NITESH PARIHAR

8/12/2019 NITESH PARIHAR

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ACKNOWLEDGEMENT

It was golden opportunity and nice pleasure for me to pursuer summer training from Raymond

Ltd. (Textile Division Chhindwara) M.P

I Nitesh parihar & Pravin Bhoyar (TIT College, Bhopal) work on the Project on Management

Accounting Function & Ratio Analysis of Raymond Ltd.

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

charge in Raymond Ltd.

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

me.

I am very much thankful to complete my summer Training under Mr. Subodh Sathe (Sr.

Manager Account) and who was imparted a necessary guidance and Knowledge for the

fulfillment of the Project.

NITESH PARIHAR

PRAVIN BHOYAR


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INDEX

Particulars

About the Project

Objectives of the Project

History and Background of Raymond

Board of Directors

Organization Setup-Finance

Short Resume of Chhindwara Plant

Raw Materials

Production Process

Foreign Export Earning and Outgo

Export Status in Raymond


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Relationship of Finance with Management Accounting

Management Accounting Process(Accounting Department)

Sales Accounting

sales and Order Details Sales Procedure

Banking Transaction Details

Bill Discounting Bill Passing Bank Payment & Receipt

NEWS PAPER ARTICLE

Company Annual Report

Financial Analysis

a. Ratio analysis


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PREFACE

I pleased to submit my study report on Raymond Limited (textiledivision) Chhindwara carried out as a part of my syllabus. Raymond (THECOMPLETE MAN) is one of the pioneers of textile industry India .As presentbusiness scenario is very responsive to the changes created bymicroenvironment I can strongly feel the changing dimension of thedynamic filed Finance. This training report gives us a general idea about

day to day working of account department of the Raymond Limited.

Chhindwara. The decisions and action taken by finance people depend ontheir practice knowledge besides their theoretical Knowledge. This justifiesthe need of strong practical background.

Various experience gained by me in Raymond Limited Chhindwaraare presented in this report such that the practical obligation of theoreticalKnowledge perceived by me in 2 nd SEM is justified.


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HISTORY AND BACKGROUND OF

Raymond Limited

Raymond Limited was initially incorporated under the name of the WADIA

WOOOLEN MILLS and was then managed by E.D.SASSOON. Shri JUGGILAL SINGHANIA

of Kanpur took over the management was brought under the control of J.K Trust Mumbai (A

Public (charitable trust) in the year 1925. There after the name was changed to Raymond

Woolen Mills Limited.

In late 1994, the Raymond woolen mills was changed to Raymond Limited.Traditional product line were discounting High quality become a member of the watchword and thediversification program got a head start. Non traditional blend of natural and manmade fabric wereintroduced back by sound research and development. This resulted in greater consumer satisfactionboth at home and abroad.

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

The subsidiary companies of Raymond Limited are as follows:-

Raymond Apparel Limited Pashmina Holding Limited Raymond Info Tech Limited Jaykeyorg AG JK (ENGLAND) Limited Regency Textile Limited Portuguese Limited Textile Regency, Sociended Limited


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A SHORT RESUME OF CHHINDWARA UNIT

Mill : RAYMOND LIMITED

(Textile division Chhindwara)

B-1A.K.V.N. Kailash Nagar

Tehsil - Sausar

District Chhindwara

Location : Raymond Limited is situated in Boregaon

This comes under M.P audhyogik viksa

Kendra nigam, Jabalpur

Head office : J.K Organization

J.K Bldg, N. Morarjee Marge, Ballard zadgaon

Mumbai 400038

Registered office : Raymond Limited

Plot no. 156/11, No.2 village zadgaon

Ratnagiri (M.H) 415612

Production commenced on : 1 st April 1991

Work director : Mr. VINOD PADMAHABHAN


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Product manufacture : Suiting polyester / wool, polyester/viscous

All wool, furnishing fabrics

Area of the plot : 100 acre

Turn over : 400 crore

Our output : 11 lacs meter per month

Power consumption : 165363 units per day

Water consumption : 45 lacs liters per day

Coal consumption : 55 metrics tones per day

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

Workers-3145

Readymade brand : Park Avenue, Parx, Zapp

OVER VIEW OF CHHINDWARA UNIT


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Raymond Limited Chhindwara is the flagship company of J.K groups (westerndivision). It produces high quality polyester wool fabric and polyester viscose blendsfabrics.

It began operation on 1 st April 1991 to cater growing demand of premium suting. Theplant is at a distance of 57 kms from ORANGEB CITY Nagpur and 70 kms fromChhindwara. The 100 acre plot stood as a pioneer in the socio economic developmentof this region.

The factor behind the location of plant in Chhindwara.

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

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

Most of their productions are export.

The present capacity of the plant after expansion, which has been concludedrecently, is 25,000 Mts. of fabric per day. Thus approximately 86 lacs Mtr. is producedper annum at Chhindwara. The finishing department is the largest of its kind is Asiawith a capacity of 40,000 Mtr. Per day. This fact opens to the possibility of carrying out


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Super Microlite labels there all wool, extra fine high denier qualities can completewith the best in the world....

They promote the Park Avenue bran d of ready made suits and other mensgarments and accessories they are the suppliers at J.K Bombay. As a matter of habitthey have done very well.

ABOUT THE PROJECT

The main Focuses of the Project is to Understand Management AccountingFunctions ( Sales Accounting , cost Accounting ) , Production Process & ManagerialTools ( Ratio Analysis & Schedule change in working capital) of the Raymond Limited

Textile division.

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

BOARD OF DIRECTORS


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Name of Director Company ofDirectorship

Directorshipin other

company ()

No. of Boardcommittees (otherthen Raymond Ltd)

in whichchairman/member

Relationshipinterse

Directors

Dr. Vijaypat singhania Promoter Non-Executive

Shri Gautam HariSinghania Chairman

and Managing Director

Promoter Executive

Shri B.K Kedia (upto

may 22,2008

Independent ,Non-

Executive

Shri Nana Chudasama Independent ,Non-Executive

Shri B.K Bhargava Independent ,Non-Executive

Shri U.V Rao Independent ,Non-Executive

Shri I.D Agarwal Independent ,Non-Executive

Shri Nabankur Gupta Independent ,Non-Executive

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

Non-Independent,Non-Executive

ORGANIZATION SETUP-FINANCE


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Planning and Control

Financial ControllerVice President Production

Additional Funds

Raw materials

Wool:- The Merino brand of wool is imported from Australia, and supplied as

Topes by the wool scouring & Grey combing department.

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

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

GODOWN FOR RAW MATERIAL

Here is three section of godown for keeping raw material.


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Raw material godown Top godown Waste godown.

