Financial Analysis

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Name of The Student ENROLLMENT. No. COURSE. Mobile No. Telephone No:- (Res)

ISHA SHARMA A1802011133 MBA IB 9810314999 9915799996

Name of the Organization (Address)

VARDHMAN TEXTILES LTD. Chandigarh Road, Ludhiana, Punjab - 141010, India. Phone: 91(0161)-2662543-48 Fax: 91(0161)-2601048, 2602710, 2642616

Date of Joining

18TH MAY, 2012

Project Topic Location Other Responsibilities:

Financial Analysis of Vardhman Textile Limited Ludhiana Assisting in routine Internal Audit Assignments.

Company’s Designated Supervising Authority* Name Designation Mr. SUNIL KUMAR ASSISTANT EXECUTIVE Phone No (O) 0161-2228943-48 (Extn. – 1199) Mobile: E-Mail : Signature of Authority(with stamp)

8146625323 [email protected]


Sr. No. 1 2

3 4

CONTENTS Indian Textile Industry 2.Company’s Profile 2.1 Introduction 2.2 History 2.3 Mission 2.4 Portfolio 3 Financial Analysis 4 Introduction to project 4.1Meaning of working capital management 4.2 Classification or kinds of working capital 4.3 Needs & objectives of working capital 4.4 Importance & advantage of adequate 4.5 Excess or inadequate working capital 4.6 Disadvantages of excess working capital 4.7 Factors determining the working capital

4.8 Concept of Working Capital 4.9Working Capital Ratios Objectives of study Findings Recommendations Limitations Suggestions & Conclusions Bibliography

5 6 7 8 9 10



Financial analysis is the conversion of financial data into useful information for decision making. Therefore, virtually any use of financial statements or other financial data for some purpose is financial analysis and, essentially, is the primary focus of accounting and finance professionals. Financial analysis can be internal (e.g., decision analysis by a company using internal data to understand or improve management and operating results) or external (e.g., comprehensive analysis for such purposes as commercial lending or investment activities). The key is how to analysis available data to make correct decisions. 1.1.1 Financial Statement Analysis process of examining relationships among financial

Financial statement analysis is the

statement elements and making comparisons with relevant information. It is a valuable tool used by investors and creditors, financial analysts, and others in their decision-making processes related to stocks, bonds, and other financial instruments. The goal in analyzing financial statements is to assess past performance and current financial position and to make predictions about the future performance of a company. Investors who buy stock are primarily interested in a company's profitability and their prospects for earning a return on their investment by receiving dividends and/or increasing the market value of their stock holdings. Creditors and investors who buy debt securities, such as bonds, are more interested in liquidity and solvency: the company's short-and long-run ability to pay its debts. Financial analysts, who frequently specialize in following certain industries, routinely assess the profitability, liquidity, and solvency of companies in order to make recommendations about the purchase or sale of securities, such as stocks and bonds. Analysts can obtain useful information by comparing a company's most recent financial statements with its results in previous years and with the results of other companies in the same industry. Three primary types of financial statement analysis are commonly known as horizontal analysis, vertical analysis, and ratio analysis.

4 Horizontal Analysis When an analyst compares financial information for two or more years for a single company, the process is referred to as horizontal analysis, since the analyst is reading across the page to compare any single line item, such as sales revenues. In addition to comparing dollar amounts, the analyst computes percentage changes from year to year for all financial statement balances, such as cash and inventory. Alternatively, in comparing financial statements for a number of years, the analyst may prefer to use a variation of horizontal analysis called trend analysis. Trend analysis involves calculating each year's financial statement balances as percentages of the first year, also known as the base year. When expressed as percentages, the base year figures are always 100 percent, and percentage changes from the base year can be determined. Vertical Analysis When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies. Ratio Analysis Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two financial statements. After calculating ratios for each year's financial data, the analyst can then examine trends for the company across years. Since ratios adjust for size, using this analytical tool facilitates intercompany as well as intra company comparisons. Ratios are often classified using the following terms: profitability ratios (also known as operating ratios), liquidity ratios, and solvency ratios. Profitability ratios are gauges of the company's operating success for a given period of time. Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. In judging how well on a company is doing, analysts typically compare a company's ratios to industry statistics as well as to its own past performance.

