NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES

ANIL SURENDRA MODI SCHOOL OF COMMERCE (ASMSOC)

FINANCIAL STATEMENT ANALYSIS

DIVISION- A
ADMIN GROUP- 7

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Division: A
Group no: 7
Industry: Textile Industry
Companies: Banswara Ltd., Alok Industries Ltd., Garware Technical Fibres Ltd., Raymond
Ltd., Arvind Ltd.

WORK CONTRIBUTION TABLE

ROLL NO. NAME COMPANY & Detailed

Work Allocation.
A031 Kavissh Belmaan Banswara Ltd.
Preparation of Balance
sheet, profit loss a/c,
common size, comparative
statement, trend analysis and
ratio analysis.

A032 Khushi Rajawat Alok Industries ltd.

Preparation of Balance
sheet, profit loss a/c,
common size, comparative
statement, trend analysis and
ratio analysis.
A033 Krishna Tayal Garware Technical Fibres
ltd.
Preparation of Balance
sheet, profit loss a/c,
common size, comparative
statement, trend analysis and
ratio analysis.

A034 Krutarth Doshi Raymond ltd.

Preparation of Balance
sheet, profit loss a/c,
common size, comparative
statement, trend analysis and
ratio analysis

A035 Kshitij Gupta Arvind Ltd.

Preparation of Balance
sheet, profit loss a/c,
common size, comparative
statement, trend analysis and
ratio analysis

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 TABLE OF CONTENT

SR. NO. PARTICULARS PAGE NO.

1. Raymond ltd. 4

2. Arvind Ltd. 12

3. Alok Industries ltd. 24

4. Banswara Ltd. 36

5. Garware Technical Fibres ld. 40

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 RAYMOND Ltd. Analysis
Common size statement

Vertical balance sheet

• Reserve and surplus – we can see that overall percentage of reserve and surplus / capital
employed has been falling in the 5 years except the PY. This can be because of a couple
of reasons firstly it could be because the company’s borrowing stakehold has increased
as a percentage of capital employed and also the company went through a loss for 2
years during covid which resulted in decrease of reserve.
• Borrowed funds – this shows an exact opposite effect of reserve and surplus. Borrowed
funds increased for 3 years continuously during the covid period when the company
was incurring losses but in the PY when the company started making profit again the
borrowed funds have reduced
• Over the course of 5 years the investment in subsidiary companies has decreased all the
5 years whereas the investment in other companies has increased all the 5 years. This
means that the company is expanding their scope of income generation.
• Trade receivable has gradually decreased over the past 5 years, this means that the
company is doing a good job in extracting money, this also indicates that the working
cycle of the company improves
• Trade payable of the company was decreasing but as soon as covid hit the company
could not make their payments on time hence the trade payable skyrocketed but now
again in the PY it has reached to the level it was in 2018-19.

Vertical Income statement

• The sale of services Raymond provides has been around 1 – 1.2% of the total net sales
all the years, hence it does not majorly contribute to the sales of the company
• COGS has been overall constant over the years except for the year 2020-21 when covid
hit the COGS was higher by around 10% than usual due to the increase in depreciation
and Work in progress as everything was shut down. The impact of COGS can be seen
in gross profit
• Administration expense increased during covid period but as now decreased a lot which
is a good thing and it tells us that even in a limited administration expense the scope
for company to grow is high
• Operating profit was negative during the year 2020- 21 due to covid and increase in
administration expense and cogs. After 2020-21 the operating profit has increased for
2 years consecutively
• In the year 2021-22 it can be assumed that the company was undergoing construction
projects as under non operating expenses development rights, construction cost show
a huge hike, which led to increase in non operating expenses
• Non operating income has more or less increases gradually over the past 5 years. In the
year 2021-22 there was an overall loss in non operating business activities due to
capital expenditure
• Due to loss in non operating activities in 2021-22 and loss in operating activities in
2020-21 the company undergoes losses for 2 consecutive years

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Trend analysis
Vertical Balance sheet
• The equity share capital has seen minor changes 2 times. That means that new equity
shares were issued by the company twice in these past 5 years
• Shareholders fund has increased all the years except 2020-21 due to covid losses.
• We can see a very big change in borrowed funds over the 5 years, they have increased
by over 500%. This clearly means that the company is still moving towards more and
more expansion
• Capital employed of the company has gone up which is a good sign for the company. It
has more than doubled in 5 years. The reason for increase in capital employed is the
increase in borrowed funds
• Loans and advances given by Raymond have constantly decresed over the years and
are close to 0 now. This means that the company is not investing their assets in loans
and advances but in non current assets
• Total investment increased for the first year then dropped for 2 years during covid and
then again increased and in the PY 22-23 It is around 140% more than 18-19
• The total non current assets have increased every single year of the 5 years except the
PY where the non current asset sees a drop.
Vertical Income statement
• The net sales fell to about half of what they were before covid in the year 2020-21.
• The cost of goods sold has also seen a big fall for the years 19-20 and 20-21. But after
that they have seen a spike which corelates to the net sales graph
• In the years 19-20 and 20-21 the cost of rent has gone down massively which has led
to the administration cost also coming down. The reason cost of rent came down could
be the company invested for construction of new buildings of their own
• The cost of development rights has gone up by 3400% which indicates that the company
is spending on building more assets
• Apart from the year 2020-21(due to covid) the non operating income has increased by
5 times in 5 years
• For the 2 years the company was in loss, EBIT was in negative under trend analysis but
in the PY 22-23 EBIT was approximately 300% of EBIT in 2018-19
Comparative statement
• This helps us understand the difference in the past 2 years between different particulars
Vertical Balance sheet
• Firstly there is a a 24% increase in shareholders fund which is a good thing impacting
a positive increase in capital employed
• There is a 15% decrease in borrowed funds which indicates that there will be a decrease
in company dependence on borrowed funds.
• The total capital employed has increase by just 12% even though the shareholders fund
has increased by 24% due to decrease in borrowed funds.

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 • There has been a 384% of increase in other investments that tells us that the company
is focusing on gaining more return from non-operating activities and there has been an
50% increase in overall total investments
• Other non current assets have shown a decrease of 50% this could be due to the big
increase in other investment the money has been take from non current assets and used
for investment
• Capital advances have increase by over 15298% that tell us that the company has given
away more advances in exchange of fixed assets, which means the company is spending
more money for fixed assets.

Vertical income statement

• Net sales have increase by 33 percent in the PY in which the sale of service saw an
increase of 55 percent whereas sale of product saw an increase of 3%.
• Proportional to increase in sales the COGS has also increased at around 31%
• Operating expenses has seen a 26% increase but operating profit has seen a 46%
increase in the PY, which suggests that the assets are more efficiently used to earn more
profits from funds they have
• Even though non operating expenses has seen a 41% decrease(there was a lot of non
operating expense in 21-22 as the company was undergoing construction as indicated
by the high amounts under construction cost, now those expenses are not present), non
operating income shows us 18% increase which is a very good thing for the company
as it tells us that even after decreasing their expenses they are increasing the income
earned from those expenses
• EBIT has seen an increase from the year before PY when the company was in loss, it
has recovered from that due to the increase in both operating profit and non operating
profit.
Ratio analysis
Liquidity ratio analysis
1. Current Ratio: Indicates a company's ability to cover short-term liabilities with
short-term assets. Ratios above 1 suggest good liquidity. All values are above 1,
indicating a positive liquidity position. Over the years the ratio has been around 1,
the highest value is 1.68, indicating strong liquidity in that period.
2. Quick Ratio: Measures a company's ability to meet short-term obligations with its
most liquid assets. Measures a company's ability to meet short-term obligations with
its most liquid assets. Ratios above 1 are considered healthy. All the values of quick
ratio are below 1 which indicates that the company is not doing well liquidity wise.
They are not very bad either they just indicate that to cover up for current liabilities
maybe the company will have to be dependent on inventory.
3. Cash Ratio: Focuses solely on a company's most liquid assets to cover short-term
obligations. Similar to the quick ratio, all values are below 1, implying that the
company does not have enough cash and cash equivalents to cover all its current
liabilities.
4. Inventory to Working Capital Ratio: Measures how well a company's inventory can
cover its short-term debts. Apart from the year 18-19 when the inventory to Working
capital ratio is negative all the other years it is positive which indicates that there is
enough inventory to manage working capital.

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 Overall all the ratios of liquidity have showed us that right now Raymond is not
doing great on liquidity and it can face problems for the same.
ACTIVITY RATIO
1. Total Asset Turnover Ratio: Measures a company's efficiency in using its assets to
generate sales. The values indicate how many times the company's total assets are
converted into sales. Higher values are generally better, indicating efficient asset
utilization. Here we can see the total asset turnover ratio is around 0.6 to 0.7
consistently that means that for every 1 Rupee of net sales the company requires
0.6 -0.7 worth of assets
2. Fixed Asset Turnover Ratio: indicates how efficiently a company uses its fixed
assets to generate revenue. Higher values suggest efficient utilization of fixed
assets. The values are relatively stable across periods, indicating consistent
performance. The fixed asset turnover ratio of the company was around 3 but it
fell the most in the year 2020-21 due to covid crises and decrease in net sales
3. Capital Turnover Ratio: Measures how effectively a company uses its capital to
generate sales. Higher values indicate efficient use of capital. The last period has
a significantly higher ratio, indicating improved performance in utilizing capital
for generating sales. This ratio fell really bad in the year 2020- 21 due to covid but
is now again recovering and is around 1.29 right now. Which indicates that for
every one rupee of capital invested the net sales are 1.29
4. Inventory turnover ratio: Indicates how many times a company's inventory is sold
and replaced during a period. Higher values indicate faster inventory turnover. All
periods have reasonable turnover ratios, suggesting efficient management of
inventory. We see the same graph like that of capital turnover ratio, fall during
covid and it is recovering back trying to reach its 2018-19 level again of 2.12
5. Stock Velocity: Measures the number of days it takes to sell the entire inventory.
The stock velocity varies from 170-330 days. It reaches the highest in the year
2020-21 at around 330 days.
6. Debtors Turnover Ratio: Indicates how many times a company's receivables are
collected and replaced during a period. Higher values suggest efficient
management of accounts receivables. The last year has a significantly higher ratio,
indicating quick collection of receivables. This fell the most during covid as it was
harder to get money from consumer
7. Creditors Turnover Ratio: Indicates how many times a company pays its creditors
during a period. Higher values suggest efficient management of accounts
payables. The first 2 years have relatively high turnover ratios, indicating prompt
payment to creditors.

8. Operating Cycle: Represents the number of days required to sell inventory and
collect receivables. Lower values indicate a shorter operating cycle, which is
favorable. The first year has the lowest operating cycle, indicating efficient
management of both inventory and receivables. It was highest during covid.
In summary, the company is performing well in terms of asset utilization, inventory
management, and cash flow efficiency. It's crucial to maintain or improve these efficiencies
and continue the trend of quicker collection of receivables and prompt payment to creditors.

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Regular monitoring of these ratios and their trends can provide valuable insights into the
company's operational efficiency and financial health.
SOLVENCY RATIO
1. Debt-Equity Ratio: Measures the proportion of shareholder equity and debt used to
finance the company's assets. Lower values are generally preferred, indicating lower
financial risk. The last two periods have very low debt-equity ratios, suggesting a
conservative capital structure. This ratio shows us that the debt to equity ratio was at its
worst in the year 2020-21 due to covid when the company took a lot of debt but still it
is way lesser than 2:1 which is considered to be good. So this tells us that the company
can borrow more funds and expand
2. Proprietary Ratio: Indicates the proportion of total assets financed by the owner's equity.
Higher values indicate a larger proportion of assets financed by shareholders. The
values are relatively stable, suggesting consistent equity financing of assets. It varies
around 30-40% which tells us that around 30% of total assets are funded by
shareholders fund
3. Debt to Total Funds Ratio: Represents the proportion of long-term debt in the
company's total capital employed. Lower values indicate a conservative financial
structure. The last two periods have relatively low debt-to-total-funds ratios, indicating
low reliance on long-term debt. This ratio has overall increased over the years but still
has a lot of scope to increase for increasing the capital funds.
4. Debt to Assets Ratio: Indicates the proportion of a company's assets that are financed
by debt. Lower values suggest lower financial risk. The first two years have very
low debt-to-assets ratios, indicating a conservative approach to debt financing. This
indicates that the company can take more risk and earn more.
In summary, the company's conservative approach to debt and stable reliance on equity
financing suggest a strong and stable financial position. The company should continue
monitoring these ratios, ensuring that any future financial decisions align with the company's
low-risk approach to financing.
Profitability ratios
1. Gross Profit Ratio: Indicates the percentage of sales revenue that exceeds the cost of goods
sold. Higher values are preferred, indicating a healthy margin between production costs and
sales. The first period has the highest gross profit ratio. Except for the year 2020-21 the Gross
profit ratio has always been increasing. It is around 35% in the PY.
2. Net Profit Ratio: Measures the percentage of net profit to total sales. Positive values are
desirable. However, negative values in the second and third periods indicate losses. The last
three periods show low net profit margins. In the years 2020-21 and 21-22 the company was
impacted by covid and was going through a loss phase but in the PY 22-23 the company
recovered and had a net profit of around 10%.
3. EBIT Margin Ratio: Represents earnings before interest and taxes as a percentage of net
sales. Positive values are preferred. The first, fourth, and fifth periods have positive EBIT
margins, indicating profitability before interest and taxes. In the years 2020-21 and 21-22 the
company was impacted by covid and was going through a loss phase but in the PY 22-23 the
company recovered and had a EBIT of around 17%.
4. Operating Expenses Ratio: Indicates the proportion of operating expenses to total sales.
Lower values are preferred, indicating efficient cost management. The first period has the
lowest operating expenses ratio. Operating expenses ratio has overall remained around 25-
31%. In the PY 22-23 the ratio has decreased which is a good thing that even after a decrease
in operating expense the net sales are increasing.

