainly to facilitate the company’s expansion plans but also to provide an accurate picture of the
performance of individual product lines.

Each SBU, which is similar to a product division within a corporation, operates as a profit center.
While long-term planning is carried out by the corporate group in consultation with the management of each
SBU, medium and short-term planning is in the hands of the unit.

Arvind has been successful in attracting high caliber professionals from the best multinationals and blue chip
companies.

SUBSIDIARIES

Arvind Mills has 11 subsidiaries, of which 7 are in textile related business. They are:

 Arvind Clothing Limited.

 Arvind Fashion Limited.

 Arvind Worldwide Inc, USA.

Arvind Clothing limited (ACL), situated in Bangalore, and began commercial production in April 1994.
ACL is the exclusive licensee in India of CluettPeabody & Co of the USA, which owns the Arrow brand
name. It has the capacity for making 1 million shirts per annum, and has received ISO 9002 certification.
Arvind Fashion limited (AFL) is a licensed user of the brand names belonging to the US Company VF
Corporation, which owns the well-known international trade marks “Lee”. The company has a letter of intent
from the Indian government (pending the issue of a license) permitting it to manufacture up to 960,000
garments per annum, provided it exports 50% of the garments produced.
AFL has invested Rs.160 million in establishing a jeans manufacturing unit at Bangalore. The state-
of-the-art factory, which has a production capacity, of 500,000 pairs of jeans per annum, is equipped with
machines made in the USA, Japan and Europe.
Spring 1995 saw a launch of a wide range of products-including jeans, jackets, denim shirts, twill shirts, T-
shirts and accessories such as belts and bags -under the “Lee” trade mark. These are sold through exclusive
showrooms located in major cities throughout India.
Although its current turnover is small, AFL is in good position to capture a significant share of the growing
domestic market.
GROUP OVERVIEW

The Lalbhai group, founded by the three Lalbhai brothers in 1908, has grown to become one of India's most
diversified business houses, with a significant presence in the textiles, ready-to-wear, chemicals, air-
conditioners and telecom industries in India.

Each company in the group, in its own way, pursues a single mission - to be the benchmark in the
industry. To achieve this, they have tied up with a variety of companies, all world leaders in their respective
fields.

LALBHAI GROUP COMPANIES

TEXTILES/ YARNS

 Arvind Limited.
 Arvind Products Limited.
 Arvind Fashion Limited.
 Arvind Brands Limited.
 Arvind Index.
 Arvind Cot spin.
 Garment Export Division, Bangalore.
 Arvind Overseas Limited., Mauritius.

CHEMICALS
 Anil Starch Products Limited.
 Atoll Limited.

TELECOM
 Arvind Telecom.

OTHERS
 Anup Engineering Limited.
 Anagram Stock Broking.
  Lalbhai realty Limited.
 Amtrex Appliances Limited.

COMPANY’S VISION

“To achieve global dominance over various businesses built around our core competencies,
through continuous product and technical innovation, customer orientation and a focus on cost
effectiveness".

All along Lalbhai Group has maintained a responsive yet level-headed attitude towards the society and its
training individuals to create a corporate culture that fosters excellence. Working in this direction the
company has created a learning environment that nurtures individual talent and intellect. It provides a
platform that challenges the individual capabilities urging them to constantly strive forward towards greater
heights using development as the fundamental tool.

It infuses in individuals a spirit of entrepreneurship which gives courage and conviction to pursue set
goals towards logical achievement and a global mind-set that transcends geographical and cultural
boundaries evolving as a world leader. All this is manifest in an environment fostering innovation and
leadership.

Drawing from the Team based structure to encourage individuals to mesh up into cross-cultural
teams in all operational processes. This process provides opportunities for individuals to match their
capabilities with organizational expectations creating a mechanism for updating the system. A strong sense
of ownership and commitment towards the organization and the business as a whole is the basic premise of
all the company actions.

COMPANY’S MISSION

Arvind limited. has laid down certain aims and objectives to be achieved while pursuing its corporate
activities. These are:

 To provide a favourable work environment to the employees to direct their working towards
achievement of corporate goals.
 To provide opportunities creating a mechanism for updating the system.
 To manage the institution as a trust, as empowered leaders and do all that needs to be done ethically
for the purpose of the institution.
 To create a vibrant institution for the future of this nation and the world at large.
 To be a world leader in an environment fostering innovation and leadership.
 To reinforce connections, and catalyse the chemistry that allows connections to be translated into
action which is beneficial for both the organization and the individual.
 COMPANY’S PHILOSOPHY
"It is my responsibility as a leader to create an environment where excellent people would like
to come and give their best, to create a vision, to give freedom for excellence."
- Sanjay Lalbhai (Managing Dir.)
“We believe in potential of every human being. Our Human Resource Development policy reflects this
belief.

We recruit the best talent wherever we do business, offer competitive compensation, provide a dynamic
work environment, make people accountable for results, and chart their growth through systematic career
planning. Our structures are well defined which allows us to be more flexible and respond to the customers
promptly.

We encourage innovation and entrepreneurship and motivate our people to take on leadership roles
through job re-assignments. This helps us create a learning organization with a workforce that has multi-
dimensional experiences and skills.

Our campus recruitment program and on-going involvement with educational institution ensures access to
highly trained managers, engineers and workers to support our aggressive global plans. And our training
centres - FOUNTAINHEAD (the hub of all training activities at Arvind), INDRADHANUSH (for
operatives), ORCHID (for behavioural training), and CALCULUS (for computer training) - ensures they
continue to learn and grow.

BOARD F DIRECTORS

Name Designation

Mr. Sanjay S. Lalbhai Executive Chairman & Managing Director

(Promoter)
Mr. Shrenik bhai Lalbhai
Mr. Jayesh K. Shah Executive Director & Chief Financial Officer
S/O Mr. Kantilal Shah
Mr. G.M. Yadwadkar Non-Executive, Independent – Nominee Director
IDBI Bank Limited.
S/O Mr. M.A Yadwadkar
Mr. S.R. Rao Non-Executive, Independent – Nominee Director
EXIM Bank of India.
S/O Raghunatha Rao
 Mr. K.M. Jayarao Non-Executive, Independent – Nominee Director
ICICI Bank Limited.
Mr. Sudhir Mehta Non-Executive, Independent – Director
S/O Uttamlal Nathalal Mehta
Mr. Tarun Sheth Non-Executive, Independent – Director
S/O Natwarlal Gordhhandas Sheth
Mr. Munesh Khanna Non-Executive, Independent – Director
S/O Narindra Khanna

DENIM MANUFACTURING PROCESS

VARIOUS PROCESSES / DEPERTMENTS OF ARVIND TEXTILES

Spinning department
The first step in the manufacturing of all kinds of fabric i.e. spinning of bales of raw cotton into yarns of
various kinds suited for producing varieties of fabric.
Trivia about Arvind Textiles:
 ‘Voile’ fabric is mainly used for knitting purposes and for making saris too, but is mostly exported to
the middle east
 In addition to collaborations with multinational apparel giants, Arvind Textiles runs its own brands of
clothing e.g. Excalibur, Flying Machine, Ellites etc.
 Cotton is procured from a host of countries including far-flung ones like Egypt, America and
Germany
 Recently, Arvind Textiles has come up with its unique product, Ready To Stitch (RTS) kits
 Cost of fabric accounts for ~65% of the cost of raw material
 850 million m2 of denim fabric is manufactured every month at facilities at Naroda, entirely
dedicated for this purpose
 Towards this end, 4500 tones of yarn is spun every month, an exercise that contributes 450 crores
towards costing only for denim

There are primarily two kinds of technologies that are in popular usage vies-a-vies spinning of yarn namely
open end technology, also called rooter spinning owing to its being the key component in the machines
involved, and ring spinning technology. The facility at Naroda works entirely on open end technology and
produces ~60 tones of yarn a day with 5472 rooters being around on campus. At other manufacturing
facilities of AM, ring technology is used, which generally results in production of 70 tones of yarn a day.
Rest of the yarn required for fabric production.

The cotton spinning can be done using any of the four technologies:
 1. Ring spinning
2. Open end spinning
3. Drip spinning
4. Air-jet spinning
The open end technology of spinning requires cotton to be processed in mainly 4 broad stages as enumerated
below:
 Blowing: In this stage physical, in situ and ex situ impurities are gotten rid of raw cotton
 Carding: Cotton, thus purified, is put into cylinders in sliver form
 Drawing: Parallelization of fiber takes place
 Rooter spinning: The main process of drawing cotton fiber into yarn is carried out.

Weaving department

The weaving department has 203 weaving machines en Toto, of the make ZAX and 209i, the latter being an
older version. The machines are of the company TSUDAKOMA, a Japanese concern as opposed to the
spinning department where the machines were of German companies. The ZAX machines work at 750 rpm
whereas 209i model machines work at 650 rpm. Together they churn out a lac m2 of cloth a day. In total the
department has 159 ZAX machines and 44 209i. There happen to be 261 labourer’s working in 4 shifts in the
department with 20 staff members i.e. 5 in each shift, out of whom there is one supervisor for each shift. A
beam card keeps all the records of what is being put on the machine and under whom it is supervised.

Inputs used for the weaving departments can vary from:

1. OE- open end

2. ER- even ring
3. UR- uneven ring

Lycra is used to increase the elasticity of the fiber. Filament is used in the fiber which is exported to
countries where the level of sweating is lower as compared to Indian condition where majorly cotton is used
for the same reason.

The weaving department has the distinction of being the largest at Arvind Textiles and exports close to 95%
of its manufactured fabric. Discussing the denim fabric, the core competence of AM, original denim is
composed of 100% cotton but with a view to bring in variations to the material in consonance with the
emerging trends in the market, various natural fibers like linen and synthetic fibers like filament, lycra,
polyester are added to cotton. While weaving such mixed fabric, the core is made of the addend and original
cotton is wound around it. Yarn woven vertically is called warp while that woven laterally is termed as weft.
For weaving purposes a cotton count ranging from 5 to 20 is generally used.

Dyeing department
Arvind Textiles has a grill section that was loaded with 12 beams of yarn, though latest machinery could
support even 16 of them. They are also known as warping beams and their design depends upon the texture
and construction of fabric e.g. weight, length etc.

Each beam consist of 350-400 ends and 12 such beams are joined together to form one at last with 4000-
4800 ends which is used in the weaving process.
Four types of dyeing processes are used in Arvind textiles namely:
1. Indigo dyeing
2. SBIT-sulphur bottoming indigo topping
3. IBST-indigo bottoming sulphur topping

4. Sulphur dyeing.

All the above processes differ in the process of loading on the fabric.