Financial statements are the sources of information on the basis of which conclusions are drawn about the profitability and financial a position of a concern. they are the major means employed by firms to present their financial situation of owners, creditors and the general public. The primary objective of financial statements is to assist in decision-making. The Accounting Principles Board Of America (APB) states the following objectives of financial statements: 

To provide reliable financial information about economic resources and obligations of a business firm.

To provide other needed information about changes in such economic resources and obligations.

To provide reliable information about changes in net resources (resources less obligations) arising out of business activities.

To provide financial information that assists in estimating the earning potential of business.

To disclose, to the extent possible, other information related to the financial statements that is relevant to the needs of the users of these statements.

Many US AID activities are aimed at and designed for improving socio-economic infrastructure of the country. Activities in education, health, family planning and even in agriculture (e.g., research and extension) often do not generate any revenues or, if any, insufficient revenues to cover the costs of the activities. Financial justification of such activities in the traditional financial internal rate of return (FIRR) terms is not possible and is unnecessary. The role of the financial analyst, however, is to determine that the selected activity will achieve the stated results at the least cost possible and to determine whether sufficient resources will be made available to cover its costs in a timely manner.


 To analyze the financial position of the Vardhman Textiles Limited and estimate for the future. To compare all the financial ratios of Vardhman Textiles Ltd. and with their competitors. To study all the key areas like liquidity, solvency and profitability and financial position of the Vardhman Textile Limited. To analyze the strength and weakness of the Vardhman Textile Limited.

To show the element of financial position in a comparative form so as to give an idea of financial position of two or more periods in order to check the profitability of the concern.

1.2.2 RESEARCH METHODOLOGY ADOPTED 1. Data Collection: Both primary and secondary data has been collected for the completion of
study “Financial Analysis of Vardhman Textiles Limited”. Following are main sources from where data collection was done: a) PRIMARY SOURCES: Discussions (With Mr. SUNIL KUMAR, Internal Audit Executive). b) SECONDARY SOURCES: 1. 2. 3. 4. 5. Group & Company‟s Financial Records / Annual Reports of the Company. Company‟s Audit Reports RBI Circulars / Banks Notifications. Journals / Magazines / Business Dailies. Web site of the Company and Other Textiles related web sites.


2. Tools Used:
a) FINANCIAL TOOLS: Following financial tools were used to analyze the actual performances of

organization by adopting various financial risk management techniques.

RATIO ANALYSIS: To analysis all the various short-term solvency ratios like Liquidity

Ratios, Activity Ratios, and Long term solvency ratios like Debt Equity Ratio, Solvency Ratio, and Fixed Assets Ratio etc. & lastly, the Profitability Ratios were covered. The Overall Profitability was analyzed with the help of ratios like Return on Equity, Return on Investment and Earning Per Share. 
HORIZONTAL ANALYSIS: To compares financial information for two or more years for a

single company, the process is referred to as horizontal analysis, since the analyst is reading across the page to compare any single line item, such as sales revenues. In addition to comparing dollar amounts, the analyst computes percentage changes from year to year for all financial statement balances, such as cash and inventory. Alternatively, in comparing financial statements for a number of years, the analyst may prefer to use a variation of horizontal analysis called Comparative Financial Statements. Comparative statement analysis involves calculating each year's financial statement balances as percentages of the first year, also known as the base year. When expressed as percentages, the base year figures are always 100 percent, and percentage changes from the base year can be determined.

VERTICAL ANALYSIS: To calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies.

SWOT ANALYSIS: The SWOT analysis was used to analyze the Strengths & Weaknesses (Within control of the organization) and the Opportunities and Threats

(Beyond control of the organization, posed by the outside environment) in relation to the current and future policies of the organization.

c) PRESENTATION TOOLS: The presentation tools have been used to present the

facts and figures in an attractive manner. The details of the same exhibits have been also mentioned alongside for the easy reference of the readers. Following main presentation tools have been used for better exhibition of the data:

 Tables & Graphs  Logos

Textile industry is primarily concerned with the design and/or manufacture of clothing as well as the distribution & use of textiles. The process of making clothes depends slightly on the fibre being used, but there are three main steps1. Spinning 2. Weaving
3. Knitting.


