34631625 Summer Training Report Alok Industries Ltd Vapi

7/31/2019 34631625 Summer Training Report Alok Industries Ltd Vapi

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A

Summer Training Report

FINANCIAL RATIOS ANALYSIS

AT

ALOK INDUSTRIES LIMITED VAPI

(FROM 10TH MAY 2010 TO 10TH JULY 2010)

FOR THE PARTIAL FULFILLMENT TO DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business and IndustrialManagement,

Veer Narmad South Gujarat UniversitySurat

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Submitted to: - Submitted by:-

Ms. NAMRATA KHATRI. DHAVALSHAH,(MENTOR & FACULTY MEMBER, MBA (FT), SEM II,

DBIM,VNSGU) DBIM, VNSGU

Preface

In this development and changing world, I feel proud for being a student of MBA full time

course offered by DEPARTMENT OF BUSINESS AND INDUSTRIAL MANAGEMENT,

VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT.

This report states about the all the departments and their workings policies at theALOK

INDUSTRIES LTD, PROCESSING PLANT BALITHA, TALUKA PARDI, VALSAD

Finance and Function of Finance are the part of Economic activities. As this report also include

the Financial Ratio Analysis which checks upon the efficiency of the firm. Ratios indicate the

trend or progress or downfall of the firm and are aid to measure financial solvency.

This project start with industry analysis, introduction of the company and organization, four

major departments of the firm they are finance, marketing, production and human resource.

Which are included in general training part and specific research includes concept definition,

literature review, objective of the research, research methodology, limitation of research, and the

ratio analysis of various ratios, and suggestion.

I am sure that this project report would give us enough food for covering different departments

of the firm and also the various ratios.

I have collected all the needed information for the project report at my best level and the

information provided are true and authentic.

DHAVAL SHAH,

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MBA (FT),SEM II,

DBIM, VNSGU

STUDENTS DECLARATION

Study of Various Departments

And

Financial Ratio Analysis

This Summer Project report entitled, Financial Ratio Analysis of

ALOK INDUSTRIES LTD has been submitted to DEPARTMENT OF

BUSINESS AND INDUSTRIAL MANAGEMENT at Veer Narmad South Gujarat

University, Surat in partially fulfillment of M.B.A. Degree.

Hereby I undersign that this Project Report has been completed by me under the

guidance ofMs. Namrata Khatri (Faculty Member, Department of Business and

Industrial Management, V.N.S.G.U. Surat.)

Study of this Project Report is entirely result of my own efforts and research and is

original in nature. All the information provided is true and authentic and is not

provided artificially. This project report is not submitted either in part or whole to

any other institute or university of any degree.

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PLACE: SURAT DHAVALSHAH,

MBA (FT), SEMII,

DBIM, VNSGU

DATE:

Department of Business & IndustrialManagement

Department Certificate

This to certify that Mr. Dhaval Ajaykumar Shah, student

of MBA (FT) Semester II, DEPARTMENT OF BUSINESS AND

INDUSTRIAL MAMAGEMENT, V.N.S.G.U. has submitted

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summer training report entitled FINANCIAL RATIO

ANALYSIS report at ALOK INDUSTRIES LTD.

(PROCESSING DIVISION),VAPI have been duly completed in

satisfactory manner in partial fulfillment for award of

Degree of MBA, Veer Narmad South Gujarat University,

Surat under my guidance and supervision.

It also certifies that the project is the research of own

works and is of sufficient management slander warrant is

presented for examination.

Ms Namrata Khatri Dr.Renuka Garg

(Faculty Finance) (Head of Department)(DBIM, VNSGU) (DBIM, VNSGU)

ACKNOWLEDGEMENT

To improve a little we need to make efforts. Not one or two but till the results. And to learn and

act we need guidance. No study however big or small can be undertaken by our own self behind

every act there are unforgettable memories, efforts, guidance and blessings if those persons

without whom this training would not have gone even a small distance.

To be successful in any field practical knowledge is most important and MBA is incomplete

without having a practical knowledge in this era of professionalism. The theoretical knowledge

is only a half way in study network.

First of all I thank ourDEPARTMENT OF BUSINESS AND INDUSTRIAL MANAGEMENT of MBA

for giving me an opportunity to practically learn about the real happenings in this field and even

the faculty member who spent valuable time in helping me to reach the best possible extent.

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I the trainee am grateful to ALOK INDUSTRIES LTD. for giving me an opportunity in

completing the summer training session and report.

In particular, I would like to greatly thank to:-

Ms. Deepal Desai (HR Executive) at ALOK INDUSTRIES LTD

Mr. Bhuvanesh Gupta (Finance Manager) who was my guide during the training session and

he guided me in the field of marketing, finance and human resource.

Mr. Deepak Jain (Sr. Manager-Accounts) who provided me with the information I needed to

calculating ratios

Mr. Murlimanohar. (Training & Development Mgr)

Ms. Renuka Garg (Head of Department, DBIM, V.N.S.G.U., Surat).

Ms. Namrata Khatri (Mentor and Faculty Member at DBIM, V.N.S.G.U., Surat).

They guided and motivated me whenever required. In spite of their busy schedule they spend

their precious time with me and also gave all practical knowledge of real world which has to be

faced by us and experience sharing moments which will be helpful in future life.

Thanking You.

DHAVAL SHAH,

MBA (FT),SEM II,

DBIM, VNSGU

INDEX

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7

Chapter

No.

Content Page No.

1 Industry Profile 9-10

2 Company Profile 12-22

3 Key Departments

Production

Department

25-28

Human Resource

Department

30-35

Marketing Department 37-42Finance Department 44-48

4 Research Report.


50-54

5 Findings and

interpretations

56-81

6 Conclusion and suggestion 83-84

Bibliography 85

Annexure 86-88


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Objectives of summer training are as follows:

To gain the practical knowledge in the real business world.

To learn more about the professional atmosphere and adopt the professional behavior.

To learn how to innovate your ideas and achieve the main objective of the organization.

To know about all departments of the firm like finance, marketing, human resource and

production.

To know what is the production process, plant layout and location layout, maintenance of

machines, basic raw material, semi- finished goods and finished goods.

In department of marketing what is their distribution channel, their major customer, and

major competitors.

In department of finance, to know how the administration and maintenance of financial

assets takes place and how the working takes place in the organization related to finance.

To know financial position of the company and is efficient to carry all its current claims or

not by conducting financial ratio analysis.

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Chapter 1Chapter 1

IndustryIndustry

Profile:Profile:

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TextileTextile

IndustryIndustry

Chapter one

Industry Profile:

Textile Industry in India

Textile Industry in India is the second largest employment generator after agriculture. It holds

significant status in India as it provides one of the most fundamental necessities of the people.

Textile industry was one of the earliest industries to come into existence in India and it accounts

for more than 30% of the total exports. In fact Indian textile industry is the second largest in the

world, second only to China

Textile Industry is unique in the terms that it is an independent industry, from the basic

requirement of raw materials to the final products, with huge value-addition at every stage of

processing. Textile industry in India has vast potential for creation of employment opportunities

in the agricultural, industrial, organized and decentralized sectors & rural and urban areas,

particularly for women and the disadvantaged. Indian textile industry is constituted of the

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following segments: Readymade Garments, Cotton Textiles including Handlooms, Man-made

Textiles, Silk Textiles, Woolen Textiles, Handicrafts, Coir, and Jute.

Till the year 1985, development of textile sector in India took place in terms of general policies.

In 1985, for the first time the importance of textile sector was recognized and a separate policy

statement was announced with regard to development of textile sector. In the year 2000,

National Textile Policy was announced. Its main objective was: to provide cloth of acceptable

quality at reasonable prices for the vast majority of the population of the country, to increasingly

contribute to the provision of sustainable employment and the economic growth of the nation;

and to compete with confidence for an increasing share of the global market. The policy also

aimed at achieving the target of textile and apparel exports of US $ 50 billion by 2010 of which

the share of garments will be US $ 25 billion. The textile industry is anticipated to generate

12mn new jobs in various sectors.