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5. Operating Profit Margin: Measures the operating profit as a percentage of net sales. Positive
values are preferred. The last three periods have positive operating profit margins, but they are
relatively low, indicating modest profitability. Only one year out of all 5 was the one where the
operating profit was negative that is the company incurred loss through operating activity itself
this was due to increase in COGS due to covid. In the PY 22-23 there was operating profit of
all time high 10%
In summary, the company needs to focus on enhancing operational efficiency, managing costs
effectively, and ensuring a balance between investments in fixed assets and equity. A thorough
analysis of the reasons behind negative profitability in certain periods is crucial, as addressing
these issues can significantly impact the company's overall financial health and sustainability.
Leverage ratios
Interest coverage ratios: The Interest Coverage Ratio (ICR) measures a company's ability to
meet its interest obligations on outstanding debt. It is calculated by dividing Earnings Before
Interest and Taxes (EBIT) by the company's interest expenses. Here's an analysis of the
provided Interest Coverage Ratios for five different periods. This ratio was negative for 2 years
when the company was going through loss. Apart from those 2 years the interest coverage ratio
is really good to pay off their intrest without any difficulty.
1.Return on Assets (ROA): Measures how efficiently the company is generating profits from
its total assets. Positive values are desirable, indicating that the company is generating profits
from its assets. The first period shows a positive ROA, while the subsequent periods are
negative, indicating losses concerning total assets.
2. Return on Capital Employed (ROCE): Measures the profitability of a company in relation to
its overall capital. Positive values indicate that the company is generating profits from the
capital employed. Similar to ROA, the first period has a positive ROCE, while the subsequent
periods are negative.
3. Return on Equity (ROE): Indicates how much profit the company generates concerning
shareholders' equity.
For all the 3 ratios we see that during the years 2020-21 and 21-22 the company experiences
loss and the return on assets, capital employed and equity are negative for those years due to
negative EBIT due to covid but now in the PY 22-23 the company is recovering and has positive
ROA ROCE and ROE of 6.6%, 22%,18.22% respectively.
Positive values are preferable, suggesting that the company is generating profits for its
shareholders. The first and fifth periods have positive ROE, while the middle periods are
negative, indicating losses concerning shareholders' funds.
In summary, the company is facing significant profitability challenges, and a comprehensive
strategic overhaul is necessary. This might involve restructuring, cost management, strategic
investments, and a focus on improving operational efficiency. Engaging with stakeholders
transparently and communicating plans for improvement can help regain confidence and
support during this challenging period.
Valuation ratios
1. Earnings per Share (EPS): Interpretation: EPS represents the portion of a company's profit
allocated to each outstanding share of common stock. Positive values in the first, fourth, and
fifth periods indicate earnings, while negative values in the second and third periods imply
losses per share.
Implications: Negative EPS can indicate financial distress, impacting investor confidence and
stock value. Positive EPS periods suggest profitability.
2. Dividend per Share (DPS) and Dividend Payout: Interpretation: DPS represents the dividend
declared per outstanding share. Dividend payout ratio compares dividends paid to earnings. A
higher payout ratio means more earnings are being distributed as dividends.

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Implications: A zero DPS in the second and third periods indicates no dividends, potentially
due to losses. Higher payout ratios indicate the company is distributing a significant portion of
earnings to shareholders.
3. Retained Earnings: Interpretation: Represents the portion of net income retained by the
company rather than distributed as dividends.
Implications: Higher retained earnings can signify reinvestment in the business, debt reduction,
or future dividends. Negative retained earnings could indicate consistent dividend payouts
without adequate profits.
4. Price-Earning Ratio (P/E Ratio) and Price-Earning Growth Ratio: Interpretation: P/E ratio
indicates how much investors are willing to pay per dollar of earnings. PEG ratio adjusts the
P/E ratio for growth. Lower P/E ratios can suggest undervaluation, while higher PEG ratios
may indicate overvaluation.
Implications: Negative P/E ratios in the second and third periods suggest losses. PEG ratio
suggests growth potential concerning the stock's current valuation.
5. Book Value per Share: Interpretation: Represents the portion of the company's equity
attributable to each outstanding share.
Implications: Higher book value indicates potential for better returns for shareholders in case
of liquidation. It also serves as a measure of a stock's intrinsic value.
6. Dividend Yield and Earning Yield: Interpretation: Dividend yield represents dividends paid
relative to the stock price. Earning yield shows earnings relative to the stock price.
Implications: Higher dividend yield can attract income-seeking investors. Positive earning
yield periods indicate earnings concerning the stock price.

Dupont analysis (3 factor)

Net profit margin: This ratio measures the percentage of revenue that is converted into net
profit. It is calculated by dividing net profit by revenue. The company's net profit margin has
decreased from 8.86% in 2020 to 5.39% in 2022, which is a negative trend. This could be due
to a number of factors, such as increased costs, decreased sales, or a combination of both.
Return on assets (ROA): This ratio measures the company's efficiency at using its assets to
generate profit. It is calculated by dividing net profit by total assets. The company's ROA has
decreased from 3.01% in 2020 to 2.72% in 2022, which is another negative trend. This could
be due to the same factors that have caused the net profit margin to decline.
Return on equity (ROE): This ratio measures the company's profitability relative to its
shareholder equity. It is calculated by dividing net profit by shareholder equity. The company's
ROE has also decreased from 5.29% in 2020 to 3.18% in 2022. This is a concern, as it indicates
that the company is not generating as much profit for its shareholders as it was in the past.

Dupont analysis (5 factor)

Net profit margin: The net profit margin has decreased from 8.86% in 2020 to 5.39% in 2022.
This is a decline of 3.47 percentage points. The decline in the net profit margin can be
calculated as follows:
(8.86% - 5.39%) / 8.86% = 3.47%
This means that for every 100 rupees of revenue, the company is now earning 5.39 rupees in
net profit, compared to 8.86 rupees in 2020.

Return on assets (ROA): The ROA has decreased from 3.01% in 2020 to 2.72% in 2022. This
is a decline of 0.29 percentage points. The decline in the ROA can be calculated as follows:
(3.01% - 2.72%) / 3.01% = 0.29%

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This means that for every 100 rupees of assets, the company is now generating 2.72 rupees in
profit, compared to 3.01rupees in 2020.

Return on equity (ROE): The ROE has decreased from 5.29% in 2020 to 3.18% in 2022. This
is a decline of 2.11 percentage points. The decline in the ROE can be calculated as follows:
(5.29% - 3.18%) / 5.29% = 2.11%

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 ARVIND LTD
1. Liquidity Ratios:

a. Current Ratio: Arvind Ltd.'s current ratio has remained relatively stable over the years,
hovering around 1. This indicates that the company has been able to maintain a balance between
its current assets and current liabilities. A current ratio of 1 means that the company can meet
its short-term obligations comfortably. However, it's essential to note that a current ratio of
exactly 1 may leave little room for unexpected expenses or economic downturns.

b. Quick Ratio: The quick ratio measures Arvind Ltd.'s ability to cover short-term obligations
using only its most liquid assets (excluding inventory). While the quick ratio has decreased
over the years, it remains above 0.4, suggesting that the company still has reasonable liquidity
to cover its short-term liabilities. However, the decreasing trend may indicate a decline in the
availability of quick assets relative to current liabilities.

c. Cash Ratio: Arvind Ltd.'s cash ratio has been consistently low, indicating that the company
relies heavily on non-cash assets to meet its short-term obligations. While this is common in
some industries, a low cash ratio means that the company may have limited cash on hand for
emergencies or opportunities.

d. Inventory to Working Capital Ratio: This ratio measures the percentage of working capital
tied up in inventory. Arvind Ltd. has seen high fluctuations in this ratio, which is a cause for
concern. In some years, the ratio has been significantly above 1000%, indicating that a
substantial portion of the working capital is invested in inventory. This may suggest
inefficiencies in managing inventory and working capital, as excessively high inventory levels
can tie up funds that could be used elsewhere.

e. Projected Daily Cash Requirements: This ratio represents the daily cash requirements to
cover operating expenses. Arvind Ltd. has experienced fluctuations in this ratio, which may be
due to changes in operating expenses, business cycles, or management decisions.

f. Defensive Interval Ratio: The defensive interval ratio indicates the company's ability to cover
operating expenses with cash and marketable securities. Arvind Ltd. has seen fluctuations in
this ratio, with the highest value in 2021-22, indicating improved short-term financial stability
and the ability to cover operating expenses for a longer period without generating additional
income.

In summary, Arvind Ltd. demonstrates reasonable liquidity as evidenced by a stable current

ratio above 1 and a quick ratio above 0.4. However, the consistently low cash ratio and high
fluctuations in the inventory to working capital ratio raise concerns. The company may need to
review its cash management and inventory control practices to ensure that it maintains an
optimal balance between liquidity and efficiency. The defensive interval ratio in 2021-22
suggests a strengthening of the company's short-term financial position, but it's essential to
monitor liquidity regularly, as it plays a crucial role in managing short-term financial risk.

2. Activity Ratios:
a. Total Asset Turnover Ratio:
The total asset turnover ratio measures how effectively the company generates sales revenue
from its total assets. Arvind Ltd. has shown consistent improvement in this ratio over the years.

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 • In 2018-19 and 2019-20, the ratio was 0.89 and 0.89, respectively, indicating that for
every rupee of assets, the company generated 89 paise in sales.
• In 2020-21, the ratio decreased to 0.65, which suggests a lower level of efficiency in
utilizing assets to generate sales.
• However, in 2021-22 and 2022-23, the ratio improved to 1.00 and 1.08, respectively,
indicating an increased efficiency in asset utilization.
The rising trend in this ratio can be seen as a positive sign of operational efficiency and the
company's ability to generate more sales with the same level of assets. This may be due to
better inventory management, improved receivables turnover, or other factors contributing to
increased sales.
b. Fixed Asset Turnover Ratio:
The fixed asset turnover ratio assesses how effectively the company generates sales from its
fixed assets. Arvind Ltd. has shown consistent improvement in this ratio over the years.
• In 2018-19 and 2019-20, the ratio was 1.92 and 1.89, respectively, suggesting that for
every rupee invested in fixed assets, the company generated approximately Rs. 1.92
and Rs. 1.89 in sales revenue.
• In 2020-21, the ratio decreased to 1.28, indicating a slight decrease in the efficiency of
using fixed assets to generate sales.
• In 2021-22 and 2022-23, the ratio improved to 2.20 and 2.42, respectively,
demonstrating an increased efficiency in utilizing fixed assets for revenue generation.
The rising trend in the fixed asset turnover ratio suggests that Arvind Ltd. is becoming more
efficient in using its fixed assets to generate sales. This could be attributed to better
maintenance, capacity utilization, or effective capital allocation.
c. Capital Turnover Ratio:
The capital turnover ratio evaluates how effectively the company generates sales from the
capital employed. Arvind Ltd. has maintained a relatively stable capital turnover ratio.
• In 2018-19, the ratio was 1.59, which means that for every rupee of capital employed,
the company generated Rs. 1.59 in sales.
• In 2019-20 and 2020-21, the ratio remained consistent at 1.59.
• In 2021-22 and 2022-23, the ratio improved to 1.79 and 1.96, respectively, indicating
an increased efficiency in utilizing capital to generate sales.
The improvement in the capital turnover ratio suggests that Arvind Ltd. has managed to
generate more sales from the same level of capital employed. This could be a result of effective
capital allocation and operational improvements.
d. Inventory Turnover Ratio:
The inventory turnover ratio reflects the efficiency of managing inventory and converting it
into sales. Arvind Ltd. has improved its inventory turnover over the years.
• In 2018-19, the ratio was 3.67, indicating that the company's inventory turned over
approximately 3.67 times during the year.
• In 2019-20, the ratio was 4.29, showing a more efficient management of inventory.
• In 2020-21, the ratio decreased to 3.42, suggesting a slight decrease in the efficiency of
inventory management.

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 • In 2021-22, the ratio further improved to 3.99, and in 2022-23, it reached 3.55,
indicating better control over inventory turnover.
The increasing trend in inventory turnover suggests that Arvind Ltd. is reducing the time its
inventory sits idle, which can lead to cost savings and improved cash flow.
e. Debtors Turnover Ratio:
The debtors turnover ratio assesses how efficiently the company collects accounts receivable.
Arvind Ltd. has shown fluctuations in this ratio.
• In 2018-19, the ratio was 8.74, indicating that, on average, the company collected its
receivables 8.74 times during the year.
• In 2019-20, the ratio decreased to 7.16, suggesting a slower rate of debt collection.
• In 2020-21, the ratio increased to 4.66, indicating a better debt collection efficiency.
• In 2021-22 and 2022-23, the ratio further improved to 6.59 and 8.77, respectively,
suggesting that the company collected receivables more frequently.
The fluctuating trend in debtors turnover may indicate variations in the company's credit
management practices. Improving this ratio reflects a quicker conversion of credit sales into
cash.
In summary, Arvind Ltd. has demonstrated improvements in its activity ratios, suggesting
increased efficiency in utilizing assets, fixed assets, and capital to generate sales revenue.
Effective inventory management, better debt collection practices, and capital allocation have
contributed to these positive trends. However, the company should continue to focus on
maintaining and further improving these ratios to enhance operational efficiency and financial
performance.

3. Solvency Ratios:
a. Debt-Equity Ratio: The debt-equity ratio for Arvind Ltd. has consistently been low,
indicating a conservative financial structure. This means that the company relies less on
external debt and is more dependent on equity financing. A low debt-equity ratio is generally
considered a positive sign as it reduces financial risk. Arvind's ability to maintain a low debt-
equity ratio suggests that it has been cautious in taking on excessive debt, which can lead to
interest burdens and financial distress.
b. Proprietary Ratio: The proprietary ratio reflects the proportion of assets financed by
shareholders' equity. Arvind Ltd. has maintained a relatively stable proprietary ratio over the
years. This stability indicates that shareholders have consistently provided a certain portion of
the company's assets, which can be seen as a positive sign of financial stability. It also means
that the company has not been excessively reliant on external sources of funding.
c. Capital Gearing Ratio: The capital gearing ratio of Arvind Ltd. has shown significant
fluctuations over the years. This ratio measures the relationship between fixed income-bearing
funds and non-fixed income-bearing funds. The substantial changes may be indicative of
changes in the company's capital structure. It's important to note that a high gearing ratio, as
seen in some years, can indicate a significant reliance on debt for financing. This can potentially
increase the financial risk for the company.
d. Debt To Total Funds Ratio: Arvind Ltd. has consistently maintained a low debt-to-total-funds
ratio. This ratio signifies the proportion of long-term debts in the company's capital structure.
A low ratio suggests that the company has a conservative approach to debt financing. By
keeping its long-term debts relatively low, Arvind Ltd. reduces the financial risk associated
with high levels of debt.