Finishing department

The department churns out 300000 meters of finished denim cloth a day. What happens to the fabric that has
come off loom is called surface finishing that entails softening of fabric, thus making it fit to wear. Further,
de sizing is done in order to reduce tension in the knit yarn, to ensure that it doesn’t break out of undue
tension.

To accomplish the process, there are three basic mechanisms involved namely desized finishing, desized
mercerized finishing and desized mercerized tint finishing. In yesteryears, there existed a demand for long
lasting colours in denim apparel, which is no longer present. Consumers are becoming more inclined
towards denim that loses colour in a few washes. For such emerging needs and choices, double dyeing
concept has been adopted that renders denim fabric various effects after subsequent washes.

The process is as follows

1. Singeing is done and the hairiness of the fabric is burned by flames.

2. Desizing removes the sizer put on by the suker muller in the dyeing department to increase the
strength of the fabric (a mixture of desizing agent, alcozyme and acetic acid is used for the same).

3. Mercerizing is the process of caustic wash and the unit studies is GPL (gram per liter).

4. Stunter is used to settle the width shrinkage and to adjust the elasticity by killing the elastic
properties of lycra in the fabric which is to the tune of 30 to 40% earlier and can be dropped down to
3 to 8% as per customer requirement.
Finishing techniques used in Arvind textiles are:
1. Glaze finishing
2. Padding
3. Curing
 4. Montfort finishing
5. Foam finishing

In addition there is an intervening singeing and washing process that brings in more softness in the fabric.
The product is washed off water soluble chemical remnants, steam dried and then caused that lead to
swelling of the material. Earlier foam technology was used for this purpose, which has now been replaced by
wet technology that gives more softness and binding to fabric. This is the followed by moving the fabric
through centering machines that kill extra percentage of inbuilt Lycra to peg elasticity at the desired level as
demanded by the customers. Temporizing is the next process to be carried out with the help of rubber and
leads to permanent shrinkage of the fabric.

Quality Assurance department

Traditional view:
Traditionally quality assurance was looked as if a post-mortem report where in the yarn and the fabric was
checked for the quality and standards as per required by the customer. A proper policing was kept on what
has been done and what is to be done.
Modern view:

In the modern day quality assurance has a wider scope and it includes activities like process ownership and
cal liberation where in the department ownership is given to a person and it becomes his/her duty to deal
with it in the most efficient manner.

Quality assurance at Arvind textiles has the following labs. :

1. Cotton laboratory
2. Physical testing laboratory
3. Chemical testing laboratory.
4. Calibration laboratory
5. Colour quest laboratory
6. Clearance department

COTTON LABORTARY:

Cotton is held for the 70% cost of the fabric cost only and hence becomes a major factor which if controlled
will add maximum contribution to the strength of Arvind textiles.
The coefficient of variance is calculated for the width, diameter and hairiness of the fiber. The machine used
for this purpose is USTER TESTER 5.the fiber is passed at a speed of 400m/min and the variance is hence
calculated. The variance is calculated against international or the present Arvind standards

The length, weight and the exact count of the fiber is also calculated and the CASCADE machine is used for
this purpose which ensured the right thing at the right time as per customer demands.

PHYSICAL TESTING LABORTARY:

This testing happens at the yarn manufacturing stage and the yarn is tested for its

1. Length
2. Elongation
3. Elasticity etc.
The yarn should be tested in a way so as to know whether the yarn can take all the loadings or not and if yes
to what extent can it take.
This helps in deciding what processes the yarn can face and what effects can be deduced.
Single yarn strength and its elongations are measured using the USTER TENSORPAID 3 machine which is
the most trusted name in the field and comes from Switzerland.
INSTRON 4465 is used to check the tensile strength of the fiber and the tear strength is also calculated in
grams.
For all the above written testing’s the standard lab conditions are made at a temperature of 60+/- 2 f and the
humidity level is maintained at 65%+/-2%
Factors like stretch ability skew and shrinkage are tested after marking is done followed by three washings
of the fabric; the fabric is toned to the environment after keeping it in the standard environment.

CHEMICAL TESTING LABORTARY:

In the chemical laboratory they check all the fuels, dyes, and all the chemicals that are used in the production
process. They even check the denim if it is washed with bleach how much it fades the colour. They try
different process like how the denim would react in different conditions like in case of perspiration, salt
water, normal water, in extreme temperature.

COLOUR QUEST LABORTARY:

In the colour quest they try to find out the different shades and they see to it that after the washing and
drying process does the shade match the requirement of the customer or not.

CALIBRATION LABORTARY:

Definition:
Calibration is a specialized measurement process where in one compares test and measuring
instruments/equipments of unknown status to well defined standards of greater accuracy in order to detect
/eliminate error by adjustments & report any variation in accuracy capability.

CALIBRATION ACTIVITY

Calibration through in –house facility 93%

Calibration throughout-side agencies 7%

CALIBRATION FACILITY AT CALIBRATION LABORATORY

PARAMETERS INSTRUMENT & FUNCTIONS

Temperature Mercury thermometer, temperature indicator & controllers,

temperature switches, temperature gauges, temperature
transmitters.
Pressure Pressure gauge, vacuum gauge, pressure transmitter, pressure
switch.
Mass Analytical weighing balance
Electrical AC/OC voltage, AC/DC current, single phase power,
frequency, resistance capacitance, conductance, logic pulses,
logic levels.
Digital &analogue amateur, millimeters, panel meters, frequency meters.
Dimensional Measure tape, steel scale, verniar capture, micro meter, dial
gauge.

Gas Lab instruments Lab instruments used for quality conformance tests & physical
testing lab & chemical testing lab.

DTNG Department
In Arvind mill manufactures 8.5 million of denim per month. Out of which 60% is exported and remaining is
manufactured for the domestic market. There are around 34 companies who are the manufactures of the
denim product in the market.
The USP of Arvind mill is that it believes in innovation and constantly keeps on innovating new products. It
innovates around 1700 new product material every year which is equivalent to 5 new product materials
every day. Arvind mill manufactures around 1600 denim fabric out of which 1300 includes different shades
of blue colour.
New designs are created on the basis of the following parameters:-
1. Customer based development: Product is developed on the basis of customer requirements.
Sometimes the customer asks for the exact imitation of the product (on the basis of texture, strength,
durability, etc.) at a cheaper rate. In order to target the exact customers and fulfil demands Arvind
textiles has its marketing team worldwide including Europe who keeps on meeting the customers
from time to time in order to get their feedback and review for the required product.
 2. Design collection: Arvind textiles also displays its designed products at fashion shows held at
various public functions to promote it brand awareness as well as show the distinct variety of product
it manufactures. The process of creating a designing concept and further executing it takes around 18
months. One of the products of Arvind textiles “Auto meter” was proposed for making in January
2009; the production process started in April 2009 and was launched in the market in the year 2010.
3. Trouble shooting: with the new technologies good quality of the same material at a cheaper rate
can be manufactured. Due to huge demand of its denim product in the market Arvind textiles
department of weaving spinning and finishing outsources not less than 1000 tones of yarn per year.
Inspection Department
After the processing of the denim in the finishing department it is sent to the inspection department where
certain parameters are checked n then inspected in the inspection machine. The parameters that are checked
before inspecting in the machines are
1. Feel of the denim
2. Look of the denim
3. Weight of the denim
4. Shrinkage
5. Skewing
6. Elasticity of the denim

The operator checks for the damages, spots, knots in the denim .there are certain signs that are used for the
damages like if he finds out any knot he puts a dot on that place

Dispatching is done according to the customer requirements. For dispatching the denim bale is packed.
There is special packing machine of LEVY & SMITH .After the role is inspected it is passed on to conveyer
belt where a bar code sticker is placed with certain details like yards of denim, meters, pieces, 4 point
,quality number , style , bale number , particular number is given to each bale.

After that it is passed through 150 degree Celsius so the total air is vacuumed from the bale. Then it is sent to
the sorting department where the bales are sorted out as per the requirement and style by the sticker that was
placed on the bale.

ISO & EMS Department

ISO 9001-2001-2008

ISO is a system certificate and not a product certificate .It tells us about how the procedure and systems are
in place or not. It says if your system is on place then your product will be good automatically.

After you apply for ISO certification first thing that takes place is pre-assessment auditing standards they
find out the discrepancy or non-conformity. After all the discrepancies are removed there is certification
audit. There is 100% audit of all the departments and report is send to the committee and they give the
certificate according to details in report for auditing. ISO has appointed different companies to do that. The
certificate is given for 3 years and for every 6 months surveillance audit is done. They check around 30
-40% of the departments and during the period of 3 years again 100% auditing is done of all the
departments. During the surveillance audit they will take sample size and would do the auditing. After 3
years you can apply for re-certification and whole procedure takes place again. Then there is another
certification that is EMS (environment management system) .it looks after whether the surrounding
atmosphere is safe for the other people or not. It looks after certain parameters like noise pollution, air,
water, land pollution for that certain standards are followed and are taken care of. there is and ETP which is
EFFLUENT TREATING PLANT which treats water ,chemical and dyes to bring down to certain PH level
which is then sent to drainage that water is not harmful after the treatment . The sludge that remains after the
treatment of water is dumped to a certain land that is certified by the government for disposal of such
harmful wastes.

There are other types of certifications are

ISO -14000-2004 is followed which looks after the resources utilization or depletion of resources.

ISO-18000 OSHO’S its occupational standards for health and safety where every measure for safety of the
staff is taken into consideration.

Marketing Department
 As Arvind mill is one of the leading company in textile industry they provide their fabric to domestic
as well as international market also. They have different teams which handle marketing activity in
different region.
Arvind mill produce 8 million meter fabric every month. Out of which 60% is exported and the rest is
manufactured for the domestic market. For, promotion of their products in domestic & international market
they organize fashion shows. They have different designer for U.s, Europe, and domestic market. They
introduce their new collection twice every year (summer spring and autumn winter) known as American line
collection for the American market and Europe line collection for the European market. Apart from that the
also hold exhibition and seminars for the concerned buyers.