Strengths of Indian textile Industry

India has rich resources of raw materials of textile industry. It is one of the largest

producers of cotton in the world and is also rich in resources of fibers like polyester, silk,

viscose etc.

India is rich in highly trained manpower. The country has a huge advantage due to lower

wage rates. Because of low labor rates the manufacturing cost in textile automatically

comes down to very reasonable rates.

India is highly competitive in spinning sector and has presence in almost all processes of

the value chain.

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Indian garment industry is very diverse in size, manufacturing facility, type of apparel

produced, quantity and quality of output, cost, requirement for fabric etc. It comprises

suppliers of ready-made garments for both, domestic or export markets.

Weaknesses of Indian textile Industry

Indian textile industry is highly fragmented in industry structure, and is led by small

scale companies. The reservation of production for very small companies that was

imposed with the intention to help out small scale companies across the country, led

substantial fragmentation that distorted the competitiveness of industry. Smaller

companies do not have the fiscal resources to enhance technology or invest in the high-

end engineering of processes. Hence they lose in productivity.

Indian labor laws are relatively unfavorable to the trades and there is an urgent need for

labor reforms in India.

India seriously lacks in trade pact memberships, which leads to restricted access to the

other major markets.

Chapter 2Chapter 2

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CompanyCompanyProfile:Profile:

AlokAlok

IndustriesIndustriesLimitedLimited

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Chapter 2

Company Profile:

History of company:-

Established in 1986 as a private limited

company, Alok began with texturizing of

yarn and steadily expanded into weaving,

knitting, processing, home textiles and

readymade garments. And to ensure

quality and cost efficiencies Alok have

integrated backward into cotton spinning

and manufacturing partially oriented yarn

through the continuous polymerization

route. Alok also controls an extensive

embroidery operation through its sister

concern, Grabble Alok Impex Ltd.

In 1993, Alok became a public limited company. Since then it have continued to increase

the scale of its operation and the range of its activities. Today, Alok is amongst the A

Group listed companies on Indias leading stock exchanges.

That is how they have evolved into a diversified manufacturer of world-class home textiles,

garments, apparel fabrics and polyester yarns, selling directly to manufacturers, exporters,

importers, retailers and to some of the worlds top brands.Alok has recently entered the domestic retail segment through a wholly owned subsidiary,

Alok Retail India Limited, with a chain of stores named H&A that offer garments and

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home textiles at attractive price points. With the sales turnover of around Rs. 2966 crores in

F.Y.2008-09, Alok is amongst thefastest growing vertically integrated textile companies in

India.

They have also ventured into the realty space through wholly owned subsidiaries with

investments in some prestigious projects in Mumbai.

Latest achievements of company are S.E.Z. (Social Economic Zone) and this plant held in

Surangi. S.E.Z. means no interference of government and police.

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The joint adventure of company is making Embroidery Company with Austria company

name Garble Alok Impex Ltd. The companys Sulzer division is in Dadara. The companys

processing plant in Vapi. Companys made-up Division is also in Vapi

Companys Milestone.

Years Events

1986 Incorporation of the Company

1993 Becomes a public limited company with a Rs. 4.5 crore IPO

1995 Sets up financial and technical collaboration with Grabal, Albert Grabher GmbH & Co

of Austria to make embroidered products through a joint venture company, Grabal

Alok Impex Ltd

2003 Export Trading House status granted

2004 Turnover surpasses Rs. 1,000 crore

2006 Texprocil silver trophy awarded for second highest export in manufacturer exporter made ups category

2007 ISO 9001:2000 certification obtained

60 per cent stake in Mileta a.s. a Czech Republic-based textile companyacquired

Controlling stake in U.K based retail store chain, qs (now Store Twenty one)

acquired

Organic cotton contract farming commenced

Gold Trophy for best export performance to Focus LAC countries awarded

by Synthetic & Rayon Textile Export Promotion Council

Awarded Silver trophy for highest fabric exports and Bronze trophy for highestmade ups export

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2008 Turnover crosses Rs. 2,000 crore

Exports crosses Rs. 1,000 crore

Joint venture with National Textile Corporation (NTC) to develop, revive New

City Mills, Mumbai and Aurangabad Textile Mills, Aurangabad formed

Awards from TEXPROCIL for 2007-2008

Gold Trophy for highest exports of bleached/yarn dyed/ printed fabrics

Silver Trophy for highest export of made ups

Bronze Trophy for highest global exports

Special achievement award for exports in fabrics

Awarded Outstanding Exporter of the Year Textiles at the International

Trade Awards 2007-08; presented by DHL CNBC TV 18 and powered byICRA

Companys SWOT analysis:-

SWOT Analysis is done in order to learn about the strength, weaknesses, opportunities & threatsof the company.

STRENTH:-

During the year the Alok textiles export grew around 31% to RS.111 crores from RS.27 crores in

previous year. The total turnover of Alok Industries ltd RS.1069 crores had an increase of

34.47% over the previous years turnover of RS.795 crores. The profit before tax during the

years was Rs.93 crores an increase of 57.63% over the previous years figure of RS.59 crores.

Alok manufacturing facilities comprises some of the equipments that have met the stringentrequirement of global retailers & importers in terms of quality, pricing environment aspects.

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WEAKNESS:-

As to state there are no specific weaknesses for Alok Industries, the only problems they are

facing is the heavy competition with the international market as well as foreign market.

OPPORTUNITIES:-The Indian textiles Industry has a much more potential to grow in next organization because

major textile payers in U.S.A & Europe are out-location manufacturing company due to the high

cost of manufacturing.

The Govt. is supporting this industry by technology up gradation scheme, gradual reduction of

import duties on Textile Machineries, Rationalization of Indirect taxes. Etc.

The industry can avail opportunities that may come in from strategy-tie-up with textile giants

from the western word for supply of goods, technical know-how, equity participation, etc.

By this we can penetrate overseas market.

THREATS:-

Textile industry is facing some challenges also, so Alok Industry cannot remain insolent from

this corporation needs to become focused & Flexible.

They will have to define key principals required to achieve operational excellence & develop

strategies to become customer- focused organization.

Products of Alok Industry Ltd

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1) Cotton and Blended Yarn 2) Apperal Fabrics

Wowen

3) Apparel Fabrics Knits 4) Work Wear Fabrics

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5) Garments Woven & Knitted 6) Home Textiles- Bed

Linen

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7) Polyester Texturized- Yarns 8) Going Organic &

Going Green

9) Home Textiles-Terry Towels 10) Embroidery

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Companys vision

To become the world's best integrated textile solutions enterprise with leadership position across

products and markets, exceeding customer & stakeholder expectation.

Companys mission

They will:

Offer innovative, customized and value added services to our customers

Actively explore potential markets & products

Optimize use of all resources

Maximize people development initiatives

Become a process driven organization

Be a knowledge leader and an innovator in our businesses

Exceed compliances and global quality standards

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Be an ethical, transparent and responsible global organization.

Some of the Alok s diversified

International and Domestic Customers

Competitors of A lok:-

Raymond company ltd.

Siyaram company ltd.

Century Textiles ltd. Vardhaman ltd.

Welspun ltd.

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GHCL ltd.

Nahar Textiles ltd.

Creative ltd.