RAW MATERIAL NORMS

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

SWL Scoured Wool

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

TOP-Polyester TOP-Wool TOP

OTHER MATERIAL:-

FLEX TOP (Linen TOP) SILK TOP VISCOSE TOP LENRING MODEL TOP BLENDED TOP LENRING MODEL TOP ACRYLIC FIBRE CASHMERE TOP

Raw material Godown receives the following material from the supplier:-

Supplier Name Material


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RIL- Reliance Industries TOW-PSF

Ltd. Pataganga (M.S)

Surat (Gujrat)

FRL- Futura Fibers TOW-PSF-TOP

Chennai

GIL-Grasim Industries Ltd VSF-TOP

Nagda (M.P)

DAL-Dewavrin Australia P. Ltd Greasy Wool

CDDL-Compagnie Importin DeLaines Greasy Wool

BEAPL-BWK Elders Australia P. Ltd Greasy Wool

RSA-Rantax S.A Curuguay Greasy Wool

NV-NVJOS Vennestex (Belgium) Greasy Wool

SNSM-Socete Novvelle Textile Maclou FLEX TOP


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France and many others Suppliers

From INDIA

AAT-Azad Agro Traders Kashmir Greasy Wool

ESL-East EndSilk Ltd. Silk TOP

(Malda)W.B

Raw Material Receipt and Consumption Per Day average

Per day Raw Material Receipt Average 30-40 Ton

Details of Raw Materials

Greasy Wool 8.90 Ton

TOW 3-5 Ton

PSF 3-10 Ton

VSF 1.70 Ton

Polyester Top in & outside 3.90+4.50 Ton


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Wool Top in & outside 4.30+0.50 Ton

Per Day RM Consumption Average 25.90 Ton

Details of Raw Materials

Department Raw Material Weight

Combing Dept. Greasy Wool 7.00 Ton

Converter Dept . TOW 4.00 Ton

SVSPG Dept PSF+VSF 1.40+1.30(2.70 Ton)

Dyeing Dept. Wool Top+Poly Top+PSF 3.0+3.80+2.0(8Ton)

Recombing Dept. Wool Top+Poly Top 1.50+1.90 (3.40 Ton)

Bill Passing of Raw Material

For Passing Bill of Raw Material Following Document are required.

Rate Approval Register

Good Received Report

Bill


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Procedure for the Passing of a Bill of Raw Material.

Raw material is required for the Production Process

Requirement is send to PPD (Production Planning Department)

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

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

Approval authority for the PAN is the preindent Thane unit

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

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

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

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

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


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

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

-Basic Price Excise Duty Tax Amount Other Charges

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

Production Process

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

First in the sequence is the row materials go down whrer the basic inputsprocured are stored, acconted for and intimated to the Commercial Department. Thefirst stage of processing is Dyeing. According to dyeing plan set by the productionplanners, the dyeing department is issued tops. Fabric and yarns produced at furtherstages which are grey or not have the desired pigmentation are also dyed.


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Some polyester is produced in the form of tows. These are cut and convertedinto silver form and made into tops in the converter section. The material is send backto the row material godown from where it is sent to the dyeing department. Onlyafter a perfect match with standard shades are the tops sent to the RecombingDepartment.

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

Tops-Roll of silver

Tow- Rolls of continuous film or filament of fiber.

Silver- Fiber in a rope like form.

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

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


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

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

EXPORT STATUS IN RAYMOND

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

The production of Fabric both Woolen and Blended was incre ased up to 190

lacs meter per year for the total three plants of India. A producer of blanket, fewdecades ago, the company now produce wide variety of wools, wools blended fabricsincluding very exquisite and delicate fabric under the microclinte in the country aswell as in the world.


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The networks of exclusive Raymond retail shop are unique in country, nearly160 in over 75 cities causing dread in the market. The retail shop is its own property.Company also runs the shop. And for the first time Raymond has introduced theconcept of ready made suits under the brand name of Parx or Park Avenue.

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

BILL DISCOUNTING

Sales:-

Raymond has three types of sales:-

Direct sale Export sales Bills discounting

Bill discounting

In this type of sales there are three parties

Seller Buyer Bank


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It is a credit sale. This type of sale is generally found in big organizations. Becauseof large amount seller wants money immediately after sales, so he take the help ofbank. In bill discounting there are again two type of sale:-

BCDA BCDA

BCDA: - Bills collection document through presentation. The Process of BCDA is asfollow.

No credit period Bank release the document after realization of amount from party Buyer gets the goods after he make payment to the bank As soon as the bank get the draft it credit seller (Raymond) account Bank charge some commission & interest on Invoice price. Some bank charge interest & commission during discounting some after

realization of amount Bank retains the bill for 25 days.

BCDA: - Bills collection document through acceptance. The process of BCDA is asfollow.

Credit period like 30,45 or 60 days Bank released the document just after discounting. Buyer gets the goods without making payment. Bank credit the seller (Raymond) account as it gets the draft. Bank charges some commission and interest on invoice price. Bank retain the bill for stipulated period plus seven days after due date. In case of dishonors dank return the bill to initial bank and then initial

bank immediately debits the sellers account. There are two bank through which Raymond discount its bill from

Chhindwara division. State Bank of India

Central Bank of India

The Raymond has appointed 23 selling agent through the country. The duty ofagent is to get order from the dealers. During booking the agent make adocument known as buyer master data sheet. These sheets contain the detailabout bank through which they want to discount the bill. From the sheet


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company bifurcate seller according to their bank. The head office at THANE hasaccount in many banks. So the discounting which cant be done fromChhindwara division can do through Thane head office.

Procedure of Bill Discounting

We prepare the invoice along with LR copy and Hundi in salesaccounting.

Check commission and interest payable by us. Fill up paying slip for the discount amount with respective banks. After the discounting the bank gives us immediate credit.

COMMISSION CHARGES OF BILL AT BANKS

Central Bank of India Rs. 9 per Thousand

State Bank of India Rs. 10 per Thousand

Rate of Interest

Central Bank of India 14%

State Bank of India 14%


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Postal Charges

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

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

In case of dishonor of the bill, bank will return the dishonor bill received from

collecting branch and will debit our account with them and will in turn debit, Thane

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

BILL PASSING

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

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

Bill Passing is Two Types


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For store For Raw MaterialIn bill passing P.V.J. (Purchase Journal Voucher) is prepared.

For Passing Store Bill Following Document are required

Purchase Order G.R.R. (Goods Received Reports)

Purchase Order:-Purchase order is prepared by purchase department on the

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

APPROVING AUTHORITY FOR THE PURCHASE ORDRE IS WORKS DIRECTOR.

G.R.R (Goods Received Report):-It is prepared on the basis of terms andcondition of purchase order by store department. This G.R.R. is then sent toconcerned department along with the materials which is indented by them


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mentioned in G.R.R. Then the department approves this approved G.R.R. is sentto stores. The stores sent all such approved G.R.R. to accounts department forthe passing of the bill.

Procedure for BILL PASSING of general stores

Materials are required by all the departments Required material is sent to the stores department and the department

makes three copy of it. Indent material is approved by the top management. Indent material is sent to purchase department.

Purchase department invites the quotation from the supplier and as perthe quality they place an order. Purchase department send the order to the party who supplies the

material. Stores department receives the material and check the material as per

the terms and condition of purchase order. If material is not as per the order placed, store will reject the materials

and return to the party. After the acceptance of the material by the concerned department stores

department will make G.R.R.

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

If there is shortage of material G.R.R. is made for the material receive

and shortage and excess reports. If material are not as per the quality it will be rejected and returns tothe party.