Introductio n:

Our economy is largely dependent on textile manufacturing and

trade in addition to other major industries. About 27% of the foreign exchange earnings are on account of export of textiles & clothing alone. The textile & clothing sector contribute about 14% of the industrial production & about 3% to the gross domestic product of the country. Around 8% of the total excise revenue collection is the contributed by the textile industry. The textile industry in India has a strong multi-fibre raw material production base. “India is presently exporting 6 billion U.S. dollars worth of garments, where as with the WTO regime in place, we can increase the production and export of garment from 18 to 20 billion U.S. dollars within next 5 years.” First time a separate policy statement was made in 1985 in regard to development of textile sector. With new investment flow, India’s cotton production increased by 57% over the last 5 years & 3 million additional spindles & 30000 shuttles less looms was installed.

 The Indian Textile Industry is the second largest in the world.  It has the largest cotton acreage (9 million hectares).  It is the second largest cotton producer.  It ranks 4TH in terms of staple fibre production & 6TH in filament yarn production.  India accounts for (circa) 25% of the Global trade in cotton yarn.  It is the largest producer of Jute, the second largest producer of silk and the 5th largest producer of synthetic fibre / yarn.


 The Indian Textile and Apparel industry : o o contributes to circa 3.6% of India’s gross domestic product Accounts for 25% of India’s exports.(Ref 7).

 The Textile Industry accounts for about 20% of industrial production.  The Textile Industry employs over 15 million people.  Textiles and Garment exports account for 39% of India’s total exports.  Globalization has brought opportunities for Indian Textiles.  But Globalization also brings threats which have to be addressed (particularly from cheap imported fabrics).  If the WTO means better distribution of world trade, it will not be free for all and only the fittest will survive.  WTO benefits for Indian Textiles will also apply to other developing countries.  The Indian Textile Industry has great potential, but great challenges ahead.  It must maximize its strengths and minimize its weaknesses.

Go vernment Reg ula tio ns a nd Support
The textile industry, b eing one of the most significant sectors in the Indian e c o n o m y, h a s b e e n a k e y f o c u s a r e a f o r t h e G o v e r n m e n t o f I n d i a . A n u m b e r o f policies have been put in place to make the industry more competitive. 1. The Technology Up gradation Fund Scheme (TUFS )

Recognizing that technology is the key to being competitive in the global market, the Government of India established the Technology Up gradation Fund Scheme (TUFS) to enable firms to access low -interest loans for technology up gradation. Under this scheme , the government reimburses 5 per cent of the interest rates charged by the banks and financial institutions, thereby ensuring credit availability for up gradation of the technology at global rates.



Capital subsidy

In the Union Budget, the Government o f India announced a credit linked capital support of 10 per cent, in addition to the existing 5 percent interest reimbursement for modernizing the processing sector. This measure has been widely acclaimed by the industry and trade circles and is expected t o bring at l e a s t , U S $ 3 3 0 m i l l i o n t o U S $ 4 4 0 m i l l i o n i n v e s t m e n t i n t w o ye a r s . T h e government also provides 20 per cent capital subsidy for procurement of modern machinery in the power loom sector


Quality improvement

The Textile Commission, under the Mi nistry of Textiles, facilitates firms in the industry to improve their quality levels and also get recognized quality certifications. Out of 250 textile companies that have been taken up by the Commission, 136 are certified ISO 9001. The other two certific ations that have been targeted by the Textile Commission are ISO 14000 Environmental Management Standards and SA 8000 Code of Conduct Management Standards.

  The Indian textile industry is one of the leading industry in the world. Currently it is estimated to be around US$ 52 billion and is also projected

to be around US$ 115 billion by the year 2012.  The share of exports is also expected to increase from 4% to 7% within

year 2012.  D u r i n g t h e p a s t f e w ye a r s , I n d i a n t e x t i l e i n d u s t r y h a s a t t r a c t e d h u g e

i n v e s t m e n t s . A s a r e s u l t , t h e c a p a c i t y i n t h e e n t i r e c h a i n h a s e x p a n d e d b e yo n d the current demand. In the context of declining economic activities, even the domestitc market is not able to absorb the surplus generated by the industry so, i t i s t o u g h t i m e f o r t h e i n d u s t r y.