14
e. Debt To Assets Ratio: The debt-to-assets ratio has also remained low and stable for Arvind
Ltd. This ratio measures the proportion of long-term debts in relation to the company's total
assets. The low and stable ratio indicates that the company's assets are not heavily burdened by
long-term debt. This is generally seen as a positive sign, as it reduces the risk of asset seizures
due to default on debt obligations.
In summary, Arvind Ltd. has maintained a conservative financial structure with low debt levels,
stable proprietary financing, and a relatively low reliance on external debt. While there have
been fluctuations in the capital gearing ratio, overall, the company's solvency ratios indicate a
prudent approach to managing long-term financial obligations and maintaining financial
stability. However, it's important to consider the industry context and the company's specific
financial goals when evaluating these ratios.

4. Profitability Ratios:
a. Gross Profit Ratio: This ratio measures the profitability of a company's core business
activities by showing the percentage of gross profit in relation to net sales. Arvind Ltd. has
consistently maintained a gross profit ratio in the range of 15% to 22%. This indicates that the
company effectively manages the cost of goods sold and maintains a healthy gross profit
margin. The stability in this ratio suggests a certain level of pricing power and control over
production costs.
b. Net Profit Ratio: The net profit ratio, also known as the net profit margin, represents the
percentage of net profit after all expenses, including taxes and interest, in relation to net sales.
Arvind Ltd. has shown significant improvement in this ratio, especially when comparing 2022-
23 to 2018-2019. This suggests the company has become more efficient in managing its
expenses and generating higher profits for every rupee of sales.
c. EBIT Margin Ratio: The EBIT (Earnings Before Interest and Taxes) margin measures a
company's profitability without considering interest and tax expenses. Arvind Ltd. has
consistently improved its EBIT margin, indicating better operational efficiency and
profitability. This improvement could be a result of cost control measures or an increase in
sales.
d. Operating Expenses Ratio: This ratio represents the percentage of operating expenses in
relation to net sales. Arvind Ltd. has effectively managed its operating expenses, keeping them
within a reasonable range of net sales. The stable trend suggests the company's ability to control
its overhead costs and maintain operational efficiency.
e. Operating Profit Margin (%): The operating profit margin, which is similar to the EBIT
margin but excludes interest and taxes, has been relatively stable for Arvind Ltd. This indicates
that the company's core business operations have consistently contributed to overall
profitability.
f. Fixed Assets to Proprietor's Funds Ratio (%): This ratio signifies the proportion of fixed
assets financed by shareholders. Arvind Ltd. has maintained a stable ratio, indicating that
shareholders have not overcommitted their funds to finance fixed assets. This may result in a
better return on equity.
In summary, Arvind Ltd. has shown positive trends in its profitability ratios. The company has
improved its ability to control costs, generate higher gross and net profits, and enhance
operational efficiency. These improvements reflect positively on the company's financial
performance and may contribute to shareholder value. However, it's essential to continue
monitoring these ratios to ensure the sustainability of these trends and assess the long-term
viability of the business.

15
5. Leverage Ratios:
a. Interest Coverage Ratio:
The interest coverage ratio measures Arvind Ltd.'s ability to meet its interest payments from
its operating profits. Here's a detailed analysis:
• 2018-2019: Arvind Ltd. had an interest coverage ratio of 3.86. This means the company
earned 3.86 times its interest expenses. While this ratio indicates a reasonable ability to
cover interest costs, it's on the lower side, suggesting that a significant portion of
operating profits goes toward servicing interest.
• 2019-2020: The interest coverage ratio improved to 2.61. The decrease suggests that
the company's ability to cover interest expenses declined, which might be due to an
increase in interest costs or a decrease in operating profits.
• 2020-2021: Unfortunately, the data for this year is not available, making it difficult to
assess the company's financial performance for this period.
• 2021-2022: The interest coverage ratio is 2.14, indicating that Arvind Ltd. continued to
face challenges in covering its interest payments from its earnings. This may raise
concerns about the company's ability to service its debt effectively.
• 2022-2023: The interest coverage ratio remained relatively stable at 2.14, suggesting
that Arvind Ltd. continued to face challenges in managing its interest expenses.
Overall, Arvind Ltd.'s interest coverage ratio indicates that it may have struggled to cover its
interest costs from operating profits. Investors and lenders should closely monitor this ratio to
assess the company's financial health, especially its ability to meet interest obligations on its
debt.

6. Return on Investment Measures:

a. Return on Assets (ROA):
ROA measures how effectively a company generates profits from its total assets. A higher ROA
indicates better asset utilization.
Arvind Ltd.'s ROA has improved over the years, indicating that the company has become more
efficient in generating profits from its assets. In 2018-2019, the ROA was 2%, and by 2022-23,
it had increased to 5%. This improvement suggests that Arvind Ltd. has been able to optimize
its asset base, possibly through better management of working capital, improved operational
efficiency, or a more effective utilization of its asset base.
b. Return on Capital Employed (ROCE):
ROCE measures the profitability of a company in relation to the total capital employed,
including both debt and equity. A higher ROCE indicates more effective use of capital.
Arvind Ltd.'s ROCE has also shown a significant improvement over the years. In 2018-2019,
the ROCE was 6%, and it increased to 15% by 2022-23. This increase suggests that the
company has become more efficient in generating profits compared to the capital invested. It
might be due to better operational performance, lower debt costs, or improved utilization of
assets.
c. Return on Equity (ROE):
ROE measures the return on shareholder's equity and indicates how effectively the company
generates profits for its shareholders.
Arvind Ltd. has shown a substantial improvement in ROE. In 2018-2019, the ROE was 3%,
and by 2022-23, it had increased to 11%. This significant improvement suggests that the

16
company is generating better returns for its shareholders. It could be due to both operational
efficiency and a lower debt burden.
Overall, the improvement in Arvind Ltd.'s return on investment measures (ROA, ROCE, and
ROE) over the years is a positive sign. It indicates that the company has been more effective
in using its assets and capital to generate profits. This improvement could result from various
factors such as better cost management, increased sales revenue, or a more efficient capital
structure.

7. Valuation Ratios:
a. Earnings per Share (EPS):
Arvind Ltd.'s EPS has shown significant fluctuations over the years. The EPS is a crucial
indicator of a company's profitability and is closely watched by investors. The fluctuations may
be due to changes in the company's net income, which can be influenced by various factors
such as operational performance, taxation, and non-operational items like one-time gains or
losses. Investors should carefully consider these fluctuations when evaluating the company's
performance and potential for growth.
b. Dividend per Share:
Dividend per share is essential for income-oriented investors who rely on regular dividends for
returns. The absence of data could imply that Arvind Ltd. may not have paid dividends
consistently or that they have not been publicly disclosed.
c. Dividend Pay-out:
The available dividend pay-out data for 2019-20 shows a pay-out ratio of 30.20%, indicating
that Arvind Ltd. distributed 30.20% of its earnings as dividends. This ratio provides insight into
the company's dividend policy and its commitment to sharing profits with shareholders. d.
Retained Earnings:
The concept of retained earnings is particularly significant for growth-oriented investors and
for assessing the company's financial stability. The data for retained earnings shows a retention
rate of 69.80% in 2019-20. This means that the company retained 69.80% of its earnings for
reinvestment or future growth. A high retention rate can signal a company's commitment to
expanding its operations and can potentially lead to increased shareholder value.
e. Price-Earning Ratio (P/E Ratio):
Arvind Ltd.'s P/E ratio has experienced fluctuations over the years. The P/E ratio compares the
company's market price per share to its earnings per share (EPS). A lower P/E ratio can indicate
that the stock may be undervalued, while a higher P/E ratio may suggest that the stock is
overvalued. The fluctuations may be due to changes in market sentiment, company
performance, or industry dynamics. Investors should consider the reasons behind these
fluctuations when evaluating the stock's valuation.
f. Book Value per Share:
The book value per share has steadily increased over the years. This represents the net worth
of the company per share and indicates the intrinsic value of the stock. Investors often consider
a stock's book value when assessing whether it is undervalued or overvalued. The consistent
growth in book value per share suggests that Arvind Ltd. has been able to build shareholder
equity over time, which can be a positive sign for long-term investors.
g. Dividend Yield (%):
The dividend yield, provides insight into the returns investors can expect to receive through
dividend payments. A higher dividend yield can be attractive to income-oriented investors.
h. Earning Yield (%):
The earning yield represents the return on investment (ROI) an investor can expect to earn from
holding the stock. The data shows fluctuations in the earning yield. The earning yield is closely
related to the P/E ratio, and the changes may reflect changes in the company's earnings and

17
market prices. Investors should consider these fluctuations when evaluating the attractiveness
of the stock as an investment.

8. 5-Step DuPont Analysis:

1. Tax Burden (%) - Profit after Tax / Profit before Tax:
Arvind Ltd. has a tax burden ranging from 60% to 289% over the years. This suggests that the
company's effective tax rate has varied significantly. The high tax burden in some years may
be due to changes in tax regulations or accounting treatments.

2. Interest Burden (%) - Profit before Tax / Profit before Interest and Tax:
The interest burden ratio varies between 21% and 63%. A lower interest burden indicates that
Arvind Ltd. relies less on debt financing and has a lower cost of servicing interest, which is
generally a positive sign.

3. Earning before Interest and Tax Margin (%) - (Profit before Interest and Tax) / Net Sales:
Arvind Ltd. has consistently maintained a stable EBIT margin of around 5% to 7%. This
indicates that the company has been able to control operating expenses and generate a
reasonable profit from its operations.

4. Total Assets Turnover (in times) - Net Sales / Average Total Assets:
The total assets turnover ratio has been stable at around 1. This suggests that Arvind Ltd. has
efficiently used its assets to generate sales revenue, which is a good sign of asset management.

5. Equity Multiplier (in times) - (Average Total Assets / Average Shareholder's Funds):
Arvind Ltd.'s equity multiplier has also remained stable at around 1, indicating that the
company has not significantly leveraged its equity, which is generally a conservative approach.

Return on Equity (ROE) Calculation:

Arvind Ltd.'s ROE is calculated by multiplying the tax burden, interest burden, EBIT margin,
total assets turnover, and equity multiplier. The resulting ROE values range from 1% to 7%.

Overall Analysis:
The variations in ROE can be attributed to fluctuations in the tax burden and interest burden
ratios. High tax burdens in certain years may have reduced the overall ROE, while low interest
burdens have contributed positively to ROE. The stable EBIT margin, total assets turnover, and
equity multiplier suggest that Arvind Ltd. has maintained operational efficiency and a
conservative financial structure.A stable and consistent ROE over the years suggests that
Arvind Ltd. has effectively balanced its profitability, asset utilization, and financial leverage to
provide a reasonable return to shareholders. The company appears to have managed its
financial and operational aspects efficiently, leading to stable and sustainable ROE.

The Comparative Income Statement for Arvind Ltd

1. Revenue Growth: Arvind Ltd experienced significant growth in its sales of goods and
services between 2020-21 and 2021-22, with a 6.26% increase in the former and a
14.57% increase in the latter. The net sales showed a similar pattern, increasing by
6.28% in 2021-22.
2. Cost Management: The company faced challenges in managing the cost of goods sold.
The cost of raw materials consumed increased by 114.58% in 2021-22 compared to the

18
 previous year, driven by changes in inventory. However, the cost of stock-in-trade
decreased by 3.18% in 2021-22, indicating some level of cost control.
3. Gross Profit: Despite cost challenges, Arvind Ltd managed to achieve a healthy gross
profit, which increased by 25.51% in 2021-22, reflecting the company's ability to pass
on some cost increases to customers.
4. Operating Expenses: Administrative expenses rose by 19.72% in 2021-22, driven by
increases in various components like salaries and wages. Selling and distribution
expenses increased by 194.38%, primarily due to higher advertising and publicity costs.
5. Operating and Non-Operating Income: The company generated additional income
from waste sales, gain/loss on derivative contracts, and other sources. However, the
foreign exchange fluctuation on vendors and customers had a significant negative
impact. Non-operating expenses were primarily driven by exceptional items, leading to
a significant overall impact on profit.
6. Net Profit: The company experienced a decline in net profit in 2021-22, with a decrease
of 16.75% in the former and a significant increase of 356.19% in the latter year.
7. Comprehensive Income: The comprehensive income for Arvind Ltd was negative in
2020-21, but it rebounded significantly in 2021-22 with a positive figure.
In summary, Arvind Ltd saw growth in sales, managed to maintain a reasonable gross profit
margin, but faced increased costs in raw materials and expenses. The company's net profit faced
challenges in the initial year but showed a substantial rebound in the following year. The overall
financial health, as indicated by comprehensive income, improved in the comparative period.

The common size income statement

1. Sales Composition: Arvind Ltd's revenue primarily comes from the sale of goods,
which accounts for the majority of its income, with minimal contributions from the sale
of services. Over the years, the company has maintained a consistent focus on its core
business of selling goods.
2. Cost Management: The cost of goods sold as a percentage of sales has remained
relatively stable, indicating consistent cost management. There has been a slight
decrease in raw material costs compared to previous years.
3. Operating Efficiency: The company has effectively managed its factory expenses,
keeping them within the range of around 26-32% of sales. Notably, depreciation
expenses as a percentage of sales have decreased in the most recent year, potentially
indicating lower capital expenditure or improved asset utilization.
4. Operating Income: Arvind Ltd has improved its operating income as a percentage of
sales over the years, with the highest value achieved in 2022-23. This suggests
improved operational efficiency or higher-margin products.
5. Non-Operating Income: The company has generated a small but consistent amount of
non-operating income, primarily from sources like interest income and scrap income.
This additional income contributes positively to the bottom line.

19
 6. Profitability: The net profit margin has shown a notable increase, reaching 4.63% in
2022-23. This indicates that the company has managed its costs effectively and is
generating stronger profits from its operations.
7. Comprehensive Income: The comprehensive income, including items not reclassified
to the profit and loss statement and items that will be reclassified, has shown
fluctuations over the years. In 2022-23, it is 4.43%, indicating a positive comprehensive
performance.
8. Earnings per Share: Earnings per share (EPS) from continuing operations have
improved from 0.04% in 2020-21 to 0.18% in 2022-23. This suggests an increase in
profitability per share.
In summary, Arvind Ltd has exhibited strong financial performance over the years, with a focus
on its core business of selling goods, effective cost management, improved profitability, and
increased earnings per share. The company's ability to maintain a competitive position in the
textile industry is reflected in its common size income statement.