Arvind mills

Plant Locations

SPINNING 412, Saily, Silvassa, U T of Dadra & Nagar Haveli

WEAVING Babla Compound, Kalyan Road, Dist. Bhiwandi, Thane

17/5/1and521/1,RakholiSaily, Silvassa, U T of Dadra & Nagar

Haveli

209/1 & 209/4, Silvassa, Village Dadra, U T of Dadra & Nagar

Haveli

KNITTING 17/5/1 and 521/1, Rakholi / Saily, Silvassa, U T of Dadra &

Nagar Haveli

PROCESSING C-16/2, Village Pawane, TTC Industrial Area, MIDC, Navi

Mumbai, Dist. Thane

268, Village Balitha, Taluka Pardi, Dist. Valsad, Gujarat

254,VillageBalitha,Taluka Pardi, Dist. Valsad, Gujarat

GARMENTS A 130-134, TTC Industrial Area, Khairne, MIDC, Navi Mumbai

374/2/2, Saily, Silvassa, U T of Dadra & Nagar Haveli

MADE UPS 374/2/2, Saily, Silvassa, U T of Dadra & Nagar Haveli

268,VillageBalitha,Taluka Pardi, Dist. Valsad, Gujarat

POY 521/1, Saily, Silvassa, U T of Dadra & Nagar Haveli

HEMMING 103/2, Rakholi, Silvassa, U T of Dadra & Nagar Haveli

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POY &

TEXTURISING

YARN

521/1, Saily, Silvassa, U T of Dadra & Nagar Haveli

Office Locations

REGISTERED

OFFICE:

B/43 Mittal tower

Nariman Point,Mumbai-400 021.

CORPORATE

OFFICE:

Peninsula Tower, A Wing,

Peninsula Corporate Park,

G. K. Marg, Lower Parel,

Mumbai 400 013

Divisions of Alok

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Chapter 3Chapter 3

KeyKey

DepartmDepartmentsents

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ProductProductionion

DepartDepart

mentment

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Production Department

Production is one of the main stages of an enterprise without which a manufacturer cant

survive. It converts the raw material into semi-finished goods and then converts into finished

goods.

According to Buffa, Production management deals with decision making regarding production

of goods & services at the minimum cost according to demand of customers through the

management process of planning, directing, and controlling.

Production P lanning

Alok produces textile products. Before producing product Company plans a schedule on a yearly

base, monthly bases & it goes very deeply by preparing a weekly schedule.

For preparing this schedule they consider the following points.

The lead of the product.

The preparation time of the product.

The demand of the product in market.

According to these points they use to plan the schedule and give the order to produce the

product.

Responsibility of the Production M anager

The responsibility of the production manager in to the Alok Company is as follows.

To control the cost of the production.

To motivate workers for maximum efforts.

To fulfill demand of the customer.

To plan production schedule.

To avoid defective goods.

To maintain enough semis finish goods as well as finish goods.

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To decide on way of handling and re handling.

To maximize utilization of machinery and manpower.

Production Planning and C ontrol

The aim of the department is fulfill the customer requirement on the time better quality and

coordinate with the marketing at head office and the production department at Silvassa (Rakholi)

Buyer-Head Office- PPC- P roduction

This Department is job is to

Check the possibility of availability yarn

Give the data to customer Meet the given data

Instruct the production units as per priority

Greige Department:

In this department all the raw material comes from Silvassa (Alok division 2nd branch). 95% of

raw material receives from Silvassa branch and rest from outside source/party. There are 3

godowns and centralized SAP system to know about the raw material. Then the stitching of

cloths is done and then lot no. is given to each set of roll with quality checked. It has the capacity

of producing 1.50 lack meters/day but they produce only 1.30 lack meter/day. Then this material

is send to Bleaching Department for further process.

Bleaching D epartment:

There are three machines in this department. These machines are imported from Germany.

1. Singedesigne: This machine works for shinning & designing the material.This batch is kept

in rotation for 8Hrs

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2. Pre-treatment: This machine works for whiteness & smoothness of the material. There are

three procedures to the material whiteness & smoothness. There are INJECTA,

EXTRACTA, and IMPACTA.

Injecta: Gives the steam pressure to material in water at 200 C for stretching the cloth

from 5 mts to 7 mts.

Extracta: In this section the material is washed by hard washer, soft washer & steam

washer at 90C.

Impacta: To remove the natural fats & waxes from the material they use this machine.

1. Mercerization: In this process the material is kept in role why dry process or wet process. If

the process is going for continuous process then the wet process is been role and to kept it in

go down it is kept as dry. For the dyeing process the material is been giving in wet form.

Dyeing D epartment:

In this process 3% color & one 1% chemical is pumped through CDR machine. Then after

dyeing the material the hard wash is done and then the material is been dried and the role is

been send to finishing department.

Finishing Department:

Finishing is applied on the textile material by different chemical and mechanical means. The

finish to be applied on textile material depends upon the end of the fabric.

MACHINERY IN FINISHING DEPARTMENT

STENTER(Monforts) 3

BRUSHING MACHINE(Lafer) 1

SUEDING MACHINE(Lafer) 1

SANFORISER(Monforts) 1

Folding D epartment

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After finishing the fabric comes to the folding department for the inspection and packing and

grading. Folding department works in four sections

1. Inspection and Grading

2. Recording & data entry

3. Grouping & Sampling

4. Packing

Laboratory D epartment:

Alok Industry is certified by ISI so the product is of good quality so this department for tests test

of material is tested by this department or that there is different machine for check the yarn.

Printing D epartment:

This is the department were printing is done on the material came from engraving department.

There are 12 color shades in a machine. This machine name is Arioli Loop Ager from Germany.

This machine can color 90 meter of cloth in 1 min.

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Production p rocess Flow Chart of Alok Industries Ltd.

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HumanHumanResourcResourc

ee

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DepartDepartmentment

Human Resources D epartment

Meaning:

Human Resource Management (HRM) is the function within an organization that focuses on

recruitment of, management of, and providing direction for the people who work in the

organization. Human Resource Management can also be performed by line managers.

Human Resource Management is the organizational function that deals with issues related to

people such as compensation, hiring, performance management, organization development,

safety, wellness, benefits, employee motivation, communication, administration, and training

Recruitment

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For recruitment of worker/staff category employee for all unskilled, semi skilled and highly

grade the firm has different approaches like direct recruitment private employment, agencies,

advertisement in news papers and personal sources. Different technique is used for recruitment

as per situation, need, importance and urgency for recruitment of man power. Minimum

education qualification for trainee in STD 10th pass minimum age criteria for category whether

staff or worker is 18 years on the date of recruitment is must.

Direct Recruitment:-

The company has adopted recruitment policy for workers belongs to un-skilled and semi skilled

grade employees. On every alternative day at the factory main gate personal department

conducts the recruitment activity at the factory gate for the persons willing to join the company.

Through private Employment agencies:-

For the recruitment of skilled and highly skilled grade employees this type or recruitment source

are preferred. The data base of candidates with relative qualification experience and training is

available with the agencies. As per our criteria we call prospective candidates for an interview

and evaluation the abilities intelligence attitude and experience.

Through Newspaper:-

For the specific recruitment in many cases the application are invited through the advertisement

in regional/national news papers. All the application will be shown to concern department heads

of short listed candidates are called for interview.

Through personal Source:-

We invite people for interview whose information/bio-data will come across/ brought to our

knowledge through any of their friend/relatives/classmates or senior or juniors working with our

organization.

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HRD

MR. DIGVIJAYSINGH

(CHIEF MANAGER P &


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Training and development

Every organization needs to have well framed and experienced employee to perform the

activities which have to perform. If the existing people can meet the recruitment then training is

of no importance. But it is found vice-versa as for existing employee also newer knowledge of

various ways of doing and performing the task in more efficient and cost effective manner

keeping in touch with competitiveness, modernization and increase the versatility and

adoptability of employee.

As the jobs have become more complex, the importance and requirement of training has

increased to meet organization objectives. Training is process of learning a sequence of

organized input to improve the employees job skill, knowledge, and change in attitude towards

his work.

Training methods:-

Onthe job

Counseling/direction & guidance

In house training

39

MR. SANJAY

PANDEY

MR. MURLI

(TRAINING &

DEVELOPMENT)

MR. KALPESH

RAVAL

(EXECUTIVE.

MR. SAMPATH

(ASST.

MANAGER)


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External training

Employees at all levels are expected to endeavor for self development and should try to excel

in their performance on their present job and should prepare for future job.