In G.R.R. challan Quantity, Receipt quantity and acceptance quantityare mentioned and G.R.R. prepared after acceptance.

After supply of material party sends the bill


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PJV (PURCHASE JOURNAL VOUCHER) is prepared on receipt of G.R.R.purchase order and invoice.

Accounting Treatment

BY THANE HADE OFFICE

At the time of sale they debit the buyer account by invoice price and

bank processing charges as per bank rule. When bill is drown or discounted by bank, they credit the buyersaccount.

When bill is discounted they debit bank account by invoice price andcredit it by commission & interest charges.

In case of dishonor they again debit the buyers account credit bankaccount.

BY CHHINDWARA DIVISION

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


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By bank

When bill is discounted bank immediately credit our account anddebit it by interest and commission.

When bill is discounted bank reserve the above entry.

RAYMOND LTD. IS USING THE SAP SOFTWARE FOR ALL COMPANY WORK, LIKE PRODUCTION PLANNING AND CONTROL, PRODUCTION PROCESS, HUMANRESOURCES DEPARTMENT, MAKETING,

PURCHASING AND ALSO IN ACCOUNTING DEPARTMENT

SINCE FEB.2007 S

SYSTEMS, APPLICATION AND PRODUCTS IN DATAPROCESSING

SALES ACCOUNTING INDEX

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

SALES ACCOUNTING FABRICS CODE & DETAILS


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Types of dealers and code (DISTRIBUTION OF CHHENNAL)

Sr. No. Customer Group Name Customer Code

1 Wholesaler 01

2 Retailer 02

3 Distributor 03

4 Company Shops 04

5 Franchise Shop 05

6 Defense 06

7 Airlines 07

8 Public Sector 08

9 Private Sector 09

10 Banks 10

11 Hospitality 11

12 Educational 12

13 Corporate Attire 13

14 Automobile 14

15 Converter 15

16 Tailor 16


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BILLING AREA WISE INVOICE NO.

Sr. No. BILLING AREA INVOICE NO.

01 0 S00200001

02 1 S01200001

03 2 S02200001

04 3 S03200001

05 6 S06200001

06 7 S07200001

07 8 S08200001

08 11 S11200001

09 12 S12200001

10 14 S14200001

11 16 S16200001

12 17 S17200001

13 20 S20200001

14 23 S23200001

15 24 S24200001

16 25 S25200001

17 26 S26200001

18 27 S27200001

19 34 S34200001


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20 35 S35200001

21 40 S40200001

21 41 S41200001

23 42 S42200001

24 47 S47200001

25 53 S53200001

26 55 S55200001

27 58 S58200001

28 PLUSH W86200001

NOTE: -

1ST

Character S for Chhindwara unit code. 2nd & 3rd Character is 58 for area code.

4 th character is 2 for year code. Last five character is 00001Invoice running nos.


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SALES PROCEDURE

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

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

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

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

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


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

AREAWISE STATION LIST WITH TRANSPORT NAME

AREA CODE STATION AREA TRANSPORT NAME

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

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

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

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

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


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

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

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

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

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

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

14 KOLKATA (W.BANGAL) INLAND SURFACE SERVICE

15 ASSAM N.E.C.C

16 ORISSA CARRYCO

17 NEPAL N.E.C.C

20 EASTERN M.P NEW GOLDEN TPT.

21 NORTH MAHARASHTRA ARCO, BATCH, & HANDDEL

23 WESTERN M.P NEW GOLDEN TPT


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24 RAJASTHAN NEW GOLDEN TPT

25 GUJRAT R.I.T.CO TRANSPORT

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

TRANSPORT

27 GOA GHATGE PATIL TRANSPORT

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

35 BOMBAY R.I.T.CO. TRANSPORT

40 ANDHRA PRADESH ASSOCIATED ROAD LINES

41 KARNATAKA PATEL, VIJAYNAND & G.P.T

42 TAMILNADU PATEL, VIJAYNAND & G.P.T

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

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

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


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BATCH MAKING PROCEDURE

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

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


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On the basis of challan which are in hand and ready for dispatch the warehousepunch the challan in the batch programme. Looking to the capacity of lorry a batch canbe made of maximum of 350 Bales or 150 bales. which covers 22 to24 thousands metersrespectively in every challan gross weight is feeded in the same programme after

punching all challan the batch programme show total numbers of bale and total meterswhich are ready for submission to EDP department for processing the final dispatch.After that one slip is prepared by warehouse department for submission of batch to EDPdepartment having the details of a batch.

Date of Dispatch

Total no. of bales

Total meters

Type of dispatch

Time

SALES ACCOUNTING


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PROCESS:-At the time of processing, there is a possibility of rejection of fewbales due to some reasons like C&D buyer, exclusively quality or without rateand when the EDP gives green signal that as per the batch, total mtrs and totalbales are getting tallied after processing the excise invoice, warehouse can start

the loading of bales which take 1-2 hours and for final processing of batch lorryshould go out from the premises within three hour.

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

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

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

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

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

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

DELIVERY CHALLAN:-It is printed for warehouse shipment section, whichare attached with shipment shade card having detail of bail no, total


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quantity of bales quality wise and shade wise. For each bale one deliverychallan is printed and one DR No. is generated.

FINAL INVOICE COPY:-After giving DR No. EDP option of batch and oncompletion of processing, final invoice copy generates, buyer no, buyername & date, invoice no, LR No & Date, description of qualities, ex-millrate total quantity, total gross weight, net value, total excise duty T CCess, insurance and final invoice value drawn.

DEMAND DRAFT:-It is bank document which are attached along withbank party invoice to present the bill before respective bank showing

value of goods, invoice no, draft no, bank name, payment term, LR No,and due date.

INSURANCE STAMENT:-This statement is printed for paying insurancespremium against goods dispatch having invoice no, LR No, anddeclaration value.

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

BOMBAY PARTY STATEMENT: - This statement shows party wise dispatchto Bombay area showing LR No. &date, buyer name & no value ofinvoice.

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


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

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

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

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

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

REMITTANCE SCHEDULE:-This statement is generated against bankparties which are also attached with the invoice before sending for billscollection to respective bank. After getting the entire document the EDPdept. final check of invoice are done by sales account. The computerizedMTR are signed by transporters which are attached along with theinvoice.

PREPARATION OF LORRY RECEIPT

Always the consignee will be the Raymond limited. The consignee can be thefollowing


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If party is direct the consignee is self If party is FOREIGN BANK, DELHI, BOMBAY the consignee is self. If party is NUTAN SAHKARI BANK &UNION BANK OF INDIA the consignee

bank is self. If party is other than above is a BANK PARTY the consignee is name of

the bank. The complete set of document will consist of If require B/D, covering letter, direct party letter. Two set of invoice namely consignee bank &direct. Lorry receipt (consigner & consignee) Shipment card (along with sample)

INVOICING

The complete set of document shall consist of

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

CHECKING OF INVOICE

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

The following have to be checked with L.R. and the invoice


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Transporters name Destination L.R. no.

4) Bale no.

5) Check meter ago bale wise. Check for flag (flag should not apper forChhindwara Rags total damaged & fents.)