Trend Analysis of Income Statement

1. Sales: Arvind Ltd has shown a fluctuating trend in sales over the years. Sales were
robust in 2018-19 and 2021-22, with a significant drop in 2020-21. In 2022-23, sales
rebounded to reach their highest point.
2. Gross Profit: The gross profit margin has also been volatile. The highest gross profit
was recorded in 2018-19, with a dip in 2020-21, and a substantial recovery in 2022-23.
The company seems to be managing its cost of goods sold effectively.
3. Operating Expenses: Administrative and selling expenses have shown variations.
Administrative expenses were relatively stable, while selling and distribution expenses
have been more erratic, notably in 2022-23. Finance costs decreased substantially in
2022-23 after reaching extraordinary levels in the previous year.
4. Operating and Non-Operating Income: Despite fluctuations, the company's
operating income has been on an upward trajectory. The significant non-operating
income in 2022-23 contributed to the overall improvement in profitability. Non-
operating expenses have been somewhat unpredictable, with a notable exceptional item
in 2022-23.
5. Profit Before Tax: There is an upward trend in profit before tax, with a significant
surge in 2022-23. This indicates improved operational performance and effective cost
management.
6. Net Profit After Tax (NPAT): After-tax profitability witnessed fluctuations, with a
notable jump in 2022-23. This indicates that Arvind Ltd is not only increasing revenue
but also managing its expenses efficiently.
7. Comprehensive Income: Total comprehensive income fluctuated over the years. The
inclusion of other comprehensive income items resulted in both profits and losses on a
comprehensive basis.

20
 8. Earnings per Share: Earnings per share (EPS) have also seen fluctuations but showed
significant improvements in 2022-23, reflecting enhanced earnings available to
shareholders.
In summary, Arvind Ltd.’s financial performance has experienced ups and downs over the last
five years, with 2022-23 standing out as a year of significant recovery and improved
profitability. The company seems to have managed its costs, increased sales, and benefited
from non-operating income.

Common Size Balance Sheet Of Arvind Ltd- Analysis

1. Shareholder's Funds: Arvind Ltd's equity capital remained fairly stable during this
period, with a slight increase in authorized share capital. Total Shareholder's Funds
increased from 76.63% in 2021-22 to 86.49% in 2022-23, indicating that the company
has strengthened its financial position.
2. Borrowed Funds: Long-term borrowings experienced a significant decrease from
18.73% in 2021-22 to 9.52% in 2022-23, demonstrating a reduction in long-term
liabilities. This suggests a focus on deleveraging or refinancing to lower interest
expenses.
3. Other Non-Current Liabilities: Other non-current financial liabilities have remained
relatively consistent over the years, indicating that the company is managing its non-
current liabilities effectively.
4. Fixed Assets: Arvind Ltd has invested significantly in tangible assets, with tangible
assets accounting for 79.17% in 2022-23, up from 76.55% in 2021-22. This may
indicate capital expenditure and expansion in its production capabilities.
5. Investments: The company has made notable investments in equity shares, and the
proportion increased from 8.91% in 2021-22 to 10.15% in 2022-23. This suggests
confidence in associated companies and joint ventures.
6. Working Capital: Working capital remained positive in all years, except for a slight
negative figure in 2020-21 and 2019-20. In 2022-23, the company showed a substantial
improvement in working capital, likely a result of efficient management of current
assets and liabilities.
In summary, Arvind Ltd has strengthened its financial position over the past five years, with
increasing shareholder's funds, a significant reduction in long-term borrowings, and notable
investments in equity shares. The positive working capital in the latest year suggests improved
liquidity and overall financial health. These trends indicate a positive direction for the
company, demonstrating its commitment to financial stability and growth.

Comparative Balance Sheet

• Shareholder's Funds: The company witnessed a 1% increase in its equity share capital
from 2020-21 to 2021-22, remaining stable in the latter year. Reserves & surplus saw
substantial growth of 256% from the previous year to 2021-22, and another 10% growth
to 2022-23. This indicates improved retained earnings and reserves in the company.
• Borrowed Funds: Long-term borrowings decreased significantly by 3312% and 51%
in 2021-22 and 2022-23, respectively, suggesting that the company reduced its reliance

21
 on long-term debt. However, the non-current government grants and non-current lease
liabilities fluctuated.
• Long Term Provisions: Long-term provisions experienced a decrease of 1795% and
an increase of 14% in 2021-22 and 2022-23, respectively. This could be due to changes
in employee benefit provisions.
• Total Capital Employed: A major decrease of 648% in 2021-22 was followed by a
smaller reduction of 3% in 2022-23, indicating an overall decline in capital employed.
• Fixed Assets: Tangible assets saw a reduction of 622% and increased by 0% in 2021-
22 and 2022-23, respectively. This could imply that the company disposed of assets or
experienced depreciation. Capital work-in-progress increased significantly in 2021-22
and 2022-23 by 8806% and 94%, respectively.
• Intangible Assets: Intangible assets experienced a decrease of 1152% in 2021-22 and
a more substantial drop of 42% in 2022-23. Right-of-use assets demonstrated
fluctuation in values.
• Investments: Investment properties significantly increased in value by 67603% in
2021-22 but experienced a decrease of 15% in 2022-23. Equity investments showed a
substantial decrease of 3420% in 2021-22 and a significant increase in 2022-23. Total
investments decreased by 1511% and 14% in 2021-22 and 2022-23, respectively.
• Working Capital: There was a significant change in current assets. Quick current
assets saw a substantial increase in 2021-22 and a massive decrease of 432.51% in
2022-23. Non-quick current assets increased by 8770% in 2021-22 and decreased by
504.91% in 2022-23. Current liabilities increased by 936% and decreased by 953.40%
in 2021-22 and 2022-23, respectively.
• Working Capital: The company's working capital turned negative by 28% and 24% in
2021-22 and 2022-23, respectively. This could indicate potential liquidity issues.
• Funds Utilized: The funds utilized decreased by 6% and 3% in 2021-22 and 2022-23,
respectively, indicating that the company became more efficient in using its resources.

Trend Analysis of Balance Sheet

Over the five-year period from 2018-19 to 2022-23, Arvind Ltd, a prominent Indian textile
company, displayed several noteworthy trends in its balance sheet. Shareholder's funds,
encompassing both share capital and reserves, exhibited a consistent upward trajectory,
gradually increasing from 100.00 in 2018-19 to 117.05 in 2022-23. This reflects the company's
efforts in raising capital and accumulating reserves, possibly for expansion and strategic
initiatives. However, within the category of shareholder's funds, it's worth noting that there
were fluctuations in various reserves and surplus components, such as capital reserves, general
reserves, and retained earnings, which could be indicative of the company's financial
management and performance during these years.

Conversely, the company experienced fluctuations in borrowed funds, with long-term

borrowings declining notably from 100.00 in 2018-19 to 37.45 in 2022-23. Such a trend could
signify a shift in Arvind's funding strategy or repayment of long-term debts. Similarly, long-
term provisions and other non-current liabilities showed variations. For instance, long-term

22
provisions, like provision for medical benefits, leave encashment, and compensatory pension,
were subject to changes over the years, suggesting adjustments in employee benefit plans or
accounting treatments.

In the realm of investments, Arvind underwent shifts in asset composition. While its equity
investments showed a decline from 100.00 in 2018-19 to 63.25 in 2022-23, its investment in
debentures increased significantly, reaching 351,850.00 in 2022-23. Such changes in
investments may be indicative of the company's risk appetite and the need to diversify its
portfolio.
One striking observation is the working capital, which demonstrated severe deficits in 2019-
20 and 2020-21. This indicates potential liquidity challenges faced by the company during
those years, which could be attributed to various factors, including industry-specific trends or
financial strategies.

23
 ALOK INDUSTRIES ANALYSIS

COMMON SIZE STATEMENT ANALYSIS

Balance Sheet

Shareholders Funds:
Share Capital-
It comprises of only equity share capital.
Increased gradually from -20% to 11% of capital employed.

Reserves and Surplus-

Changed drastically from 207% to -387% of capital employed.
Mainly due to high deficit in profit/loss account ballooning from 227% to 462%.
Reserves like securities premium, capital reserve also declined in absolute terms.
Reflects consistent losses eroding reserves over the years.

Net worth position of the company turning negative indicates financial stress.
Inability to raise further equity due to weak profitability and reserves.
High reliance on debt and external liabilities to fund operations.

Borrowed Funds:
Borrowed funds increased significantly from -85% in FY2018-19 to 474% of capital employed
in FY 2022-23.
Indicates high reliance on debt financing to fund operations and growth.
Loans from banks changed from -79% to 91% of capital employed.
Loans from financial institutions increased from -3% to 315%.
Other borrowings like term loans also went up.
There seems to be higher dependence on institutional borrowing.
Debt/Equity ratio increased considerably due to higher debt and lower net worth.
Heavy interest burden due to large debt levels has impacted profitability

Other Non- Current Liabilities:

Current tax liabilities reduced from -2% to 0% of capital employed.
Indicates payment of tax dues over the years.
Non-current provisions like gratuity and leave encashment were negligible.
Interest accrued but not due emerged in the last 2 years indicating delays in interest servicing.
No major long-term liabilities like deferred tax, lease obligations etc.
Non-current liabilities are not significant compared to current debt repayment obligations.
Interest accruals need to be monitored as delays could indicate liquidity issues

Total Fixed Assets:

Total fixed assets have increased from -212% of capital employed in FY2018-19 to 114% in
FY2022-23
Indicates significant investments in enhancing gross block over the period.
Sharp jump in gross block indicates major capacity expansion and modernization.
Higher asset base would have led to increased depreciation charge impacting profits.
But revenue growth may not have kept pace with rise in fixed assets.
This could have resulted in under-utilization of capacity and poor return on capital employed.
24
Total Investments:
Investments in shares of subsidiaries are written down over the years.
Loans to subsidiaries also declined from -13% to 0% of capital employed.
Very few new investments are made considering the financial stress.

Total Current Assets:

Trade receivables decreased by 38.20%, indicating improved collection or credit management.
Inventories showed a decrease of 20.60%, implying potential efficiency in inventory
management.
Other bank balances decreased slightly by 0.25%.
Overall, quick current assets decreased by 35.27% and non-quick current assets decreased by
18.07%.

Total Current Liabilities

Trade payables increased by 24.64%, possibly indicating a delay in payments to suppliers.
Other financial liabilities increased significantly by 62.20%, due to increased borrowings.

Other Non Current Assets:

Changes in capital advances reflect alterations in long-term project commitments.
Tax asset variations could stem from strategic tax planning or regulatory shifts.
Overall, stable management of financial assets is observed.

The company experienced a decrease in both sources of funds and application of funds,
indicating a potential reorganization or restructuring.
The decrease in working capital suggests a need to review and optimize the working capital
cycle for improved efficiency.
Changes in investments and fixed assets indicate a strategic shift in the company's investment
and growth plans.
The increase in current liabilities and decrease in current assets highlight the importance of
effectively managing short-term obligations and collections.

Profit and Loss Account

Cost of Goods Consumed:

It is a combination of Total Goods Consumed and factory expenses.

Lowest at 90% in FY 2020-21 due to lower volumes.
Highest at 112% in FY 2018-19 and FY 2022-23 indicating production and cost inefficiencies
The stability in raw material indicates the company maintained steady production activity in
most years.
The spike in inventory levels and -9% change in FY2020-21 reflects raw material/work-in-
progress build up likely due to lower demand
Overall, the fluctuations in total goods consumed seem aligned to changes in production
volumes and inventory levels during different operating environments over the 5 years.
Controlling raw material costs, improving inventory management and aligning production to
demand forecasts could help optimize total goods consumed

Gross Profit:

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In FY 2020-21, Gross Profit was 10% of net sales which indicates the company was able to
generate positive gross margins in this year because of lower COGS due to production cuts,
inventory build-up and cost control efforts undertaken by the company.
n other years, COGS was higher than Net Sales leading to negative gross margins (losses)
High COGS was due to:
Inefficiencies in production leading to higher costs
Raw material price increases not fully passed on
Significant fixed costs like depreciation and overheads

Operating expenses:

Share of fixed expenses like salaries, rent may be high leading to lack of operating leverage
Need to control discretionary expenses like advertising, sales promotion in weak periods
Reducing debt would help lower interest costs
Tight expense control and cost optimization needed to improve profitability

Net operating profit

Gross Profit was negative in most years due to high COGS.

Operating Expenses were 15% to 30% of net sales.
Other Operating Income was minor at 2-4% of net sales.
The company had operating losses in all the years.

Profit Before Interest and Tax:

In FY2018-19 and FY2022-23, high exceptional gains of 226% and 203% respectively resulted
in overall PBIT profits.
These were mainly due to one-time write-backs of interest, loans and liabilities.
Excluding exceptional gains, PBIT was negative reflecting operating losses.
In FY2020-21, losses widened due to impairment losses.
Negative PBIT excluding exceptional gains indicates poor operating profitability.
Key factors were high COGS, inadequate gross margins and high operating expenses.
This underscores the need to improve operational efficiency and cost optimization.

Profit After Tax:

In FY 2018-19 and FY2022-23, exceptional gains led to high PBT and PAT.
In FY 2020-21, impairment losses caused widening of losses.
Depreciation and interest costs negatively impacted profitability.
Accumulated losses over the years also reduced net earnings.

Profit After available for Appropriation:

It was negative across all years indicating accumulated losses.
This is because:
• PAT was negative due to operating losses in most years
• Reserves were negative throughout the period
• No dividends were paid out

26
 • Highest loss of -501% in FY2018-19 and FY2022-23.
• Even in profitable years, accumulated losses exceeded PAT.

COMPARATIVE STATEMENT ANALYSIS

Balance Sheet
Source of Funds:-
1. Shareholders Funds
The equity components, including share capital and reserves, remained constant between the
two years. However, there was a minor increase (20.96%) in other comprehensive income,
reflecting a positive aspect.
The deficit/surplus in the statement of profit and loss increased by 4.29%.

