summer training at sangam group(working capital management & ratio analysis)
TRANSCRIPT
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A
PROJECT STUDY REPORT
ON
Training undertaken at
SAGAM (INDIA) LTD
“Working Capital & Ratio Analysis” In Partial fulfillment of the requirement for the award of the degree of
Master of Business Administration
Submitted By Submitted To
Ruchika Toshniwal Mr. Tanveer Ahmed
MBA Part III
(2009-2011)
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Preface
It is a matter of great Pleasure and privilege for me to Place before the
esteemed readers of this Project Report on the “Sangam (India) Ltd.” For the
year 2009-2010. This report mainly features the financial analysis of Sangam
(India) Ltd. In the Ratio Analysis interpretation form.
The Sangam (India) Ltd. Of the path of rapid and self sustaining growth. In
the Bhilwara City for this I have taken a Ratio Analysis of this Industry.
Tables and graphs are prepared to present the facts and findings in a
convenient manner.
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Acknowledgement
To do anything, anywhere first of all one needs an opportunity. I am sincerely grateful to
Mr. G.C. Jain (Precident). Who provided me the opportunity to conduct my summer
training as a management student at his prestigious organization.
When I joined the company for summer training, I was a layman to textile. It was the
interest and willing co-operation of the people at the workplace without, that I might
have not been able to completely my training as smoothly and indepth as I did.
Regarding My Project I want to pay my regards to Mr. Anil Jain (V.P. Finance),
Mr.Ashok Arora (Finance), Mr. Lalit Jain (A.G.M. Accounts), for their guidance.
Finally, I want to pay my special gratitude to Mr. V.K. Bheta (R&D Manager) Mr. S.K.
Lodha (A.G.M. Marketing), Who not only motivate me but through his discuss sessions,
built a platform of knowledge about the textile industry, which is immensely helpful for
me in conducting my training and project work.
Many other persons inside and outside the organisationhelped me in doing this project,
for which I am gratful to all of them.
Last but not least, I also pay my sincere thanks and gratitude to all the staff members of
Sangam Spinners for their co-operation, which made my training informative and
knowledge enhancing.
Ruchika Toshniwal MBA Part III
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Contents
Preface
Acknowledgement
Background of the study
INDIAN TEXTILE INDUSTRY
Introduction to the Sangam(India)Ltd.
OTHER VENTURES OF THE GROUP
ORGANISATIONAL STRUCTURE
THE SANGAM GROUP & IT’S UNITS
1 SANGAM SPINNERS A UNIT OF SANGAMGROUP
2 Suiting & Shirting / Weaving Unit of Sangam Group
3 Sangam Process Unit of Sangam Group
Faults in the work
Dye House Department
I.S.O. ( International Organisation for Standardization )& Quality Policy
Audit & Reserch Design And Development (R&D) Department
COMMERCIAL AND FINANCE DEPARTMENT :
Sangam Group Milestones.
Marketing Department.
Relating to Selling and Marketing
Sales Policy Ratio Analysis
SWOT Analysis
Major Finding & Conclusions & Suggestions
Major Findigs Conclusion & Suggestions
Bibliography
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List of ratios
Liquidity Or Short term Solvency Ratio
Current Ratio
Quick or Liquidity Ratio
Activity or Effeciency Ratio
Inventory (Stock) Turnover ratio
Debtors (Accounts Receivable ) turnover ratio
Creditor (Payble) turnover ratio
Total Assets Turnover ratio
Fixed Assets Turnover ratio
Capital turnover Ratio
Profitability Ratios
Gross profit Ratio
Net Profit Ratio
Return on capital employed
Net Profit to total Assets ( Return on Total Assets)
Return on Equity shareholder’s fund
Earning per Equity share
Leverage / Capital Structure Ratios
Dept-Equity Ratio
Proprietory Ratio
Solvency or Debt to Total Assets Ratio
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Background of the study
Summer training program is an attempt to acquaint the student with the real world
situation so that the knowledge gained from the classroom is further strengthened. In
order to fulfill this objective the faculty placed me in Sangam (India) Ltd. For a period of
forty five workinmg days and asked me to submit a report at the end of the programme.
However, at the first phase of my training I observed and understood the functional
procedures of various departments of the organization and in the second phase I was
assigned a project which included the interpretation of the balancesheet of the company
and his Ratio Analysis.
This report consist of two parts.
Part A : Deals with the organizational aspect I.e.background of the group,
backfround of the company, functional procedure of the various
departments.
Part B : Deals with study title “Ratio Analysis of Sangam (India) Ltd.”
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Introduction To The Indian Textile Industry
The term textile derived form the latin word texture (to weave) originally applied
only to woven fabrics has now become a general term for fabric, yarns and other material
that can be made into fabrics and for fabrics produced by interlacing or any other
construction method. Threads, cards repes, braids, lace, embroidery,nets and fabrics
made by weaving, knitting bonding, felting or tufting are textile.
The textile industry although highly developed as a craft remained essentially a cottage
industry until the 18th century. Although the textile grew and flourished especially during
the middle ages not until the industrial revolution, did it undergo remarkable expression.
It helped to transform the industry into significant of international trade and rational
economy. The scienticif and techonological advances of the 19th and 20
th centuries
improved manufacturing elements and increased the volume and quantity of production,
loweing prices of finished cloth and garments.
In the 20th century, with the development of electonics and computer, now physical
engineering concepts were employed in textile research and development.
An application of science to the textile industry introduced man made fibers. Now both
industrialized and developing countries have modern installation capable of highly
efficient fabric’s production.
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INDIAN TEXTILE INDUSTRY
India woud realize its offer to the Prime share of the projected increase in the world trade
in the post –GATT era if there is a substantial growth in its agriculture and textile
sectore. It is very simple to appreciate this.
It is estimated that the largest increase in furthure world trade be in the clothing sectore –
up by prehasps 60% and in the agriculture –up perhaps 20%. In india textile industry hold
the key and have emerged as the foremost net-foreign exchange earner accounting for
34% of India’s total export during 2001-2002. India is ranked 14th in the list of leading
exporters of textiles. Its share in export of textile and clothing in the international market
has been covering around 2.6 %. The import content of textile products is almost
insignificant as compared to the items like engineering goods, gems and jewekary etc.
The textile industry occupies a special niche in the indian ecomon. Synthetics constitutre
close to 40% the indian textile industry. Significantly , the textile sectore is a noteworth
contributor to the indian ecomony-4% of GDP 35% to gross exportearning.
INDIAN TEXTILE CAPACITY & CAPITAL AVAILABILITY.
According to the survey report by AIFCOSPIN the no. of unorganized small scale
spinning units was 900, having 25 lacs spindles, 25500 rotors and annual yarn production
of 250 million Kg., The count configuration varying form 6s to 40s. these units are
mostely located at Tamil Nadu., Haryana, U.P., M.P. and Rajasthan.
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Introduction to the Sangam(India)Ltd.
General Information : Name of the Company : Sangam (India) Ltd.
Constitution : Public Limited Company
Date of Incorporation : 29.12.1984
Date of Commencement of Business : 02.05.1985
Location of Registered Office : Pur Road, Bhilwara
Location of Factory/Shop/Principal : (1) Vill Billiya, Chittor Road,
Place of Business (2) Vill Atun, Chittor Road,
Group to which the borrower belongs : Sangam
No. of person employed : Approximate 2500
Groth story
Installed Capacity (Product Wise)
2006 2007 2008 2009 2010
Looms 172 172 178 257 257
Spindles 36288 48384 177320 193920 193920
Production
Product 2006 2007 2008 2009 2010
Yarn(in MTs) 13844 41238 38280 33266 46553
Fabrics(Lac Met.) 56.51 60.79 57.56 57.58 60.72
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Brief Background of the Company
Sangam (India) Limited (SIL), Flagship company of the SANGAM GROUP, was
promoted under the name and style of Arun Syntetics Pvt. Ltd. With annual turn over 200
crore(Rs.). The group had its humble begnings in 1984 with a weaving unit consisting of
only eight looms and in a short span of Little more than a decade multiplied its weaving
capacity. The weaving capacity was gradually increased by installation of additional
looms and the merger of two closely held profit making companies in the 1995 took the
weaving capacity to 98.83 lac meters per annum. The company took a strategic decision
to intergrate backward and made a sucessful entry spinning in 1995 by installing 17280
spindles for manufacturing of PV dyed yarn and it gave the company the volunes,
margins and cash surplus which have enabled to embark on a path of rapid and self
sustaining growth.