Human Resources Department

Arvind mill produce 8 million meter fabric every month. Out of which 60% is exported and the rest is
manufactured for the domestic market. For, promotion of their products in domestic & international market
they organize fashion shows. They have different designer for U.s, Europe, and domestic market. They
introduce their new collection twice every year (summer spring and autumn winter) known as American line
collection for the American market and Europe line collection for the European market. Apart from that the
also hold exhibition and seminars for the concerned buyers.
 S.W.O.T. ANALYSIS

SRRENGHT: WEAKNESS:

 A company from prestigious Lalbhai  Situated very far from city

group
 Low advertisement budget
 One of the oldest played in Indian
fabric market
 Unable to handle small orders
 Can supply both fabric as well as
garment  Higher cost of production due to
heavy investment
 Production capacity of 7 million
tons monthly wise
 Provide quality with consistence
 OPPORTUNITIES; THREATS;

 Able to handle more franchisee  Competition from various domestic

of international brands
 Retails are going to be a major sector
in India. Therefore demand for fabric
is also increasing
 Having potential to increase their
capacity, so that they can satisfy
more and more customer needs
 By providing “consistency in quality”
they can attract more customers.
players, especial from Raymond’ sand
LNJ.
 Fluctuation in price of yarn
 Regularly innovation in technology
 Existing players coming up with more
variety and innovation ESP. Catering
small order.
 Change in government policy

CHAPTER – 2

RESEARCH METHODOLOGY

Meaning:

The process used to collect information and data for the purpose of making business decisions. The
methodology may include publication research, interviews, surveys and other research techniques, and could
include both present and historical information.

OBJECTIVES OF THE STUDY:

The objectives of the study is to analyse the competitive strength of different products of different
companies. In order to achieve the above objective the study is divided into following

 To provide a strong framework for analysing the financial statements.

 To study and compare the growth profile of the company during the study period.
  To know how good or bad the companies are performing in comparison to previous performance.

 To deeply understand the working of company which will help in deciding whether or not one should
invest in them.

 To know the current position of company.

 To know about profit or loss of company.

 To provide useful suggestion to improve the financial performance of the company.

SCOPE OF THE STUDY:

 This study “Financial Performance Analysis of Hindustan Unilever Limited” is vital because just
earning profit is not enough, a business should earn sufficient profit to cover its cost of capital and
create surplus to grow. So finding the surplus profit is made essential.

 Study aim to analyse the liquidity, profitability, solvency position of the firm and efficiency which it
converts its resources into service.

SOURCES OF DATA:

The is based on the secondary data. The Audited Financial Statements of the Company are the Main Source
of Data. The major data sources used in this study are:

 Annual Reports of Company

 Websites

 Journals

 Magazines

 Reference Books

Comparative Analysis

Financial statements play a vital role in comparative analysis in business. By analysing financial
comparatives, businesses are able to pinpoint significant trends and project future trends with the
identification of considerable or abnormal changes. Business comparative analysis against others in their
industry allows a company to evaluate industry results and gauge overall company performance. Different
factors such as political events, economics changes, or industry changes influence the changes in trends.
Companies may often document significant events in their financial statements that have a major influence
on a change in trends.

Comparative analysis as comparison analysis. Use comparison analysis to measure the financial
relationships between variables over two or more reporting periods. Businesses use comparative analysis as
a way to identify their competitive positions and operating results over a defined period. Larger
organizations may often comprise the resources to perform financial comparative analysis monthly or
quarterly, but it is recommended to perform an annual financial comparison analysis.

Technical Analysis

Ratio Analysis as a tool possesses several important features. The data, which are provided by financial
statements, are readily available. The computation of ratios facilitates the comparison of firms which differ
in size. Ratios can be used to compare a firm’s financial performance with industry averages. In addition,
ratios can be used in a form of trend analysis to identify areas where performance has improved or
deteriorated over time.

Because Ratio Analysis is upon accounting information, its effectiveness is limited by the distortions which
arise in financial statements due to such things as Historical Cost Accounting and inflation. Therefore, Ratio
Analysis should only be used as a first step in financial analysis, to obtain a quick indication of a firm’s
performance and to identify areas which need to be investigated further.

Graphs

There are several different types of charts and graphs. The four most common are probably line graphs, bar
graphs and histograms, pie charts, and Cartesian graphs. They are generally used for, and best for, quite
different things.

Bar graphs to show numbers that are independent of each other. Example data might include things like the
number of people who preferred each of Chinese takeaways, Indian takeaways and fish and chips.

Pie charts to show you how a whole is divided into different parts. You might, for example, want to show
how a budget had been spent on different items in a particular year.

Line graphs show you how numbers have changed over time. They are used when you have data that are
connected, and to show trends, for example, average night time temperature in each month of the year.

For the purpose of the study, financial performance analysis is made.

 Financial performance analysis: The classification of financial analysis can be made either on the
basis of material used for the some or according to modus operation of the analysis.

I. According to material used:

a) External Analysis –
Analysis of financial statements conducted by those who do not have access to books of accounts or carried
out on the basis of published information is known as external analysis (Sharma R. 2006, P-461). This is
affected by those who do not have access to the detailed accounting record of the company. This group
comprising investors, credit agencies, government and the public 153 depends almost entirely on published
financial statement. With the recent changes in the government regulations required business concern to
make available detailed information to the public through audited concerns to make available detailed
information to the public through audited accounts, the position of the external analyst has been considerably
improved.
b) Internal Analysis –
Analysis conducted by those who have access to book of accounts is known as internal analysis (Sharma R.,
2006, p. 461). It is based on detailed information available within enterprise, which is not available to the
outsiders. This is affected by those who have access to the books of accounts and other information relating
to the business concern. Any financial analysis is conducted with reference of a whole unit. Executives and
employees of the business units as well as government agencies, which have statutory control and
jurisdiction over such units, conduct this type of analysis meant for managerial purpose.

II. According to modus operandi of analysis:

a) Horizontal or Dynamic Analysis –

Analysis which involves comparisons and establishing relationship among related items based on financial
statements of an enterprise for a number of years or financial statement of various enterprises for the same
year is known as horizontal analysis.‖(Sharma R., 2006, P-461). As the data of more than one year are used
in such a type of analysis, it is possible to generate the trend of each item of financial statements. As the data
of various years are used in horizontal analysis, it is known as dynamic analysis. (Sehgal Ashok & Deepak,
Advanced Accounting- 2, Corporate Accounting, Taxmann‘s Taxmann Allied Services (p) Ltd. P-
407).When financial statement for a certain number of years is analysed the analysis is called a horizontal
analysis. It is also known as ‗Dynamic analyses. This is based on the data spread over a period of years
rather than on one date or period of time as a whole.

b) Vertical Analysis –
Analysis of financial data based on relationship among various items in a single period of financial
statements is called vertical analysis.‖ (Sharma R., 2006, P-461). Normally, common-size statements may be
considered as a tool of vertical analysis. As the facts and figures of financial statements of given period of
time are used in vertical analysis, it is also known as static analysis. This refers to analysis of ratio developed
for one date or for one accounting period. This is also known as ‗static analyses. But vertical analysis does
not facilitate a proper analysis and interpretation of figures in perspective and also comparison over a period
of years. As such this type of analysis is not resorted to by the financial analysis. In short, financial analysis
done on the basis of only one year is known as vertical analysis.
c) Trend analysis –
The financial statements for a series of years may be analysed to determine the trend of the data contained
therein. The trend percentages are also referred to as „trend ratios‟. This method of analysis is adopted to
determine the direction upward or downward. This 155 involves the computation of the percentage
relationship that each item in the statement bears to the corresponding items contained in that of the base
year. For this purpose the earliest year involved in comparison or any intervening year may be considered as
the base year. The trend percentages emphasize changes in the financial data from year to year and facilitate
horizontal comparison and study of the data. These trend ratios can be considered as index number showing
relative change in the financial data over a period of years.
III. On the basis of objective of analysis
a) Long term analysis –
This analysis is made in order to study the long term financial stability and liquidity as well as profitability
and earning capacity of the business. The objective of this analysis is to know whether the firm will be able
to earn a minimum amount which will be sufficient to maintain a reasonable rate of return on the investment.
b) Short term analysis –
This analysis is done in order to determine the short term solvency, stability, liquidity and earning capacity
of the business. The requirement if any, and sufficient borrowing capacity to meet the contingencies in the
near future.
Parties Interested in Financial Statement Analysis:
a) Financial executives-
The first party interested in the financial analysis in the financial department of the business concern who
have a deep insight into the financial of the enterprise and a view of the past performance which help in
decision making.
b) Management –
The management of the concern is also interested in the analysis of the statements because it helps them in
reaching conclusion regarding the overall operation of the business. The management is interested in every
aspect of the financial analysis as it is their overall responsibility to see that the firm's finances are used most
effectively and firm's financial position is sound.

c) Creditors –
Creditors also evaluate the financial statements and on the basis of these financial statements they come to
know about the credit worthiness of the business enterprises and chose to extends, maintain or restrict credit.
Creditors will be interested to give credit for those business enterprises which is having sound financial
position and are capable of repaying their credit. Some of the aspects of enterprise operation that are useful
for the creditors are liquidity of funds, soundness of the financial structure, profitability of the operations,
effectiveness of working capital management etc. The bankers and trade creditors of a business enterprise
are interested in its cash generation and credit worthiness. They want to assess whether the enterprise will be
able to pay the interest due as per agreed schedules. They get all this information from the analysis of
balance sheet and income statement of the company.
d) Investor –
Investors, present as well as prospective are interested in the financial profitability of the business. Every
investor expects to earn fair return on his investments.
 e) Government –
The financial statements are used to assess the tax liability of the business enterprise. The government
studies economic situations of the country which enables it to find out whether business is following various
rules and regulations or not.
f) Bankers –
The banker is interested to see that the loan amount is secure. The bankers will analyse the balance sheet to
determine financial strength of the concern and profit & loss account will also be studied to find out the
earning position of the business.

DATA COLLECTION AND DATA RESOURCES

The study is based on secondary data is involved in it. Data has been collected with the help of review of
published related literatures, books, magazines and journals.

LIMITATION OF THE STUDY

 These analysis based on the annual reports of the company therefore is only a limited to find.
 Adequate data was not available due to secrecy maintain by the company.
 The study reveals the findings for the present and it will not reflect the past and the future every tools
used in data analysis has certain limitation.

TOOLS OF FINANCIAL ANALYSIS

The analysis of financial statements consists of relationship and trends, to determine whether the financial
position of the company is satisfactory or not. The analytical methods listed below are used to ascertain the
relationships among the financial statements items.

Analytical methods used in analysing financial statements are as follows:

 Ratio Analysis

 Common size financial statement

 Trend Analysis
 CHAPTER – 3

REVIEW OF LITERATURE

“The purpose of every business is to create and keep a customer”

-Peter F.Drucker
In this chapter, an endeavour has been made to provide an overview of various aspects and issues related to
this research work through the review of studies already carried out both at the national and international
level in the garment sector in textile industry. The review of literature can lead to draw some significant
conclusions and serve as a guide mark for this study. It also gives a fair chance to identify one gap that exists
in the area of research. Some of the important studies have been reviewed under marketing in the following
studies.