6) Check Excise duty (No Excise for orient silk & sherwani)

7) No charges like S.T, C.S.T. and G.S.T.

8) If hand delivery parties, check octra for Nagpur delivary.

9) For Bank invoices check bank processing charges & draft no.

10) If feints are dispatched under ACD (14.05%), BCD (20%), ccd (25.7%) thendiscount is to be checked.

11) Check whether Invoice is legible and in good condition.

Method of Depreciation And Amortisation

Depreciation on factory building, plant and machinery, electrical installations andequipment and aircraft is provided on the straight line method (S.L.M.) by writing off95% of the cost of the assets over the specified period of the assets in accordance withthe provision of section 205 (2)(b) of the Companies Act, 1956;

Depreciation on other fixed assets (other than Land, Live stock where is no

deprecation is provided), is provided on the Written Down Value Method (W.D.V.)at the rates specified in schedule XIV to the Companies Act, 1956 from time to time.


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

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

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

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

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

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

TUFS fabric likely to get a double knit

INTEREST CLAIMS


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Ministry has also urged the finmin to clear backlog of Rs. 1,400-crore interestclaims.

THE textile ministry has approached the finance ministry with a proposal to double the fund

allocation of a scheme that provides funds to the industry at benign interest rates. The finance

ministry is deliberating doubling the technology up gradation fund scheme (TUFS) funds from Rs.1,090 crore in 2008-09 to 2,000 crore this year, a textile ministry official said. The scheme, which

helps textile companies modernize their equipment, was conceived after the government saw

many units still dependent on traditional and less efficient ways of production. Under TUFS, the

government reimburses 5% interest charged by the financial institutions and banks for loans to

textile units. With 16 banks acting as nodal agencies, the scheme implemented through 250 other

banks. A decision on the amount is yet to be taken, the official said, requesting anonymity.

The finance minister is sensitive to the needs of the industry. We are hoping that the allocationwould go up in the forthcoming Budget.

The textile ministry has also urged the finance ministry to clear the backlog of about Rs. 1, 400

crore interest interest claims. Textile firms are facing trouble in getting TUFS reimbursements for

2008-09. The ministry recently released Rs. 600 crore to settle claims up to September 2008. The

official pointed out that many companies were still interested in availing the benefits of the

scheme. To meet their demand, it was estimated that the annual interest claims could be over Rs.

2000 crore.

The government has to honour its commit ment of reimbursing interest paid on loans taken by

the sector for modernization. If there is a high demand for such loans, then adequate provisioning

has to be made in the Budget to ensure that the reimbursement claims are dealt with on time.


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help Indian textile will be to extend the National Rural Employment Guarantee Act to textile

production. Textile producer should be allowed to hire workers at up to 100 days a year, who

will be paid the minimum wage by state governments.

This will provide textile producers with free labour, so they should be asked to supplement the minimum

wage by 50%. This will make the Indian textile industry highly competitive, give it labour flexibility, and

employ idle workers. The scheme should automatically lapse after 12 months by which time the recession

should be over. This is the way to help the industry, not protectionism.

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

2002-03

(Rs.in lack)

2003-04

(Rs. Inlack

2004-05

(Rs. Inlack

SOURESES OFFUND

Shareholders fund

Share capital 6138.08 6138.08 6138.08

Reserves & surplus 89297.33 98717.37 104255.5

95435.41 104855.45 110393.53

LOAN FUND

Secured Loan 27179.69 22928.24 39333.3

Unsecured Loan 20960.2 24722.05 17944.5

48139.89 47650.29 57277.8

Deferred tax4912.83 5701.71 5402.35


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liability (net)

148488.13 158207.45 173073.68

APPLICATION OFFUNDS:

Fixed Assets:

Gross block 90893.54 97952.73 114069

Less Depreciation 51465.77 57309.49 62798.1

Net Block 39427.77 40643.24 51270.86

Capital work inprogress 1112.25 1478.85 6291.96

Technical know-how& Software 61.85

40601.87 42122.09 57562.82

Investment 61231.64 71586.85 73427.48

Current Assets,

Loan and Advn.

Inventories 27734.83 29490.66 28756.59

Sundry Debtors 29070.82 24614.52 22627.67

Cash and BankBalance 1494.35 2675.92 1324.83

Other Current Assets 2516.56 1887.79 2277.72

Loan and Advances 12863.63 12122.14 12206.35

73680.24 70791.03 67193.16

Less:

Current Liabilitiesand Provision


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Current Liabilities 20217.82 18037.24 19504.61

Provisions 6839.76 8373.15 5605.17

27057.58 26410.39 25109.78

Net Current Assets 46622.66 44380.64 42083.38

TOTAL 148488.13 158207.45 173073.68

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

2005-06

(Rs. Inlack

2006-07

Rs.inLack

2007-

08

Rs.inLack

SOURESES OFFUND

Shareholdersfund

Share capital 6138.08 6138.08 6138

Reserves &surplus 112856.45 123477.9 2087

Share Warrants 133690

118994.53 135615.94 141915

LOAN FUND

Secured Loan 54667.56 123003.5 50498

Unsecured Loan 22120.28 56686.05 38203

76787.84 78761.01 88701

Deferred taxliability (net) 6402.73 5587.73 5967

202185.1 219964.68 236583


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TOTAL

APPLICATIONOF FUNDS:

Fixed Assets:

Gross block 136672.8 123003.5 134540

LessDepreciation 67765.8 55397.84 62587

Net Block 68907 67605.64 71952

Capital work inprogress 15604.81 8568.51 1358

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

84511.81 76174.15 73310

Investment 73660.28 98447.5 104730

Current Assets,Loan and Adv

Inventories 31904.16 28366.36 32974

Sundry Debtors 24846.74 26877.07 28988

Cash and BankBalance 2503.17 2561.4 2182

Other Current Assets 3315.06 2969.9 5775

Loan and

Advances 14442.06 21715.86 24421

77011.19 82490.59 94340

Less:

CurrentLiabilities and


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Provision

CurrentLiabilities 26227.34 29083.9 28245

Provisions 6770.84 8063.66 7553

32998.18 37147.56 35799

Net CurrentAssets 44013.01 45343.03 58543

TOTAL 202185.1 219964.68 236583

BALANCE SHEET AS AT 31ST MARCH, 2009.