The company has production faility located at Bhilwara and Mandapam. The Company
manufactures man Made Syntetic Fibre Yarn and Blended Suitings. PV yarn is used in
Suiting, shirting, and dress-material and knotted fabric and has been steadily gaining
market share in the blended yarn segments. Polyster spun yarn is used for stitching and in
industrial fabrics. In case of fabric manufacturing, the finished yarn forms the input and
depending upon the type of fabric to be woven is fed on the different types of looms. The
designs and the colour combinations and number of picks etc. are decided on the basis of
market feed back.
At present SIL have 48384 spindles for dyed PV yarn installed at Village Billia Kalan,
Hamirgarh Road, Bhilwara. The weaving division has 116 Looms installed at Village
Atun, Hamirgarh Road. Both the Plants arewell located in terms of basic infrastructure.
The proposed expansion project is also to be implemented at the same site. After the
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implementation of proposed expansion project, at the land adjacent to he exusting site of
its Spinning Division total spindlage in the Spinning division will be 62784.
Today the Company is one of the largest Producers of PV Synthetic dyed yarn in the
country and is reckoned as market leader in PV dyed yarn activity. Its country and is
reckoned as market leader in PV dyed yarn activity. Its spinning division is ISO 9002
accredited. It offers the largest rang in colour and shades. SIL’s products are sold under
the popular “SANGAM” brand name. Its fabric is marketed through a network of 500
dealers and retailers with strong presence in UP, Bihar and Southern India.
OTHER VENTURES OF THE GROUP
SPBL Limited
The Other group of SANGAM GROUP was formed in 1984 to underke Fabric
Processing Operation. The present capacity of processing of all kind of fabric is 25
Million per annum. The company later on embarked upon a new project for
manufacturing furnishing fabric and Dress Materials namely Flock Faric (American
Velvet) with a total outlay of Rs.2500 Lacs. The Project was set with an insalled capacity
of 37.5 Lac meters of flock fabrics per annum. Most of the Plant and machinery and
technical know-how have been imported into the country form U.K.
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Hospital:
Shri RP Soni, Founder of the group has also activity been associated with various Social
activity and Institutions. A well-equipped Hospital is run in a Trust named after his
respected and beloved mother Late Smt. Kesar Bai Soni since Last 10 years.
Smt. Kesar Bai Soni Hospital is well known in the Textile City of Bhilwara, Rajasthan
for it’s noble work in the field of healthcare to the under privileged since 1993.After
sucessful completion of ten years in the field of healthcare, Smt. Kesar bai Soni
Charitable Yrust, has to decided to modernized the existing Hospital and shift it
to a new spacious and well equipped Building.
Institute of Technology and Management
Recently considering the problem of Techical education in the Region, Shri Soni has
decided to set up an Engineering College under a Trust founded in the Memory of his
Respected and beloved Father Late Shri Badri Lal Soni.
With a view to provide the Technical and Management education to the youths of the
Region an Institute of Technology and Management has been constucted in the
Bhilwara City under Trust. The Institute offers Engineering and management course. The
institute has got the approval of AICTE.
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ORGANISATIONAL STRUCTURE
Board of Directors
Name of Director Position
Shri Ram Pal Soni Chairman
Shri S.N. Modani MD
Shri T.R. Bajalia Directore
Shri G.K. Chapparwala Director
Shri Ramavatar Jaju Director
Management Team
Shri G.C. Jain President
Shri S.M. Gupta President (Works)
Shri M.K.Palaria Company Secratory
Shri S.K. Ladha Marketing Manager
Shri V.K. Bhatt D.G.M. (R&D)
Shri Anil Jain Vice President
AUDITORS - M/S R. KABRA & CO. MUMBAI
M/S B.L. CHORDIA & CO. BHILWARA
BANKERS - STATE BANK OF INDIA
THE BANK OF RAJASTHAN
ICICI BANK LTD.
DENA BANK
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THE SANGAM GROUP & IT’S UNITS
Sangam Spinners :- Manufacturing Of P/V Yarn having ISO 9002
Certification. It have also Manufacturer of Power for
captive consumption.There is thurmal power plant.
Sangam Suiting :-Manufacturing the synthetic Fabrics.
Sangam Processing :- Processer of synthetic Fabrics.
SANGAM SPINNERS A UNIT OF SANGAMGROUP
Function of Various Departments.
The Various departments at Sangam (India) Limited’s unit of spinning Mill has as
follows.
1. Personnel and Administration Department.
2. Production Department.
3. Commercial and Finance Department
4. Marketing and Salse Department.
Personnel and Administration Department:
The General Manager (Personnel) Looks after all the Personnel, legal and secretarial
matter of the company. He reports to the Executive Directors through President.
Reporting to him are the Factory Manager, Labour Officers, Security Officers, and Legal
Advisers.Some of the functions carried out by the Personnel and Administration
Department are:
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(1) Recruitment & Selection:
Sangam Spinning Mills Ltd. has got its own recruitment, Selection and Training system.
The recruitment and selection of technical personnel and managers is made through
placing advertisement in leading Newspaper,and Personal contact .
(2) Working:
There are three shifts in a day the first shift starts in the morning (i.e.) All the labour laws
like P.F., E.S.I, Minimum Wages Act, Payment of wages Act, Apprentic Act and all
other Acts related to the industry are taken care of. At present there are about 2000
labour 200 tranee labour and there is contract labour is 500 and administration staff is
290 member. The shift timing is 7 a.m. to 3p.m. and 3p.m. to 11 p.m. and 11p.m. to 7a.m.
and the lunchtime of the worker is half an hour in day. Techniqual jurnal shift 8 a.m. to
5p.m. and commercial staff 9.30 a.m. to 6.30 p.m.
(3) Regular Performance Appraisal is done.
(4) Human Relation :- In the largre family of “SANGAM” there are 2500 more
than and they must keep very cordination and fruitful relationship with each other
and they should always work togather like a good team.
Production Department:
This department is divided into two separate departments.
(1) Spinning Department
(2) Suiting & Shrting/ Weaving Department
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(3) Processing Department
Spinning work is done in the separate (unit ) Sangam Spinners, Bhilwara. And the
Weaving Work is done in another (unit) Mill, Sangam Weaving, Bhilwara.
(1) Spinning Department :
Spinning Department is headded by vice precident (spinning). He is assist by production
Engineers and other Personnel’s is the various processes which comes under the spinning
department are as follows:
Ring Fram * No.of Spindles * Production = Total Production Per day
110 * 576 * =(63360) *1.21Kgs/spindles per day = 76 Tone Production per day.
(a) Raw-Material:
The Common raw material used in the spinning is polyester, Viscose. These are received
in the form of balses in the gray and dyed condition. In this the proportation of the
mixture is (35% Viscose + 65% Polyester). And the Polyester is from Relienc Industry
and the Viscose is from Grasim Industry .They are used Polyester are of three type (1)
Gray,(2) TBL, (3) Black and the Viscouse is dyed.
(b) Mixing / Blending :
Fibre in the requisite ratio are taken, opened and blended in the mixing blenders. During
this process water and anti static agents are sprayed on the fibres. In greay type mixing
colour are also mixed in the spraying solution to provide identification of the mixing. The
mixed material is toppled once or twice it ensures proper blending of the fibres.
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Blow Room :
The mixing is again opened to remove the waste by mixing the tough size is reduced and
better blending of the fibre is achived. The mixing is converted into laps to be fed into the
card. There are two type of feeding first is lap feeding and secound is aero feeding and in
the aero feeding is the latest technology.
(c) Carding :
The feeding the lap or in the opened stage fibre are individual as hasrd chips, short fibre
and entanglements are removed in the form of dropping, fly and flat strip respectively. In
the out put of 8 drum is going to draw frame and form the draw frame same as out put of
drum going to Rsb and then one out put drum going to Simplex.
(d) Draw Frame/RSB :
The draw frame sliver is subjected to doubling and drafting process to parallise these
fibre and the products in uniform sliver.
(e) Simplex / Speed Frame :
The draw frame sliver is drafted slightly, twisted and wound on speed frame bobbin and
robim this is 750 Gram. for the formation of the roving.
(f) Ring Frame :
The Ring Frame is the main part of the spinning in the in spinning of roving onto yarn of
required count and twist is done here at this stage.
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(g) Finishing : In the finishing deopartment it is divided into these sub
divisions.
(1) Auto Coner/winding :
Defects present the yarn is cleared by using electronic gauges and the cleared yarn is
wound in cones.
(2) Cheese Winding :
Two or more yarns are required for playing are wound are cheeses.