Peeler J. Patsula, on January 23, 2006 in his article “successful business analysis” tries to define
that, a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face. We have to make sure that people know exactly how we
arrived to the final financial positions. We have to show the calculation but we have to avoid
anything that is too mathematical. A business performance analysis indicates the further growth and
the expansion. It gives a physiological advantage to the employees and also a planning advantage.

Chidambaram Rameshkumar, Dr. N. Anbumani on February 2, 2006 in his article “An

overview on financial statements and ratio analysis” argue that Ratio Analysis enables the
business owner/manager to spot trends in a business and to compare its performance and condition
with the average performance of similar businesses in the same industry. To do this compare your
ratios with the average of businesses similar to yours and compare your own ratios for several
successive years, watching especially for any unfavourable trends that may be starting. Ratio
analysis may provide the all-important early warning indications that allow you to solve your
business problems before your business is destroyed by them.

Susan Ward on May 1, 2008 in his article “Financial Ratio Analysis for Performance Check”
emphasis that financial analysis using ratios between key values help investors cope with the
massive amount of numbers in company financial statements. For example, they can compute the
percentage of net profit a company is generating on the funds it has deployed. All other things
remaining the same, a company that earns a higher percentage of profit compared to other
companies is a better investment option.

Jonas Elmerraji on April 2005 in his article “Analyse Investments Quickly With Ratios” tries to
say that ratios can be an invaluable tool for making an investment decision. Even so, many new
investors would rather leave their decisions to fate than try to deal with the intimidation of financial
ratios. The truth is that ratios aren't that intimidating, even if you don't have a degree in business or
finance. Using ratios to make informed decisions about an investment makes a lot of sense, once you
know how use them.

Park et al(1986) put forward in Bhat’s article that the importance of establishing a brand image
relevant to its market segment in which it is based, is significant so as to ascertain a strong brand
position, help create a barrier to entry for potential competitors: thus raise the brands performance in
the market.

Sandra M Frosythe (1991) in his research based paper on “Effect of Private, Designer and the
National Brand Names on Shoppers’ Perception of Apparel Quality and Price” examined the effect
of product characteristics and brand name on shopper’s evaluations of apparel, quality and price and
the effect on consumer decision- making style on evaluations. It is analysed that brand name
influenced shoppers perception for price but not for quality. With the help of ANOVA Test Sandra
reached to the conclusion that brand name (in the independent variable) did not affect the perception
of garment quality (the dependent variable) at the 0.5 level. It is also analysed that consumers
appears to rely primarily on intrinsic cues (actual garment characteristics) rather than brand name
when evaluating the quality of apparel items.

Meenaghan (1995) noted that to build up a successful brand image, a well rounded marketing plan
will be required focusing on all areas of the marketing mix. It needs to focus on the organisation’s
strengths in all areas and ensure that the good/service is positively differentiated from its closest
rivals. Manchester United has established a range of global, commercial partnerships with certain
blue chip firms such as Vodafone and Nike. Indeed this has helped put Manchester United on the
global scene. Nike has launched their new Cool Motion double layer kit, promoted by many of the
players such as Scholes and Ferdinand, wearing Nike Boots, which have helped connect the famous
market leader with this Premier Football team. Further, legends such as Cantona have helped create
this maverick image for Manchester United, but also having such a combination of powerful
sponsors has brought the team a reputable image.

O P Sharma (1996) in his paper on Performance, Policy Issues and Prospects of India’s exports
discusses Performance, Policy Issues and Prospects of India's Exports and opined that against the
backdrop of India's export performance in the last five years. The major policy issues thrown up by
it, this paper discusses export prospects in the Ninth Plan and sketches essential contours of a policy-
frame.

Jyoti Vastrad and Shivaleela Kyadi(2002) conducted a survey to know that how age and
occupation of women influences her preference of fibre content for saree blouse. It was resulted that
cotton was one of the most preferred fibre for routine wear while silk fibre was for occasional wear.
Silk fibre was preferred by most of the women irrespective to their occupational status and age.

Ernest J North, Retha B de Vos and T Kotze (2003) in their research based article on “The
importance of apparel product attributes for female buyers” concluded that trends in the apparel
industry are changing very quickly and it is not very easy for the marketers to judge the acceptability
of these trends accurately. So in order to develop the understanding of females buying behavior and
the factors which she values in the decision making of apparel purchase is very important. It is
concluded that style is the most influential factor of buying decision followed by price on the second
important attribute. However a strong relationship was also discovered between Age and style and
age as well as brand of the apparel.

Parker, Hermans & Schaefer, (2004) stated that while buying clothes customer gives preference to
comfort and trendiness they also do not mind if their friends or celebrities have the same clothes. He
also focused on the fact that female gender has a great fascination for stylish clothes.

Richard, N. (2005) According to Richard since 1960, the garments production sector has moved to
the countries where labour is cheaper and abundant. As a result, developed countries restricted and
limited their garments imports to protect their domestic industries. Such restrictions started in 1961
and were revised in 1976 to become the Multi-Fiber Agreement (MFA), by which developed
countries restrict textiles and garments imports in terms of volume .The quotas had been negotiated
each year on a country to country basis, assigning the quantities of specified items which could be
exported from a developing country to a developed country. The quota allocations could be changed
and revised with bilateral negotiations between countries in conjunction to trade policies and
promotions.

Lenny,T. M. (2005) According to Mr. Lenny on January 1st 2005, the MFA, which had limited the
textile and garment trade for almost 30 years, ended. Consequently, trade experts predicted that
China and India would control about 80% of 64 the global textile market in the post quota era. The
strong growth of Chinese and Indian exports has impacted the pattern of world textiles and garments
trade. A recent study by McKinsey Quarterly suggested that low-cost Chinese manufacturing and
Indian services have significantly influenced the prices of traded goods .Thus, Asian countries that
have been major exporters of garments (e.g., Hong Kong, South Korea, Taiwan, and Macao) during
the past two decades would no longer be a source of comparative advantages in textileand garments
production. Instead, they became a source of management innovation by providing production
services to the foreign buyers and contracting productions in low wage countries.

James Lawler and Anthony Joseph (2006) in their research based article on “A Study of Apparel
Dress Model Technology on The Web” critically examine the design factors that contribute to
discernable differential in the experience of goal-focused shoppers on dress model web sites. In case
of apparel industry, accessibility and convenience, availability of information, lack of sociality,
media richness, and product selection are the factors that affect the web site dress model.

M. K. Panthaki (2007) this article is penned by Shri M.K. Panthaki. He gives an overview of
Garment Industry in India. Shri Panthaki observes that "The garment industry is gearing itself up for
the next five years. By 2010/11, the industry has a vision to scale up exports to $. 23 billion with a
corresponding increase introduction to meet the demands of the domestic market". "This would
mean virtually a four-fold increase in production and heavy investment in additional manufacturing
capacity as well as human resources. Direct labour is expected to increase from the current 36.5 lacs
to 121.9 lacs by 2010/11, if this vision is fulfilled”. Finally he concludes by saying that "Taking into
account the demand push on the economy and the prospects of a resurgent rural economy, the
industry does not wish to be caught napping".

Sunil Nair (2007) According to this report foreign investment and collaboration in India’s textile
and apparel industry has increased significantly in recent years. The increase is attributable partly to
the restriction of foreign direct investment (FDI) and partly to the fact that domestic demand for
textiles and apparel in India is large and buoyant. It also stems from recognition that the sector has
strong export potential. While FDI in the textile and apparel sector has been modest in past years,
there is now evidence of a major acceleration. Indeed, FDI inflows in this sector have roughly
doubled every year since 2003—from Rs838 mn in 2003to Rs 1785 mn in 2004 and Rs 3,462 mn
(US$79 mn) in 2005. Foreign companies have been motivated to enter into collaborations with
Indian firms by the increasing gains that can be made by producing brands in India and selling them
into the Indian market. Indian companies have been motivated by the scope for gaining technical and
marketing expertise from foreign partners.

Jagannathan (2008) this industry profile helps to gain an insight into the evolution of the industry
and competitive dynamics prevalent in the market. It discusses the significant developments in the
industry and analyses the key trends and issues. The profile provides inputs in strategic business
planning of industry professionals and this profile is of immense help to management consultants,
analysts, market research organizations and corporate advisors.

Goldar (2010) this paper identifies thatpost-1991 pro-market reforms in India are expected to
reduce price-cost margins in industries, lower inter-firm productivity dispersion, increase export
intensity of firms, and cause changes in the size structure and industrial composition. But, barring
the increase in export intensity, the other effects have not occurred or occurred only marginally,
despite the reforms induced increases in import competition and possibly some intensification of
competition among domestic firms as well. The industrial growth rate has not accelerated in the
post-reform period compared to the 1980s. This seems less attributable to stalled reforms, than to
infrastructure bottlenecks and demand deficiency.

Joshi et al (2010) the findings of this paper were that Indian garment industry has achieved a
moderate average TFP growth rate of 1.7 per cent per annum during the study period. The small-
scale firms are found to be more productive than the medium- and large-scale firms. The
decomposition of TFP growth into technical efficiency change (catch-up effect) and technological
change (frontier shift) reveals that the productivity growth is contributed largely by technical
efficiency change rather than by technological change.

Saini (2011) this paper examine the implications of non-tariff measures (NTMs) on firms'
international business operations through a survey of India's textiles and clothing exporting firms.
The main objectives were to identify and assess the impact of NTMs, and analyse the cost incurred
in complying with them. The results reveal that the EU and USA-based buyers are more restrictive
with significantly higher NTM incidences. The technical barriers, product and production process
standards, and conformity assessment requirement for technical barriers are the widely used NTM
categories. The compliance expenditure may vary according to firm size, and an inverse relation is
revealed by this study. The larger and smaller firms demonstrate important differences in
compliances due to their varying resource endowments. Further, the regression results suggest that
the US and EU markets and firms' product profile/type are an important determinant of compliance
cost.

Chaudhary(2011) the paper focuses on the changes in the Textiles exports of different countries
after the MFA (Multi Fiber Agreement). Special focus is on the Indian Textiles Industry and its
position in the world in terms of textiles and clothing exports. The paper explores the changes in the
exports and profits of the Indian textiles exporters. Further it investigates the role of FDI in the
industry and what Indian Government is doing for the promotion of the industry. It was presented
that India has emerged as a major sourcing destination for new buyers. As a measure of growing
interest in the Indian textile and clothing sector a number of buyers have opened their sourcing/
liaison office in India.