2008-09

Rs.in Lack

SOURESES OF FUND

Shareholders fund

Share capital 6138.08

Share Warrants 2086.95

Reserve & Surplus 106560.29

114785.32

LOAN FUND

Secured Loan 86884.81

Unsecured Loan 47621.85

134506.66


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Deferred tax liability (net) 2837.2

TOTAL 252129.18

APPLICATION OF FUNDS:

Fixed Assets:

Gross block 170064.13

Less Depreciation 70159

Net Block 99904.55

Capital work in progress 6210.69

Technical know-how & Software - -

106115.24

Investment 88859.46

Current Assets, Loan and Adv

Inventories 34040.36

Sundry Debtors 30447.61

Cash and Bank Balance 4679.94

Other Current Assets 5066.34

Loan and Advances 23931.08

98165.33

Less:

Current Liabilities and Provision

Current Liabilities 35044.23

Provisions 5966.62

41010.85


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Net Current Assets 57154.48

TOTAL 252129.18

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

31st March,2003

(Rs. In Lack)

INCOME

Sales, Services and Export incentives 102058.56

other Income 7529.25

109587.81

Increase/(Decrease) in finished

and process stock -17.23

109570.58

EXPENDITURE

Material Cost 23926.31

Manufacturing & Operating Cost 21321.94

Employment Cost 16803.66

Excise Duties 8448.83


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Administration, Selling & General Expenses 17316.96

Finance Charges & Variation 2727.11

Depreciation 5779.72

Miscellaneous Expenditure written off 127.03

96451.56

PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 13119.02

Add / (Less): EXCEPTIONAL ITEMS 194.59

PROFIT FOR THE YEAR BEFORE TAX 13313.61

Provision for Income Tax

Current Tax 3600

Deferred Tax 520.26

Provision for Wealth Tax 50

PROFIT FOR THE YEAR AFTER TAX 9143.35

Add / (Less): Prior period adjustments (net) -117.87

Excess provision for tax written back

Balance brought forward 4140.68

BALANCE AVAILABLE FOR APPROPRIATION 13166.16

APPROPRIATION

Debenture Redemption Reserve 375

General Reserve 6700

Dividend paid 0.38

Proposed Dividend 2762.14

Tax on proposed dividend 353.9

10191.42

Balance carried to Balance sheet 2974.74


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

Year ended

31st March,2004

(Rs. In Lack)

Year ended

31st March,2005

(Rs. In Lack)

INCOME

Sales, Services and Export incentives 102393.56 114382.74

other Income 14459.52 8256.28

Total 116853.08 122639.02

EXPENDITURE

Material Cost 31134.16 34683.24

Manufacturing & Operating Cost 22932.1 25816.24

(Increase)/Decrease in finished and process stock -417.46 1009.29

Employment Cost 18042.16 20287.69

Administration, Selling & General Expenses 18120.12 19943.38


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Finance Charges & Variation 2308.94 2883.14

Depreciation & Amortisation 6337.85 6376.72

Miscellaneous Expenditure written off 82.44

98540.31 110999.7

Less: Trial Run Expenditure Capitalized -10.96

110988.74

PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 18312.77 11650.28

Add / (Less): EXCEPTIONAL ITEMS 345.65 -2467.99

PROFIT FOR THE YEAR BEFORE TAX 18658.42 9182.29


Current Tax++ 4660 1775

Deferred Tax 788.88 -299.36

Provision for Wealth Tax 26 25

PROFIT FOR THE YEAR AFTER TAX 13183.54 7681.65

-146.98 -43.66

Excess provision for tax written back 192.38 676.55

Balance brought forward 2974.74 6144.78

BALANCE AVAILABLE FOR APPROPRIATION 16203.68 14459.32

APPROPRIATION

Debenture Redemption Reserve 250 250

General Reserve 6000 831.45

Dividend paid 0.41 0.36

Proposed Dividend 3375.95 2455.23

Tax on proposed dividend 432.54 320.87

10058.9 3857.91

Balance carried to Balance sheet 6144.78 10601.41


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Current Tax 2750

Deferred Tax 1000.38

Fringe Benefit Tax 358



Add / (Less): Prior period adjustment (net) -110.63

Excess provision for tax written back -18



APPROPRIATION


General Reserve 1210.05

Dividend paid



5984.52


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

Year ended

31st March,2007

(Rs. In Lack)

INCOME


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Sales, Services and Export incentives 129962.75

Less: Excise Duties -1543.4

128419.35

other Income 9077.82

137497.17

EXPENDITURE

Material Cost 37737.82

Manufacturing & Operating Cost 27099.12

(Increase)/Decrease in finished and process stock 791.45

Employment Cost 22558.39

Administration, Selling & General Expenses 26113.63

Finance Charges & Variation 4711.91

Depreciation & Amortisation 6305.51

125317.83

Less: Trial Run Expenditure Capitalized -51.04

Finished and process stock transferred on

divestment of Carded Woollen business -3468.26

PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 121798.53

Continuing operations 15172.47

Divested Denim business 526.17

15698.64

Add / (Less): EXCEPTIONAL ITEMS

Surplus on divestment of Denim business 8809.32

Others -684.68




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Current Tax 4210

Deferred Tax -815

Fringe Benefit Tax 275



Add / (Less): Prior period adjustment (net) 88.05

Excess/Short provision for tax written back -1.3



APPROPRIATION


General Reserve 4000



9040.62


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

Year ended

31st Year ended


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March,2008 31st March,2009

(Rs. In Lack) (Rs. In Lack)

INCOME

Sales, Services and Export incentives 133756.33 139325.37

Less: Excise Duties -1505.18 -1405.99

132251.15 137919.38

other Income 12080.89 9860.4

144332.04 147779.78

EXPENDITURE

Material Cost 46855.29 44290.85

Manufacturing & Operating Cost 26467.16 27030.47

(Increase)/Decrease in finished and process stock -3792.31 -2904.95

Employment Cost 23315.98 26100.26

Administration, Selling & General Expenses 30437.68 32845.78

Finance Charges & Variation 6010.34 8500.86

Loss/(Gain)on Variation In Foreign

Exchange Rates (Net) -1683.66 8910.27

Depreciation & Amortisation 8106.71 8881.35

135717.19 153654.89

PROFIT FOR THE YEAR BEFORE EXCEPTIONAL ITEMS 8614.85 -5875.11

Add / (Less): EXCEPTIONAL ITEMS -445.19 -23879.95

PROFIT FOR THE YEAR BEFORE TAX 8169.66 -29755.06


Current Tax 780.08

less/MAT Credit -642.08

Deferred Tax 1015.49 -3130.38


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Fringe Benefit Tax 342 315

Provision for Wealth Tax 62 100

PROFIT FOR THE YEAR AFTER TAX 6612.17 -27039.68

Add / (Less): Prior period adjustment (net) 1.03 -65.41

Tax in Respect of earlier year (Net) 629.1 -50.04

Balance brought forward 27888.77 32674.54

BALANCE AVAILABLE FOR APPROPRIATION 35131.07 5519.41

General Reserve 661.22 -

Proposed Dividend 1534.52 -

Tax on proposed dividend 260.79 -

Balance carried to Balance sheet 32674.54 5519.41

PROFIT AND LOSS A/C FOR THE YEAR ENDED 31.03.09 SHOWS LOSS OF RS5519.41 Lacs.


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ANALYSIS AND INTERPRETATION OF FINANACIAL STATEMENTS

INTRODUCTION

There are various methods or techniques used in analyzing Financial Statement. Such ascomparative statement, trend analysis, common-size statement, schedule of change in working

capital, fund flow and cash analysis, cost-volume-profit analysis. The Ratio Analysis is one ofthe most powerful tools of Financial Analysis. It is the process of establishing and interpretingvarious ratios (quantitative relationship between figures and groups of figures). It is with the helpof ratio that the financial statement can be analyzed more clearly and decision made from suchanalysis.