(3) TFO (Two For One)/ Doubling :
In doubling twist is impated to the yarn wound on the cheese here the doubling defects
are removed from the yarn.
(I) Packing :
After thorough checking all the cones are packed in cartoons or bags as per process and
sent to the yarn godown. These are stored in the store romm on the humdity at +0.96
Steem.
Warehouse :-
Warehouse department prepares the challan according to the order paced by the sales
department. This bill is sent to the account officer for filling, side by side the yarn and
fabric is packed and made ready for dispatch. Rest of the material is stored either in
packed form or in loose form in the warehouse.
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There is of two type of warehouse (1) Storage department in this department the raw
material is stored. (2) warehouse in this the finished product is stored and pack in the 65
Kg. Of polythene Bage In the Production they are using FIFO(First in first out method)
for raw material.
Suiting & Shirting / Weaving Unit of Sangam Group
This seperate unit of sangam. That is Sangam Weaving /Suiting & Shirting unit of
Sangam (India) Ltd. The various Process that come under the weaving department are as
follows. There is approximat 230 labour and 200 staff members work in this unit.
(1) Warping :
It is as per the Programme given by the design and development department after
the approval of the marketing departmen. The cones that are receving form the
spinning mill are fed on the creeds as per pattern and design and then warped and
beamed the weaver’s beam.
(2) Sizing:Yarns required sizing or deaming is first warped and then fed into the
sizing machine that produces weaver’s beam as per requirement.
(3) Drawing in :
All the warped into the weavers beam are to be passed through held eyes belonging
to different heald frames (as per design) and then through deuts of reeds to give
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proper structure to the fabric to be woven as per particular supplied by design and
development department.
(4) Knotting/Warp tyeing :In the case of repeated design all the ends of running
out beam are typed to the corresponding ends of each fresh beam on looms or
away from the loom.
(5) Pin Dropping :
To stop the loom in case of wrap end break, each ends is provided with a drop pin.
This spinning can be done either on the loop or aways form the loom.
(6) Looms:
Drawn beams are gaited on looms for which it is meant and these looms are
controlled to weave fabrics of required particulars. In case of shuttle less loom, the
weft yarn is supplied in the form of cones only,
whereas incase of shuttle looms the weft yarn is first wound into the pin
windingand then fed into the battery of the loom the fabric is woven by the
interlacement of warp and weft threads in the given sequence and wound on the
fabric rolls.
(7) Mending Department :
Woven fabrics is dofted from the loom on the fabric rolls and is inspected,
measured, mended and again re-inspected in this department.
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Sangam Process Unit of Sangam Group
This is the seperat unit of sangam group in this unit is doing the work after the work of
sangam weaving is finished .
(1) Gray Department :-
In this department the material is unloaded by the weaving unit of sangam or many other
weaving company like .Shrisiyaram, Ajay Textile, Nillu Textile, M.P. Sulzer.
(a) Fibre Dyed :- goes to scauring
(b) Piece dyed :- * 100% polyester
* Polyester + Viscouse
Scauring:- From there the fabric goes to Singing Burn
Singing Burn :- In the Singing Burn the produced fabrics goes between the two flams
on both side of fabric of LPG gas . This process becouse of the fiber of the fabric are
burn (finish the rufghness) and the fabric is becom smooth and plain.
Zambo Jigger :- This machin is used for the dyed fibre for washing the fabric .this is
so big so that it’s capacity is also more than Jigger machines they are also do same work.
Dry Range:- In dry rang duration is set on it on the heat setting is 2100
temp. Becouse
after that when the fabric is dyed on the temp. of 1400
then no defet is show on the fabric
no effect on the fabric of 140 degree temp. now when the fabric dry rang then the coldair
is sprade over it so that the fabric is frzee on the 210degrss temp. These machines are of
vertical shap becouse they are save the spac of the factory.
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Dye Machine:- They are of two type.
(a) Dye machine :The fabric go in the dye machine by airfeed these machines are
in the (U) shape machine becouse these type of shap is save the space of the
factory.And then the fabric dyed then it again wash on the Jigger and then again
goes on the dry rang.
(b) Bim dyeing : In this ther is a bim that has many hools over it and then the fabric
is dressed on it and then the liqure is goes in the dim and over the bim.
Stenter :- Then the fabric goes over it It set the width like Incress & Decrees the width
of the fabric.and set the temprature of the fabric.
Spoting :- For chacking the spot like some spots of temperary nature they are washed
by the two persons with the detergent and anti spot agent.
These machine are used according to the demand of customer:
Open Dacatisind Machine, Rotary Machine:- These machine for the shyning in the cloth
and bulkiness in the cloth and the demand of the customer.
Packing : In the last when all the work is finished then the packing is done
Different Process in folding are as follows,
1 Grading: Detection of faults & grading according to the severity of faults.
2 Folding: Folding of fabrics on hard paper boards.
3 Tagging: Tagging the plastic cover for writing specifications.
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Faults in the work
1 There are these types of faults at the time of Spinning they are:-
Yarn patta, due to different count or colour.
Slub-thick yarn in warp and weft.
2 There are these types of faults at the time of Weaving faults in fabric :-
(a) Jhiri : Absence of weft
(b) Missing ends : absence of ends
(d) Other : Looms Oil, Read mark, Temple Mark, Loose ends,
Straight mark and holes etc.
3 There are these types of faults at the time of Processing faults :-
(a) Singing Burn : Shrinkkage due to burning.
(b) Moon Cut : Selvedge bends like moon.
(c) Stitching mark : Weft wise light shade mark on the fabric.
(d) Other : Colour spot and other processing faults.
Dye House Department :
Dye house is an integral part of the production department. In this department about 95%
of polyster and 5% of viscousedyed, becouse the department is already purchase dyed
viscouse from Grasim Industry Birla. So it is not nesessary to dye that. But the polyster is
purchased from Relince Industry in gray so it is necessary to dye it. The temperature
required for polyster dyeing is 135 degree centigrade .
There is 7 dye Beaker or Plants of 300 kg. Capacity.
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I.S.O. ( International Organisation for Standardization )
The I.S.O. is an organisation, which takes care of standardization of various systems all
over world. Its Head Quarter is at Geneva. There are four types of I.S.O.
A. ISO-9001
B. ISO-9002
C. ISO-9003
D. ISO-9004
ISO is a quality assurance model delaing with production installation. Servicing Design
& Development.
ISO-9002 is a Q.A.M (Quality Assurance Model) for product installation and Servicing.
ISO-9003 is a Q.A.M. (Quality Assurance Model) for final inspection and testing.
ISO-9004 provides guidelines for models to select.
Quality Policy :
We shall produced yarn confirming to internbationally acceptable quality standards with
consistency to the full satisfaction of the customers and their needs.
In order to achive this we shall involve :-
All our suppliers of fibre yarns and somponents to obtain incoming materials of standard
quality.
All staff member and worker to attain high quality consciusness, productivity and
improving their working skills. Upgrade technology and work practices to reach higher
quality level in the country and establish leadership.
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Audit :
Audit is conducted by examiningrecords work practices and Asking question to those
who perform and or control the qctivity. Non conformities if any are recoded in the non-
conformity report (NC) or nil report is prepared.
There is seprate audit department for verifying the books and accounts of the entire
organisation, they conduct the following audits-
1 The Satutory Audit – It is conducted for investigating the profit and loss accounts
and the balance sheet of the company.
2 ISO Audit – ISO Audit is conducted to investigate the proper implementation
of the quality certificate and it is conducted half yearly.
3 Internal Audit – This audit is conducted by the Audit Department of the
company as it investigate the books and the accounts and the proper working of the
department.and entire qulaity system of the company is audited at least twise in a
year.
Reserch Design And Development (R&D) Department
Various samples are developed before the fabric is produced in bulk various shades are
developed and given to the marketing executives, agents and delars. New design and
shades are also produced according to their choice and demand.
(1) Feedback of the latest design and development in the markets is gathered through
various like market report and trends of fashion in the various cities.
(2) Feedback from the member of the distribution channel.
(3) By tracing the popular designs and the shades of the competitors like Vimal,
Rayamonds, Siyaram, Mayur etc, some of the designs and shades are developed in
house by professional designers of the organisation apart from these functions the
departments maintains tight quality control through its laboratory.
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COMMERCIAL AND FINANCE DEPARTMENT :
This departmentis also divided into two separate sub-departments. One headed by
General manager(commercial) and another by Vice President (Finance). Commercial
Department take care of preparing spinning budget, estimation of excise, fibre purchase
various legal matter s relating to commercial aspects of the organisation stores and
department of electronic data processing (EDP). The main Function of Finance
department is to plan for procurement of funds, taking various investment decisions,
preparation and maintenance of balance sheet etc. one of the important function include
liasion with banks.