Nasir et al (2012) studied that there is a boom in textile industry of Pakistan. Apparels produced in
Pakistan are becoming popular amongst local women. Added to this trend is the growth of usage of
Social networking sites amongst the women of Pakistan alongside social interaction in person. This
research also focuses on the buying behaviour of women in Pakistan. A study has been carried out
on 200 female respondents from the city of Lahore in Pakistan. The results indicate that women of
Pakistan consider traditional word of mouth to be more authentic than social media for making
purchase decisions related to their apparels.

Shetty et al (2013) the paper studies the perceptions of exporters in Bangalore towards the
opportunities and threats in the post-MFA global textile and clothing trade. The data for the study is
collected from a sample of one hundred export-oriented textile and clothing units based in Bangalore
through a structured questionnaire. The results showed textile and clothing industry in Bangalore,
which houses some of the largest Indian export houses. The abolition of the quota regime under the
WTO in 2005 has opened up the global textiles and clothing arena for exporters in Karnataka, with
its adequate raw material base complemented with state-of-the-art infrastructure facilities and skilled
manpower supply.

Rassolpur et al (2013) this empirical paper attempts to study the leverage decisions of Textile &
readymade garments industry of the Indian corporate sector. The study is limited to top 19 firms
from Textile & readymade garments out of top 500 manufacturing firms selected on the basis of the
turnover for the year 2004-2005 which covers the time span of eleven years commencing from
1995-96 to 2005-06. The study reveals that around half of the companies (47.29 percent) in this
industry are in 0-100 percent capital structure range which means that these companies are using
lesser amount of debt capital as compared to their own capital in their capital structure which is
below the well-established standard range of 2:1 during the study period. It is found that one-third
companies (33.50 percent) in this industry are in 100-200 percent capital structure range which
 means that these companies are using more amount of debt in their capital structure than their own
capital but less than the well-established standard range of200 percent (2:1) during the study period.
Number of companies in this range is considerably more. It has been observed that around one-fifth
companies (19.21 percent) in this industry are lying in more than 200 percent capital structure
ranges during the study period. Such companies are using debt beyond the well-established standard
range of 200 percent (2:1) during the study period. Number of companies in this range is
considerably more. It is also observed that 5.42 percent companies in this industry are in 190 to 210
percent (1.90:1 to 2.10:1) capital structure ranges which are nearing to the well established standard
range of 200 percent (2:1) during the period under study. Thus, the study reveals that in this
industry, around half of the companies are following low degree leverage, one-third of the
companies are following moderate degree leverage and rest of the companies are following high
degree leverage in their capital structure during the study period. Overall, Textile & readymade
garments industry is following moderate approach of leverage in their capital structure during the
study period.

CHAPTER – 4

DATA ANALYSIS AND INTERPRETATION

The financial performance of the company is measured by analysing the financial statement. The financial
analysis shows and relationships. These also help predict the future, show weakness, strengths. The ratios
usually are compared to other companies within the industry average to see where the company stands. The
analysis is done by using various ratios of ratio analysis and analysing the income Balance Sheet and Profit
and Loss Account of the company.

The Ratio Analysis

To evaluate the financial condition and performance of a firm, the financial analyst yields certain yardstick
frequently used as a ratio, or index, relating two pieces of financial data to each other. Analysis and
interpretation of various ratios should give experienced, skilled analyst a better understanding of the
financial conditions and performance of the firm than they would obtain from analysis of financial data
alone.

What is Ratio?

Ratio analysis is a powerful tool of financial analysis.

A Ratio is defined as - The indicated quotient of two mathematical expressions and as the relationship
between two or more things‖. In financial analysis a ratio is used as benchmark for evaluating the financial
position and performance of a firm. Ratios help to summarize large quantities of financial data and to make
qualitative judgments about the firm‘s financial performance.

The financial statements are prepared and presented annually are of little use for guidance of prospective
investors, creditors and even management. If relationships between various related items in the financial
statement are established, they can provide useful clues to gauge accurately the financial health and ability of
business to make profit. This relationship between two related items of financial statement is known as –
“Ratio”.

Ratio can be expressed in three different ways such as:

 Percentage- for example, the Return on Investment is 30%.

 Rates- for example, Price Earning Ratio is 5 times.
 Proportion- for example, Debt-Equity Ratio is 1:2

Standards of Comparison

The ratio analysis involves comparison for a useful interpretation of the financial statement. A single ratio
itself does not indicate favorable condition. It should be compared with some standards. The standards may
consist of:

 Past ratio: Ratios calculated from the past financial statement of the same firm
 Competitors‟ ratio: Ratio of some selected firms especially the most successful competitor, at the
same point in time.
 Industry ratios: Ratios of the industry to which the firm belongs.
 Projected ratios: Ratios developed using the projected financial statement of the same firm.

Importance of Ratio Analysis

The use of ratios was started by banks for ascertaining the liquidity and profitability of companies business
for the purpose of advancing loans to them. It gradually became popular and other creditors began to use
them profitably. Now even the investors calculate ratios from the published accounts of the company in
order to have an idea about the solvency and profitability of the company before investing their savings. The
ratio analysis provides useful data to the management which would help them in taking important policy
decisions. Diverse groups of people make use of ratios to determine a particular aspect of the financial
positions of the company in which they are interested.

1) Profitability
Useful information about the trend of profitability is available from profitability ratios. The gross profit ratio,
net profit ratio and ratio of return on investment gives a good idea about the profitability of business. On the
basis of these ratios, investors get an idea about the overall efficiency of business, the management gets an
idea about the efficiency of managers and bank as well as other creditors draw useful conclusion about
repaying capacity of the borrowers.
2) Liquidity
The use of ratios was made initially to ascertain the liquidity of business. The current ratio, liquid ratio and
acid test ratio will tell whether the business will be able to meet its current liquidities as and when Banks and
other lenders will be able to conclude from these ratios whether the firm will be able to pay regular interest
and loan instalments.
3) Efficiency
The turnover ratios are excellent guides to measure the efficiency of managers. E.g. the stock turnover will
indicate how efficiently the sale is being made. The debtors’ turnover will indicate the efficiency of
collection department and assets turnover shows the efficiency with which the assets are used in business.
All such ratios related to sales present a good picture of the business.
4) Inter Firm Comparison
The absolute ratios of a firm are not of much use unless they are compared with similar ratios of other firms
belonging to the same industry. This is inter firm comparison which shows the strength and weakness of the
firm as compared to other firms and will indicate corrective measures.

5) Useful for Budgetary Control

Regular budgetary reports are prepared in a business where the system of budgetary is in use. If various
ratios are prepared in this report it will give a fairly good idea about various aspects of financial position.

6) Useful for Decision Making

Ratio guides the management in making some of the important decisions. Suppose the liquidity ratio shows
an unsatisfactory position the management may decide to get additional liquid funds. Even for capital
expenditure decisions, the ratio of return on investment will guide the management.

Limitation of Ratio Analysis:

Anyone who draws any conclusion on the basis of accounting ratios about the financial conditions and
earning capacity of the business must take into account the following limitations of the ratios.

1) Single year’s ratio has limited utility

The utility of ratios computed from the financial statements of one year only is obviously limited. They must
be compared with the past results of the company as also with the result of other business firms in the same
industry.
2) Other factors must be considered
While comparing ratios of different firms, it must be remembered that different firms follow different
accounting plans and policies. For example, some may use a straight line method while other may use
diminishing balance method. Hence care has to be exercised before any conclusions are drawn from such
comparison.
3) Limited utility of Historical ratios
While comparing ratios of past several years, it should be remembered that changes in price level may
render such comparison useless. An asset purchased some 10years before may be shown at its historical
value and comparison of these assets with sales may be of no value as sales are expressed in current market
value.
4) Lack of standard ratios
There is practically no standard ratio against which the actual performance can be compared. The
satisfactory level of various ratios may differ from one industry to another because circumstances differ from
industry to industry and even from firm to firm.
5) Inaccurate base
The accounting ratios can never be more correct than the information from which they are computed. If the
accounting data is not accurate, the accounting ratios based on these figures would give misleading results.
6) Rigidity harmful
If in the use of the ratios, the manager remains rigid and sticks to them, it will lead to dangerous situation.
For example, if the manager believes the current ratio should not fall below 2:1, then many profitable
opportunities will have to be forgone.

7) Ratios of two irrelevant figures

Ratio must be established between related matters. It is of no use if the ratios are found between two figures
which have no relation with each other. E.g. , ratio of factory expenses to selling expenses is illogical and
does not give any useful conclusion.

Types of Ratio Analysis

The ratio analysis involves comparison for useful interpretations of the financial statements a single ratio in
itself does not indicate favorable or unfavorable condition. It should be compared with some standard.
Standards of comparison may consist of:

Time Series Analysis:

The easiest way to evaluate the performance of a firm is to compare its current ratios with the past ratios.
Such analysis is known as the time series (or trend) analysis. It gives an indication of the direction of change
and reflects whether the firm‘s financial performance has improved, deteriorated or remained constant over
time. The analyst should not simply determine change, but more importantly, he should understand why
ratios have changed. The change, for example, may be affected by changes in the accounting policies
without a material change in the firm‘s performance.

Pro-forma Analysis:

Sometimes future ratios are used as the standard of comparison. Future ratios can be developed from the
projected financial statements. The comparison of current or past 158 ratios with future ratios shows the
firm‘s relative strengths and weaknesses in the past and future. If the future ratios indicate weak financial
position, corrective actions should be initiated.

Cross-Sectional Analysis:

Another way of comparison is to compare ratios of one firm with some selected firms in the same industry at
the same point in time. This kind of comparison is known as the cross-sectional analysis. In most cases, it is
more useful to compare the firm‘s ratio with ratio of few carefully selected competitors, who have similar
operations. This kind of a comparison indicates the relative financial position and performance of the firm. A
firm can easily resort to such a comparison, as it is not difficult to get the published financial statements of
the similar firms.

Industry Analysis:

To determine the financial condition and performance of a firm, its ratios may be compared with average
ratios of the industry analysis, helps to ascertain the financial standing and capability of the some point of
time to determine the position of company in the industry.