Training modules:-

AWARENESS PROGRAM

QUALITY

PRODUCTIVITY/SKILLS DEVELOPMENT

SAFETY/HEALTH ENVIRONMENT

LATEST TRAND IN TECHONOLOGY

BEHAVIOURAL AND COMMUNICATIONHRM FOR LINE MANAGER

TECHNOLOGY ASPECTS

COMPUTER AWARNESS PROGRAMME

External training:-

Nomination is done for external programme for which there are no internal programmes. The

P&A department will maintain a list of training programme being organized in the country along

with evaluation report on the quality of these programs. Based on individual training

requirement, the P&A department will recommend to the A.Vp/E.D through the concerned

department heads, names of staff to be nominated for various training programmes.

In respect of external nomination, the participants on return of the programme attend by him to

the concerned manager and a copy of it along with a copy reading materials shall be sent to the

P&A department within maximum period of weeks from return of the training programme.

Ethics of employment

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Alok Industries Ltd. isprofessionally managed company; therefore certain ethics of employment

is necessary for achieving climate in organization.

No interview is to be conducted/Bio-data from be got filled-in without the approval of

personal dept. Personal dept arranges and conducts the requirements process only after approval for

requirement is sought. The interview panel is to be earned marked well in advance off the

interview and the interview briefing is required to be given to all the panel members by the

personal dept. No direct hope, commitments, whatsoever regarding employment should be

given to anyone.

No compromise on quality standard of people should be made.

Frank and free opinion should be exchanged during the course of interview by the panel.

All appointment are subjected to credential verification and in case of false, part information

or concealed information, the employment of the concerned person is liable for termination,

without assigning any cause or notice or compensation in lieu thereof.

All appointment will be subjected to production of satisfactory proof release by the previous

employer, salary terms, and previous employment and experience certificate of all previous

employers.

All appointments are subjected to credentials given by the selected candidate being verified

and reference report being satisfactory. In case any employee gives wrong information or

conceal facts in either the Application for employment from or in subsequent declaration

to the company, his employment is liable for termination, without any notice or

compensation in lieu thereof.

Period of the candidate joining the duty, the personnel dept will complete following formalities.

Intimate the date of joining to the dept. head

Seating arrangement (Through personnel dep.)

Arrange through P&A for residential accommodation, if required or agreed upon

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Draw up orientation/Training Programme

Finalize the job allocation/description with dept. / division head considering recruitment

objectives.

Induction:

The personnel dept. will be Responsible for

Completing joining formalities, such as joining report, checking of medical

Certificates and medical checkup etc.

Instruction to concern executive.

Acquainting to new entrant with organization structure, Rules & Regulation

Background and history of the company, local information and Assistance.

The induction programme of new entrant will is for five days.

After completing the cycle of indication the new entrant will be sent to the concerned dept.

whenever necessary, the P&A dept. will also issue a general circular regarding the new entrant

and his assignment, for information of all employees in company.

Types of appointment:

PERMANENT: All appointments will be against the permanent sanctioned vacancies. All

appointments would be on probation of six months. Confirmation will not be deemed to have

taken place, unless conveyed in writing. In the absence of any written communication, the

probationary period would automatically stand extended.

TEMPORARY: Wherever such appointments are authorized, they will be for limited

period, specified in their terms of appointments, not exceeding 60 days at any stage.

Extension of temporary period beyond 60 days shall also be authorized by A.V.P.

TRAINEES: The Company may engage, from time to time, services of such fresh

graduates/diploma holders (Technical and Non technical). Who on successful completion of

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their training period would be absorbed in staff at suitable levels? The terms of appointment

and benefits/facilities for such appointments would be as finalized by the management from

time to time.

Payment of fare to candidates called for interview

Unless otherwise specified, payment of fare to all outstation candidates called for an interview

will be made on the following basis:-

A) All candidates called for Manager & above

B) All persons called for Dy. Manager & below fare

Joining expenses:

It is not the normal practice of the company to pay joining expenses incurred for selected

candidates for joining or moving his residence on selection. Exception this can only be

authorized by the M.D/E.D/A.V.P. in writing.

Letter of intent:

All candidates selected for appointment as staff shall be offered letter of intent indicates the position for

which they have been selected. Formal letter of appointment shall be handed over to the

candidate, on the term mutually agreed upon, on the day of joining duty.

Pre-joining formalities:

Candidates selected for joining as staff will be issued letter of intent indicating, a part

from the position for which selected, the date/ place of reporting, the documents etc. at

the time of reporting duties.

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MarketiMarketingng

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DepartDepart

mentment

Marketing Department

Marketing is an important activity in our society. Marketing today requires more proximity

towards customer. It also requires:

1) Of end users more understanding.

2) Creating more moment of truth and delight.

3) Retaining customer.

4) Relationship marketing.

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Modern definition of M arketing: -

Marketing is continues process of discovery and translating consumer wants into appropriate

product services. Creating demand for this product and serving the demand with the help of

distribution such as wholesaler and retailer.

The American marketing association defined marketing as:-

The performance of business activities that directs the flow of goods and services from

producer to customer

M arketing management:-

Marketing management is an ongoing process involving identification of consumer need and

wants of converting them into appropriate products and satisfying the demand of consumer who

are the most merciless, meanest and toughest marketing disciplinary. It is an important

functional area of business.

-According to Phillip Kotler:

The market concept is customer orientation backed by integrated marketing aimed at

generated customer satisfaction to satisfy organizational goals.

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4Ps of Marketing Mix

Product

Alok is more concern about the product they are always try to give qualitative product to their

buyers, they have product planning & control department.

This is playing vital role in the organization. It creates the link between the production

department and marketing department. It exchanges the information between the departments.

Manufacturing plans are made, based upon input from marketing and designing .The

development of fabric deciding the specification is done by designing while the acceptability to

market and the quality is decided by market.

They conduct booking session twice in a year in order to decide what should be produced for

season.

A yearly plan is 1st made based upon the expectation of marketing. The capacity balancing is

then done & the entire production is divided in to the available production capacity at various

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locations depending upon the capacity loading, the requirement for marketing the converted into

manufacturing.

Raw material, Dyes& Chemicals, other horizontal inputs and optimum utilization of capacity are

the major balancing factors which decide the feasibility of timely delivery.

After allocation of plants of various location .Any problem faced at any location need an

immediate attention so that other location take up the production need in order to meet the

deadline of delivery.

Place

Alok is basically fabric manufacturer so they are not selling their product directly. They are

selling their product retailer like Wal-Mart, M&S. They are distributing their product through

agent for international buyers. The web has created a platform whereby organizations can now

directly communicate with the customers, as a result of which many of the channels are being

disinter mediated. This disintermediation does not necessarily mean that they completely

eliminate the intermediaries, but rather when it comes to shipping the products it may outsource

some of the distribution functions like the storage, transportation from third party firms.

Price

Pricing strategy at Alok: Pricing is one of the linchpins of marketing strategy and success.

Every organization has their own technique for pricing & Alok is one of them. The company

adjusts product prices to reflect changes in costs and demand and to account for variation in

buyers and situations. Many times they are using online auctions. It is a popular and innovative

way of pricing. Top Management or Responsible person who has authority, they can be

participating in online auction where buyers bid against each other. The highest bidder wins.

They are using Geographical pricing to decide the price. It includes Geographical

considerations strongly influence prices when costs must cover shipping heavy, bulky, low-unit-cost materials. Buyers are all over the world so there are variations in price in different area of

the world. Another strategy is value pricing where they are offering right quality at fair price.

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Many times they compromise with the price when order in bulk. Price is also depending upon

the quality of product. They are always providing high quality product.

Basic structure of Price: Total Fabric Price=Basic price of fabric + Overhead + Transportation

cost + Profit.

Promotion

The next element of the marketing mix is deciding the appropriate set of ways in which to

communicate with customers to foster their awareness of the product, knowledge about its

features, interest in purchasing, likelihood of trying the product and/or repeat purchasing it.