The main bankers are.
Bank of Rajasthan Ltd.
Sate Bank of India.
Dena Bank
ICICI Bank
Purchase Department :
The main function is to purchase the spare parts etc. for the maintenance of the
machinery. These department invites quotation from various dealers of the spare partsand
choose the best alternative from them. And chemicals bought out and items also.
Engineering Department :
To give assistance in maintaining the various machineries of the company in good
working condition. The areas of work included under this department are supply of
power, water, maintenance of electric components, steam compressors, boilers, diesel
generators etc.
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Sangam Group Milestones.
First Venture established in 1982 for Manufacturing of Synthtic Fabtics with a
Samll Project of 8 No’s of Looms.
Flagship Sangam (India) Limited & SPBL Limited incorporated During 1984 for
taking Weaving & Processing activities respectively.
Expanded Weaving & Processing activity several times till 1992.
SPBL Limited became one of the largest process house of Rajasthan.
Sangam (India) Limited came out with its maiden Public issue during 1993 and
successfully got the issue oversubscribed with public confidence.
Sangam (India) Limited Established “Northern” India’s first “Rapier weaving
machines” project with the proceeds of public issue during 1993.
Sangam (India) Limited came out with right issue for its prestigious “Spinning
Project” during 1994 which also got oversubscription.
Group amalgamated its associate weaving units in its flagship Sangam (India)
Limited which improved administrative efficiency during 1995.
Spinning project started its commercial production during 1996 within record
period.
SPBL Limited cameout with its maiden public issue during 1996.
Expanded its spinning and weaving capacity during 1997.
Spinning division were conferred ISO 9002 CERTIFICATION BY BUREAU
OF INDIA STANDARD, The quality symbol during 1998.
SPBL limited established country’s first fully automatic and 100% imported plant
for manufacturing of flock fabrics.
Power project of 3.8 M.W., were established during 1999 for captive consumption
by spinning division with expansion in spinning & weaving.
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Marketing Department.
The function of marketing department perform under the regime of marketing manager
who report to Executive directore through President. Reporting to him are managers of
Domestic/Export salse, Managers(Publiccity & Advertising ), Managers of Grey folding,
Finish folding, Packing and ware house. Sangam Spinners produce three type of quality
of P/V yarn.
2/15, 2/18, 2/30 Sangam Spinners sell its product, 90% of total slase in domestic market,
5% Export and 5% use in its own weaving Mills.
Thus is department is divided into two main division.
1 Export Sales.
2 Domestic Sales
1 Export Sales : There are two way of procurig the order,
(a) Sending the sample through the mail to the parties through the agent of export
sales.
(b) To move with the sample personally. The secound way is found to be more
effective in this case, executives move with the sample and the party requests to
open a letter of credit at their respective bank, after the quantity and price is agrees
upon. From the mill the product is packed and sent to the Bombay head Office for
documentation. After documentation the product is sent for shiping and payment
slip is submitted in the bank within 15 days.
Britane, Turki, Jordan, U.K., Jeneva, Egypt, Spain Singhapur, Seria, selection
syntetic, Balar.Bombay Branch Office is handle the export and legal matter.
Ashiyas largest unit in PV Dyed yarn IN THE Higest production 35 % yarn of the
total production.
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2. Domestic Sales :
In domesticmarket the order are procured by three ways.
(a) Customer sending there sample through mail, to the respective agents, dealers etc.
(b) Dealers come to the mill, and select the shades and design, acourding to their
requirment and place the order for the same.
Domestic market Mumbai : VHM(Rukshmani)
Delhi : Chinar Syntex, KSL (Kamdgri), Anupam,
Jaydeep, Siyaram, Grasim, Jagrati
Bhilwara : B.S.L, R.S.W.M. , Sujuki.,
MCM( Mahadev Kotan Mill, Sarvoday.
Ludhiyana : Vishal Trading House, Orient,
Amit Enterprisess
Indore : SKumar
Ahemdabad : Relience
Amritsar : Vishal Trading Corporation,
Sanjay Weaving
Gujrat, M.P., Panjab, Hariyana
The fabric of SANGAM is marked under the Brand Name Anmole. The
organisation has its own publicity(Advertisment & sales promotion) department,
which is entrusted with the task of preparing advertisment budget for the year and
to place order with various advertising agencies according to their planning.
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Salse Promotion :
A Variety of short incentives to encourage trial or puchase of a product or services.
Sangam Spinners Participated in arious Tex fair and tex exhibitons . In Sangam Spinners
there is no separate marketing and advertising department. Thre is no any other salse
promotion activities. All the work of marketing channel and distribution of product all
over India are committed to the main office of the Sangam Spinners situated at Bhilwara.
Public Relation & Publicity :
A variety of programs have designed to promote and protect a company’s image its
individual product.
Personal Selling :
Face to face interaction with one or more prospective purchase for the perpose of making
presentation answering questions, and procuring orders.
Direct marketing :
Use of mail, Telephone, Fax, E-mail and other non-personal contact tools to
communicate directly with or solicit a directly from specific customers & prospects.
Marketing Channels :
Marketing channels are set of interdependent organisation involved in the process of
making a product or service available for use or consumption.
Most producers work with making intermediaries up a marketing channel (also a trade
channel or distribution channel.)
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Sangam Spinners has one autorised agent in every state to bring their products to market
in every state. Company provide 2% commission to these agents.
Sangam Spinners contact with companies through agents according to order.
The slaes representatives also send to various markets for receving the order for Sangam
Spinners Yarn.
All the work of marketing Channel and distribution of product all over india are
committed to the main office of th Sangam Spinners situated at Bhilwara.
Sangam has appointed the agents those agents salse the fabric and yarn in domestic as
well as export. Its agent, dealers are located in the main citys in india. Marketing
manager looks frequently visits and meet the agents and dealers. The marketing manager
also help the agents in appointing deals. The company also enjoys the swcurity money
form the agents, dealers and retailers.
Direct purchasing by the mills.
Puchasing through agent
Purchasing through sales representative
Marketing Mgr.
Or
Authoriesed Agent
Or
Salse Representative
M
A
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F
A
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T
U
R
E
R
I
N
D
U
S
T
R
Y
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Mainly company has two booking programmes every year
Summer Booking Dec. to Jan.
Winter Booking Jun. To July
The Company continues the quartely booking system. 15 days after completion of every
quarter the booking shall be treated as cancelled untill and renewed and confirmed by the
mills.
Deposit
Minimum deposit of Rs. 20000/- will be paid by every wholesale dealer which will be
known as dealership deposit and an intrest @ 16.5 % per annum subject to TDS shall be
paid on this deposit.
Transportation :
As per the order of marketing department and parties goods are packed in cartoons very
carefully and send to the transport market.
The company has good transportation system, with help of transportation the goods are
send to relevant parties.
The company has good transportation system, with help of transportation the goods are
send to revelant parties.
After dispatching of the goods the dispatch copy and document is lodged in decided
bank.
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Pricing: -
The Budget department gives the minimum price for the sellings the product after
considering the costs, which are incureed in the various stages of production. The
marketing department fixed the price after analyzing the various factore, which affects
the marketing of product in the domestic market. This means that while fixing the price,
we must analyze the priceing policies, which are adopted by the competitors, the attitude
if the customer in that price.
Conversition cost
Fibre + Packing + Conversition cost = Total Cost
85 + 0.75 + 20.25 = 106
Relating to Selling and Marketing
Contract Review :
Contract review is carried out in order to under stand the customer requirment, assessing
over own capabilities to fulfil the same and establish a defined mechanism to resolve any
differences.
The Over all responsibilities for fontract review in domestic sales & deemed export salse
lies with H.O. D. (Export) is over responsible for contract review of export.
The detailed procedure of contract review have provisions to ensure that :
(a) The customer’s requirment are adequately defined and documented.
(b) Sangam Spinners has a capability to meet the customer requirment.
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(c) Before an order is received by verbal means order requirment are agreed their
expectancy.
(d) Differing requirment are revised and reviewd and amended/ resolved as agreed
with customer.
Procedure :
Salse and despatching, Same Procedure is follow for deemed export.
(1) The marketing manager/Asstt. Received the order booked by agent/Marketing
Manager/ bny salse representative in offer form.
(2) Enter the quantity given in offer form and other particulars in booking statement
ultimately offer form is change into contract.