2. Borrowed Funds
Borrowed funds saw a decrease of 2.64%, mainly due to a decrease in rupee loans from banks.

3. Other Non Current Liabilities

There was a significant increase (163.25%) in other non-current liabilities, mainly attributed to
increased interest accrued but not due and non-current provisions.
4. Total Capital Employed
Overall capital employed decreased by 23.22%, primarily due to the decrease in borrowed
funds and a slight decrease in shareholders' funds.

Fixed Assets:
Total tangible and intangible assets decreased by 5.22%, mainly due to a decrease in property,
plant, and equipment.
Investments:
Investments in shares remained constant, while total investments increased slightly by 0.01%.

Working Capital:
Working capital decreased significantly by 642.88%, primarily due to a decrease in current
assets, especially trade receivables, and an increase in current liabilities.

Current Assets:
Trade receivables decreased by 38.20%, indicating improved collection or credit management.
Inventories showed a decrease of 20.60%, implying potential efficiency in inventory
management.
Other bank balances decreased slightly by 0.25%.
Overall, quick current assets decreased by 35.27% and non-quick current assets decreased by
18.07%.

Current Liabilities:
Trade payables increased by 24.64%, possibly indicating a delay in payments to suppliers.
Other financial liabilities increased significantly by 62.20%, possibly due to increased
borrowings.

The company experienced a decrease in both sources of funds and application of funds,
indicating a potential reorganization or restructuring.

27
The decrease in working capital suggests a need to review and optimize the working capital
cycle for improved efficiency.

Changes in investments and fixed assets indicate a strategic shift in the company's investment
and growth plans.

The increase in current liabilities and decrease in current assets highlight the importance of
effectively managing short-term obligations and collections.

Profit and Loss Account

Sales and Revenue:
Gross sales increased by 3.57% primarily due to a rise in local sales.
Net sales decreased by 5.14% primarily due to a significant decrease in sales from exports and
job work charges collected.

Cost of Goods Sold:

The cost of goods sold increased by 3.28%, influenced by a rise in raw material consumed and
factory expenses.

Gross Profit:
Gross profit showed a significant decline, falling by 103.78%, mainly due to a sharp decrease
in net sales and an increase in operating expenses.

Operating Expenses:
Operating expenses increased by 10.20%, impacting the gross profit negatively.
Administrative expenses saw a substantial rise of 9.16%.

Other Operating Incomes:

Other operating incomes decreased by 34.28%, affecting the overall profit.
Export incentives significantly decreased by 35.58%.

Net Operating Profit:

Net operating profit decreased dramatically, with a negative change of 271.29%.
Non-Operating Incomes and Expenses:
Interest expenses increased by 5.37%.
There was a notable loss in non-operating incomes, resulting in a decrease in profit before tax.

Profit After Tax:

The company incurred a significant loss, with a negative change of 375.02% in profit after tax.
Other Comprehensive Income:
Other comprehensive income increased significantly due to gains in defined benefit plans.

Profit available for appropriations decreased by 4.29%.

TREND ANALYSIS

Balance Sheet

Shareholders Funds:
Equity Share Capital has remained constant at 36.28 from 2019-20 to 2022-23.

28
Reserves and Surplus have shown an increasing trend, reaching 124.68 in 2022-23.

Borrowed Funds:
Borrowed Funds have decreased from 477.46 in 2018-19 to 371.62 in 2022-23.

Non-Current Liabilities:
Non-Current Provisions have shown a slight increase, from 67.82 in 2018-19 to 101.92 in 2022-
23.

Fixed Assets:
Tangible Assets have seen a slight decrease, from 96.37 in 2018-19 to 35.96 in 2022-23.
Intangible Assets have shown fluctuations, reaching 70.24 in 2022-23.

Investments:
Investments in Shares have remained constant at a very low value.
Investments in Loans have remained relatively stable over the years.

Working Capital:
Current Assets have shown a decrease from 305.08 in 2020-21 to 237.10 in 2022-23.
Current Liabilities have increased slightly from 7.80 in 2020-21 to 10.30 in 2022-23.

Other Non-Current Assets:

Capital Advances have decreased from 143.96 in 2019-20 to 50.73 in 2022-23.

Current Tax Asset has shown a consistent increase over the years.

Overall, the trend analysis shows a decrease in borrowed funds and fixed assets, a slight
increase in reserves and surplus, and fluctuations in investments and working capital.

Profit and Loss Account

Gross Sales:
The total gross sales increased consistently over the years, from 100.00 in 2018-19 to 2.57 in
2022-23.
The local sales showed steady growth, reaching 2.57 in 2022-23 from 100.00 in 2018-19.
Sale of services (Job work charges collected) fluctuated but showed a general decline, dropping
to 0.21 in 2022-23 from 100.00 in 2018-19.

Cost of Goods Sold:

The cost of goods sold increased from 100.00 in 2018-19 to 1.91 in 2022-23, indicating a rise
in expenses related to producing goods.
Total raw material consumed and factory expenses contributed to this increase, indicating
higher input costs and operational expenditures.

Gross Profit:
Gross profit saw fluctuations but remained relatively stable overall, with a slight increase from
100.00 in 2018-19 to 0.06 in 2022-23.

29
Operating Expenses:
Total operating expenses showed an upward trend, rising from 100.00 in 2018-19 to 1.06 in
2022-23. This suggests increased administrative, selling, and distribution costs.

Net Operating Profit:

Net operating profit initially increased but declined in 2022-23. It was 1.07 in 2018-19,
reaching 0.59 in 2022-23.

Profit Before Tax:

Profit before tax showed fluctuations, with a decrease from 100.00 in 2018-19 to -0.38 in 2022-
23, indicating a potential financial downturn.

Profit After Tax:

Profit after tax followed a similar pattern as profit before tax, dropping from 100.00 in 2018-
19 to -0.38 in 2022-23.
Other Comprehensive Income:
Other comprehensive income varied significantly, increasing from 0.81 in 2018-19 to 2.50 in
2022-23. This indicates a notable impact on comprehensive income from items not included in
the profit and loss statement.

While gross sales saw a consistent increase, there were fluctuations and declines in profit-
related metrics, suggesting challenges in maintaining profitability and managing costs over the
years.

RATIO ANALYSIS

A. Liquidity ratios
i. Current Ratio
Alok Industries had a very low current ratio in 2018-19 but a year later, the ratio was really
good. Due to covid, this ratio kept decreasing which shows the company might be struggling
to meet its short- term obligations.

ii. Liquidity Ratio

In the past 5 years, the company has never had enough liquid assets to cover its short- term
liabilities. Though in 2019-20, the ratio was 0.77 which is close to 1 but covid has had a huge
impact on this company and it kept decreasing in the later years.

iii. Cash Ratio

All the 5 years, the company has had a very low cash ratio which indicates that the company
does not have enough cash and cash equivalents to entirely pay off all their short-term
debts as they might be borrowing responsibly. It was only in 2019-20 where the cash ratio was
ideal.

iv. Inventory to Working Capital Ratio

Inventory to Working Capital ratio of the company was very low from 2018-2020 which shows
less amount of working capital was funded by its inventory in those 2 years while from 2020-
22, this ratio was really high which shows high amount of working capital was funded by its
inventory in those 2 years and in 2022-23, it was in negative which is not a good sign.

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 v. Defensive Interval Ratio (DIR)

Over the years, there has been an increase in the projected daily cash requirements of the
company. Defensive Interval Ratio needs to be high for a textile industry but Alok Industries
has a low DIR which shows that the company cannot operate for more than 98 days on an
average while relying only on liquid ratios. The company had a high DIR in 2019-20 which
shows that they could operate for 400 days while only relying on liquid assets in that financial
year.

The above ratio analysis indicates that the company is not in a good liquidity position.

B. Activity Ratios

i. Total Asset Turnover Ratio

Total Asset Turnover ratio is less than 1 which is very low that indicates that the company is
not efficiently using its owned resources to generate sales.

ii. Fixed Asset Turnover Ratio

Fixed Asset Turnover Ratio of the company is very low as it is below the ideal ratio of 2.5 or
more indicates that the company is not efficiently generating sales from its existing fixed assets
but it is increasing each year.

iii. Capital Turnover Ratio

The capital turnover ratio of the company is really low as it is below 1.5 which indicates that
the company is not using its financial resources efficiently to generate sales and gain revenue.

iv. Inventory Turnover Ratio

Over the 5 years, the Inventory Turnover Ratio of the company has always been high though it
did have a sudden drop after covid but it increased again in 2021-22 which indicates that the
company very often replaces its inventory relative to its cost of sales.

vi. Debtors Turnover Ratio

Debtors Turnover ratio of the company is very high though it keeps fluctuating every year but
it is still high which shows that the company very frequently changes debtors into cash during
one financial year.

vii. Creditors Turnover Ratio

Creditors Turnover Ratio of the company is very high which indicates that prompt payment is
being made to the company for purchases on credit but the ratio keeps varying each year. It
was very low in 2018-19 but the ratio had a drastic increase in the later years.

C. Solvency Ratio

i. Debt- Equity Ratio

The company has debt to equity ratio in negative because of high deficit in the Profit and Loss
Statement in contrast to the ideal ratio of 1 to 1.5 which means the company has a lot of debt
as compared to its assets.

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ii. Proprietary Ratio
This ratio is negative for all the years because of a negative amount of shareholders funds due
to high amounts of deficit in the profit and loss statement.

iii. Capital Gearing Ratio

This ratio is negative for all the years because of a negative amount of shareholders funds due
to high amounts of deficit in the profit and loss statement.

iv. Debt To Total Funds Ratio

This ratio is negative for all the years because of a negative amount of shareholders funds due
to high amounts of deficit in the profit and loss statement.

v. Debt to Assets Ratio

This ratio has continuously increased over the years and way more than 1 which means a high
ratio means a riskier investment because the business is not able to make enough money to
repay its debts.

D. Profitability Ratios

i. Gross Profit Ratio

Gross profit ratio represents the percentage of revenue retained after covering the cost of goods
sold. This ratio is always higher the better. The negative values in 2019-20 and 2018-19 indicate
that the cost of goods sold exceeded the revenue. After 2021, gross profit ratio is constantly
decreasing every year.

ii. Net Profit ratio

Net profit ratio measures the proportion of net profit to total revenue. Net profit ratio was high
in 2018-19 and 2019-20 compared to the other years. During 2020- 21, there was severe
impairment loss on assets which resulted in extremely negative net profit ratio. The ratio is still
negative in 2021-22 and 2022-23 but has reduced a lot since 2020-21.

iii. EBIT Margin Ratio

EBIT margin ratio measures the proportion of earnings before interest and taxes to total
revenue. The initial 2 years have high EBIT Margin ratio but due to severe impairment loss on
assets there is high negative ratio. In the year 2021-22, this ratio is again positive which shows
they recovered quickly but in 2022-23 this ratio becomes negative again which shows the
company is very uncertain.

iv. Operating Expenses Ratio

Operating expenses ratio represents the proportion of operating expenses to total revenue.
The ratio is relatively stable across the years which suggests consistent control over operating
expenses

v. Operating profit Margin

Operating profit margin measures the proportion of operating profit to total revenue.
The negative values indicate that operating expenses are higher than the operating profit, which
is a concerning trend

32
 vi. Fixed Assets to proprietor's funds Ratio
This ratio indicates the proportion of fixed assets in relation to shareholder's funds.
This ratio is negative for all the years because of a negative amount of shareholders funds due
to high amounts of deficit in the profit and loss statement.

E. Leverage Ratios

i. Interest Coverage Ratio

This ratio has fluctuated a lot in the 5 years. The company has insufficient earning to cover its
interest expenses every alternate year. Currently, the company's earnings are just sufficient to
cover its interest expenses.

F. Return on Investment Measures

i. Return on Assets
The return on assets is decreasing over the years and is in negative now. A negative ROA
indicates that the company is not generating sufficient profits relative to its average total assets
mainly due to poor operational performance.

ii. Return on Capital Employed (ROCE)

ROCE measures the efficiency of a company in generating profits from its capital employed.
The negative values (-8%, -61%, -92%) imply that the company is not effectively utilizing its
capital to generate profits due to high levels of debt and inefficient utilization of capital in the
business operations.
iii. Return on Equity (ROE)

Initially, this ratio was negative but it increases in the later years but it is still very low which
indicates that the company is not managing the capital well that shareholders have invested
in it.

G. Valuation Ratios

i. Earnings per Share (EPS)

EPS represents the earnings attributable to each outstanding share of common stock. Negative
EPS values indicate a net loss on a per-share basis. The trend shows improvement over time,
moving from -1.76 to 16.56. The positive values in later periods suggest increased profitability

ii. Dividend per Share (DPS)

The DPS is the amount of dividend declared per share. All values are zero, indicating that the
company did not distribute dividends during the specified periods.

iii. Dividend Pay-out

This ratio indicates the proportion of earnings paid out as dividends. Since DPS is zero for all
periods, the dividend payout ratio is also zero, implying that the company did not distribute
earnings as dividends.

iv. Retained Earnings

This ratio indicates the portion of earnings retained within the company. A value of 100
indicates that all earnings were retained and not paid out as dividends

33
 v. Price- Earning Ratio
The P/E ratio signifies the market's expectations of a company's future earnings growth.
Negative values indicate a negative earnings trend. Investors are willing to pay more for
earnings in the later periods although still low, suggesting potential market optimism or
improved earnings outlook.

vi. Price- Earning Growth Ratio

A negative growth ratio indicates a decline in earnings. The later periods show negative ratios,
suggesting declining growth relative to the P/E ratio.

vii. Book value per share

Book value per share represents the net worth attributable to each outstanding share. Negative
values is a result of accumulated losses and a decline in net worth.

viii. Dividend Yield

Since DPS is zero, dividend yield is also zero for all periods, indicating no dividend payments
to shareholders.

ix. Earning Yield

Earning yield indicates the return on investment based on the market price per share. The
increasing trend suggests that investors are gaining a higher return on their investment
relative to the market price of shares, which could be due to improving earnings.

Overall, the company appears to have faced challenges in profitability based on negative
EPS and P/E ratios, potentially resulting in a negative book value per share. However, there
are signs of improvement in earnings and market perceptions in the later periods. The
absence of dividend payouts indicates a focus on retaining earnings to potentially reinvest
in the business.