Effective marketing requires an integrated communications plan combining both personal selling

efforts and non-personal ones such as advertising, sales promotion, direct marketing and public

relations. Put together, they are referred to as the promotion mix.

Elements of Promotion

Personal Selling

Sales Promotion

Public Relations (PR.

Direct Mail

Trade Fairs and Exhibitions

Advertising

Sponsorship

Alok is promoting their self in such approaches like trade faire & exhibition. It helps to make

new contacts and renewing old ones. The main purpose is to increase awareness and to

encourage trial & attract the new customer.

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They also promoting through sponsorship where company pay associated with particular events

like Fashion show the attributes of the event are then associated with the organization.

Direct mail is the very highly focused way to develop relationship with customer. The mail is

sent out to the potential buyers and responses are carefully monitored.

Branch Offices of Marketing Plants

Bangalore

Chennai

Delhi

Sri Lanka

United States

Bangladesh

Vapi

Silvassa

Navi Mumbai

Thane

M arketing strategies :-

The choice of marketing strategies hinges on a number of consideration like the companys.

Current market share.

Current and Planned Capacity

Customer price sensitivity.

Marketing Growth.

Competitors.

The company may find a number of alternatives for fulfilling its purpose but it needs to be select

one The company needs monitor the impact of marketing strategies on its sales, market shares,

cost, profit and long term investment

Strategies related to P roduct:

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A product means a bundle of benefits, which satisfy the human need. According William

Stanton, A product is a complex of tangible attributes including packing, color and service

which the buyer expect as offering of satisfaction of wants and need.

Q uality:-

For Alok Industries ltd. quality stands at a first place. And it is most important to any production

house. Also consumer satisfaction is the best scale for the quality measures and they are favor in

Alok Industries Ltd.

Packing and Labeling:-

In Alok product are packed as per the convenience of consumer. So packing is also changed

on the basis of customer.

also change on the basis of the customer feedback.

r exporting are packed separately using some specific material only.

Brand name:

Brand name is the effective tool to identify and to differentiate

The product from the competitors product.

Brand name is an attractive parameter for the customer while they choose one amongdifferent product.

Alok industries ltd .has brand name ALOK itself.

Sales department:

In sales department firstly consumer inquiry for our product if consumer like the material of

company so he give order of some quality and from that we make A sales order and theprocedure of sales department is begin.

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So consumer check the material and then he give order then companies authorized person decide

that the sales should be done or not if authorized person approve so the department see the when

another parties order will full fill then give date and try to finish that order.

When the order is full filled by department they inform the party and also say to collect their

order when the party comes to collect the order they make legal document and make Challan and

the payment in some specific time period.

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Finance Department

Finance is the lifeblood of the industries because we cannot imagine business without finance, as

it is the central point of all the business activity. Whether big or small, government finance

function is of equal importance. Finance is defined as the provision of money at the time it is

wanted.

Till 1950 finance function was regarded as the function only of rising finance of the business.

There after it has undergone remarkable changes over the time. Since last 30 to 40 years the

important function of finance management is of effective efficient utilization of finance.

Financial management means rising of adequate funds at the minimum cost and using them

effectively in the business. It is concerned with financial problem in business.

Management Hierarchy

Accounts & Finance Department

54

V.P ACCOUNTS

(Mr. Bhuvanesh Gupta)

Senior Manager Accounts

(Mr. Deepak Jain)

Accounts Officers

FINANCE & ACCOUNTS DEPARTMENT


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Procedure of Accounting Department

Gate Entry

Store department GRN (Goods Receipt Note)

Accounts

Booking Checking Payment Audit

B o oking process

P ayment process

Importance of Finance Department:-

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Assistants

Accounts Booking

(Assistant)

Manager

(Check)

VP Accounts

(Sign)

Assistant Manager(Check

VP Accounts(Sign)

PartyDistribute


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1. Finance is required for the scheme of modernization, expansion and development of

existing enterprise.

2. The financial plan helps to check out the success of the company.

3. The effective financial plan will provide sufficient funds to business.

4. Finance department is always linked with success of other departments where it is

responsible to provide necessary finance.

Responsibility of finance Department

In modern enterprises the financial manager occupies a key position. He is one of the dynamic

members of the management and his role day by day becoming more pervasive, progressive,

intensive and significant in solving complex problem. The responsibility of financial manager

includes:

Raising of funds

Minimizing cost of funds raised

Allocate funds prudently

Control the working of an organization

Maintain enough liquidity

Registered M aintained:-

Cash and bank book

Sales register

Debit Note

Credit Note

Purchase register

Trial Balance

Profit & Loss A/C

Balance Sheet

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Accounting Procedure:

Here the entries are made and it is sent to the head office and there the account is maintained.

The account procedure starts from the raw material enter to the company. The procedure of

account as follows:-

1. The security officers firstly check the goods or raw material enters at the gate and note down

the no. of vehicle.

2. Then the goods and brought to the quality control lab where it is check and approval is OK

then the goods are stored in the stored department and the entry is made there.

3. The book entry is done after the material stored4. After the book entry is sanded to the account department where the bill order slips are

compared with other.

5. After the document are checked and signed by the head of the department and manager and

manager and the data are entered in the particular account.

6. Then the daily entries are mail to head office.

7. After making the entries the payment activity is made during the period.

8. The required fund for the payment generally comes from the head office.

Credit policy of Alok:

Credit is facility provided by the company, which enables the creditor to extend the pay off

period to some days as per companys policy. Alok generally provided the credit facility of 30

days to all the parties or consumer of product.

Dividend:-

Dividend is that amount of capital or profit, which is shared between the shareholders of thecompany after meeting all the expenses. The director had authorized the payment of an interim

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dividend of Rs.60 per share during the year the expenses. The director had authorized the

payment of an interim dividend of Rs.60 per share during the year.

Export:-

During the year made the export and the efforts are made to achieve the higher growth.

Insurance :-

Plant and machinery, stock, building etc of the companies have been adequate insured.

Accounting policy of Alok:

Basic of preparation of financial statement:- The accompanying financial statement has

been prepared under historical cost convention in accordance with generally accepted

accounting principles and provisions of the company

Use of estimates : - The preparation of financial statement in conformity with the generally

accepted accounting principles required estimates and assumptions to be made that affect

the reported amounts of assets and liabilities on the date of the financial statement and the

reported amounts of revenues and expenses during the period.

Fixed assets : - Fixed assets are recorded at the cost of acquisition including incidental

expenses. They are stated at historical cost.

Depreciation :- Depreciation on the fixed assets is provided on written down value method

excepted in respect of non-factory

Investment;- Investment classified as long term investments a fare started at the cost

provision is made to recognize a declined, other than temporary n the value of investment.

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Foreign Currency Transaction ; - Transaction in foreign currency is recorded at the

original rate of return exchange in force at the time transaction is affected.

Revenue Recognition : - Revenue in respect of insurance, interest, etc is recognized only

with it is reasonably certain that the ultimate collection will be made.

Audit System : - Audit is the process of checking, verifying and inspecting the financial

procedure and position of the company. They are two types of audit are carried out in Alok

Internal audit

Statutory audit

ChapterChapter 44

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Primary data are those, which are collected for the first time, and they are original in character.

Primary data gives higher accuracy and facts, which is very helpful for any research and its

findings.

For primary data, I personally met Vice President- Accounts & Finance Mr. Bhuvanesh Gupta

and Sr. Manager-Accounts Mr. Deepak Jain, and other staff members for the collection of

required information

Secondary data:

The secondary data are those, which are already collected by someone for some purpose and

are available for the present study.

Secondary data was collected from the Companys Annual Report and other financial

statements, websites and other such sources.

Limitation of the Report

I tried to work best in preparing the report, still there are some obstacles, which come in the way

and stop me to get 100% result. These limitations are sometimes overcome but sometimes they

become unavoidable. Some of the limitations, which I faced in preparing the report, are as

follow:-

1. Due to their busy schedule they were not able to spend more time with me.

2. Detailed information of data was not given due to which ratio analysis were not

concluded.