(3) Delivering against an order booked on the verbal or writing request of the party be
made to its associates.
(4) Cancellation/ Amendment of an order shall be made on verbal or writing request of
the customer either directly or through agent / Salses representatives.
(5) Amendment relating to as follws.
(a) Reduction in quantity
(b) Increase in quantity
(c) Change in shades/blades of yarn.
(6) Received daily packing report form finishing department and verify the goods with
references to the same.
(7) Prepare delivery order of finishing goods.
(8) Prepare invoice according to delivery order.
(9) Arrange delivery of goods by suitable mode of transport.
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Procedure Adopt by company in export sales :
(1) The marketing manager received offer.
(2) Get feasibility of accomplishment, examine by E.V.P
(3) Convey approved / Modification etc. of offer.
(4) Prepare contract, enter in contract register, and forward once copy each to
customer / Agent etc. and salse and planning deptt.
(5) Received latter of credit (L/C) and verify the same.
(6) Intimates review of L/C to sales and panning deptt.
(7) Intimate packing instruction to packing deptt.
(8) Prepare despatch advice and documents for duty free removal.
(9) Despatch the material through suitable mode like truck/Container etc.
(10) Communicate with clearing agent and arrange filling of following documents for
customer clearnce.
(a) Customer Invoice
(b) Shipping List.
(c) Packing List.
(11) Obtain bill of loading.
(12) Prepare pending order position.
Sales Policy
Term of Payment
Document shall be drawn on DP basis and intrest shall be charged form the date of
lodgment in the bank of Bhilwara. The intrest as per bank rate for 10 days form the date
of lodgment shall be deducted in the bills itself for transit period. The document shall be
detained in the bank, for a period of 90 days form the date of lodgment in the bank at
Bhilwara.
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1.5 % prompt payment discount shall be applicable provide the payment is made
1.6 within 60 Days form the date of lodgment at Bhilwara.
Advance payment 4% as advance payment will be allowed in all qualities of yarns value,
Provide the payment is made before dispatches of goods.
Credit balance accured on account of goods return rebates etc. will be considered as
advance payment, provide biils against the goods returned are paid.
But in case document are over 60 says and are still in bank, goods will bot be despatched
under advance payment but document will be made “ Free of payment “ Out of accured
Credit balance.
Bank Charges:
Rs. 50 Per Rs.100/- provide document are presented through our bankersbank of
Rajasthan Ltd., Oriental Bank of Commerce, Bank of baroda . No double Bank
commission will be charged.
In case document are presented through other bank that above, but branches are in
Bhilwara, the bank charged will be Rs. 1.00 per Rs. 100/- but double bank commission
will be charged. The branches are as under- State bank of India and its subsidiaries, State
bank of Bikaner and Jaipur, Central Bank of India, New Bank of India, United
commercial Bank, Canera Bank and Allahabad Bank.
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In case document are presented through bank whose branches are not available in
bhilwara then bank charged will be Rs. 1.5 Per Rs. 100/- and other bank commission will
be born by the delar.
Intrest :
19.5% Intrest will be charged in case of overdue payments. In case document are overdue
above 90 days then intrest will be charged from 1st day of documents.
In case of return of document, expenses, Intrest and bank Charges will be debited to the
wholesalers account.
WORKING CAPITAL
Introduction:
Working capital is the life blood and nerve centre of a business. Just as circulation of
blood is essential in the human body for maintaining life, working capital is very
essential to maintain the smooth running of a business. No business can run successfully
with out an adequate amount of working capital.
Working capital refers to that part of firm’s capital which is required for financing short
term or current assets such as cash, marketable securities, debtors, and inventories.
In other words working capital is the amount of funds necessary to cover the cost of
operating the enterprise.
Meaning:
Working capital means the funds (i.e.; capital) available and used for day to day
operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets of a
business which are used in or related to its current operations.
It refers to funds which are used during an accounting period to generate a current
income of a type which is consistent with major purpose of a firm existence.
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The most common definitions of working capital are:
current assets - current liabilities
stocks + trade debtors - trade creditors
WORKING CAPITAL = Current Asstes – Current Liability
(Rs. In Lac.)
Year Current
Assets
Current
Liabilities
Working
capital
2006-2007 31824 4086
27738
2007-2008 36994 5803
31191
2008-2009 32331 5084
27247
2009-2010 38341 5139
33202
Objectives of working capital:
Every business needs some amount of working capital. It is needed for following
purposes-
• For the purchase of raw materials, components and spares.
• To pay wages and salaries.
• To incur day to day expenses and overhead costs such as fuel, power, and office
expenses etc.
• To provide credit facilities to customers etc.
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Factors that determine working capital:
The working capital requirement of a concern depend upon a large number of factors
such as
? Size of business
? Nature of character of business.
? Seasonal variations working capital cycle
? Operating efficiency
? Profit level.
Sources of working capital:
The working capital requirements should be met both from short term as well as long
term sources of funds.
? Financing of working capital through short term sources of funds has the benefits of
lower cost and establishing close relationship with banks.
? Financing of working capital through long term sources provides the benefits of
reduces risk and increases liquidity
Types of working capital:
Working capital an be divided into two categories-
Permanent working capital:
It refers to that minimum amount of investment in all current assets which is required at
all times to carry out minimum level of business activities.
Temporary working capital:
The amount of such working capital keeps on fluctuating from time to time on the basis
of business activities.
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Advantages of working capital:
• It helps the business concern in maintaining the goodwill.
• It can arrange loans from banks and others on easy and favorable terms.
• It enables a concern to face business crisis in emergencies such as depression.
• It creates an environment of security, confidence, and over all efficiency in a business.
• It helps in maintaining solvency of the business.
Disadvantages of working capital:
• Rate of return on investments also fall with the shortage of working capital.
• Excess working capital may result into over all inefficiency in organization.
• Excess working capital means idle funds which earn no profits.
• Inadequate working capital can not pay its short term liabilities in time.
Management of working capital: A firm must have adequate working capital, i.e.; as much as needed the firm. It should be
neither excessive nor inadequate. Both situations are dangerous. Excessive working
capital means the firm has idle funds which earn no profits for the firm. Inadequate
working capital means the firm does not have sufficient funds for running its operations.
It will be interesting to understand the relationship between working capital, risk and
return.
The basic objective of working capital management is to manage firms current assets and
current liabilities in such a way that the satisfactory level of working capital is
maintained, i.e.; neither inadequate nor excessive. Working capital some times is referred
to as “circulating capital”.
Operating cycle can be said to be t the heart of the need for working capital. The flow
begins with conversion of cash into raw materials which are, in turn transformed into
work-in-progress and then to finished goods. With the sale finished goods turn into
accounts receivable, presuming goods are sold as credit. Collection of receivables brings
back the cycle to cash.
The company has been effective in carrying working capital cycle with low working
capital limits. It may also be observed that the PBT in absolute terms has been increasing
as a year to year basis as could be seen from the above table although profit percentage
turnover may be lower but in absolute terms it is increasing. In order to further increase
profit margins, SSL can increase their margins by extending credit to good customers and
also by paying the creditors in advance to get better rates.
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Ratio Analysis
Ratio analysis is one of the important and generally used technique for analysis financial
statement. A ratio is simply one number expressed in term of another. It is found by
dividing one number, the base, into the other. The precentage is one kind of ratio in
whoch the base is taken as equaling to 100 & the quotient is expressed as per 100 of the
base. Ratio analysis is , an attempt to present the information of the financial statement in
simplified, systematized & summarized form. Ratio analysis measures the profitability,
efficiently and financial soundness of the business. In the world of Meyers, ratio analysis
is a “ Study of relationship Among the various financial factores in a business.”
In modern world in each & every Business to run it smoothly & well it is necessary that
in each & every step businessman have to take some decisions. Decision is started when
the resources are limited. In resources both physical and economical resources is
included. For better results the resources is to be used carefully.
every decision. For the better result the decesion is to be taken from the available
resources by the Managing Director The Managing Directore runs the business, so the
Managing Directore is taken each &.
Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives a skilled and experienced analyst, a
better understanding of the financial conditions and performance of the firm than what he
could obtained only through a perusal of financial statements.
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Ratios are relationship expressed in mathematical terms between figures, which are
connected with each other in same manner. Obviously, no purpose will be served by
comparing two sets of figures, which are not at all connected wit each other. Moreover,
absolute figures are also unfit for comparisons.
Accounting ratios are, theerfore, mathematical relationship expressed between inter-
connected accounting figures.