L a r g e

industry conglo merate, with turnover of USD and presence in textiles, retail,



e n g i n e e r i n g g o o d s , p e r s o n a l c a r e a n d p r o p h yl a c t i c s .
T e x t i l e

products - worsted fabrics, wool and blended

fabrics, specialty ring colour and stretch denim f a b r i c , c o t t o n a n d l i n e n s h i r t i n g f a b r i c , r e a d ym a d e garments, woolen blankets and home furnishings .


o f t h e o l d e s t t e x t i l e s c o m p a n i e s i n t h e c o u n t r y,

having turnover of USD 300 million.
P r o d u c e s

suiting, shirting, sarees, towels, bed linen

a n d m e n ‟ s a p p a r e l ; s i g n i f i c a n t e x p o r t e r o f p o l yc o t t o n blended fabrics ,furnishings and made ups.
O n e

of the largest producers of denim in the world,

having turnover of USD 300 million and exports to more than 70 countries.
P r o d u c e s

denim fabric, cotton and blended fabric,

knitted fabric, voiles, apparel .

of the largest tex tile business houses in India,

having turnover of USD 700 million.



a c r yl i c



s yn t h e t i c a n d b l e n d e d s p u n ya r n s , g r e y a n d p r o c e s s e d f a b r i c s , c o t t o n a n d s yn t h e t i c s e w i n g t h r e a d s .

l a r g e s t e x p o r t e r o f r e a d ym a d e g a r m e n t s ,

having turnover of USD 180 million.

to 100+ retailers and fashion brands in 39




The industrial city of Ludhiana, located in the fertile Malwa region of Central Punjab is otherwise known as the “MANCHESTER OF INDIA”. Within the

precincts of this city is located the Corporate Headquarters of the Vardhman Group, a household name in Northern India has carved out a niche for itself in t e x t i l e i n d u s t r y. T h e V a r d h m a n G r o u p , b o r n i n 1 9 6 5 , u n d e r t h e e n t r e p r e n e u r s h i p of Late Lala Rattan Chand Oswal, has today blossomed into o ne of the largest Textile Business houses in India under the leadership of Chairman cum Managing Director of the company. Mr. S.P.OSWAL


Brief History
T h e V a r d h m a n G r o u p i s o n e o f t h e l a r g e s t t e x t i l e h o u s e s i n t h e c o u n t r y. T h e group has the sizeable presence in Spinning, Weaving, Sewing Threads, Fabrics P r o c e s s i n g , A c r yl i c F i b e r m a n u f a c t u r i n g a n d A l l o y S t e e l s . In 1965, at the time when India was awakening to the need for industrial investment, Ludhiana, a bustling town in the fertile Malwa belt of Pu njab, witnessed the establishment of Vardhman which started as a 14,000 spindle spinning unit under the entrepreneurship of Late Lala Rattan Chand Oswal. Over t h e ye a r s , V a r d h m a n h a s e x p a n d e d i t s s p i n n i n g c a p a c i t i e s b e s i d e s a d d i n g n e w business. The Group i s, now, one of the largest textile con glom rate in the country with the turnover of about Rs.4455 crores(2010-11). The group has also d i v e r s i f i e d i n t o ya r n p r o c e s s i n g , w e a v i n g , s e w i n g t h r e a d , f a b r i c p r o c e s s i n g , a c r yl i c f i b r e m a n u f a c t u r i n g a n d i n t o s p e c i a l / a l l o y s t e e l s . V a r d h m a n g r o u p h a s a l s o e n t e r e d i n t o t h e g a r m e n t s e c t o r . T o d a y, c l o s e t o 2 4 0 0 0 p e o p l e a r e t h e organisation‟s most important assets -its human capital. T h e g r o u p p r e s e n t l y h a s 2 0 m a n u f a c t u r i n g l o c a t i o n s , s p r e a d a c r o s s 5 s t a t e s . At its inception, Vardhman had an installed capacity of 14,000 spindles, today; its capacity has increased multifold to over 8 lacs spindles. In 1982 the Group entered the sewing thread market in the country which was a forward integration of the business. Today Vardhman Threads is the second largest producer of sewing thread in India. In 1990, it undertook yet another diversification - this time into the weaving business. The grey fabric weaving unit at Baddi (HP), commissioned in 1990 with a capacity of 20,000 meters per day, has already made its mark as a quality producer of Grey poplin, sheeting, shirting in the domestic as well as foreign market. This was followed by entry into fabric processing by setting up Auro Textiles at Baddi and Vardhman Fabric at Budhni,Madhya Pradesh. Today the group has 900 shuttleless looms and has processing capacity of 90mn meters fabrics/annum.