3. As audit was held the staffs was busy and company kept their data confidential.

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Outline of the study


Introduction

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated

quotient of two mathematical expressions and as the relationship between two or more

things. In financial analysis, a ratio is used as a benchmark for evaluating the financial position

and performance of the firm. The absolute accounting figures reported in the financial statements

do not provide a meaningful understanding of the performance and financial position of a firm.

An accounting figure conveys meaning when it is related to some other relevant information. For

e.g., a Rs. 5 crore NP may look impressive, but firms performance can be said to be good or bad

only when NP figure is related to the firms investments.

The relationship between two accounting figures, expressed mathematically, is known as a financial ratio

(or simply as a ratio). Ratio helps to summarize large quantities of financial data and to make qualitative

judgment about the firms financial performance. For e.g., consider Current Ratio, it is calculated by

dividing current assets by current liabilities: a ratio indicates a relationship a quantified relationship

between current assets and current liabilities. This relationship is an index or yard stick, which permits a

qualitative judgment to be formed about the firms ability t meet its current obligations. It measures

firms liquidity. The greater the ratio, greater is the firms liquidity and vice versa. The point to note is

that a ratio reflecting a quantitative relationship helps to make qualitative judgment. Such is the nature

of all financial ratios.

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Ratio analysis is a technique of analysis and interpretation of financial statements. It is the

process of establishing and interpreting various ratios for helping in making decisions. It gives

us better understanding of financial strengths and weaknesses of a firm.

Standards of comparison

The Ratio analysis involves comparison for a useful interpretation of the financial statements. A

single ratio in itself does not indicate favorable or unfavorable condition. It should be compared

with some standard. Standards of comparison may consist of:

Past Ratios, i.e., ratios calculated from the past financial statements of the same firm.

Competitors Ratios i.e., ratios of some selected firms especially the most progressive and

successful competitor, at the same point in time.

Industry Ratio i.e., the ratio of industry to which the firm belongs; and

Projected Ratio i.e., the ratios developed using the projected, orproforma, financial

statements of the same firm.

Classification or Types of Financial Ratios

Several ratios, calculated from the accounting data, can be grouped into various classes

according to financial activity or function to be evaluated. As stated earlier the parties interested

in financial analysis are short and long term creditors, owners and management. Short-term

creditors main interest is in the liquidity position or the short-term solvency and profitability of

the firm. Long-term creditors on the other hand, are more interested in the long term solvency

and profitability of the firm. Similarly owners concentrate on the firms profitability and

financial condition. Management is interested in evaluating every aspect of the firms

performance. They have to protect the interest of all parties and see that the firm grows

profitably.

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In view of the requirements of the various users of the ratios, we may classify them into the

followingfourimportant categories

1. Liquidity ratios

2. Capital structure/leverage ratios

3. Activity ratios

4. Profitability ratios

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Classification of Financial Ratios


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(A) Liquidity Ratios:

1. Current ratio

2. Liquidity ratio or Quick ratio or acid test ratio

(A) Leverage Ratios

1. Total Debt Ratio

2. Debt-Equity Ratio

3. InterestCoverage Ratio

(A) Activity Ratios

1. Inventory/Stock turnover Ratio.

2. No. of days Inventory

3. Debtors turnover Ratio

4. Working capital turnover Ratio

(D) Profitability Ratios

1. Gross Profit Margin

2. Net Profit Margin

3. Rate of return on Investments (ROI) OR Rate of return on Capital

Employed (ROCE)

4. Asset Turnover Ratio

5. Rate of return on Equity

6. Earnings per Share

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ChapterChapter 55

FindingsFindingsAndAnd

InterpretaInterpreta

tionstions67


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Findings and Interpretations

(A) Liquidity Ratios:

These ratios analyse the short-term financial position of a firm and indicate the ability of the firm

to meet its short-term commitments (current liabilities) out of its short-term resources (current

assets).

These are also known as solvency ratios. The ratios which indicate the liquidity of a

firm are:

1. Current ratio

2. Liquidity ratio or Quick ratio or acid test ratio

(1) Current ratio

It is calculated by dividing current assets by current liabilities.

Where,

Current assets, includes Current Liabilities, includes

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Current ratio = Current


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Inventories of raw material, Work in progress, finished goods, stores and spares, sundry Debtors/receivables, short term loans deposits and advances,

cash in hand and bank, prepaid expenses, incomes receivables and marketable investments And short term securities.

sundry creditors/bills payable, outstanding expenses, unclaimed dividend, advances received, incomes received in advance, provision for taxation,

proposed dividend, instalments of loans payable within

12 months, bank overdraft and cash credit

Conventionally a current ratio of 2:1 is considered satisfactory

The current ratio is a measure of the firms short-term solvency. It indicates the availability of

current assets in rupees for every one rupee of current liability. A ratio of greater than one means

that the firm has more current assets than current claims against them. Current ratios for last five

years of Alok Industries Ltd are as under.

The Current Ratios for the last five years of the company are as under

YearsTotal Current assets

(Rs. Crore)Total Current liabilities

(Rs. Crore)Current

Ratio

2004-05 1359.21 647.3 2.099814615

2005-06 1403.87 668.1 2.101287232

2006-07 1992.66 1371.21 1.453212856

2007-08 3377.53 2341.16 1.442673717

2008-09 2685.93 1976.02 1.359262558

Years 2004-05 2005-06 2006-07 2007-08 2008-09

Current ratio 2.1:1 2.1:1 1.45:1 1.44:1 1.35:1

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Interpretation of Current Ratio

Conventionally a current ratio of 2:1 is considered satisfactory for a company. This means in a

worse condition, even if the value of companys Current Assets becomes half, the firm is able to

meet its obligations

It can be seen from past records that CR in years 2004-05 & 2006-07 is 2:1 which meets

the ideal ratio for a company as company is able to meet its obligations very well. So CR

in these years can be interpreted to be sufficiently liquid.

But in years 2006-07 & 2007-08 this ratio has decreased to 1.45 & 1.44 respectively but

still company manages to meets its obligations as its current assets are more than its

current liabilities.

In year 2008-09 the decreasing trend continues and CR becomes 1.35, as far as meeting

obligations is concerned, it is still able to, so this ratio cant be said to be an insufficiently

liquid but if this decreasing trend continues for next few years then it would be a matter

of concern for companys liquidity position. For the time being companys CR can be

interpreted as moderately liquid but an alarming one.

Suggestions:

Since last three years CR has shown a decreasing trend, so Company needs to invest

more in its current assets if it fails to do so then in near future companys CL may

increase over CA and short term liquidity position might be in threatening condition and

it may struggle to meet its current obligations.

Also company should indentify its slow paying debtors and insist them to be quick in

payment

Moreover, company needs to exercise control over slow moving and absolute stock of

goods, which impairs companys ability to pay bills on time

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(Rs. Crore) (Rs. Crore)

2004-05 999.85 647.3 1.544646995

2005-06 1049.5 668.1 1.570872624

2006-07 1522.04 1371.21 1.109997739

2007-08 2692.15 2341.16 1.149921406

2008-09 1739.8 1976.02 0.880456676

Years 2004-05 2005-06 2006-07 2007-08 2008-09

Quick ratio 1.54:1 1.57:1 1.11:1 1.11:1 0.88:1

Interpretation of liquid ratio:

Generally, a quick ratio 0f 1:1 is considered to represent a satisfactory current financial

condition.

In years 2004-05 & 2005-06 quick ratio, is almost more than 1.5 times which implies that

companys quick assets are 1.5 times more than its liabilities this is because company is

able to convert its assets into cash very successfully. This ratio sets a very rosy current

liquidity condition as company has enough cash to meet its current obligation.