ADVANTAGES OF RATIO ANALYSIS
Following are some of the advantages of ratio Analysis:
1. Simplifies the Financial Statements :- Ratio analysis simplifies the
comprehension of financial statement. Ratios tell the whole story of changes in the
financial condition of the business.
2. Facilitates Inter-firm Comparison. :- Ratio analysis provides data for inter-firm
comparison. Ratios highlight the factore associated with sucessful and unsucessful
firm. They also reveal strong firms and weal firms, over-valued and undervalued
firms.
3. Makes Intra-firm Comparion Possible. :- Ratio analysis also makes possible
comparion of the performance of the different divisions of the firm. The ratios are
helpful in deciding about their effciency or otherwise in the past and likely
performance in the future.
4. Helps in Planning :- Ratio analysis helps in planning and forecasting . Over a
period of time a firm or industry develops certain norms that may indicate furture
success or failure. If relationship changes in firm’s data over different time periods,
the ratios may provide clues on trends and future problems.
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Limitation of Accounting Ratios.
Accounting ratios are subject to certain limitations. They are given below :
1. Comparative Study Required :- Ratios are usedful in judging the efficiency of
the business only when they are compared with the past results of the business or
with the result of a similar business.
2. Limitation of Financial Statements :- Ratios are based only on the information
which hasd been reecorded in the financial Statements.
3. Ratios alone are not Adequate :- Ratios are only indicators, they cannot be taken
as final regarding good or bad financial position of the business. Other things have
also to be seen. It has been correctly observed,
“ Ratios must be used for what the are financial tools. Too often they are looked
upon as ends in themselves rather than as a means to an end. The value of a ratio
should not be regarded as good or bad inter-se. It may be an indication that a firm
is weak or strong in a particular area but it must never be taken as proof.”
4. Window Dressing :- The term window dresing menas manipulation of accounts
ina way so as to conceal vital facts and present the financial statements in a way to
show a better position than what it actually is. On account of such a situation,
presence of a particular ratio may not be definite indicatore of good or bad
management.
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5. Problem of Price Level Changes :- Financial analysis based on accounting ratio
will give misleading results if the effects of changes in the price level are not taken
into account.
For example, two companies set up in different years, having plant and machinery
of different ages cannot be compared on the basis of traditional accounting
statements. This is because the depreciation the depreciation charged on plant and
machinery in case of old company would be at a much lower figure as compared to
the company, which has been set up recently. The financial statement of the
companies should, therefore be adjusted keeping in view the price level changes if
a meaningful comparison is to be made through accounting ratio.
6. No Fixed Standards :- No fixed standards can be laid down for ideal ratios. For
example, current ratio is generaly considered to be ideal if current assets are twice
the current liabilites. In case of those concerns, Which have adequate arrangements
with their bankers for providing funds when require, it may be perfectly ideal if
current assets are equal to slightly more than current liabilities.
7. Ratios are Composite of Many Figures :- Ratios are a composite of many diff.
Figures. Some cover a time period, other are at an instant of time while still others
are only averages. A balance sheet figure show the balance of the accountant at
one day. It certainly may not be representative of typical balance during the year.
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Classification of Ratios
Ratios can be classified into different categories depending upon the basis of
classification. They are :
Financial Ratios indicate about the financial position of the company. A company is
deemd to be financially sound if it is in a position to carry on its business smoothly and
meet its obligations, both short term as well as long term, withought strain. It is a sound
principle of finance that the short- term requirement of funds should be met out of short-
term funds and long-term requirments should be met out of long-term fund.
1. Liquidity Or Short-Term Solvency Ratios.
2. Activity or Efficiency Ratios
3. Profitability Ratio
4. Leverage or Capital Structure Ratio
Liquidity Or Short term Solvency Ratio
These ratios are also called as “ working capital” or “ Short Term Solvency Ratios”. An
enterprise must have adequate working capital to run its day-to-day operation to a
grinding halt because of inability of the enterprise to pay for wages, materials and other
regular expenses. The important Liquidity Ratios are as.
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Current Ratio
This ratio is an indicatore of the firm’s commitment to meet its short- term liability.
Current assets mean that will either be used up or converted into cash within a year’s
time or during the normal operation cycle of the business which ever is longer. Current
liabilitiy mean liability payble within a year or during the operating cycle whichever is
longer out of the existing current assets by creation of current liabilites.It is expressed as .
Current Assets
Current Ratio =
Current Liabilities
Purpose :- Measures the short term debt paying ability.
Intrepretation :- High Ratio indicates healthy manufacturing operations and growth of
the company. Low ratio is a alarm signal that the business may turn into losses any
moment.
Current Ratio
(Rs. In Lac.)
Year Current
Assets
Current
Liabilities
Ratio
2006-2007 31824 4086
7.79
2007-2008 36994 5803
6.37
2008-2009 32331 5084
6.36
2009-2010 38341 5139
7.46
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Note : - The current Assets include the cash in hand plus Inventories plus sundry debtors
plus loan and advances. And current liabilities include creditors, unclaimed divident,
advance from customer /securietyand provisions.
Quick or Liquidity Ratio :- Liquidity ratio is the measure of the instant debt
paying ability of the business enterprise, here it is also called “Quick ratio” or “ acid test
ratio” This ratio establishes the relationship between quick/liquid assets and current
liabilities.
Current Assets – (Stock + Prepaid Exp.)
Liquidity Or Quick Ratio =
Current Liabilities
Puspose :- A refind measure of the short term debt paying ability by measuring short
term liquidity.
Interpretation :- A high ratio reveals a company’s sound position in term of liquidity.
Liquidity Or Quick Ratio
(Rs. In Lac.)
Year Quick
Assets
Current
Liabilities
Ratio
2006-2007 19570 4086 4.79
2007-2008 20121 5803 3.47
2008-2009 18045 5084 3.55
2009-2010 20641 5139 4.02
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Note :- Liquid or quick assets refer to all the current assets except inventory and prepaid
expenses. The exclusion of inventory is based on the fact that it cannot be easily
converted into cash. Prepaid expenses by their very nature do not provide cash, they
merely reduce the demand of cash rrequire in one period because of payment in a prior
period.Current liability have the same meaning as used for current ratio.
B Activity or Effeciency Ratio : The fund of creditor and owner are
invested in various assets to generate salse and profit. The better the
management of these assets, the larger the amount of salse. Activity ratios
enable the firm oto know how efficiently these assets are employed by it. These
ratios indicate the speed with which assets are being converted or turned over
into salse, that is why thee ratios are also known as “Turnover Ratios” an
activity ratio is the relationship between salse or cost of good sold and
investment in various assets of the firm.
(1) Inventory (Stock) Turnover ratio: a firm must have resonable stock in
comparison to sales. The quantity of stock should be sufficient to meet the demand of te
business, but it should not be too large to indicate unnecccessary locking-up of capital in
stock, danger of stock –item becoming obsolete and resulting in wast by passing of time.
The inventory or stock turnover ratio is calculated to consider the adequacy of the
quanatum of capital and it justification for investing in inventory Inventory turnover ratio
normally establish the relationship between cost of salse and average inventory.
Sales
Inventory (stock) Turnover ratio =
Average Inventory at cost
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Inventory (stock) Turnover ratio (Rs. In Lac.)
Year Quick
Assets
Current
Liabilities
Ratio
2006-2007 19570 4086 4.79
2007-2008 20121 5803 3.47
2008-2009 18045 5084 3.55
2009-2010 20641 5139 4.02
Purpose :- Measure the liquidity of the inventory and adequacy of inventory controls.
Interpretation:- Normally a higher ratio is prefreed as it amount to good inventory
management. However a very high ratio may indicate under invetment in inventories.
Note:-we are considering the sales and in the average Inventory we are taking the closing
inventory of the firm .
Debtors (Accounts Receivable ) turnover ratio : Receivables normally include
debtore and bill receivable and represent the uncollected portion of credit sales. If a firm
is not able to collect its debtore within a reasonable time, its funds are innecessarily tied
up in receivables. Therefore to know how fa the firm is sucessful in realising the
credit,”debetore or receivables turnover ratio” is calculated.
Net credit sales
Debtors turnover ratio = Average Receivables (Drs. + B/R)
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Debtors turnover ratio
(Rs. In Lac.)
Year Sales Average
Receivable
Ratio
2006-2007 55476 19268 126
2007-2008 69505 19658 103
2008-2009 74959 19524 95
2009-2010 85498 18388 78.5
Purpose :- Measure the liquidity of debetore and effectiveness of credit realisation.