In the year 1999 the Group has added yet another feather to its cap with the setting up of Vardhman Acrylics Ltd., Bharuch (Gujarat) which is a joint venture in Acrylic Fibre production undertaken with Marubeni and Exlan of Japan. The company also has a strong presence in the markets of Japan, Hong Kong, Korea, UK and EU in addition to the domestic market. Adherence to systems and a true dedication to quality has resulted in obtaining the coveted ISO 9002/ ISO 14002 quality award which is the first in Textile industry in India and yet another laurel to its credit.

The Vardhman group comprises of three listed and three unlisted companies -

Listed Companies:

   

Vardhman Textiles Limited (formerly Mahavir Spinning Mills Limited) V a r d h m a n A c r yl i c s L i m i t e d Vardhman Holdings Limited Vardhman Special Steels Limited

(Formerly Vardhman Spinning & General Mills Limited) C Unlisted Companies:

  

VMT Spinni ng Company Limited Vardhman Investment Limited Vardhman Yarn and Threads Limited


Vardhman aims to be the world class Textile organization producing diverse range of products for the global Textile market. Vardhman seeks to achieve Customer delight through excellence in manufacturing and customer service Based on creative combination of state of the art technology and human resources. Vardhman is committed to be a responsible c orporate citizen. The mission of the Vardhman Group can be summed up in a single line i.e.

“Rooted in Values, Creating World Class Textiles”.



Business Wise Turnover for the financial Year 2010-11 Actual 2010-11 Group Total( Rs crore) Yarn Fabric Sewing Thread Steel Power plant Fibre Total 2280 1093 440 435 9 235 4492 USD Million 500 240 97 95 2 52 986 % Share 51% 24% 10% 10% 0.2% 5% 100%



. Yarn Manufacturing is the major activity of the group accounting for 51 percent of the group turnover. Vardhman is virtually a supermarket of yarns, producing the widest range of cotton, synthetics and blended, Grey and Dyed yarns and Hand Knitting Yarns, in which Vardhman is the market leader in India. The group has twenty one production plants with a total capacity of over 8.8 lacs spindles, spread all over the country. In many of the yarn market segments, Vardhman holds the

largest market share. Vardhman is also the largest exporters of yarn from India, exporting yarns worth more than USD 282 million.



Cotton Hosiery Yarn

All kinds of knitted garments for kids, ladies ,gents, socks, T-shirts

Woven Yarn T yr e C o r d ya r n A c r yl i c Y a r n Hand Knitting Yarn

Shirts and Trousers Manufacturing of Tyres Sweaters and Shawls Knitting


Sewing Thread Vardhman is the second largest producer of sewing thread in the country. The sewing thread manufacturing capacity is being expanded from 17 tons per day to 33 tons per day in its sewing thread plants located at Hoshiarpur, Baddi and Ludhiana. Sewing threads contributes 10 percent of the group turnover.

SEGMENT Apparel Sewing Threads Specialty Threads

APPLICATIONS Clothing, Tailoring, Hosiery Sports, Leather Goods, Mattresses, Quilting, Parachutes etc.

Textile Crafts Kite Flying

Embroidery, Crochet Tapestry etc. Kite Flying


FabricsThe group has created state-of-the-art fabric weaving and processing facilities in its plant at Baddi, Northern India. The group has installed 900 shuttle less looms and a fabric processing capacity of 90 million meters per annum in collaboration of Tokai Senko of Japan. Fabrics business contributes 24 percent to the group turnover.

V a r d h m a n v e n t u r e d i n t o t h e m a n u f a c t u r e o f a c r yl i c f i b e r i n 1 9 9 9 . T o d a y , V a r d h m a n A c r yl i c s l t d . p r o d u c e s c o n s i s t e n t s u p e r i o r q u a l i t y f i b e r a n d h a s emerged as an important producer in In dia. The products are marketed under the brand name VARLAN.

The group has set up an Acrylic Staple Fibre plant at Bharuch in Gujarat in collaboration with Marubeni and Japan Exlan of Japan. The plant has annual

capacity of 20000 tons per annum. Fibre contributes 5 percent to the total turnover of the group.