Types of Ratio:

Several ratios, calculate from the accounting data can be grouped into various classes according to financial
activity or function to be evaluated. The ratios can be classified for the purpose of exposition. Into four
broad groups, viz,
  Liquidity Ratio: Measure the firms ability to meet current obligations;
 Leverage ratios: Show the proportions of debt and equity in financing the firm‘s acts;
 Profitability Ratio: Measure overall performance and effectiveness of the firm;

 Activity Ratios; Reflect the firm‘s efficiency in utilizing its assets.

The present study is based on the profitability ratios which would give a clear idea how ratios are
interrelated with the designing of the firm‘s impact of the industrial policy. However, the other ratios also
directly or indirectly affect to the financial performance of the company.

Accounting ratios are relationship expressed in mathematical terms between figures which are connected
with each other in some manner. Obviously, no purpose will be served by comparing two sets of figures
which are not at all connected with each other. Moreover, absolute figure are also unfit for comparison.

ACCOUNTING ANALYSIS:

 The comparative and common sized of the balance sheet of the company.

 The comparative and common sized of the income statement of the company.

 The changes in assets

 The changes in liability

 The changes in profits

Comparative and Common Size Financial Statement

Financial statements reveal the financial credibility of a company. A financial statement, which expresses
the different values in form of percentage, is called a Common size financial statement. A common size
financial statement helps in comparing two companies, which differ in size. Two components of the
common size financial statement are:

 Balance sheet

 Income statement

When both these components are clubbed together, a comparative and common size financial statement is
obtained.

Features of a common size Financial Statement:

A common size financial statement consists of various amounts expressed as percentage. For example, if
cash of a particular company is calculated to be 847678395. In the common size financial statement, it will
be represented as 15% of the total assets. If the total assets of a company are found to be 5567069464, it will
appear as 100% in the common size financial statement as it is the base for calculation. Similarly, if the
current liabilities of a company are found to be 295273778, it will appear as 5%. The numbers obtained in
the income statement will appear in form of percentage.

Advantages of the common size financial statement:

 One advantage of having the various amounts expressed in percentage is the percentage assets of
any company can be compared to another company or to other companies in the industry.
 The size of the companies being compared is not important. The companies being compared may be
small or big. Hence, it is termed as common size. Since size of the company does not matter, it
removes any kind of bias, while comparing companies. Analysing the operational activities of
comparing companies can also be obtained.
 Changes in different values pertaining to company's performance can also be ascertained during a
particular period. For example, if one wishes to know how the cost of goods sold over a span of time
has changed, the common size financial statement can be helpful.
 A common size financial statement is used for predicting future trends and analysing prevailing
trends in the industry.
Comparative and Common Size Income statement

An income statement in which each account is expressed as a percentage of the value of sales. This type of
financial statement can be used to allow for easy analysis between companies or between time periods of a
company.

Common size income statement analysis allows an analyst to determine how the various components of the
income statement affect a company's profit.

The values on the common size statement are expressed as percentage of a statement component such as
revenue. While most firms don’t report their statements in common size it is beneficial to compute if you
want to analyse two or more companies of differing size against each other.

It also allows for the analysis of a company over various time periods, revealing for example what
percentage of sales is cost of goods sold and how that value has changed over time.

LIQUIDITY RATIO
Liquidity refers to the existence of the assets in the cash or near cash form. This ratio indicates the ability of
the company to discharge the liabilities as and when they mature. The financial resources contributed by
owners or supplemented by outside debt primarily come in cash form as under in the balance sheet form.
The following Liquidity Ratios are calculated for the company.
 Current Ratio
 Quick Ratio
 Cash Ratio
 Stock to Working capital Ratio

1) Current Ratio
The Current Ratio is a financial ratio that shows the proportion of a company’s current assets to its current
liabilities. The current ratio is often classified as a liquidity ratio and a larger current ratio is better than a
smaller one. However, a company’s liquidity is dependent on converting the current assets to cash in time to
pay its obligations.

Current Assets
Current Assets = Current Liabilities

Table 1
YEAR 2019 2018 2017 2016 2015
Current Assets 2990.43 2851.95 2648.32 2689.19 2658.24
Current Liabilities 3082.93 2946.13 2699.38 2601.02 2524.82
Ratio 0.97 0.97 0.98 1.03 1.05
Source: Done by researcher
Graph 1

Current Ratio
1.06

1.04

1.02

0.98

0.96

0.94

0.92
2019 2018 2017 2016 2015
Interpretation
 Current Ratio is always 2:1 it means the current assets two times of current liability.
 After observing the figure of current ratio is fluctuating.
 In the year 2019 ratio has been decreased.
 Company’s current ratio is same in the year 2018 and 2019.
 Current Ratio can be improved by having more current assets or by reducing current liabilities.
 2) Quick Ratio
The Quick Ratio is an indicator of a company’s short-term liquidity position and measures a company’s
ability to meet its short-term obligations with its most liquid assets. Since it indicates the company’s ability
to instantly use its near-cash assets (that is, assets that can be converted quickly to cash) to pay down its
current liabilities, it is also called as the acid test ratio. An acid test is a quick test designed to produce instant
results.

Quick Assets
Quick Ratio = Quick Liabilities

Table 2
YEAR 2019 2018 2017 2016 2015
Quick Assets 1625.49 1544.23 1349.08 1551.99 1617.7
Quick Liabilities 3082.93 3082.93 2699.38 2601.02 2524.82
RATIO 0.53 0.53 0.50 0.60 0.64
Source: Done by researcher
Graph 2

Quick Ratio
0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2019 2018 2017 2016 2015

Interpretation
 A Quick Ratio of 1:1 has long been considered generally satisfactory but indiscriminate use of this
standard is not recommended.
 After observing the figure of quick ratio is fluctuating.
 In the year 2019 the ratio has been decreased.
  Company’s quick ratio is same in the year 2018 and 2019.
 Higher the ratio better is the immediate solvency of the company.

3) Cash Ratio
The Cash Ratio is the ratio of a company’s total cash and cash equivalents to its current liabilities. The
metric calculates a company’s ability to repay its short-term debt with readily-liquidated cash resources. This
information is useful to parties such as creditors when they decide how much debt, if any, they would be
willing to extend to the asking party. The cash ratio is generally a more conservative look at a company’s
ability to cover its liabilities than many other liquidity ratios because other assets, including accounts
receivables, are left out of the equation.

Cash∧Bank Balance
Cash Ratio=
Current Liabilities

Table 3
YEAR 2019 2018 2017 2016 2015
Cash & Bank Balance 31.19 14.36 13.28 23.41 45.02
Current Liabilities 3082.93 2946.13 2699.38 2601.02 2524.82
RATIO 0.0101 0.0049 0.0049 0.0090 0.0178
Source: Done by researcher
Graph 3

Cash Ratio
0.02

0.02

0.02

0.01

0.01

0.01

0.01

0.01

0
2019 2018 2017 2016 2015

Interpretation
 Standard Ratio is 1:1.
 The cash ratio is at its highest in year 2015, while it was lowest in year 2018 and 2017.
  Higher the ratio better is the absolute solvency of the company.
 Cash ratio signifies absolute liquidity of the company.
 Company’s ratio is decreasing in the year 2016 till 2018 and then increases in the year 2019.
4) Stock to Working Capital Ratio
This ratio signifies the percentage of stock in working capital. Higher percentage signifies that more money
is blocked in stock which may create a liquidity problem in short term. It is defined as a method to show
what portion of a company’s stock is financed from its available cash. This is essential to businesses which
hold stock and survive on cash supplies. In general, the lower the ratio, the higher the liquidity of a company
is.

Closing Inventory
Stock ¿ WorkingCapital Ratio= X 100
Working Capital

Table 4
YEAR 2019 2018 2017 2016 2015
Closing Inventory 1364.93 1307.72 1299.24 1137.20 1040.54
Working Capital -92.5 -94.18 -51.06 88.17 133.42
RATIO -1475.60 -1388.53 -2544.54 1516.62 779.90
Source: Done by researcher

Graph 4

Stock to Working Capital Ratio

2000

1500

1000

500

0
2019 2018 2017 2016 2015
-500

-1000

-1500

-2000

-2500

-3000

Interpretation:
 The ratio signifies the percentage of stock in working capital.
  Higher percentage signifies that the more money is blocked in stock which may create a liquidity
problem in short term.
 Here, more money is blocked in the year 2016 as it has higher percentage.
 And less money is blocked in the year 2017 as it has lower percentage.

CAPITAL STRUCTURE RATIO

 Structure Ratio
 Debt Equity Ratio

5) Structure Ratio
Structural ratios are based on the proportions of debt and equity in the capital structure of the firm. The ratio
studies the extend of total assets financed by proprietors. When a higher proportion of capital employed is
financed by owners, the financial leverage of the firm is low and therefore long term solvency of the firm is
high, accordingly the financial risk also reduces. The ratio is relevant to loan providers like bankers,
financial institutions. It is also important to the investors.

Owne r ' s Funds

Structure Ratio =
Total Capital Employed

Table 5
YEAR 2019 2018 2017 2016 2015
Owner’s Funds 2816.12 3158.23 3241.71 3041.48 2845.28
Total Capital Employed 3785.27 3914.21 4326.81 4373.49 4016.60
RATIO 0.74 0.81 0.75 0.70 0.71
Source: Done by researcher
Graph 5
 Structure Ratio
0.82

0.8

0.78

0.76

0.74

0.72

0.7

0.68

0.66

0.64
2019 2018 2017 2016 2015

Interpretation:
 Higher capital is in year 2016.
 This shows that firm is capable of facing the period of depression.
 Even in the years of low profit, the firm can continue as it will not have major commitments for
repayment of loan or interest payment.
6) Debt Equity Ratio
A high debt equity ratio indicates high component of capital employed being financed through borrowed
funds, which gives company a high financial leverage or high gearing which gives company the advantage to
magnify returns for its shareholder if it is earning higher rate of returns on money invested as compared to
the rate of fixed cost of finance (i.e. interest rate).

Debt
Debt Equity Ratio=
Equity

Table 6
YEAR 2019 2018 2017 2016 2015
Debt 969.15 755.98 1085.10 1332.01 1171.32
Equity 2816.15 3158.23 3241.71 3041.48 2845.28
RATIO 0.34 0.24 0.33 0.44 0.41
Source: Done by researcher
Graph 6
 Debt Equity ratio
0.5

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2019 2018 2017 2016 2015

Interpretation:
 A low debt equity ratio indicates a lower amount of financing by debt via lenders, versus funding
through equity via shareholders.
 A higher ratio indicates that the company is getting more of its financing by borrowing money, which
subjects the company to potential risk if debt levels are too high.
 High financial leverage or high gearing brings high financial risk with it for both, the shareholders
and debt financers.