Interpretation:- Normally a higher ratio shorter collection period and vice-versa.
Therefore high ratio is preferred as it means better credit management and prompt
payment by Debetores.
Note:-credit sales mean allcredit sales minus sales returns. If Information about sales is
not available, the figure of total sales may be assumed to be the credit sales. Debetore and
bill receivables which areise, the full amount of bill discount, which creates liabilities,
should be included and provision for bad and douful debts should not be deducted
because it may give an impression that some amount of receivable has been collected.If
the data relating to opening and closing balances of debetore and receivable are not
available, the receivable ar the end of the year may be consider for computing this ratio.
Creditor (Payble) turnover ratio : Firm from good s and services are purchased
on credit are known “Creditors” and the bill accepts in lieu of credit purchase are called “
bills payble” The creditors and bill paybles both are reckoned as “ Total Payble”. If these
paybles remain outstanding for a long time period, lesser will be the problemof working
capital to the firm. But, when the firm does not pay off its creditors within time,it may
face difficulties in procuring further working capital. It show the relation between net
credit purchase for the year and total paybles, whereas average payment period or
creditors’.
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Net Credit Purchase
Creditor turnover ratio=
Total or Average Payble (Crs.+ B/P)
Purpose :- Credit period enjoyes by the firm in paying creditors.
Creditor turnover ratio
(Rs. In Lac.)
Year Purchase Average Payble Ratio
2004-2005 8466 168 50.55
2005-2006 10990 611 17.98
2006-2007 10713 327 32.78
2007-2008 12264 454 27
2008-2009 16167 461 35
Interpretation:- A high turnover ratio or shorter payment period shows the availablity of
less credit or early payments. This boosts up the credit worthiness of the firm. On the
other hand a very low turnover ratio or longer payment period implies availability of
more credit or delayed payments.
Thus, the lower the ratio, the liquidity position of the firm, and the higher the ratio, the
lesser is the liquidity position of the firm, and the higher the ratio, the lesser is the
liquidity position of the firm.
Note:- Credit Purchase means all credit purchase of goods minus purchase return . If the
credit purchase is not available the figure of total purchase may be assumed to be credit
purchase. Average payble refer to the one half of openingand closing balance of trade
creditors which includes sundry creditors and bills payble. Provision for discount on
creditors” will not be deducted form the amount of creditors.
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4 Total Assets Turnover ratio : This ratio express the relationship between cot of
goodsold/ net sales and total assets/investment of a firm. It is also called “ Total
Investment Turnover Ratio, and is calculated by using the following fourmula:
Sales
Total Assets turnover ratio =
Total Assets
Tota Assets Turnover ratio
(Rs. In Lac.)
Year Sales Total Assets Ratio
2006-2007 55476 87346 0.63
2007-2008 69505 96461 0.72
2008-2009 74959 89545 0.83
2009-2010 85498 91684 .93
Purpose :- Measure the productivity of total Assets.
Interpretation:- Normally a higher ratio indicate an efficient assets management.
Note:-Mean all fixed and current assets but the provision for depreciation is adjusted in
it. A few exclude fictitious assets like preliminery expenses, underwriting commission,
discount on share and debenture etc. The figure of net sales can be used where
information regarding cost of good sold is not available.
5 Fixed Assets Turnover ratio : This ratio express the relationship between cot of
goodsold/ net sales and fixed assets of a firm. and is calculated by using the following
fourmula:
Sales
Fixed Assets turnover ratio =
Net Fixed Assets
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Fixed Assets Turnover ratio (Rs. In Lac.)
Year Sales Net Fixed
Assets
Ratio
2006-2007 55476 36578 1.51
2007-2008 69505 49570 1.40
2008-2009 74959 61106 1.32
2009-2010 85498 56441 1.51
Purpose :- Measure the productivity of Fixed Assets.
Interpretation:- Normally a higher ratio indicate an efficient Fixed assets management.
Note:-Mean all fixed assets but the provision for depreciation is adjusted in it. A few
exclude fictitious assets like preliminery expenses, underwriting commission, discount on
share and debenture etc. The figure of net sales can be used where information regarding
cost of good sold is not available.
6 Capital turnover Ratio:- This ratio establish the relation ship between net sales or
costof good sold and capital employed.
Sales
Capital turnover ratio=
Capital employed
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Capital turnover ratio (Rs. In Lac.)
Year Sales Capital
Employed
Ratio
2006-2007 55476 83267 66.62
2007-2008 69505 92292 75.30
2008-2009 74959 87011 86.14
2009-2010 85498 88705 96.38
Purpose :- This ratio is a better measurment of efficient use of capital employed.
Feeicient use of capital symbolies profit earning capacity and managerial efficiency of
the business.
Interpretation:- Higher ratio show the higher profit and lower ratio show the lower
profit
Note:- Capital employed is calsulated either by deducting liabilities form total assets or
by adding long-term loans in shareholder’ fund (sharecapital+ reserve&surplus).
Fictitious and non-trading assets are excluted form assets
C) Profitability Ratios :- The amain objective of every firm is to earn profit.
Each firm want to earn maximum pforits only in absolute term abut also in relative terms.
It possible only when resources of the firm are effectively utilised. The firm’s ability to
earn maximum profit by the best utillsation of its resources is called profitability. The
profitability of a firm can easily be measured by its profitability ratio. These ratios
indicate overall managerial efficiency. There are two types of profitability ratios First
profitability ratios are based on sales; secound profitability ratio based on capital and
assets.
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Profitability Ratios based on Sales :-
From profit point of view it is significant that adequate profit should be earned on each
unit of sales. If adequate profit is not earned on sales there will be difficulty in meeting
the operation expensesd and no divident will be paid to theshareholder there following
profitability are calculated in relation to sales.
1 Gross Profit ratio
2 Net Profit ratio
Profitability ratio based on capital and assets.
The primery objective of making investment in any business is to obtain adequate return
on capital invested. Therefore to measure the overall profitability of the firm, it is
essential to compare profit with capital employed. With this objective return on capital
employed is calculated. It is also called “ Return on Investment(ROI)”. This ratio express
the relationship between profit and capital employed and is calculatd in presentage by
dividing the net-profit by capital employed.
1.Return on capital employed
2. Net Profit to total Assets ( Return on Assets)
3.Return on shareholder fund (Equity shareholder fund)
4.Earning per Equity share
1 Gross profit Ratio :- This ratio expressed the relationship of gross profit on sales to
net sales in terms of percenstage. Expressed as a fourmula the gross profit ratio is:
Gross Profit
Gross profit Ratio = * 100
Net Sales
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Gross profit Ratio (Rs. In Lac.)
Year Gross Profit Sales Ratio
2004-2005 1531 17976 8.52%
2005-2006 1818 20799 8.74%
2006-2007 1678 21724 7.73%
2007-2008 2569 22546 11.40%
2008-2009 3206 29860 10.74%
Purpose :-Reveals the efficiency of the production/ trading operations.This ratio is
measures the trading effectivness and basic profit earning potentiality of a firm.
Interpretation:- High ratio indicate healthy manufaturing operations and growth of the
company. Low rati is a alarm signal that the business may turn into losses any moment.
Note:-According to the accounting standard Board of India., “Gros Profit” is the excess
of the proceds of goods sold and service rendered during a period over their cost before
traking into account administration, selling, distribution and financial expenses.” It is
calculated by deducting the cos of good sold form the net sales. Net sales means total
sales minus sales returns.
2 Net Profit Ratio :- This ratio measure the relationship between net profit and sales
of a firm. The net profit ratio is determinied by dividing the net profit by sales and
expressed as percenstage. Formulla used is as follows:
Net Profit (After Tax)
Net Profit Ratio = * 100
Net sales
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Net profit Ratio (Rs. In Lac.)
Year Net Profit Sales Ratio
2006-2007 2702 55476 4.87
2007-2008 537 69505 .77
2008-2009 -1598 74959 -2.13
2009-2010 1715 85498 2.01
Purpose :-Reveals the Net margine on sales.this is the indiacationof overall profitability
and efficecy of the business.
Interpretation:- High ratio indicate healthy and long term survival. A high ratio is also
mean adequate return to the owners. It also enable or cost of production is rising. A low
net profit ratio on the other hand would only indicate inadequate return to the owners.
Note:-According to the accounting standard Board of India., Net profit is the excess of
revenue over expenses during a particular accounting period. Net sales means total sales
minus sales returns.