H. 3 Step DuPont analysis

i. Net profit Margin

Net Profit Margin indicates the percentage of revenue that remains as profit after all expenses,
including taxes. Negative values for NPM (-13%, -3%, -159%) in some periods indicate losses
or very low profitability.

ii. Total Asset Turnover Ratio

The values suggest a decline in asset turnover over time, indicating a decrease in efficiency in
utilizing assets to generate sales. A lower asset turnover ratio signifies underutilization or
inadequate management of assets.

iii. Equity Multiplier

Negative values indicate a potentially problematic situation where the average total assets are
lower than the average shareholder's funds. Shareholders funds are in negative due to the heavy
deficit in the statement of profit and loss.

iv. Return on Equity

Positive ROE values (0.05, 0.01, 0.43) suggest the company is generating a return for
shareholders during those periods. However, the negative ROE values (-0.10, -0.16) indicate

34
losses or inefficiencies in generating returns for shareholders due to the negative values in Net
Profit Margin and Equity Multiplier.

The company is facing challenges in profitability, asset turnover, and equity utilization,
particularly indicated by negative Net Profit Margins and Equity Multipliers. These factors are
contributing to negative or low ROE.

I. 5 Step DuPont Analysis

i. Tax Burden
Tax Burden measures the percentage of profits after tax relative to profits before tax. All periods
show Tax Burden at or near 100%, indicating that taxes are not significantly impacting the
company's profitability.

ii. Interest Burden

Interest Burden measures the proportion of profits before tax to profits before interest and tax.
The variation in Interest Burden across periods (-66% to 226%) suggests fluctuations in the
company's financial structure and interest expenses.

iii. Earnings before interest and tax Margin

EBIT Margin shows the percentage of EBIT relative to net sales, providing insights into
operational profitability. The negative value in one period (-108%) is due to the heavy loss the
company has incurred. Subsequent periods show improvement which suggests a recovery in
operational profitability.

iv. Total Asset Turnover Ratio

The values suggest a decline in asset turnover over time, indicating a decrease in efficiency in
utilizing assets to generate sales. A lower asset turnover ratio signifies underutilization or
inadequate management of assets.

v. Return on Equity
Positive ROE values (0.05, 0.01, 0.43) suggest the company is generating a return for
shareholders during those periods. However, the negative ROE values (-0.10, -0.16)
indicate losses or inefficiencies in generating returns for shareholders due to the negative
values in Net Profit Margin and Equity Multiplier.

vi. Return on Equity

Positive ROE values (0.05, 0.01, 0.43) in certain years indicate a return for shareholders,
whereas negative values (-0.10, -0.16) suggest losses.

The company faces challenges in operational profitability, asset turnover, and financial
structure, as indicated by negative EBIT Margin, declining Total Assets Turnover, and negative
Equity Multiplier. These factors contribute to negative or low ROE in certain periods.

35
 BANSWARA SYNTEX LIMITED
1. Comparative balance sheet
▪ The shareholder's funds of the company has seen an increasing trend over the year
due to the consistent increase in the firms retained earnings which is a sign of the
firms profit making abilities.
▪ There is a decrease in the borrowed funds of the company from the base year which
indicates that the firm isn’t using too much debt to expand the firms operations.
▪ The total investments that firm has made has also increased by a great amount of
over 50%
▪ There has been a significant increase in the total current assets of the firm in the
year 2023 while there is a dip of over 30 percent that can be seen during the covid
period.
▪ A decrease in current liabilities has been observed in the firm which can indicate
that the firm has good financial health but it could also mean that its paying of its
liabilities too quickly which could cause the firm to lose out on investment
opportunities.
▪ The working capital of the company has shown a significant increase over the past
5 years which is due to the increase in the total current assets of the company and
the decreasing liabilities that the company has.

2. Common size balance sheet

▪ The equity share capital has seen a slight decrease over the years.
▪ The percentage of retained earnings has been increasing over the year which
displays the financial soundness of the company.
▪ There is a decrease in the percentage of fixed assets of the company which could be
due to them being depreciated faster but its still more than 70 percent of the
shareholder's funds so we can say that the company is using its funds efficiently.
▪ The percentage of investments have seen a decrease over the years although they
weren't much to begin with
▪ The working capital has shown an increasing trend after a decline from its peak in
2021 which shows that more funds are being directed to the acquisition of current
assets.

3. Trend analysis of balance sheet

▪ The equity share capital has remained constant which shows that the company isn’t
increasing its debt through the means of equity.
▪ Theres been an increase in the reserves and surplus of the company due to an
increase in the firms retained earnings.
▪ There has been an increase in the borrowed funds of the company which shows that
its expanding its operations through means of these funds.
▪ There has also been a significant 20% increase in the firms investments.
▪ There has been a big increase in the other non-current assets of the firm due an
increase in capital advances and prepaid expenses
▪ The working capital of the firm has also increased due to an increase in the current
assets of the firm.

4. Common size statement of profit and loss

36
 • The gross profit of the firm has seen a steady increase due to the firm being able
to decrease its expenses when it comes to the cost of goods being sold.
• The total operating expenses have also remained stagnant over the years at
around 25%.
• The net operating profit of the firm is also showing a steady increase due to the
firm being able to control its operating expences and due to the increase in the
firms gross profit.
• The ebit of the company has also increased for the same reasons of the firm
being able to control its expences.
• The firm has shown an increase in the net profit of the firm and retained earning
over the years.

5. Comparative statement of profit and loss

▪ The net sales of the company have increased by a significant percentage showing
the firms profit making abilities.
▪ The cost of goods sold has been kept somewhat constant over the past few years
▪ The company has shown an increase in its gross profits
▪ There has been an increase in the operating expenses of the firm due to an increase
in the admin expences
▪ There has been a huge increase in the operating profit of the firm due to it being
able to keep its costs low
▪ The company has seen a big increase in its net profits and retained earnings

6. Trend analysis of profit and loss

▪ The net sales have showed a marked increase which is a good sign and we can see
that the sales of goods have increased while the sale of services have decreased
▪ The cost of goods sold have also seen a controlled increase but the gross profit of
the company has still managed to gain a significant increase
▪ The operating expences have also increased due to an increase in the administrative
expences although a fall in the sales and distribution expences were observed
▪ Over all there was a huge increase in the operating profit of the firm which has led
to an increase in the net profit of the firm due to a decrease in non operating
expences

7. Liquidity ratios
❖ Current ratio- The current ratio of the company is undergoing an increasing tread when it
peaked at 21 but then fell after that. Although it's increasing now it's still below the ideal
level of 2
❖ Quick ratio- The quick ratio is also showing an increasing trend with at peak at 21
decreasing after that but has always been much below the ideal level showing the poor
solvency of the company
❖ Cash ratio- The cash ratio is also showing a decreasing trend and is extremely low showing
that it has very low short term solvency and can only cover o percent of its liabilities with
the short term Funds they have
❖ Defensive interval- The defensive interval ratios has shown an increasing trend over the
years and ranges from 19 days to 33 days which is the amount of time that the company
can operate while relying on its own finances
❖ Overall the companies financial condion over these years isn't too sound due to it's low
solvency but has showing a rising trend due to an increase in liquid assets

37
8. Activity Ratios
❖ Total asset turnover ratio- The total asset turnover ratio has seen an increasing trend
with a dip in 2021 due to low sales with covid going on but picked up after that and
is now at 1.5 showing that the firm has efficiently used it's total assets to generate
sales
❖ Fixed asset turnover- The fixed asset turnover ratio has also seen an increasing trend
with a decrease during 2021 due to less sales during covid but then picks up and has
ended with a turnover ratio of 4 which shows the the firm is effectively using it's
fixed assets to generate sales
❖ Capital turnover- The capital turnover ratio has remained some what stagnant with
the ratio remaining in the 2 range with a dip in 2021 due to covid but later went
back to 2 but this ratio still gives a positive return on the investment in the company
so we can say it is utilizing it's shareholders funds efficiently
❖ All of these ratios indicate that the firm is functioning well when it comes to
working with efficiency

9. Solvency ratios
❖ Debt to equity- The debt to equity ratio is showing a decreasing trend and has
remained very low and near zero which shows that the shareholders funds are more
than enough to cover the company's long term debts and that it might not be using
debt effectively to finance the company to induce growth
❖ Proprietary ratio- The proprietary ratio has seen an increasing trend over the years
which is a promising sign as it's increasing due to an increase in shareholders funds
due to an increase in the retained earnings of the company
❖ Debt to total funds- The debt to total funds ratio has also remained some what
stagnant over the past few years around the 0.2 level which again shows that the
company may not be using debt effectively to expand the company's operations
❖ Debt to total assets- The debt to total asset ratio has also remained somewhat
stagnant at the 0.1 level which again shows that it isn't using leverage effectively to
finance the operations of the company
❖ All these ratios show that the firm has sound long term solvency but it isn't using
debt to effectively expand the operations of the company to induce growth within it
❖
10. Profitability ratios
❖ Gross profit- The gross profit ratio seems to be increasing every year except when
it took a dip during 2021 due to a decrease in sales because of covid. This is
happening due to a higher increasing rate of growth in sales as compared to the cost
of goods sold.
❖ Net profit- The net profit margin of the company has shown an increasing trend and
a huge increase in the ywar 2023 due to them being able to minimize the amount
by which the companies operating expenses rise
❖ Ebit margin- The ebit margin has also seen an increasing trend with a huge increase
in the current year as the amount of non operating incomes and expenses have risen
at a similar rate and hense the increasing is just due to the rise in the net operating
profit of the firm
11. Leverage ratios
All leverage ratios indicate that the firm is credit-worthy and can sufficiently finance
its borrowing expenses

38
12. Return on investment measures
The return on assets, capital employed and equity are all increasing and are at a good
level which shows that the firm is utilizing its resources effectively to generate revenue.
The ratio showed a big decline in covid due to a decrease in profits.

13. Valuation ratios

The earning per share is at an all-time high showing that the equity shareholders are
getting an increasing return on their investment due to an increase in the net profit of
the company. The amount of dividend being paid to the shareholders have been
decreasing which might indicate that the firm has been reinvesting a larger part of its
earnings into the company. The company has a low PE of 3 which is below the industry
average of 8. The book value per share has been increasing over the past two years due
to an increase in the net worth of the company but has shown a decrease from the years
before 2021 due to an increase in the amount of equity shares issued.

14. 3-Step du-Pont analysis

The company has been showing an increasing increase in the return on equity of the
company which is a great sign for the shareholders of the company. The net profit
margin of the company has been low for most of the years but has made a significant
increase the fy 22-23 due to an increase in the net profit of the company. The company
has managed to maintain a positive return on its assets employed showing that they’ve
been able to utilize their assets effectively to generate sales. They’ve also been able to
generate a consistent positive return on the shareholder's funds which can be explained
by the decline in the proprietor's ratio which shows that the company as been using
more of debt to finance its assets

15. 5-step du-Pont analysis

The company has been showing an increasing increase in the return on equity of the
company which is a great sign for the shareholders of the company. The company has
shown an increase in the tax burden of the company which may be due to an increase
in the sales the company has experienced showing that it pays a substantial amount of
tax. The interest burden of the company was low until the year 2021 but has reached
the 80% range in 2023 which shows the company’s shift in reliability from external
borrowing to internal funds. The earnings before interest and tax margin shows an
increasing trend which shows that the company is getting a better handle on its finances
by minimizing its costs and increasing its sales.

39
 Garware Technical Fibres Ltd. Analysis

RATIO ANALYSIS
1. Liquidity Ratios:

a. Current Ratio : Current Ratio = Current Assets / Current Liabilities. The current ratio
measures the company's ability to meet its short-term obligations with its short-term
assets. In 2022-2023, the current ratio decreased to 1.3349 from 2.0245 in 2021-2022.
This indicates a reduction in the company's short-term liquidity. A ratio above 1 is
generally considered healthy, but it's important to watch the trend. Its also essential to
note that a current ratio of exactly 1 may leave little room for unexpected expenses or
economic downturns.
b. Quick Ratio: Quick Ratio = Quick Assets / Current Liabilities. Quick assets are a more
conservative measure of liquidity, excluding inventory. The quick ratio also decreased
in 2022-2023 to 1.2931 from 2.1053 in 2021-2022, suggesting a potential decrease in
the company's ability to meet its short-term obligations without relying on inventory.
c. Cash Ratio: Cash Ratio = (Cash + Bank + Marketable Securities) / Current Liabilities.
This ratio is the most conservative measure of liquidity, focusing only on highly liquid
assets. The cash ratio in 2022-2023 is 0.1160, which is much lower than in the previous
year. This suggests a decrease in the company's ability to pay off its short-term liabilities
with its most liquid assets.
d. Inventory to Working Capital Ratio: Inventory to Working Capital Ratio =
(Inventory / Working Capital) * 100 (in percentage). This ratio assesses how much of
the working capital is tied up in inventory. The ratio increased in 2022-2023 to 1.3365,
indicating a higher percentage of working capital being tied up in inventory. This may
affect the company's liquidity.
e. Projected Daily Cash Requirements: This ratio evaluates the company's daily cash
requirements based on operating expenses. The projected daily cash requirements
increased in 2022-2023, which may indicate an increase in the company's operating
expenses.
f. Defensive Interval Ratio: Defensive Interval Ratio = (Cash + Bank + Marketable
Securities) / Projected Daily Cash Requirements. This ratio assesses how long the
company can cover its expenses with its most liquid assets. In 2022-2023, the ratio is
30.7089, which is higher than in previous years. This means the company can cover its
expenses for a more extended period using its liquid assets.
In summary, the company's liquidity ratios have shown a decline in 2022-2023, which is a
concerning trend. The current, quick, and cash ratios have all decreased, indicating a
potential decrease in liquidity. Additionally, the increase in the Inventory to Working
Capital Ratio suggests a higher percentage of working capital is tied up in inventory.
However, the Defensive Interval Ratio has improved, indicating that the company can cover
its expenses for a more extended period using its liquid assets. It's essential for the company
to monitor and manage its liquidity carefully, especially in light of the declining current
and quick ratios. The company should consider optimizing its working capital and
managing inventory levels to enhance its short-term liquidity.
2. Activity Ratios