Gearing ratios
Higher the source of capital which carries fixed cost of finance higher will be pace with which the
company’s profits will increase with a small increase in turnover, therefore such companies are known as
highly levered companies because there financial leverage is very high and for the same reason they are also
known as highly geared companies because they are running in high gear.
 Proprietary Ratio
 Capital Gearing Ratio

7) Proprietary Ratio
Proprietary ratio is also known as Equity Ratio or Net worth to total assets or shareholders equity to total
equity. Establishes relationship between proprietor’s funds to total resources of the unit. Where proprietor’s
funds refer to Equity share capital and Reserves, surpluses and tot resources refer to total assets.

Proprieto r ' s Funds

Proprietary Ratio =
Total Assets
 Table 7
YEAR 2019 2018 2017 2016 2015
Proprietor’s Funds 2816.12 3158.23 3241.71 3041.48 2845.28
Total Assets 6924.85 7044.07 7153.50 7083.04 6652.42
RATIO 0.41 0.45 0.45 0.43 0.43
Source: Done by researcher
Graph 7

Proprietor's Funds
0.46

0.45

0.44

0.43

0.42

0.41

0.4

0.39
2019 2018 2017 2016 2015

Interpretation:
 It is the proportion of shareholders equity to total assets, and as such provides a rough estimate of the
amount of capitalization currently used to support a business.
 The equity ratio is a general indicator of financial stability.
 A high proprietary ratio indicates a strong financial position of the company and greater security for
creditors.
 A low ratio indicates that the company is already heavily depending on debts for its operations.
 In the year 2017 and 2018 company has a strong financial position and greater security for creditors.
 Company is heavily depending on debts for its operations in the year 2019.
 8) Capital Gearing Ratio
Capital Gearing Ratio is a useful tool to analyse the capital structure of a company and is computed by
dividing the common stockholders equity by fixed interest or dividend bearing funds. A company is said to
be low geared if the larger portion of the capital is composed of common stockholders equity.

Capital Gearing ratio =

Capital having ¿Cost of Finance ¿ Cost of Finance ¿

Capital not Having ¿

Table 8
YEAR 2019 2018 2017 2016 2015
Capital having Fixed 969.15 755.98 1085.10 1332.01 1171.32
Cost of Finance
Capital not having 2816.12 3158.23 3241.71 3041.48 2845.28
Fixed Cost of Finance
 RATIO 0.344 0.239 0.335 0.438 0.412
Source: Done by researcher
Graph 8

Capital Gearing Ratio

0.5

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2019 2018 2017 2016 2015

Interpretation:

 Companies with high capital gearing will have a large amount of debt relative to their equity.
 The gearing ratio is a measure of financial risk and expresses the amount of a company’s debt in
terms of its equity.
 A company with a gearing ratio of 2.0 would have twice as much debt as equity.
 High ratio indicates high gearing and high financial leverage and accordingly higher risk.

Profitability ratios
These ratio indicate the efficiency of the company in employing various assets to generate turnover and the
percentage of profits it is generating from such turnover.
A company should earn profits to survive and grow over a long period of time. It would be wrong to assume
that every action initiated by management of company should be aimed at maximizing profits, irrespective
of social as well as economic consequences. It is a fact that sufficient must be earned to sustain the operation
of the business to be able to obtain funds from investors for expansion and growth and to contribute towards
the responsibility for the welfare of the society in business environment and globalization. The profitability
ratios are calculated to measure the operating efficiency of the company.
The following Profitability Ratios are calculated for the company.
 Quantitative Profitability Ratios / Turnover Ratios
 Qualitative Profitability Ratios
Quantitative Profitability Ratios / Turnover Ratios
These ratios indicate company efficiency in employing various assets to generate sales or turnover. At a
given level of assets if a company can generate more sales as compared to its competitors it is obviously a
better company than its competitors.
a) Net Worth Turnover Ratio
b) Capital Turnover Ratio
i) Fixed Assets Turnover Ratio
ii) Working Capital Turnover Ratio
 Inventory Turnover Ratio
 Inventory Turnover Ratio for Finished Goods
 Inventory Turnover Ratio for Raw Materials
 Inventory Velocity
 Debtors Turnover Ratio
 Debtors Velocity
 Creditors Turnover Ratio
 Creditors Velocity
Qualitative Profitability Ratios
While turnover ratio signifies the company’s sales capability in terms of quantity, qualitative profitability
indicates company’s profitability in terms of quality of capital employed, return it provides to owners and
percentage of profits its generates by selling each unit of its product.
 Returns on Net Worth
 Net Profit Ratio

9) Net Worth Turnover Ratio

The net worth turnover ratio states the return that shareholders could receive on their investment in a
company< if all of the profit earned were to be passed through directly to them. Thus, the ratio is developed
from the perspective of the shareholder, not the company, and is used to analyse investor returns.

Net Sales
Net Worth Turnover Ratio = Closing Net Worth

Table 9
YEAR 2019 2018 2017 2016 2015
Net sales 6435.96 6423.34 5627.59 5414.81 5228.45
Closing Net Worth 2816.12 3158.23 3241.71 3041.48 2845.28
RATIO 2.29 2.03 1.74 1.78 1.84
Source: Done by researcher
Graph 9

Net Worth Turnover Ratio

2.5

1.5

0.5

0
2019 2018 2017 2016 2015

Interpretation:
 It is an important metric to gauge a company’s health and it provides a snapshot of the firm’s current
financial position.
 Positive net worth means that assets exceed liabilities.
 Negative net worth means that liabilities exceeds assets.
 Positive and increasing net worth indicates good financial health.
 Positive and decreasing net worth is cause for concern as it might signal a decrease in assets relative
to liabilities.
 Higher ratio indicates better employment of proprietor’s funds and higher efficiency.
10) Capital Turnover Ratio
Capital turnover compares the annual sales of a business to the total amount of its stockholders equity. The
result is high capital turnover, but at an increased risk level profits. The ratio ignores whether a company is
generating a profit, concentrating instead on the generation of sales.

Net Sales
Capital Turnover Ratio = Closingcapital Employed

Table 10
YEAR 2019 2018 2017 2016 2015
Net Sales 6435.96 6423.34 5627.59 5415.81 5228.45
Closing Capital Employed 3785.27 3914.21 4326.81 4373.49 4016.45
 RATIO 1.70 1.64 1.30 1.24 1.30
Source: Done by researcher
Graph 10

Capital Turnover Ratio

1.8

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2019 2018 2017 2016 2015

Interpretation:
 Capital turnover ratio indicates the efficiency of the organisation with which the capital employed is
being utilized.
 A high capital turnover ratio indicates the capability of the organisation to achieve maximum sales
with minimum amount of capital employed.
 Higher the capital turnover ratio better will be the situation.

11)Fixed Assets Turnover Ratio

Fixed asset turnover is the ratio of sales to the value of fixed assets. It indicates how well the business is
using its fixed assets to generate sales. The Fixed Asset Turnover ratio (FAT) is, in general, used by analysts
to measure operating performance. This efficiency ratio compares net sales (income statement) to fixed
assets (balance sheet) and measures a company’s ability to generate net sales from its fixed asset
investments, namely property, plant, and equipments (P P & E).

Net Sales
Fixed Assets Turnover Ratio = Closing ¿ Assets ¿
 Table 11
YEAR 2019 2018 2017 2016 2015
Net Sales 6435.96 6423.34 5627.59 5414.81 5228.45
Closing Fixed Assets 3326.24 3164.42 3016.58 2909.93 2695.80
RATIO 1.93 2.03 1.87 1.86 1.94
Source: Done by researcher
Graph 11

Fixed Assets Turnover Ratio

2.05

1.95

1.9

1.85

1.8

1.75
2019 2018 2017 2016 2015

Interpretation:
 Higher the ratio higher is the efficiency of the company.
 The graph indicates that the ratios are fluctuating.
 The ratio is at its peak in the year 2018.
 High ratio indicates that a company spent less money in fixed assets for each rs of sales revenue.
 Declining ratio indicates that a company has over-invested in fixed assets.

12) Working Capital Turnover Ratio

working capital turnover is a ratio that measures how efficiently a company is using its working capital to
support a given level of sales. Also referred to as net sales to working capital, work capital turnover shows
the relationship between the funds used to finance a company’s operations and the revenues a company
generates as a result.

Net Sales
Working Capital Turnover Ratio = ClosingWorking Capital
 Table 12
YEAR 2019 2018 2017 2016 2015
Net Sales 6435.96 6423.34 5627.59 5414.81 5228.45
Closing Working Capital -92.5 -94.18 -51.06 88.17 133.42
RATIO -69.58 -68.20 -110.21 61.41 39.19
Source: Done by researcher

Graph 12

Working Capital Turnover Ratio

80

60

40

20

0
2019 2018 2017 2016 2015
-20

-40

-60

-80

-100

-120

Interpretation:
 Higher the ratio higher is the efficiency of the company.
 The ratio is at its peak in the year 2016 and lowest in the year 2017.
 As the current liabilities of the company are more than the current assets so the working capital of the
company is in negative from last 3 years.
 The efficiency of the company is low.
 The ratios of the company are fluctuating.

13) Inventory Turnover Ratio for finished Goods

Finished goods inventory refers to the number of manufactured products in stock that are available for
customers to purchase the cost of finished goods inventory is considered a short-term asset, since the
expectation is that these items will be sold in less than one year.

Cost of Goods Sold

Inventory Turnover Ratio for Finished Goods = Closing Finished Goods
 Table 13
YEAR 2019 2018 2017 2016 2015
Cost of Goods Sold 2973.93 2852.60 2732.59 2195.37 2366.11
Closing Finished Goods 1364.93 1307.72 1299.24 1137.20 1040.54
RATIO 2.18 2.18 2.10 1.93 2.27
Source: Done by researcher

Graph 13

Inventory Turnover Ratio for Finished Goods

2.3

2.2

2.1

1.9

1.8

1.7
2019 2018 2017 2016 2015

Interpretation:

 The ratios of the company are fluctuating.

 The ratio is at peak in the year 2015 and lowest in the year 2016.
 The ratio in the year 2018 and 2019 is same it means there is no increase and decrease in the
inventory turnover for finished goods.

14) Inventory Turnover Ratio for Raw Materials

Raw materials inventory is the total cost of all component parts currently in stock that have not yet been used
in work-in-process or finished goods production. Direct materials. These are materials incorporated into the
final product. For example, this is the wood used to manufacture a cabinet.