Special steels
V a r d h m a n S p e c i a l S t e e l s w a s e s t a b l i s h e d i n t h e ye a r 1 9 7 3 t o m a n u f a c t u r e Special and Alloy Steel. The true impetus came with the upgrading of the plant l o c a t e d i n L u d h i a n a t o a n u l t r a m o d e r n p l a n t . The Group is also present in upper-end of the steel industry. The group has manufacturing capacity of 100000 tons of special and alloy steel. The group supplies its steel products to some of the most stringent quality steel buyers like Maruti and Telco. It contributes 10 percent to the total turnover of the group. Continuous research and development efforts, focused on customer

satisfaction, have enabled Vardhman Steels to m eet the stringent quality r e q u i r e m e n t s o f p r o d u c e r s o f a l l t yp e s o f c o m m e r c i a l v e h i c l e s , t r a c t o r s , c a r s , two wheelers, defense applications, and other engineering products. The company has received approval for its products from leading Companies like T e l c o , A s h o k L e yl a n d , M a r u t i , H i n d u s t a n M o t o r s , Y a m a h a , K i n e t i c a n d E s c o r t s among others.


Year of Establishment and Market Position


Year of Establishment

Market Share







Sewing Thread










Manufacturing and Distribution Network



1) 2)

Largest Spinning capacity in India. First Indian Textile Company to get ISO -9002 & ISO 14002 certification

in 1992-93. 3) 4) L a r g e s t m a n u f a c t u r i n g e x p o r t e r o f c o t t o n ya r n i n t h e c o u n t r y. Exports to high quality conscious countries like Japan, Canada, Korea,

I t a l y, G e r m a n y, U . K and Switzerland 5) Winner of „OUTSTANDING EXPORT ACHIEVEMENT AWARD’ of

t h e ye a r 1 9 9 6 - 9 7 . 6) 7) 8) 9) 10) 11) Recipient of „ TRADING HOUSE STATUS’ IN 1994. R e c i p i e n t o f „ S T A T E E X P O R T A W A R D ’ f o r f i v e s u c c e s s i v e ye a r s . L a r g e s t p r o d u c e r a n d e x p o r t e r o f c o t t o n ya r n . L a r g e s t p r o d u c e r o f h a n d k n i t t e d ya r n s . Second largest producer of sewing threads in the country. MSML is the winner of the Texprocil Award for highest Exports .


Financial Position :
Value in lacs Particulars Sales [Including other income] Total Expenditure PBDIT Interest and Financial Charges PBDT Depreciation PBT Tax PAT Year 2006-07 212165.8 173840.5 38325.34 3769.5 34555.84 11979.05 22576.79 5406.01 17170.78 Year 2007-08 231765.1 194011.3 37753.75 5399.86 32353.89 15456.29 16897.6 4644 12253.6 Year2008-09 248717.3 211580.4 37136.85 10233.56 26903.29 20732.41 6170.88 3436 2734.88 Year2009-10 279792.28 220329.02 59463.26 8673.29 50789.97 22087.57 28702.4 7326.1 21376.30 Year2010-11 365079

94469.3 10981.22 83488.08 22602.36 60885.72 13915.21 46970.51

Sales of Vardhman Textile Ltd have increased from Rs.279792.28 lakh

in Year 2009-10 to Rs. 365079 lakh in Year 2010 -11. i.e it has increased by Rs 85286.72. Therefore increase by 30.48 %      Expenses of the company have also increased from Rs. 220329.02 lakh

in Year 2009-10 to Rs.270609.7 in Year 2010 -11. Thus increase of 22.82% PBDIT has increased from Rs.59463.26 lakh in Year 2009 -10 to in Year 2010 -11. Hence increased by 58.87%.


PBDT has also increased from Rs. 50789.97 lakh in Year 2009 -10 to

Rs.83488.08 in Year 2010 -11. Hence increase of 64.37%. PBT has increased from Rs.2 8702.4 lakh in Year 2009-10 to

Rs.60885.72 in Year 2010 -11. Hence increased by 112.12 % PAT has also increased from Rs. 21376.30 lakh in Year 2009-10 to

Rs.46970 in Year 2010 -11. Hence a increase of 119.73 %.

Meaning of Working Capital
Capital required for business can be classified under two main categories viz,

1. 2.