40
Activity ratios are financial metrics that help assess a company's efficiency in managing
its assets and operations. They are important indicators of a company's operational
performance and can provide insights into how effectively the company is using its
resources. Let's analyse the activity ratios I have provided in detail
a. Total Asset Turnover Ratio: This ratio measures how efficiently a company utilizes
its total assets to generate sales. It's generally desirable for this ratio to be higher, as
it indicates that the company is generating more sales per dollar of assets.The values
for this ratio range from 0.7942 to 0.9867, which suggests a reasonable level of
asset utilization.
b. Fixed Asset Turnover Ratio: This ratio evaluates how efficiently a company uses
its fixed assets to generate sales. A higher ratio indicates that the company is
effectively using its fixed assets. The values vary from 3.9565 to 5.0884, which
generally suggests that the company is using its fixed assets efficiently.
c. Capital Turnover Ratio: This ratio measures how well a company generates sales
based on its capital employed (equity + debt). A higher ratio indicates effective use
of capital to generate sales. The values range from 1.1098 to 1.4598, which suggests
the company is reasonably efficient in utilizing its capital.
d. Inventory Turnover Ratio: This ratio assesses how quickly a company sells its
inventory. A higher ratio implies faster inventory turnover, which is generally
preferred. The values range from 1.9643 to 2.5335, indicating that inventory
turnover varies but is generally reasonable.
e. Stock Velocity: This is the number of days it takes to sell the entire inventory. The
values range from 144.0696 to 185.8209 days, implying that the company takes
around 144 to 186 days to sell its inventory. A lower number is usually preferred,
as it indicates faster inventory turnover.
f. Debtors Turnover Ratio: This ratio evaluates how quickly a company collects
payments from its customers (receivables). A higher ratio suggests that the company
is collecting payments more efficiently. The values range from 4.0022 to 5.0738,
indicating varying but reasonable efficiency in collecting payments from customers.
g. Debtors' Velocity: This is the number of days it takes to collect payments from
debtors. The values range from 71.9380 to 91.1998 days, indicating that the
company typically collects payments from debtors in about 72 to 91 days. A lower
number is generally preferred.
h. Creditors Turnover Ratio: This ratio assesses how quickly a company pays its
creditors. A higher ratio indicates that the company is taking longer to pay its
creditors, which can be advantageous if it helps manage cash flow effectively. The
values range from 1.2783 to 1.9860, suggesting varying payment periods to
creditors.
i. Creditors' Velocity: This is the number of days it takes to pay creditors. The values
range from 183.7852 to 285.5446 days, indicating that the company typically takes
around 184 to 285 days to pay its creditors. A lower number is generally preferred
to manage cash effectively.
j. Operating Cycle: This is the number of days it takes to convert inventory and
receivables into cash. The values range from 216.0075 to 277.0207 days, indicating
the company's operating cycle typically falls within this range.

41
 k. Net Operating Cycle: This is the operating cycle minus the number of days it takes
to pay creditors.values range from -25.0507 to 32.2224 days, indicating that, on
average, the company either pays its creditors before or after the operating cycle,
which can impact cash flow management.
l. In conclusion, the activity atios suggest that the company has varying levels of
efficiency in managing its assets and operations. It's essential to monitor these ratios
over time to identify trends and make improvements where necessary, such as
optimizing inventory turnover, managing debtors and creditors effectively, and
ultimately enhancing overall operational efficiency.
3. Solvency Ratios
Solvency ratios are financial metrics that assess a company's ability to meet its long-
term financial obligations. These ratios indicate the company's financial stability and
its capacity to manage debt effectively. Let's analyze the solvency ratios you've
provided in detail:

a. Debt-Equity Ratio: This ratio assesses the proportion of a company's financing that
comes from debt compared to equity. A debt-equity ratio of 0.0000 for all periods
suggests that the company has no long-term debt and is entirely financed by
shareholders' funds. While this indicates low financial risk, it may also imply that
the company is not leveraging debt for potential growth.

b. Proprietary Ratio: This ratio indicates the proportion of assets financed by

shareholders' equity. The values range from approximately 60.62% to 69.67%. A
higher proprietary ratio suggests a higher level of equity financing relative to total
assets. This implies that the company has a relatively strong equity base to support
its operations, which is generally considered a positive sign.

c. Capital Gearing Ratio: This ratio evaluates the balance between income-bearing and
non-income-bearing funds in the capital structure. A capital gearing ratio of 0.0000
for all periods suggests that there are no income-bearing funds (such as debt) in the
capital structure. This can indicate low financial risk but may also imply limited
leverage for potential growth.

d. Debt to Total Funds Ratio: This ratio measures the proportion of long-term debt in
relation to the total capital employed. A ratio of 0.0000 for all periods suggests that
long-term debt is not a component of the company's capital structure. This indicates
that the company is not using long-term debt to finance its operations.

e. Debt to Assets Ratio: This ratio assesses the proportion of long-term debt relative
to net assets. Similar to the previous ratios, a value of 0.0000 for all periods
indicates that there is no long-term debt used to finance the company's net assets.
The company is not relying on debt to support its assets.

In summary, the solvency ratios suggest that the company operates with a conservative
financial structure. It has no long-term debt (or it's negligible) and relies predominantly
on shareholders' equity to finance its operations. While this conservative approach
reduces financial risk, it may also limit the company's capacity for leveraging debt for

42
 expansion or investment. Companies with very low debt levels may miss out on the
potential tax benefits and leverage opportunities that debt can provide. The choice
between equity and debt financing should align with the company's strategic objectives
and risk tolerance.

4.Profitability ratios
Profitability ratios measure a company's ability to generate profits in relation to its sales,
expenses, and assets. These ratios provide insights into the company's operational
efficiency and financial performance. Let's analyze the profitability ratios you've provided
in detail:

a. Gross Profit Ratio: This ratio measures the portion of sales revenue that remains after
deducting the cost of goods sold (COGS). The values range from approximately
60.23% to 63.48%. A higher gross profit ratio indicates that the company is effectively
managing its production and sales costs.
b. Net Profit Ratio: This ratio evaluates the portion of sales revenue that results in net
profit after all expenses, including operating expenses, interest, and taxes. The values
range from approximately 15.47% to 17.50%. A higher net profit ratio suggests efficient
management of all expenses and higher profitability.
c. EBIT Margin Ratio: This ratio calculates the proportion of earnings before interest and
taxes (EBIT) to net sales. The values range from 17.41% to 24.13%. A higher EBIT
margin indicates that the company is generating a significant amount of profit before
accounting for interest and taxes, which can be an indicator of operational efficiency.
d . Operating Expenses Ratio: This ratio assesses the portion of sales revenue that is used
to cover operating expenses. The values range from approximately 43.76% to 47.38%. A
lower operating expenses ratio is generally preferred, as it signifies that the company is
controlling its operational costs effectively.

d. Operating Profit Margin: The calculation of this ratio is missing from the information
you provided. It typically represents the proportion of operating profit to net sales and
is a key indicator of a company's operational efficiency.

e. Fixed Assets to Proprietor's Funds Ratio: This ratio evaluates the proportion of fixed
assets in relation to shareholder's funds (equity). The values range from 0.24% to
0.35%. A higher ratio suggests a relatively higher proportion of fixed assets in
comparison to shareholder's funds, which may indicate a capital-intensive business
model.

In summary, the profitability ratios indicate the company's ability to generate profits. The
company has shown reasonably stable gross profit and net profit ratios, suggesting effective
control of cost of goods sold and overall expenses. The EBIT margin has increased
significantly over time, indicating improved operational efficiency. The operating expenses
ratio has decreased, which is generally a positive sign.

5. Leverage ratio

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a. Interest Coverage Ratio: This ratio evaluates the company's capacity to cover its interest
expenses with its earnings before interest and taxes (EBIT). The values range from
25.81 to 28.42. A higher interest coverage ratio indicates that the company has a
comfortable margin to cover its interest expenses from its operating earnings. In
summary, based on the provided information, the company appears to have a strong
ability to cover its interest expenses with its earnings (high interest coverage ratio).
However, a more detailed analysis of the Debt Service Coverage Ratio would require
additional information about the nature of the repayment obligation.

6. Return on Investment Measures

Return on Investment (ROI) measures assess how effectively a company generates
returns on its investments, including assets and capital employed. They provide insights
into a company's profitability and the efficiency of its asset utilization. Let's analyze the
return on investment measures you've provided in detail:

a. Return on Assets (ROA): ROA measures how efficiently a company generates profits
from its total assets. The values range from approximately 10.89% to 15.65%. A higher
ROA indicates that the company is generating more profit per dollar of assets. It
suggests effective asset utilization and management.

b. Return on Capital Employed (ROCE): ROCE evaluates the return generated from the
capital employed in the business. Capital employed typically includes both equity and
debt. The values range from 20.04% to 27.66%. A higher ROCE signifies that the
company is effectively utilizing its capital to generate returns. This can be a sign of
good financial performance and efficiency in managing capital.

c. Return on Equity (ROE): ROE measures the return generated for the shareholders'
equity. The values range from approximately 15.50% to 23.03%. A higher ROE
suggests that the company is effectively using shareholders' equity to generate returns.
It's a critical measure of how well the company is rewarding its shareholders. In general,
the return on investment measures provided show a positive trend over the periods,
indicating improved financial performance and efficiency in generating returns. These
ratios are indicative of good financial management and effective utilization of assets,
capital, and shareholder equity.
7.Valuation Ratios
Valuation ratios provide insights into how the market views a company's financial
performance and prospects. These ratios are essential for investors and can help assess
whether a company's shares are undervalued or overvalued. Let's analyze the valuation
ratios you've provided in detail:

a. Earnings per Share (EPS): EPS is the portion of a company's profit allocated to each
outstanding share of common stock. The values range from approximately 57.40 to
81.35. A higher EPS is generally favourable, indicating higher earnings per share.
b. Dividend per Share (DPS): DPS represents the amount of dividend distributed to
shareholders per share. The values range from 0.00 to 22.00. A higher DPS suggests
that the company is paying out more in dividends to shareholders.

44
c. Dividend Pay-out Ratio: The dividend pay-out ratio evaluates the proportion of
earnings that a company distributes as dividends to shareholders. The values range from
0.00% to 27.05%. A higher dividend pay-out ratio indicates that the company is
distributing a larger share of its earnings as dividends.
d. Retained Earnings: This represents the proportion of earnings that are retained within
the company rather than distributed as dividends. The values range from approximately
72.95% to 100.00%. A higher retained earnings ratio indicates that more earnings are
being reinvested in the business.
e. Price-Earning Ratio (P/E Ratio): The P/E ratio measures the market's valuation of a
company's earnings per share The values range from approximately 13.35 to 37.72. A
lower P/E ratio may suggest that the company's shares are undervalued, while a higher
P/E ratio could indicate overvaluation.
f. Price-Earning Growth Ratio (PEG Ratio): The PEG ratio is missing in the information
provided. It typically compares the P/E ratio with the company's expected earnings
growth rate. This ratio can help assess whether the stock is priced relative to its growth
prospects.
g. Book Value per Share: Book value per share represents the net worth of the company
divided by the number of equity shares. The values range from approximately 296.82
to 497.72. A higher book value per share suggests a stronger financial position.
h. Dividend Yield: Dividend yield measures the return on investment from dividends. It is
calculated as (DPS / MPS) * 100. The values range from 0.00% to 2.03%. A higher
dividend yield can be attractive to income-oriented investors.
i. Earning Yield: Earning yield measures the return on investment from earnings. It is
calculated as (EPS / MPS) * 100. The values range from approximately 2.65% to
7.49%. A higher earning yield may indicate that shares are providing a better return
based on earnings.
In summary, these valuation ratios provide a comprehensive view of how the market values
the company's shares and the company's approach to dividends and retained earnings.
Investors often use these ratios to make investment decisions and assess whether a stock is
priced appropriately based on its fundamentals and market conditions.

8.Step Dupont Analysis

The DuPont analysis is a method of breaking down the return on equity (ROE) into its
components to understand what is driving a company's profitability. It does this by
examining three key ratios: net profit margin, total asset turnover, and equity multiplier.
Let's analyze the DuPont analysis in detail based on the information provided:
a. Net Profit Margin: Net Profit Margin measures how efficiently a company converts its
sales into profits after all expenses. The values range from approximately 12.39% to
19.10%. A higher net profit margin indicates that the company is generating a greater
profit from its sales.
b. Total Asset Turnover Ratio: Total Asset Turnover Ratio assesses how effectively a
company utilizes its assets to generate sales. The values range from approximately 0.76
to 0.95 times. A higher turnover ratio suggests that the company is more efficient in
utilizing its assets to generate sales.
c. Equity Multiplier: Equity Multiplier indicates the proportion of assets financed by
equity in comparison to total assets. The values range from approximately 1.45 to 1.73
times. A higher equity multiplier suggests a higher reliance on debt to finance assets.
45
d. Return on Equity (ROE): ROE is the ultimate measure, representing the return
generated for shareholders. ROE is calculated using the three components: Net Profit
Margin x Total Asset Turnover x Equity Multiplier. The values range from
approximately 15.40% to 23.65%. A higher ROE indicates that the company is
effectively generating returns for shareholders.
In summary, the DuPont analysis provides a comprehensive view of what drives a
company's ROE. The company's increasing ROE over time can be attributed to
improvements in net profit margin, asset turnover, and equity multiplier. The increase in
Net Profit Margin suggests better cost management and profitability. The increase in Total
Asset Turnover indicates more efficient asset utilization. The increase in Equity Multiplier
suggests greater reliance on debt financing. A higher ROE is generally seen as a positive
sign as it reflects effective management and utilization of both assets and equity capital to
generate profits.