Raw Material Consumed

Inventory Turnover Ratio for Raw materials = Closing Raw Material Stock
 Table 14
YEAR 2019 2018 2017 2016 2015
2822.50 2600.60 2385.33 2078.47 2174.04
779.19 784.54 777.52 651.90 571.07
RATIO 3.62 3.31 3.07 3.19 3.81
Source: Done by researcher

Graph 14

Inventory Turnover Ratio for Raw Materials

4.5

3.5

2.5

1.5

0.5

0
2019 2018 2017 2016 2015

Interpretation:

 The ratios of the company are fluctuating.

 The ratio is at peak in the year 2015 and lower in the year 2017.
 Higher the ratio higher is the efficiency of the company.
15) Debtors Turnover ratio
Debtor’s turnover ratio is an accounting measure used to measure how effective a company is in extending
credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how
efficiently a firm uses its assets. The ratio shows how well a company uses and manages the credit it extends
to customers and how quickly that show-term debt is collected or is paid.

Net Credit Sales

Debtors Turnover Ratio = Closing Debtors + Bills Receivables
 Table 15
YEAR 2019 2018 2017 2016 2015
Net Credit Sales 6435.96 6423.34 5627.59 5414.81 5228.45
Closing Debtors + 714.38 736.61 490.03 4419.66 462.27
Bills Receivables
RATIO 9.01 8.72 11.48 12.90 11.31
Source: Done by researcher

Graph 15

Debtors Turnover Ratio

14

12

10

0
2019 2018 2017 2016 2015

Interpretation:
 The ratios have a fluctuating trend.
 The ratio is at peak in the year 2016 and lowers in the year 2018.
 Debtor’s turnover ratio simply measures how many times the receivables are collected during a
particular period.
 Higher the ratio higher is the efficiency of the company.

16) Creditors Turnover ratio

Creditor’s turnover ratio is also known as Accounts Payable turnover ratio. Creditor’s turnover is a ratio that
measures the speed with which a company pays its suppliers. If the turnover ratio declines from one period
to the next, this indicates that the company is paying its suppliers more slowly, and may be an indicator of
worsening financial condition.
 Net Credit Purchase
Creditors Turnover Ratio = ClosingCreditors+ Bills Payables

Table 16
YEAR 2019 2018 2017 2016 2015
Net Credit Purchase 154.70 325.61 247.14 116.90 98.40
Closing Creditors + 1194.45 948.94 667.73 795.75 721.72
Bills Payables
RATIO 0.13 0.34 0.37 0.15 0.14
Source: Done by researcher

Graph 16

Creditors Turnover Ratio

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2019 2018 2017 2016 2015

Interpretation:

 The ratios have a fluctuating trend.

 The ratio is at peak in the year 2017 and lowest in the year 2019.

17) Returns on Net Worth

Return on net worth is also known Return on equity. RONW is considered a measure of how effectively
management is using a company’s assets to create profits. RONW is expressed as a percentage and can be
calculated for any company if net income and equity are both positive numbers. Net income is calculated
before dividends paid to common shareholders and after dividends to preferred shareholders and interest to
lenders.
 Profit After Tax
Returns on Net Worth = Shareholders Funds X 100

Table 17
YEAR 2019 2018 2017 2016 2015
Profit After Tax 199.44 250.04 270.88 318.85 377.43
Shareholder’s Funds 2816.12 3158.23 3241.71 3041.48 2845.28
RATIO 7.08 7.92 8.36 10.48 13.27
Source: Done by researcher

Graph 17

Returns on Net Worth

14

12

10

0
2019 2018 2017 2016 2015

Interpretation:

 The returns on net worth are decreasing from 2015 till year 2019.
 It shows that the business was not able to successfully utilize the resources provided by its equity
investors and the company’s accumulated loss in generating income.

18) Net Profit Ratio

Net Profit Ratio (NP Ratio) is a popular profitability ratio that shows relationship between net profit after tax
and net sales. It is computed by dividing the net profit (after tax) by net sales.

The relationship between net profit and net sales may also be expressed in percentage form. When it is
shown in percentage form, it is known as net profit margin.
 Net Profit
Net Profit Ratio = X 100
Net Sales

Table 18
YEAR 2019 2018 2017 2016 2015
Net Profit 199.44 250.04 270.88 318.85 377.43
Net Sales 6435.96 6423.34 5627.59 5414.81 5228.45
RATIO 3.10 3.89 4.81 5.89 7.22
Source: Done by researcher

Graph 18

Net Profit Ratio

8

0
2019 2018 2017 2016 2015

Interpretation:

 After observing the figure, the ratio is fluctuating.

 Though the company’s sale is continuously decreasing but the net profit is not so much increased.
 Ratio has been decreasing from the last 5 years there is no growth in the ratio.
 The overall ratio is showing not so good position of the company.
 The ratio can be improved by increasing sales and controlling the cost of goods sold and operating
expenses.
 So net profit ratio is not performing well of the company.

CHAPTER– 5

CONCLUSION AND SUGGESTIONS

Sr. RATIOS 2019 2018 2017 2016 2015
No.

1 Current Ratio 0.97 0.97 0.98 1.03 1.05

2 Quick Ratio 0.53 0.53 0.50 0.60 0.64

3 Cash Ratio 0.0101 0.0049 0.0049 0.0090 0.0178

4 Stock to Working Capital -1475.60 -1388.53 -2544.54 1516.62 779.90

Ratio

5 Structure Ratio 0.74 0.81 0.75 0.70 0.71

6 Debt Equity Ratio 0.34 0.24 0.33 0.44 0.41

7 Proprietary Gearing Ratio 0.41 0.45 0.45 0.43 0.43

8 Capital Gearing Ratio 0.344 0.239 0.335 0.438 0.412

9 Net Worth Turnover Ratio 2.29 2.03 1.74 1.78 1.84

10 Capital Turnover Ratio 1.70 1.64 1.30 1.24 1.30

11 Fixed Assets Turnover 1.93 2.03 1.87 1.86 1.94

Ratio

12 Working Capital Turnover -69.58 -68.20 -110.21 61.41 39.19

Ratio

13 Inventory Turnover Ratio 2.18 2.18 2.10 1.93 2.27

for Finished Goods

14 Inventory Turnover Ratio 3.62 3.31 3.07 3.19 3.81

for Raw Materials

15 Debtors Turnover Ratio 9.01 8.72 11.48 12.90 11.31

16 Creditors Turnover Ratio 0.13 0.34 0.37 0.15 0.14

17 Returns on Net Worth 7.08 7.92 8.36 10.48 13.27

18 Net Profit Ratio 3.10 3.89 4.81 5.89 7.22

The main aim of this research is financial analysis of Arvind Textiles Limited to see that whether the
company is in better financial position or not. As from above research we can conclude the Arvind
Textiles Limited is

The company has grown over the years.

Current ratio of the company is well throughout the 5 years.

Quick ratio is increasing in the current year.

Cash ratio is less than 1 that means company has insufficient cash to pay off current liabilities, and have
been decreased till 2018.

Stock to working capital ratio is negative in last 3 years, it means that the money is not blocked in stock
and it does not create a liquidity problem in short term.

Structure ratio is decreased in the year 2019 than 2018.

Debt equity is fluctuating. Higher debt equity ratio indicates that the company is better equipped to meet
its obligation and even in times of recession it will be able to pay what it owes to the lender.

Capital gearing ratio

 Annexure

Standalone Balance Sheet as at March 31,

Particulars 2019 2018 2017 2016 2015

ASSETS
Non-current assets
a) Property, plant and equipment 3013.27 2877.90 2797.16 2610.83
3027.31
b) Capital work-in-progress 33.31 58.32 74.08 75.53
187.92
c) Investment properties 43.13 117.74 - -
35.65
d) Intangible assets 91.50 80.36 14.90 9.44
109.35
e) Intangible assets under development 26.34 - 23.79 -
1.66
f) Financial assets
i. Investments 883.25 1264.92 1098.76 885.39
516.53
ii. Loans 1.86 2.45 380.11 407.84
1.34
iii. Other financial assets 30.63 43.45 - -
33.11
g) Other non-current assets 68.83 60.04 5.05 5.15
21.55
Total non-current assets(A) 4192.12 4505.18 4393.85 3994.18
3934.42
Current assets
a) Inventories 1307.72 1299.24 1137.20 1040.54
1364.93
b) Financial assets
i. Trade receivables 736.61 490.03 419.66 462.27
714.38
ii. Cash and cash equivalents 7.36 4.31 23.41 45.02
23.12
iii. Bank balance other than (ii) 7.00 8.97 - -
8.07
above 219.39 353.08 800.87 800.88
255.11
iv. Loans 96.35 161.61 - -
182.05
v. Other financial assets 101.91 40.09 - -
76.46
c) Current tax assets (net) 375.61 290.99 308.05 309.53
366.31
d) Other current assets 2851.95 2648.32 2689.19 2658.24
2990.43
Total current assets (B) - - - -
89.03
Assets classified as held for sale (C) 7044.07 7153.50 7083.04 6652.42
7013.88
TOTAL ASSETS (A)+(B)+(C)

EQUITY AND LIABILITIES

Equity 258.62 258.36 258.24 258.24
258.62
a) Equity share capital 2899.61 2983.35 2756.24 2587.04
2557.50
b) Other equity 3158.23 3241.71 3014.48 2845.28
2816.12
Total equity (A)
Liabilities
Non-current liabilities
a) Financial liabilities 775.98 1085.10 1332.01 1171.32
969.15
i. Borrowings 0.54 1.01 - -
1.67
ii. Other financial liabilities 37.29 27.18 15.48 14.36
44.76
b) Long-term provisions 91.77 68.34 120.05 96.64
39.31
c) Deferred tax liabilities (net) 34.13 30.78 - -
59.94
d) Government grants 939.71 1212.41 1467.54 1282.32
1114.83
Total non-current liabilities (B)
Current liabilities
a) Financial liabilities 1536.34 1661.43 1750.26 1325.28 1331.57
i. Borrowings 1194.45 948.94 667.73 795.75 721.72
ii. Trade payables 295.13 276.87 211.96 - -
iii. Other financial liabilities 9.96 7.88 6.38 79.32 92.71
b) Short-term provisions 4.60 5.59 4.69 - -
c) Government grants 42.45 45.42 211.96 400.67 378.82
d) Other current liabilities 3082.93 2946.13 2699.38 2601.02 2524.82
Total current liabilities (C) 7013.88 7044.07 7153.50 7083.04 6652.42
TOTAL EQUITY AND LIABILITIES (A)+
( B)+(C)