MEANING OF RATIO

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

The ratio is calculated by dividing one figure by the other figure. It may be expressed in any ofthe three way- TIMES, PROPORTION, PERCENTAGE accord ing to the convenience orsuitability. When value is divided by the other, the quotient obtained indicates TIME. If thequotient is multiplied by 100, we get the percentage. If we take proportion between the twofigures, we get the proportion or ratio.

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


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caliber of analyst, etc. are important factors which influence the use of ratios. Followingguidelines or factors may be kept in mind while interpreting various ratios.Accuracy of financial statements- The ratios are calculated from the data available in financialstatements. The reliability of ratios is linked to the accuracy of information in these statements.Before calculating ratios one should see whether proper concepts and conventions have been

used for preparing financial statements or not. These statements should also be properly audited by competent auditors. The precautions will establish the reliability of data given in financialstatements.Objective or purpose of analysis- The type of ratios to be calculated will depend up on the

purpose for which these are required. If the purpose is to study current financial position thenratio relating to current assets and current liabilities will be studied. The purpose of user is alsoimportant for analysis of ratios. A creditor, a banker, an investor, a shareholder, all has differentobject for studying ratios.Selection of ratios Another precaution in ratio analysis is the proper selection of appropriateratios. The ratios should match the purpose for which these are required. Calculation of largenumber of ratios without determining their need in the present context may confuse the things

instead of solving them. Only those ratios should be selected which can throw proper light on thematter to be discussed.Use of standards The ratios will give an indication of financial position only when discussedwith reference to certain standards. Unless otherwise these ratios are compared with standardsone will not be able to reach at conclusions. Theses standards may be rule of thumb as in case ofcurrent ratios (2:1) and acid test ratio (1:1), may be industry standard.Calibre of the analyst The ratios is only the tools of analysis and their interpretation willdepend up on the caliber and competence of the analyst. The utility of ratios is linked to theexpertise of the analyst.

USE AND SIGNIFICANCE OF RATIO ANALYSISThe ratio analysis is one of the most powerful tools of financial analysis. It is used as a device toanalyze and interpret the financial health of enterprise. Just like a doctor examines his patient byrecording his body temperature, blood pressure etc. before making his conclusion regarding theillness and before giving his treatment, a financial statements with various tools of analysis

before pressure, the commenting up on the financial health or weaknesses of an enterprise.The use of ratio is not confined to financial mangers only; there are different parties interested inthe ratio analysis for knowing the financial position of a firm for different purposes. The supplierof goods on credit, banks, financial institutions, investors, shareholders and management allmake use of ratio analysis as a tool in evaluating the financial position and performance of a firm

for granting credit, providing loans or making investments in the firm. With the use of ratioanalysis one can measure the financial condition of a firm and can point out whether thecondition is strong, good, questionable or poor. The conclusions can also be drawn as to whetherthe performance of the firm is improving or deteriorating. Thus, ratios have wide applicationsand are of immense use today.Managerial Usage of Ratio AnalysisHelps in decision making- Financial statement are prepared primarily for decision making. Butthe information provided in financial statement is not an each in itself and no meaningful


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conclusion can be drawn from these statements alone. Ratio analysis helps in making decisionsfrom the information provided in these financial statements.Helps in financial forecasting and planning- Ratio analysis is of much help in financialforecasting and planning is looking ahead and the ratios calculated for a number of years work asa guide for the future. Meaningful conclusion can be drawn for future from these ratios. Thus,

ratio analysis helps in forecasting and planning.Helps in communicating- The financial strength and weakness of a firm are communicated in amore easy and understandable manner by the use of ratios. The information contained in thefinancial statements is conveyed in a meaningful manner to the one for whom it is meant. Thus,ratios help in communication and enhance the value of the financial statements.Helps in co-ordination- Ratios even help in co-ordination which is of utmost importance ineffective business management. Better communication of efficiency and weakness of anenterprise results in better co-ordination in the enterprise.Helps in control- Ratio analysis even helps in making effective control of the business. Standardratio can be based up on proforma financial statement and variances or deviations, if any, can befound by comparing the actual with standards so as to take a corrective action at the right time .

Utility to shareholders/Investors

Investors in the company will like to assets the financial position of the concern where he isgoing to invest. His first interest will be the security of his investment and then a return in the

form of dividend or interest. For the first purpose he will try to asses the value of fixed assets andthe loans rose against them. The investor will feel satisfied only if the concern has sufficient

amount of assets. Long-term solvency ratios will help him in assessing financial position of theconcern. Profitability ratios, on the other hand, will be useful to determine profitability position.

Ratio analysis will be useful to the investor in making up his mind whether present financial position of the cocern warrants further investment or not.

c. Utility to CreditorsThe creditors or suppliers extend short-term credit to the concern. They are interested to knowwhether financial position of the concern warrants their payments at a specified time or not. Theconcern pays short-term creditors out of its current assets. If current assets are quite sufficient tomeet current liabilities then the creditors will not hesitate in extending credit facilities. Current

and acid-test ratios will give an idea about the current financial position of the concern.d. Utility to Employees

The employees are also interested in the financial position of the concern especially profitability.Their wage increase and amount of fringe benefits are related to the volume of profits earned bythe concern. The employees make use of information available in financial statements. Various

profitability ratios relating to gross profit, operating profit, net profit etc. enable employees to put

forward their viewpoint for the increase of wage and other benefits.

Utility to Government Government is interested to know the overall strength of the industry. Various financial

statements published by industrial units are used to calculate ratios for determining short-term,long-term and overall financial position of the firm. Profitability indexes can be prepared with


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the help of ratio. Government may base its future policies on the basis of industrial informationavailable for various units. The ratio may be used as indicators of overall financial strength of

public as well as private sector. In the absence of the reliable economic information, government plans and policies may not prove successful.

Tax Audit Requirements Section 44AB was inserted in the Income Tax Act by the Finance Act.1984. Under thissection every assesses engaged in any business and having turnover or gross receipts exceedingRs. 40 lakh is required to get the accounts audited by a charted accountant and submit the taxreport before the due date for filing the return of income under Section 139(1) . In case of a

professional, a similar report is required if the gross receipt exceed Rs.10 lakh. Clause 32 of theIncome Tax Act required that the following accounting ratios should be given.Gross Profit

Net Profit /TurnoverStock-in-trade/Turnover

Material Consumed/Finished Goods Produced.

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

LIMITATION OF RATIO ANALYSIS

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

Limited use of a single Ratio: - A Single ratio, usually, does not convey much of a sense. To

make a better interpretation a number of ratios have to be calculated which is likely to confusethe analyst then help him in making any meaningful conclusion.

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

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

Change of Accounting Procedure:- Change in accounting procedure by a firm often makes ratioanalysis misleading, For example a change in the valuation of methods of inventories, from

FIFO to LIFO increases the cost of sales and reduces considerably the value of closing stockswhich makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio.

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


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

Incomparable:-Not only industries differ in their nature but also the firm of the similar businesswidely. Differ in their size and accounting procedure, etc, it makes comparison of ratio difficult

and misleading. Moreover, comparisons are made difficult due to differences in definitions ofvarious financial terms used in the ratio analysis.