Fixed Capital Working Capital

Every business needs funds for two purposes – for its establishment and to carry out its day to day operations. Long term funds are required to create production f a c i l i t i e s t h r o u g h p u r c h a s e o f f i x e d a s s e t s s u c h a s p l a n t & m a c h i n e r y, l a n d , building, furniture, etc. Funds are also needed for short term purposes for the p u r c h a s e o f r a w m a t e r i a l , p a ym e n t o f w a g e s a n d o t h e r d a y t o d a y e x p e n s e s . These funds are known as working capital. In simple words, working capital refers to that part of the firm capital, which is required for financing short term or current assets such as cash, marketable securities, debtors and inventories. Funds thus invested in current assets keep revolving fast and are being constantly converted into cash and this cash flows out again in exchange for others current assets. Hence it is also known as revolving capital.


Classification of Working Capital

W o r k i n g c a p i t a l m a y b e c l a s s i f i e d i n t w o w a ys :  

On the basis of Concept On the basis of Time

Kinds Of Working Capital

On the basis of Concept

On the basis of Time

Gross Working Capital

Net Working Capital

Permanent Or Fixed Working Capital

Temporary Or Variable Working Capital

Regular Working Capital

Reserve Working Capital

Special Working Capital

Seasonal Working Capital


1. On the basis of Concept – Working capital is classified as gross working capital and net working capital as we discussed earlier. 2. On the basis of Time – Working capital may be classified as: -

a) b) 1.

Permanent or Fixed Working Capital Temporary or Variable Working Capital Permanent or Fixed Working Capital : Permanent or fixed working capital is the minimum amount, which is

required to ensure effective utilization of fixed facilities and for maintaining t h e c i r c u l a t i o n o f c u r r e n t a s s e t s . T h e r e i s a l w a ys a m i n i m u m l e v e l o f c u r r e n t assets, which is continuously required by the enterprise.


Temporary or Variable Working Capital : Temporary working capital is the amount of working capital which is

required to meet the seasonal demands and some special exigencies. Most of the enterprises have to provide additional working capital to meet the seasonal d e m a n d s a n d s p e c i a l n e e d s . T h i s t yp e o f c a p i t a l i s c a l l e d w o r k i n g c a p i t a l .

Temporary working capital differs from permanent working capital in sense that it is required for the short periods and cannot be permanently e m p l o ye d g a i n f u l l y i n t h e b u s i n e s s .

Need of Working Capital
Every business needs some amount of working capital. The need for working capital arises due to the time gap between production and realization of cash f r o m s a l e s . T h e r e i s a n o p e r a t i n g c yc l e i n v o l v e d i n t h e s a l e s a n d r e a l i z a t i o n o f cash. There are time gaps in the purchase of raw material and production; production and sales and sales realization of cash. Thus working capital is needed for the following purp oses:


     

To pay wages and salaries. To incur day to day expenses and overhead costs such as fuel, power and office expenses, etc. For the purchase of raw material, components and spares To meet selling costs as packing, advertising. To provide credit facilities to the customers. To maintain the inventories of raw materials, work in progress, stores and spares and finished goods.

Importance or Advantage of Adequate Working Capital
No business can run successfully without an adequate amount of w orking capital. The main advantages of maintaining adequate amount of working capital are as follows: -


Solvency of the Business - Adequate working capital helps in

maintaining solvency of the business by providing uninterrupted flow of production.


Goodwill- Sufficient working capital enables a business concern to make

p r o m p t p a ym e n t s a n d h e n c e h e l p s i n c r e a t i n g a n d m a i n t a i n i n g g o o d w i l l .


Easy Loans- A concern having adequate working capital, high solvency

and good credit standing can arrange loans from ban ks and other on easy and favorable terms.


C a s h Di s c o u n t - A d e q u a t e w o r k i n g c a p i t a l a l s o e n a b l e s a c o n c e r n t o

avail cash discount on the purchase and hence it reduces cost.


R e g u l a r S u p p l y o f Ra w Ma t e r i a l - S u f f i c i e n t w o r k i n g c a p i t a l

ensures regular supply of raw materials and continuous production.



R e g u l a r pa y me n t o f Sa l a r i e s & W a g e s - A c o m p a n y w h i c h h a s

a m p l e w o r k i n g c a p i t a l c a n m a k e r e g u l a r p a ym e n t o f s a l a r i e s a n d w a g e s .


Ability to face crisis- Adequate working capital enables a concern to face business crisis in

emergencies such as depression.