9. Step dupont analysis

The 5-Step DuPont Analysis is an extension of the traditional DuPont analysis, which
further dissects the return on equity (ROE) into five components. These components
provide a more detailed understanding of what contributes to a company's ROE. Let's
analyze the 5-Step DuPont Analysis based on the provided information:
a. Tax Burden (%): Tax Burden measures the portion of profit retained after taxes in
comparison to profit before taxes. The values range from approximately 0.69 to 0.82.
A higher tax burden implies that the company is more efficient in managing its tax
expenses.
b. Interest Burden (%): Interest Burden evaluates the portion of profit retained after
interest expenses in comparison to profit before interest and tax. The values range from
approximately 0.94 to 0.96. A higher interest burden suggests that the company is
effectively managing its interest expenses.
c. Earnings Before Interest and Tax (EBIT) Margin (%): EBIT Margin measures the
proportion of earnings before interest and tax to net sales. The values range from
17.41% to 24.13%. A higher EBIT Margin indicates that the company is generating a
significant amount of profit before accounting for interest and taxes, reflecting
operational efficiency.
d. Total Assets Turnover (in times): Total Assets Turnover assesses how efficiently the
company utilizes its assets to generate sales. The values range from approximately 1.13
to 1.52 times. A higher total assets turnover ratio indicates that the company is using its
assets effectively to generate sales.
e. Equity Multiplier (in times): Equity Multiplier represents the proportion of assets
financed by equity in relation to total assets. The values range from approximately
81.42 to 506.74 times. A higher equity multiplier suggests a significant reliance on debt
financing relative to equity.
f. Return on Equity (ROE): ROE is calculated using the five components: Tax Burden x
Interest Burden x EBIT Margin x Total Assets Turnover x Equity Multiplier. The values
range from approximately 1599.31% to 7489.07%. A higher ROE is indicative of the
company's effectiveness in utilizing its financial and operational resources to generate
returns for shareholders.

46
In summary, the 5-Step DuPont Analysis provides a detailed view of the factors
contributing to ROE. The company's increasing ROE over time can be attributed to
improvements in each of these components, including better tax management, interest
management, operational efficiency (EBIT Margin), asset turnover, and the use of financial
leverage (equity multiplier). A higher ROE indicates effective management and utilization
of both financial and operational resources.

Common income statement Gross Sales: This section provides information on gross sales,
and the figures are presented as a percentage of the total revenue for the respective years.
For example, in 22-23, "Sale of Products" accounts for 94.28% of total revenue.
a. Sale of Services: This section breaks down revenue into sales of products and services.
"Sale of Services" accounts for a smaller portion of total revenue, with 5.72% in 22-23.
b. Net Sales: This section presents net sales as a percentage of total revenue. For instance,
in 22-23, net sales represent 100% of total revenue.
c. Cost of Goods Sold: The common size table presents cost of goods sold as a percentage
of total revenue. It's a measure of the cost efficiency of producing goods. In 22-23, it's
39.15% of total revenue.
d. Gross Profit: Gross profit is presented as a percentage of total revenue. In 22-23, it's
60.85% of total revenue.
e. Administrative Expenses: Administrative expenses are presented as a percentage of
total revenue. In 22-23, administrative expenses account for 31.44% of total revenue.
f. Selling & Distribution Expenses: These expenses are shown as a percentage of total
revenue. In 22-23, selling & distribution expenses make up 15.22% of total revenue.
g. Finance Expenses: Finance expenses are presented as a percentage of total revenue. In
22-23, they represent 0.30% of total revenue.
h. Operating Income: Other Operating Income: This section shows income from non-
operating activities as a percentage of total revenue. In 22-23, it's 1.59% of total
revenue.
i. Net Profit and Taxes: Net Profit Before Interest & Tax (EBIT): EBIT is presented as a
percentage of total revenue. In 22-23, it's 17.41% of total revenue.
j. Interest: Interest expenses are shown as a percentage of total revenue. In 22-23, they
account for 0.66% of total revenue.
k. Net Profit before Tax (NPBT): NPBT is presented as a percentage of total revenue. In
22-23, it's 16.75% of total revenue.
l. Tax Expense: Tax expenses are shown as a percentage of total revenue. In 22-23, they
represent 3.86% of total revenue.
m. Net Profit After Tax (NPAT): NPAT is presented as a percentage of total revenue. In 22-
23, it's 12.89% of total revenue.
n. Other Comprehensive Income: Total Other Comprehensive Income for the year: This
section represents other comprehensive income as a percentage of total revenue. In 22-
23, it's -0.22% of total revenue.
o. Total Comprehensive Income: Total Comprehensive Income for the year: Total
comprehensive income is shown as a percentage of total revenue. In 22-23, it's 12.68%
of total revenue.
Comparative income statement
For the Year 22-23: Sales to Net Sales: 100.00%. This year, the Gross Sales were equivalent
to the Net Sales, indicating no returns or deductions. This might be a positive sign. Total

47
Cost of Goods Sold to Net Sales: 39.15%. The cost of goods sold (COGS) as a percentage
of Net Sales is 39.15%. This means that 60.85% of the Net Sales represent gross profit.Total
Operating Expenses to Net Sales: 46.93%.Operating expenses account for 46.93% of Net
Sales. This represents a significant portion of revenue used to cover the company's
operational costs.
Net Profit to Net Sales: 15.48% Net profit as a percentage of Net Sales is 15.48%. This is
the profit margin, indicating that the company is making a 15.48% profit after covering
both COGS and operating expenses.
For the Year 21-22: Gross Sales to Net Sales: 100.00%. Similar to the previous year, Gross
Sales were equivalent to Net Sales. Total Cost of Goods Sold to Net Sales: 37.72%. The
cost of goods as a percentage of Net Sales decreased from the previous year, indicating an
improvement in gross profit margin (62.28%). Total Operating Expenses to Net Sales:
46.82%.Operating expenses remained relatively stable at 46.82% of Net Sales. Net Profit
to Net Sales: 16.86%. Net profit increased as a percentage of Net Sales, showing improved
profitability compared to the previous year.
For the Year 20-21: Gross Sales to Net Sales: 100.00%. Gross Sales were 100% of Net
Sales. Total Cost of Goods Sold to Net Sales: 36.58%. The cost of goods sold as a
percentage of Net Sales further decreased, leading to a higher gross profit margin (63.42%).
Total Operating Expenses to Net Sales: 47.50%. Operating expenses as a percentage of Net
Sales increased slightly, indicating increased operational costs. Net Profit to Net Sales:
17.52%. Net profit as a percentage of Net Sales increased, indicating improved profitability.
For the Year 19-20: Gross Sales to Net Sales: 100.00%. Gross Sales accounted for 100%
of Net Sales. Total Cost of Goods Sold to Net Sales: 37.41%. The cost of goods sold as a
percentage of Net Sales decreased, leading to a higher gross profit margin (62.59%). Total
Operating Expenses to Net Sales: 47.35%. Operating expenses accounted for 47.35% of
Net Sales. Net Profit to Net Sales: 16.74%. Net profit as a percentage of Net Sales indicates
the company's profitability.
For the Year 18-19: Gross Sales to Net Sales: 100.00%.Gross Sales accounted for 100% of
Net Sales. Total Cost of Goods Sold to Net Sales: 39.76%. The cost of goods sold as a
percentage of Net Sales was the highest among the years, leading to a lower gross profit
margin (60.24%). Operating expenses accounted for 43.78% of Net Sales. Net Profit to Net
Sales: 16.87%. Net profit as a percentage of Net Sales indicates the company's profitability.

Trend analysis of income statement

Gross Sales of Products increased steadily from 18-19 to 22-23, with a total increase of
21.71%. Sale of Services also increased over the period, with a total increase of 109.73%.
Net Sales increased by 21.60% in total.

Cost of Goods Sold: The cost of goods consumed increased consistently over the years,
with a total increase of 19.09%.
The total raw material consumed also increased by 19.78% in total.
Changes in Inventory: The total changes in inventory saw fluctuations, with the most
significant decrease in 21-22 and a substantial increase in 22-23.
Purchase Of Stock In Trade:The purchase of stock in trade increased by 4.52% in total.
Factory Expenses: Factory expenses saw a slight increase of 4.44% in total.
Total Cost of Goods Sold: The total cost of goods sold increased by 19.80% over the five-
year period.
Gross Profit: Gross profit increased by 22.83% over the five years.
Administrative expenses increased by 17.62% in total
Selling & Distribution expenses increased by 17.42% in total.

48
Finance expenses increased by 31.86% in total.
Total Operating Expenses: Total operating expenses increased by 30.30% over the five
years.
Other Operating Income: The sale of scrap and miscellaneous receipts increased
significantly in 22-23 compared to the earlier years.
Net Profit: Net profit after tax increased by 12.31% over the five-year period.
Non-Operating Income: Non-operating income, including interest income and other gains,
saw significant fluctuations over the years.
Interest: Interest expenses on borrowings increased by 23.48% in total.
Net Profit before Tax: Net profit before tax increased by 4.01% over the five years.
Tax Expense: Tax expenses remained relatively stable with a slight decrease over the years.
Net Profit After Tax: Net profit after tax increased by 12.52% over the five-year period.
Other Comprehensive Income: Other comprehensive income showed significant
fluctuations, including negative values, indicating the impact of non-operating items.
Total Comprehensive Income: Total comprehensive income increased by 4.00% over the
five years.

Common balance sheet

Sources of Funds
Shareholders' Funds:
Equity Share Capital: This is the proportion of equity share capital relative to the total
capital employed. It shows a slight decrease from 1.90% in 22-23 to 1.98% in 21-22. This
could indicate that the proportion of equity capital in total capital has decreased.
Preference Share Capital: Remains at 0% in all years, indicating no preference shares are
issued or redeemed.
Total Share Capital: The overall share capital (equity and preference) as a percentage of
total capital employed. It follows a similar pattern as equity share capital, with a slight
decrease.
Retained Earnings: This indicates the proportion of retained earnings (accumulated profits)
within the total capital employed. It ranges from 71.88% in 21-22 to 83.21% in 22-23. A
higher percentage suggests that a significant portion of capital comes from retained profits.
Other Reserves and Surplus: This category includes other forms of surplus not accounted
for in retained earnings. It has been increasing, suggesting the allocation of profits to
various reserves.
Other Non-Current Liabilities: Trade Payables, Provisions, Deferred Tax Liabilities,
Security Deposit, and Lease Liability: These are non-current liabilities expressed as a
percentage of total capital employed. They fluctuate over the years, indicating changes in
the company's long-term obligations relative to its capital structure.
Application of Funds (Common Size based on Total Fixed Assets):

Fixed Asset (Tangible and Intangible Assets):

Tangible Assets: The proportion of tangible assets (like land, buildings, machinery) as a
percentage of total fixed assets. It decreases slightly, showing that the company may be
investing less in tangible assets relative to other asset classes.
Intangible Assets: This shows the percentage of intangible assets (like patents, copyrights,
goodwill) within total fixed assets. It remains relatively low and fluctuates.
Investments: Investments in Subsidiary and Associate: These investments constitute a
substantial portion of total fixed assets, indicating that the company has made significant
investments in other entities.

49
Investments in Mutual Funds: These are minor in relation to total fixed assets and vary
widely across different schemes.

Comparative Balance Sheet

Shareholders' Funds: The equity share capital has decreased by ₹24.00 from the previous
year, indicating a decrease in new equity investments.
Retained earnings have increased significantly by ₹14,198.13 (18.93%). This indicates
retained profits from the previous year and potentially reinvestment in the business.
Other reserves show significant variations, with some like the general reserve experiencing
a decrease of ₹11,178.14 (-50.61%). Further investigation might be needed to understand
this decrease.
Borrowed Funds: There appear to be no borrowed funds for the given years. The company
might not have any long-term debt obligations.
Other Non-Current Liabilities: Trade payables have decreased by ₹62.18 (-18.66%).
Provisions for employee benefits, gratuity, and leave encashment have increased by ₹52.19
(6.92%). Net deferred tax liabilities have decreased by ₹303.05 (-9.05%). Security deposits
from contractors have increased by ₹105.57 (35.04%). Lease liability has increased by
₹59.80.
Total Capital Employed: Total capital employed has increased by ₹2,849.50 (2.73%).
Fixed Assets and Intangible Assets: The data shows the book values of various tangible and
intangible assets for each year. You can analyze the changes in these assets over the years.
For example, there has been a net increase in tangible assets of ₹537.69 (2.24%).

Trend analysis of balance sheet of Garware Technical fibres

To provide a comprehensive analysis of the financial data you've presented, it's essential to
break down the information into several key areas: Shareholders' Funds, Borrowed Funds,
Other Non-Current Liabilities, and the Application of Funds. Here's a detailed analysis:

1. Shareholders' Funds: Share Capital has remained relatively stable over the years, with
a slight increase in the latest year (22-23 ₹).\
2. Retained Earnings have seen a consistent growth trend over the five years, with a
significant increase from 18-19 ₹ to 22-23 ₹.
3. Other Reserves and Surplus have also grown substantially over the years, with a
noticeable spike in 21-22 ₹.
4. Borrowed Funds: The company does not appear to have any Borrowed Funds, indicating
that it relies primarily on equity and retained earnings for financing.
Other Non-Current Liabilities: Trade Payables have increased significantly over the years,
with a sharp rise in 22-23 ₹. Provisions for Employee Benefits, Gratuity, and Leave
Encashment have grown consistently. Net Deferred Tax Liabilities have been relatively
stable. Security Deposit from Contractor has grown significantly, making up a substantial
portion of other non-current liabilities in recent years. Lease Liability is reported in 22-23
₹, indicating a new liability in the latest period.
Total Capital Employed: Total Capital Employed has shown a consistent upward trend over
the years, primarily driven by the growth in Shareholders' Funds.
5. Fixed Assets:Tangible Assets (e.g., Leasehold Land, Buildings, Plant and Machinery)
have generally increased over the years, although some assets have shown fluctuations in
value.

50
Intangible Assets (e.g., Technical Knowhow, Product Development, Computer Software,
Patent) have been on the rise, with varying rates of growth.
6. Investments in Subsidiary and Associate Companies have significantly increased in 22-
23 ₹. Other Investments (both at FVTOCI and FVTPL) have shown significant
fluctuations over the years.
7. Investments in Mutual Funds: Investments in Debt Mutual Funds have increased, with
various plans reported in 22-23 ₹. Investments in Mutual Funds show varying levels of
growth, and some have increased substantially in the latest year.
Key Observations and Insights:
The company relies heavily on Shareholders' Funds and Retained Earnings for financing
its operations, indicating a strong financial position.
The growth in Other Reserves and Surplus, along with Retained Earnings, signifies that the
company has been profitable and has retained a substantial portion of those profits.
The significant increase in Investments in Subsidiary and Associate Companies in 22-23 ₹
may indicate expansion or acquisition activities.
The company has invested in various types of assets, both tangible and intangible, reflecting
a diversified investment portfolio.
The fluctuations in the value of Other Investments suggest that the company may have
made speculative or strategic investments

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