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

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

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

PROCEDURE OF ANALYSIS

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

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

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

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

Classification of ratios

Classification of ratios is done in two ways viz. (1) according to nature of items and (2)according to purpose or function.According to Nature of Items: ( i) Balance Sheet Ratios : The ratios exhibiting the relation sheep

between two items or groups of items in the balance sheet e.g. relation between current assetsand current liabilities.


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(ii) Revenue Statements or Profit & Loss A/C Ratios: The ratios disclosing the relationship between two items or group of items in the profit & loss A/C e.g. relationship between sales andGross Profit or Net Profit.

(iii) Inter-Statement or Composite Ratio: The ratios indicating the relationship of certainitems in the balance sheet with some figures in the revenue statements e.g. net profit and capital

or sales and fixed assets.Functional Classification: (i) Liquidity Ratios: These ratios measure the liquidity position of theenterprise i.e. whether the current assets are sufficient to pay off current liabilities as and whenthey mature. Thus, these ratios indicate short-term solvency of the business.

(ii) Leverage Ratios: They indicate the relative use of debt and equity in financing the assetsof the firm. The extent, to which the practice of trading on equity can be carried on safely, can beknown through these ratios.

(iii) Activity Ratios: These ratios measure the efficiency in the employments of funds in the business operations. T hey reflect the companys level of activities in relation to its turn over.

(iv)Profitability Ratio: These ratios measure overall performance and profit earning capacity ofthe business. They reveal the total effect of the business transactions on the profit position of the

enterprise.

However, the classification according to the following will be effective for analyzing andinterpreting the financial statements.Profitability RatiosTurnover RatiosFinancial Ratiosleverage RatiosThese ratios are explained below in detail.

Profitability Ratio:These ratios give an idea about the profitability of a business firm. Profit and profitability differfrom each other as profit is the difference between income and expenditure while profitability ismeasured by comparing the profit with some other parameter like sales, capital employed, and


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total assets etc. The ratio following under this category is usually expressed in percentage. Thefollowing are the ratio under this category:

Gross Profit Ratio Net Profit Ratio

Operating Net RatioOperating ratioReturn On Capital EmployedReturn on EquityReturn On Total AssetsPrice Earning RatioDividend Payout RatioDividend Yield Ratio

Turnover Ratio:These ratios are also known as activity ratio or asset management ratio. These ratios are very

important for a business concern to find out how well the facilities at the disposal of the concernare being used. These ratios are usually calculated on the basis of sales or cost of goods sold.High turnover ratio indicates better utilization of resources. The important turnover ratios arediscussed below.

Working Capital Turnover RatioDebtors Turnover RatioCreditor Turnover RatioInventory / Stock Turnover ratioFixed Assets Turnover RatioSales To Capital Employed

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

Current RatioLiquid / Quick /Acid Test RatioDebt-Equity RatioProprietary RatioCurrent Assets to Fixed Assets

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

Capital Gearing Ratio


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Chart Showing The Important Ratios

Name of Ratio Formula for Calculating Ratio

Type of Ratio Accordingto

Nature Function

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

2:1 Ratio sheet Short-term

solvency

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

Quick Ratio or " "

Liquid Ratio

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

Capital Ratio

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

Ratio

5. Debtors Turnover Credit Sales / Average Debtor " "

Ratio

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

Ratio


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7. Total Assets Turnover Sales / Total Assets " "

Ratio

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

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

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

* 100 / Net Sale

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

Investment Ratio

12. Return on CapitalNet Profit (after tax & interest) * 100 /Capital Composite Activity

Employed or Net Profit to / Capital Employed

Assets Ratio or Return

on Total Assets

13. Return on Equity

Net Profit (after tax & Pref. Dividend) *

100 " "

Capital Ratio / Equity Capital

14. Earning Per Equity Net Profit (after tax & Pref. Dividend) " "


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Share Ratio / No. of Equity Share

15. Interest Coverage Ratio or Net Profit Before Deduction of Interest& Income Revenue "

Fixed Charges Cover Tax / Fixed Interest Charges

Ratio or Debt Service Ratio

16. Price Earning Ratio Market Price per Equity Share / Earningper Revenue Profitability

or P/E Ratio Equity Share

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

EPS Ratio / Market Price Ratio

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

/ Market Price per Equity Share

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

/ Earning per Equity Share

20. Proprietary Ratio Proprietors Fund / Total Assts Balance Leverage

Sheet

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

Fixed Assets * 100 / Proprietors Fund


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22. Current Assets toCurrent Assets * 100 / ProprietorsFund " "

Proprietors Fund

23. Debt to Equity Ratio or Total Debt i.e. long & Shirt-term " "

Total Liabilities to / Net Worth or Owners' Equity

Proprietors' Fund Ratio

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

/ Preference Share Capital & LoanCapital

SOME IMPORTANT TERMS

Capital Employed : This term used in different meanings by different accounts as given

below :Sum-total of all assets i.e. fixed current assets, excluding profit & loss A/c debit

balance, preliminary expenses, brokerage, underwriting commission, discount on

debentures or share etc.

It can also be stated as Share Capital + Reserves & Surplus + Long-term & short-term

liabilities.

Sum-total of fixed assets only.

Sum-total of long-term funds i.e. (Share Capital + Reserve and Surplus + Long term and

loans) (Non-business assets and fictitious assets).

Operating Profits: It means Gross Profit less Operating Expenses. In other words, it

means profit before charging interest on long-term loans, such as debentures and tax.

Similarly, non-trading incomes such as interest on govt. securities, amount received or

profit earned on sale of fixed assets etc. are to be excluded. Non trading losses and


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A combination

of variation in

sales price and

cost, the

margin

widening

Change in the method of valuation of stock resulting in over-valuation of closing

stock.

Omission of

some of the

purchases.

Some salesmight have

been entered

more then

once.

The goods which have been sold but not delivered might have been included in

closing stock.

The reasons for decrease

Undervaluation of Stock

Higher

cost,

price

sales

priceremainin

g same.

Lower

sales

price,


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cost price

remainin

g

unchange

d.

Pilferage

of Stock.

Some

purchase

s might

have

beenentered

more

than

once.

INTERPRETATIONS: - Raymond cos Trading A/C is confidential, thats why I cannot

find the amount of Gross profit and cost of goods sold.

Net Profit Ratio: Net profit is that proportion of net sales which remains to the owners or

shareholders after all cost, charges and expenses including income tax have been

deducted. It is calculated as under.

et Profit Ratio = Net Profit (after taxes) / Net Sales X 100


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It measures overall efficiency of all the functions of a business firm like production,

administration, selling, financing, pricing tax management etc. This ratio is very useful

for prospective investors because it reveals the overall profitability of the firm. Higher

the ratio, better it is because it gives an idea of overall efficiency of the firm.

NET PROFIT RATIO

YEAR NET PROFIT NET SALE N P RATIO (%)

2002 8363.76 97512.31 8.58

2003 9143.35 102058.56 8.96

2004 13183.54 102393.56 12.87

2005 7681.65 114382.74 6.71

2006 12229.1 134459.99 9.09

2007 20125.28 129962.75 15.48

2008 6612.17 133756.33 4.94

2009 -27039.68 139325.37 -19.40


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concept of net profit. Operating net profit arising out of the business operations only.