In years 2006-07 & 2007-08 this ratio has reduced to 1.11 times but still company has

managed to be in line with standard ratio, although the ratio has decreased but it cant be

said insufficiently liquid as company liquid assets are almost equal to its current

liabilities.

In year 2008-09 the decreasing trend continues and ratio becomes 0.88 times which is

does not sounds good as company may find it difficult to meets its obligations as its

liquid assets are less than its current liabilities.

Suggestions

Company needs to have more liquid asset in form of cash as cash is considered to the

most liquid asset.

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Also Company needs to exercise control over its investment in inventories as inventories

are considered to less liquid as compared to BR and other readily convertible or

marketable securities. If company fails to do so then it may not be able to meet its current

obligation.

(B) Gearing ratios or Leverage ratios

These ratios indicate the long term solvency of a firm and indicate the ability of the firm to meet

its long-term commitment with respect to:

repayment of principal on maturity or in predetermined instalments at due dates

and

Periodic payment of interest during the period of the loan.

The process of magnifying the shareholders return through the use of debt is called, financial

leverageorfinancial gearingortrading on equityTheses ratios are calculated to measure the

financial risk and the firms ability of using debt to shareholders advantage. Leverage ratio can

be calculated from the Balance Sheet items to determine the proportions of debt in total

financing. They can also be computed from profit & loss items by determining the extent to

which operating profits are sufficient to cover the fixed charges.

Leverage ratios are classified as under:

1. Total Debt Ratio.

2. Debt-equity Ratio.

3. Interest coverage Ratio.

1. Total Debt Ratio

Several debt ratios may be used to analyze the long-term solvency of a firm. The firm may be

interested in knowing the proportion of the interest bearing debt (also called funded debt) in

the capital structure. It may, therefore, compute debt ratio by dividing total debt by capital

employed or net assets. Total debt will include short and long term borrowings from financial

institutions, debentures/bonds, deferred payment arrangements for buying capital equipments,

bank borrowings, public deposits and any other interest bearing loans. Capital employed will

include total debt and net worth.

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The firm may be interested in knowing the proportion of the interest bearing debt (also called

funded debt) in capital structure. It may therefore compute debt ratio by dividing total debt (TD)

by capital employed (CE) or Net Assets (NA).

Where, Total Debt (TD) will include short and long term borrowings from financial institutions,

debentures/bonds, deferred payment arrangements for buying capital equipments, bank

borrowings, public deposits and any other interest-bearing loan.

Capital Employed (CE) will include Total Debt (TD) + Wet Worth (NW)

Debt ratio for last five years of the company is as under:

YearsTotal Debt(Rs Crore)

Capital employed(Rs Crore) Debt Ratio

2004-05 1403.24 2001.31 0.70116074

2005-06 2212.5 3020.03 0.732608616

2006-07 3336.76 4361.2 0.765101348

2007-08 5767.31 7198.65 0.801165496

2008-09 6596.35 8351.42 0.789847715

Years 2004-05 2005-06 2006-07 2007-08 2008-09

Debt ratio 0.701:1 0.732:1 0.765:1 0.801:1 0.789:1

Interpretation of Total Debt Ratio:

Generally, total debt ratio of 2/3 is considered satisfactory.

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Here the companys total debt ratio has shown an increasing trend from years 2004-05 to

2006-07. Almost more than 70% of companys net assets (capital employed) are being

financed by lenders in these years.

In year 2007-08 company total debt ratio is highest i.e. 0.801 which means lenders have

financed 80% or about four-fifths of company net assets (capital employed). It obviously

implies that owners have provided remaining one fifth or just 20%, i.e. the stake of

owners is quite low in the total capital employed of the company.

In year 2008-09 this ratio is 0.708 which in no sense is satisfactory as is surpasses

conventional ratio of 0.66. From creditors point of view, the trend is risky and

undesirable.

Suggestions:

Company needs to improve its debt position by reducing debt in its capital mix,

otherwise it may led to creditors pressures and constraints on managements independent

functioning and energies. If company fails to reduce its debt, it may get entangled in a

Debt Trap.

1) Debt- Equity Ratio

The relationship describing the lenders contribution for each rupee of the owners contribution

is called debt- equity ratio. It is directly computed by dividing total debt by net worth.

YearsTotal Debt(Rs. Crore)

Net worth(Rs. Crore) Debt-equity Ratio

2004-05 1403.24 598.07 2.346280536

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2005-06 2212.5 807.53 2.739836291

2006-07 3336.76 1024.44 3.257155129

2007-08 5767.31 1431.34 4.029308201

2008-09 6596.35 1755.06 3.758475494

Years 2004-05 2005-06 2006-07 2007-08 2008-09Debt Equity 2.34:1 2.73:1 3.25:1 4.02:1 3.75:1

Interpretation of Debt Equity Ratio:

Generally, A Debt- equity ratio of 2:1 is considered to be conventional.

But here like total debt ratio, debt equity ratio also seems to be very unconventional and

undesirable.

Debt equity ratio has also shown an increasing trend from years 2004-05 to 2007-08. In year2007-08 ratio is highest i.e. 4.02 times. In year 2008-09 it has reduced to 3.75 times, but then too

it doesnt sound much impressive as companys debt is much higher than its owners stake.

Suggestion:

Its high time for company to think about its indebtedness. Company needs to reduce its

debt capital in order to sound financially strong. Otherwise, company may suffer great

strains, it may even fail to pay interest charges of creditors, as a result their pressure and

control may further tightened.

There is a need to strike a proper balance between use of debt and Equity.

1) Interest Coverage Ratio:

Debt ratio described above are static in nature and fail to indicate the firms ability to meet

interest (and other fixed charges) obligations. The Interest Coverage ratio or the times-interest-

earned is used to test the firms debt-servicing capacity. The interest coverage ratio is computedby dividing earnings before interest and taxes (EBIT) by interest charges. The interest coverage

ratio shows number of times the interest charges are covered by the funds that are ordinarily

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available for their payment. Since taxes are computed after interest, interest is calculated in

relation to earnings before tax. Depreciation is a non-cash item. Therefore, funds equal to

depreciation are also available to pay interest charges.

We can thus calculate this ratio as earnings before interest taxes, depreciation and amortization

(EBITDA) divided by interest

A ratio of 6 to 7 times is considered satisfactory

YearsEBIDTA(Rs Crore)

Interest(Rs Crore)

Interest coverageRatio

2004-05 244.75 63.68 3.84343593

2005-06 301.26 66.78 4.511230907

2006-07 410.96 89.04 4.615453729

2007-08 547.75 131.83 4.154972313

2008-09 822.61 304.12 2.704886229

Years 2004-05 2005-06 2006-07 2007-08 2008-09

Interest.Coverage Ratio 3.84 4.51 4.62 4.15 2.7

Interpretation of Interest Coverage Ratio:

A ratio of 6 to 7 times is considered satisfactory.

Here Interest coverage Ratio has shown an increasing trend from years 2004-05 to 2006-

07 and has shown a decreasing trend in last two years.

77

Interest coverage Ratio =


78/100

In year 2008-09 ratio is lowest i.e. 2.7 times. In year 2006-07 the ratio is highest i.e. 4.62

times, but is not at all satisfactory when compared 6-7 times. This indicates excessive use

of debt or inefficient operations.

Suggestions:

As seen earlier in case of total Debt ratio and Debt-equity ratio, even interest coverage

ratio is not satisfactory this is because of the reason that company uses too much of debt

capital, so it needs to review its portfolio regarding use of debt in its capital mix.

Moreover the company should make efforts to improve the operational efficiency, or to

retire debt to have a comfortable coverage ratio. And this can be done by analysing the

variability of the companys cash flows over time

(C) Activity Ratios

Funds of creditors and owners are invested in various assets generate sales and profit. The better

the management of assets the larger is the amount of sales. Activity ratios are employed to

evaluate the efficiency with which the firm manages and utilizes its assets. These ratios are alsocalled as turn over ratios because they indicate the speed at with which assets are being

converted or turned over into sales. Activity ratios, thus involve a relationship between sale and

assets. A proper balance between sales and assets generally reflects that assets are managed well.