3 Return on capital employed :- The primery objective of making investment in
any business is to adequate return on capital invested. Therefore, to measure the overall
profitability of the firm it is esntial to compare profit with capital employed. With this
objective return on capital employed is calculated. It is called “ Return on Investment
(ROI)”. This ratio is expressed the relationship between profit and capital employed and
is calculated in percenstage by dividing the net-profit by capital employed.
Net Profit After Tax
Return on capital employed = * 100
Capital Employed
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Return on Capital employed ratio
(Rs. In Lac.)
Year Net Profit Avg.Capital
Employed
Ratio
2006-2007 5804 64211 9.04
2007-2008 3891 87779 4.43
2008-2009 1160 89651 1.29
2009-2010 6541 87858 7.45
Purpose :- Measure the rate of return on long term borrowin and owner’s equity.
Interpretation:- A high ratio indicates the efficient use of capital employed. It may help
in getting easy credits from the banks/financial institions.
Note:- Capital employed is calsulated either by deducting liabilities form total assets or
by adding long-term loans in shareholder’ fund (sharecapital+ reserve&surplus).
Fictitious and non-trading assets are excluted form assets. And the Net profit is after tax.
4 Net Profit to total Assets ( Return on Total Assets):- Profitability can also
be measured by eastiblishing relationship between net profit and total assets.
This ratio is computed by dividing the net profit after tax by total funds invested or total
assets.
Net Profit After Tax
Return On Total Assets = * 100
Total assets
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Return On Total Assets
(Rs. In Lac.)
Year Net Profit Total
Assets
Ratio
2006-2007 2702 87346 3.09
2007-2008 537 96461 0.57
2008-2009 -1598 89545 -1.78
2009-2010 1715 91684 1.87
Purpose :-Measure the productivity of total assets.
Interpretation:- A high ratio is prefered as it indicates the efficient use of shareholder’s
fund and hence preferred.
Note:- Note:-Mean all fixed and current assets but the provision for depreciation is
adjusted in it. A few exclude fictitious assets like preliminery expenses, underwriting
commission, discount on share and debenture etc. The figure of net sales can be used
where information regarding cost of good sold is not available. . Net sales means total
sales minus sales returns.
5.Return on Equity shareholder’s fund :- Equity shaholder are the real owners
of the company. Therfore the profitability of acompany form the owners stand point
should be viwed in terms of return to eqity shareholder. This ratio is calculated by
dividing the profit available for equity shareholder by the equity shareholder’s fund.
Expressed as fourmula
Net Profit after tax – Preference Dividend
Return on Equity = * 100
shareholder’s fund Equity shareholder fund
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Return on equity shareholder fund
(Rs. In Lac.)
Year Profit available fo
equity shareholder
Equity share
holder fund
Ratio
2004-2005 703 3915 17.95**
2005-2006 707 4800 14.73**
2006-2007 409 4050 10.09**
2007-2008 705 4601 15.32**
2008-2009 1154 6690 17.25**
Purpose:-Measure earning power of equity capital.
Interpretation:- A high ratio is prefered as it indicates the efficient use of shareholder’s
fund and hence preferred.
Note:- Net profit represent the resident profit left and available for distribution to the
equity shareholder after provision has been made for all other financial obligation such as
tatin. Interset and preference revenaue and capital reserves and undistributted profit and
surplus.
6. Earning per Equity share :- The rate of divident on share depends upon the
amount of profit earned by the firm. Whatever profit remains, after meeting all expenses
and paying preference share divident, belongs to equity shaholder. Thesew are the profit
earned on equity share capital.
Profit available for equity
shareholder
Earning per equity share = * 100
No. of Equity share
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Earning per equity share
(Rs. In Lac.)
Year Profit Available
for equity
shareholder
No of
Share
Ratio
2006-2007 2702 39421559 6.86
2007-2008 537 39421559 1.36
2008-2009 -1598 39421559 -4.05
2009-2010 1715 39421559 4.35
Purpose:-Indicate the amount of earning attribute to each equity share.
Interpretation:- High amount of earning per share mean higher market price of the
equity share as it attribute new investments form public.
Note:-. The earning per share (EPS) iw calculated by dividing the profit avaialble to
equity shareholder is represented by the net profit after taxes and preferences share
dividend.
D) Leverage / Capital Structure Ratios :- Leverage or capital structure
ratios are claculated to judge the long-term solvency or financial position of the firm.
Therefore, these ratios are also know as long term solvency ratios.
1).Dept-Equity Ratio :- This ratio indicaetes the relative proportion of debt and equity in
financing the asets of a firm. In other words, debt equity ratios reveals the relationship
between internal and external equity ratios’. Expressed as a formula
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External Equities
Debt-Equity Ratio =
Internal Equities
Debt- Equity Ratio
(Rs. In Lac.)
Year Total Debts Shareholder
fund
Ratio
2006-2007 46050 18792 2.45
2007-2008 49878 19329 2.58
2008-2009 49627 17731 2.80
2009-2010 46459 19446 2.39
Purpose :-Reveals the proportation of funds being financed through borrowings.
Interpretation:- It is used as a measure pointing out the extend of trading on equity. It is
very necessary to maintain optimum capital structure in the long term.
Note:-. External equties refer to the total outside liabilities short term and long term
loan. Internal equities or shareholder’s fund total paid up amount of equity and
preference share capital plus the total or accumalated amount of reserve and surplus.
2. Proprietory Ratio :-This is also called “Owners “ Equity or Net worth to total
assets Ratio’ Proprietory ratio establishes relationship between proprietor’ or
shareholder’ funds and total assets of the business.
Shareholder fund
Proprietory Ratio =
Total Assets
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Proprietory Ratio
(Rs. In Lac.)
Year Shareholder
fund
Total
Assets
Ratio
2006-2007 18792 87346 .21
2007-2008 19329 96461 .20
2008-2009 17731 89545 .19
2009-2010 19446 91684 .21
Purpose:-Measure the ecxtend of shaholder’s fund in the total assets employed in the
business.
Interpretation:- High ratio indiacte the long term stability of the business
Note:-. Proprietor fund include share capital (Equity and preference) all reserve and
surplous and undistributed profits. Total assets include all curent and fixed assets.
Fictitious assets such as preliminary expenses, discount on share and debenture are
excluded from reserves.
3 Solvency or Debt to Total Assets Ratio :- This ratio meger the long-term
solvency of the business. It reveals the relationship between total assets and total external
liability. External liabilities mean all long- term and short term liabilities.
Total Liabilities
Solvency Ratio =
Total Assets
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Earning per equity share
(Rs. In Lac.)
Year Total Liabilities Total Assets Ratio
2004-2005 12427 7061 1.76
2005-2006 13724 7428 1.85
2006-2007 13555 7157 1.89
2007-2008 18369 10443 1.76
2008-2009 26376 16429 1.61
Purposre:- This ratio measured the proportation of total assets provide by creditors of
the firm. What part of assets is being financed from loans.
Interpretation :- If total assets are more than external liabilities, the firm is treated as
solvent. So the higher the ratio the greaster is the amount of creditors that is being used to
generate profits for the owners of the firm.
SWOT Analysis
Strength
Strong R&D focus supporting new design introduction and product innovation.
Successful record in the timely and low cost implementation of expantion and
mordenization projects.
Large and reputed customer brands within India and Abroad.
Production flexibility for smaller to bigger size of lot from 600kg to 100mt size.
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The company employs the best of its class machineries to ensure efficient and better
quality of finished products.
Weakness
No presence in garments.
Lack of branding and small penetration in fabrics and home textile segments.
Major raw materials - polyester and viscose fibers depend on oil price and are volatile.
Opportunities
Volatility in cotton prices is creating huge demand for PV-fabrics.
Affordablility and durability of PV-fabrics opens a huge potential market for the
company.
To move into technical textile market.
The great indian retail revolution fuelling the demand in new customer segments.
Threats
High debt equity ratio.
Fluctuation in forex market affect export demand.
Availability of cost effective labour due to NAREGA.
Power cost in vulnerable to fluctuating coal price.
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BIBLIOGRAPHY
BOOKS
1. Boyed, Jr.Weatfall, Marketing Research: Text & Cases
All India traveller book seller,2001, 128 -130pp
2. Malhotra K.Naresh Marketing Research: An Applied Orientation
Pearson Education, 2004, 48pp, 78 –80pp
3. Kotler Philip, Marketing Management :
Pearson Education, 2004,8 –17pp, 102 –106pp,
Web –sites:
WWW.SAMNAGMINDIA.COM
www.google.com
Magazines:
1. Annual report of the Sangam India Ltd,.
2. Product manual of Sangam India Ltd,..