This is calculated as follows:

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

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

INTERPRETATION:- There is no availability of non- operating expenses in companys

Profit & Loss A/C, thats why I am unable to calculate Operating Net Profit Ratio.


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Operating Ratio: This ratio is reciprocal to the operating net profit to sales. The cost of

goods sold + operating expenses are compared to net sales. The calculation of this

ratio is as follows.Operating Ratio = Cost of goods sold + Operating Expenses / Net Sales X 100

INTERPRETATION:-Raymond cos Trading A/C is confidential, thats why I cannot find

the amount of cost of goods sold. Thats why I am unable to calculate Operating Ratio.

Naturally higher the ratio, the less favorable it is, because it would leave a small

margin to meet interest, dividends and other corporate needs. The ratio is an index of

the operating efficiency of the enterprise. It is advisable to study the ratio over a

number of years so as to view the direction of the operating efficiency.

Return on Capital Employed: This ratio indicates the percentage of net profits before

interest and tax to total capital employed. The capital employed is calculated as

follows.

Capital Employed = Equity Capital + Preference Capital + Reserves and Surplus + Long-

term Debt-Fictitious Assets.


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This Ratio is calculated as follows:

Return on Capital Employed = Net Profit (before tax & interest) / Cap. Emp.

X 100

The ratio is an index of the operating efficiency of enterprise. It is advisable to study

the ratio over a number of years so as to view the direction of the operating

efficiency.

Return on Capital Employed (%)

(Rs. In Lacs)

YEAR NET

PROFIT Eq.

Cap. Pref.Cap. Reserve & LongTerm Capital

Return onCapital

Surplus Debt Employed

Employed

Ratio (%)

2002 11061.08 6138.08 - 83388.27 14243.87 97632.14 11.33

2003 13313.61 6138.08 - 89297.33 27179.69 116477.02 11.43

2004 18658.42 6138.08 - 98717.37 22928.24 121645.61 15.33

2005 9182.29 6138.08 - 104255.5 39333.3 143588.75 6.39

2006 16370.48 6138.08 - 112856.5 54667.56 167524.01 9.77

2007 23823.28 6138.08 - 129477.9 56686.05 186163.91 12.79

2008 8169.66 6138.08 - 133690.4 50204.16 183894.58 4.44

2009 -29755.06 6138.08 - 106560.3 86884.81 193445.1 -15.38


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INTERPRETATION: - In year 2007 the capital employed ratio indicates 12.79 %

In year 2008 ratio shows 4.44 % & in year 2009 ratio goes minus side because due to recession, -15.38 %

6.Return on Equity:-This ratio , also known as return on shareholders funds or

return on proprietors fund or return on net worth, indicates the percentage of

net profit available for equity shareholders to equity shareholders fund , In

other words this ratio measures the return only on equity shareholders fund

and not on total capital employed like ratio number(5). The formula for

calculation is as follows:


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Return on equity = Net profit after interested, income tax and preference dividend if

any / Equity shareholders fund * 100

Note: Equity shareholders funds = Equity capital + Reserves and surplus

This ratio indicates the productivity of the owned funds employed in the firm

However, in judging the profitability of a firm, it should not be overlooked that during

inflationary periods, the ratio may show an upward trend because the numerator of

the ratio represent current values whereas the denominator represents historical

values.

Return On Equity

(Rs. In Lacs)

Year Net Profit Equity Reserve EquityShare- Return On

(After Tax) Capital & Surplus

holders

fund

Equity

Ratio (%)

2002 8363.76 6138.08 83388.27 89526.35 9.34

2003 9143.35 6138.08 89297.33 95435.41 9.58

2004 13183.54 6138.08 98717.37 104855.45 12.57

2005 7681.65 6138.08 104255.45 110393.53 6.96

2006 12229.1 6138.08 112856.45 118994.53 10.28

2007 20125.28 6138.08 129477.86 135615.94 14.84

2008 6612.17 6138.08 133690.42 139828.5 4.73

2009 -27039.68 6138.08 106560.29 112698.37 -23.99


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INTERPRETATION: - In year 2007 the return on equity ratio indicates 14.84 %

In year 2008 ratio shows 4.73 % & in year 2009 ratio goes minus side because due to recession,

-23.99 %

7. Return on Total Assets: This ratio compares the net profit after tax with the total

assets. The formula for calculation of this ratio is as follows:

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


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RETURN ON TOTAL ASSETS.

Rs.(In lacks)

YEAR NET

PROFIT FIXED CURRENT TOTAL RETURN ON

(after tax) ASSETS ASSETS ASSETS TOTAL

ASSETS. (%)

2002 8363.76 37430.1 76977.28 114407.38 7.31

2003 9143.35 40601.87 73680.24 114282.11 8.00

2004 13183.54 42122.09 70791.03 112913.12 11.67

2005 7681.65 57562.82 67193.16 124755.98 6.15

2006 12229.1 84511.81 77011.19 161523 7.57

2007 20125.28 76174.15 82490.59 158664.74 12.68

2008 6612.17 73310.87 93282.09 166592.96 3.97

2009 -27039.68 106115.24 98165.33 204280.57 -13.24


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INTERPRETATION: - In year 2007 the return on total assets ratio indicates 12.68 %

In year 2008 ratio shows 3.97 % & in year 2009 ratio goes minus side because due to recession,

-13.24 %

8. Earning Per Share: This is one of the important indicators of performance of a

company. Earning per share indicates the amount of profit available for

distribution amongst the equity shareholders. This ratio calculated as shown

below:

Earnings per Shares = Net Profit after Interest, Income tax and Preference Dividend /

Number of Equity Share


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As mentioned above, EPS is one of the important criteria for meaning the

performance of a company. If EPS increases, the possibility of a higher dividend per

share also increases. However, the dividend payment depends on the policy of the

company. Market price of shares of a company may also show an upward trend if

the EPS is showing a rising trend. However, it should be remembered that EPS of

different companies may very from company to company due to the following

different practices by different companies regarding stock in trade, depreciation,

source of raising finance, tax-planning measures etc.

Earning Per Share

Year Net Profit Number of Earning per

(after tax) Equity Share Share(Rs.)

2002 836300000 61380857 13.62

2003 914300000 61380857 14.89

2004 1318300000 61380857 21.47

2005 768100000 61380857 12.51

2006 1222900000 61380857 19.92

2007 2012500000 61380857 32.78

2008 661200000 61380857 10.77

2009 -2703900000 61380857 -44.05


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

in minus side.

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


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

Price Earning Ratio

Year *Market Price Per Earning Per PE Ratio (Rs.)

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

2002 126.25 13.62 9.27

2003 245 14.89 16.45

2004 355.95 21.47 16.58

2005 555 12.51 44.36

2006 652 19.92 32.73

2007 474 32.78 14.46

2008 303.95 10.77 28.22

2009 91 -44.05 -2.06

* Highest Share Price in BSE


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

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

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

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


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

low (2.25 %).

10. Dividend Pay

NITESH PARIHAR

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