Several activity ratios can be calculated to judge the effectiveness of asset utilization.

Activity ratios can be further classified as under:

1) Inventory/Stock turnover Ratio.

2) No. of days Inventory.

3) Debtors turnover Ratio.

4) Asset Turnover Ratio.

78


79/100

5) Working capital turnover Ratio.

1) Inventory/ Stock turnover Ratio:

This ratio indicates the number of times inventory is replaced during the year. It measures the

relationship between cost of goods sold and the inventory level. This ratio calculated by dividing

Cost of Goods Sold (COGS) by Average stock (or inventory)

Where,

Cost of Goods Sold (COGS) implies Sales Operating Profit or EBITDA.

Average Inventory implies total Inventory/2.

Yearscost of goods sold

(Rs. Crore)Average inventories

(Rs. Crore) STR

2004-05 999.75 181.635 5.5041704522005-06 1119.44 179.075 6.251235516

2006-07 1423.72 232.23 6.130646342

2007-08 1622.66 343.79 4.719916228

2008-09 2154.32 471.92 4.565011019

79

Years 2004-05 2005-06 2006-07 2007-08 2008-09

InventoryTurnover Ratio

5.5times

6.25times

6.13times

4.71times

4.56times

Inventory turnover Ratio: Cost of goods sold(COGS)


80/100


81/100

2008-09 360 4.56 78.94736842

Years 2004-05 2005-06 2006-07 2007-08 2008-09

No. of Days,

Inventory

65

Days

57

Days

58

Days

76

Days

78

Days

Interpretation of no. of days

Here more inventory days indicates that company is holding its stock for longer period of

time and investments in inventories is blocked which would increase costs and reduce

profits, on the contrary less inventory holding days is indicative of good inventory

management system for a company

In year 2005-06 the holding period is least i.e.57days and then onwards it has shown an

increasing trend and was highest in year 2008-09 i.e.78days.

Suggestion:

Company should investigate and find out slow moving or absolute stock and take

appropriate steps to write-off them as soon as possible otherwise this will adversely

affect working capital and liquidity position of the company

Company needs to reduce investment in sluggish inventories that leads to unnecessary

tied-up of funds. Failure of doing so may lead to increased costs and reduced profits. So

the absolute inventories must be written off

3) Debtors Turnover Ratio

This ratio is a test of the liquidity of the debtors of a firm. It shows the relationship betweencredit sales and debtors.

81

Debtors Turnover Ratio = Credit

Sales X360 da s


82/100


83/100

YearsSales

(Rs. Crore)Capital Employed

(Rs. Crore)Assets Turnover

Ratio

2004-05 1224.5 2001.31 0.611849239

2005-06 1420.7 3020.03 0.47042579

2006-07 1824.68 4361.2 0.418389434

2007-08 2170.41 7198.65 0.301502365

2008-09 2976.93 8351.42 0.356457944

Years 2004-05 2005-06 2006-07 2007-08 2008-09

Assetsturnover

0.61Times

0.47times

0.41times

0.31times

0.35times

Interpretation of Asset turns over Ratio.

Ratio of more than one should be considered to be satisfactory. But here company is not

able to maintain that ratio which means there are unutilized or underutilized assets in

company.

In the year 2004-05 the ratio is highest but doest show any satisfaction. As since

company is able to generate only 0.60Rs of sales for every one rupee capital employed in

net assets. Besides this in year 2007-08 this condition has gone worsen as ratio reached

its lowest level i.e. 0.3 which shows companys inefficiency in utilizing its assets.

Suggestions

Companys sales have increased but not in the proportion of increase in net assets or

capital employed.

Company needs to improve a lot as far as operational performance is concerned, more

sales promotion activities should be carried out t increase sales at this given level of

assets On the other hand it necessary to check whether assets are properly valued ie.

Whether undervalued or overvalued because valuation of assets is very important.

83


84/100

5) Working Capital turnover ratio:

A firm may also like to relate net current assets (or net working capital gap) to sales. It may thus

compute net working capital turnover by dividing sales by net working capital.

Where, Networking Capital=( Total Current Assets)-(Total Current Liabilities)

YearsSales

(Rs. Crore)

Net Working

Capital(Rs. Crore)

Working

capitalturnover

2004-05 1224.5 711.91 1.720020789

2005-06 1420.7 735.77 1.93090232

2006-07 1824.68 621.45 2.93616542

2007-08 2170.41 1036.37 2.094242404

2008-09 2976.93 709.91 4.193390711

Years 2004-052005-

06 2006-07 2007-08 2008-09

Working capitalTurnover

1.72times

1.93times

2.93times

2.09times

4.19times

84

Working Capital turnover = Sales


85/100

Interpretation o f Working capital Turnover Ratio

From this point of view companys working operational performance is quite sound.

Since from year 2004-05 to 2008-09 working capital turnover ratios has shown an increasing

trend. In year 2008-09 this ratio is highest i.e. 4.19times which implies that for every one rupee

of working capital company is able to generate 4.19 rupee of sales.

This is because companys sales have increased year by year one the one hand while on

the other hand net working capital has reduced.

Suggestions

Company must maintain this level of working capital but not being so optimistic it

should see that net working capital doesnt get reduced which stagnates growth. Because

due to inadequate working capital it becomes difficult for the firm to undertake profitable

project.

85


86/100

D) Profitability Ratios

Profit is the difference between revenues and expenses over a period of time (usually one year).

Profit is the ultimate output of a company, and it will have no future if it fails to make

sufficient profits. Therefore the financial manager should continuously evaluate the efficiency of

the company in terms of profits. The profitability ratios are calculated to measure the operating

efficiency of the company. Besides management of the company, creditors and owners are also

interested in the profitability of the firm. Creditors want to get repayment of their principal

regularly. Owners want to get a required rate of return on their investments. This is only possible

when the company earns enough profits.

Profitability Ratios can be classified as under:

1) Gross Profit Margin

2) Net Profit Margin

3) Rate of return on Investments (ROI)ORRate of return on Capital Employed (ROCE).

4) Rate of return on Equity

5) Earnings per Share.

1) Gross Profit Margin:

TheGross Profit Margin reflects the efficiency with which management produces each unit of

product. This ratio indicates the average spread between the cost of goods sold and the sales

revenue. A firm should have a reasonable gross profit margin to ensure coverage of its operating

expenses and ensure adequate return to the owners of the business i.e. shareholders.

To judge whether the ratio is satisfactory or not, it should be compared with the firms past ratios

or with the ratio of similar firms in the same industry or with the industry average.This ratio is calculated by dividing gross profit by sales. It is expressed as a percentage.

86

Gross Profit Margin= EBIT


87/100

Years

EBIT

(Rs. Crore)

Sales

(Rs. Crore)

GP Margin

(%)2004-05 187.19 1224.5 15.28706

2005-06 220.78 1420.7 15.54023

2006-07 278.92 1824.68 15.28597

2007-08 385.79 2170.41 17.77498

2008-09 589.11 2976.93 19.78918

Years 2004-05 2005-06 2006-07 2007-08 2008-09

GrossProfitMargin(%) 15.28% 15.54% 15.28% 17.77% 19.78%

Interpretation of GP ratio:

GP ratio has shown an increasing trend which shows companys profitability condition is

well also companys operating efficiency is also satisfactory.

In years 2007-08 and 2008-09 there is more than 2% & 4%increase in GP ratio

respectively as compared to that of year 2005-06, which indicates that company is

operating at an efficient pace. This is because both sales and operating profit haveincreased in these years.

Suggestions

Company should maintain this pace of selling finished goods so that it can fetch desired

rate of operating profit.

Moreover company should make efforts to reduce its variable costs in order to earn more

profit margins i

34631625 Summer Training Report Alok Industries Ltd Vapi

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