High Morale- Adequacy of working capital creates an environment of security, confidence

and high morale and creates overall efficiency in a business.

Excess or Inadequate Working Capital
Every business concern should have adequate working capital to run its business operations. It should have neither working capital nor inadequate nor shortage of working capital. Both excess as well as short working capital positions are bad for any business.

Disadvantages of Excessive Working Capital


Excessive working capital means idle funds, which earn no profit for the business and hence

the business cannot earn a proper rate of return on its investment.


Excessive working capital implies excessive debtors.


It may result into overall inefficiency in the organization.


When there is excessive working capital, relations with banks and other financial institutions

may not be maintained.


The excessive working capital gives rise to speculative transactions.


Factors Determining the Working Capital
The working capital requirements of a concern depend upon a large number of factors such as nature and size of business, the character of their operations, the length of production cycle etc. however, the following are important factors generally influencing the working capital requirements:


Nature of Business- The working capital requirement of a firm basically depends upon the

nature of its business. Public utility undertaking like electricity, water supply and railways need very limited working capital.


Size of Business- The working capital requirement of a concern is directly influenced by the

size of its business, which may be measured in terms of scale of operations. Greater the size of a business unit, larger will be the requirement of working capital and vice-versa.


Production Policy- In certain industries, the demand is subject to wide fluctuation due to

seasonal variations. The requirement of working capital, in such cases, depends upon the production policy.


Length of Production Cycle- In manufacturing business, the requirement of working capital

increases in direct proportion to the length of manufacturing process. Long the process period of manufacturing, larger is the amount of working capital.


Seasonal Variation- The certain industries, raw material is not available throughout the year.

They have to buy raw material in bulk during the season to ensure an interrupted flow and process during the entire year. A huge amount is thus, blocked in the form of material inventories during such season, which gives rise to more working capital requirement. During the busy season, a firm requires larger working capital than in the slack season.


Working Capital Cycle- In the manufacturing concern, the working capital cycle starts with

the purchase of raw material and end with the realization of cash from the sale of finished goods. This cycle involves purchase of raw material and stores, its conversion into stocks of finished goods through work-in-progress with increment of labour and service cost, conversion of finished stock into sales, debtors and receivables etc.

Debtors (Receivables)


Finished Goods

Raw Materials

Work In Progress


Credit Policy- The credit Policy of a concern in its dealings with the debtors and creditors

influence considerably the requirement of working capital. A concern that purchase its requirement on credit and sell its product/services on cash, required lesser amount of working capital.


Business Cycles- Business Cycle refers to alternate expansion and contraction in general

business activity. It is a period of boom i.e. when the business is prosperous; there is a need for larger amount of working capital due to increase in sales, rise in prices, optimistic expansion of business etc.


Price Level Changes- Changes in the price level also affects the working capital requirement.

The rising prices will require the firm to maintain larger amount of working capital, as more funds will be required to maintain the same current assets.


Other Factors- Certain other factors such as operating efficiency, management ability,

import policy, assets structure, banking facilities etc. also influence requirement of working capital.


Primary and Secondary sources of information were utilized for the collection of required data, as comprehensive analysis requires a great deal of it. PRIMARY DATA Primary data are the first hand information, which we can get directly from the people working in that concern. I have personally met manager of MIS Department of Vardhman Textiles Ltd. to know the various facts regarding my project and the organization. Primary data was collected regarding various activities performed in the unit by observing the manufacturing process and interviewing the concerned person involved in the process.

SECONDARY DATA The secondary data is the information about the facts that we can get from published materials such as books, journal etc. My sources of secondary data for this project were annual reports, Internet, journals, historical cost information available in the organization. Accounting records were studied to get the costing data and operation reports were studied to gather the data regarding the practices of the company.


Sources of Working Capital
There are various sources of working capital.

Permanent or Fixed

Temporary or Variable

1. 2. 3. 4. 5.

Share Debenture Public Deposits Loans from financial Institutions Ploughing Back of Profits

1. Commercial Bank 2. Indigenous Bank 3. Installment Credit 4. Advance 5. Accounts Receivable Credit 6. Accrued Expenses 7. Commercial Papers 8. Trade Creditors

A. Permanent or Fixed Working Capital-

Permanent working capital should be financed in such a manner that the enterprise may have its uninterrupted use for a sufficiently long period. There are 5 important sources of permanent or long term working capital:-

a. Share- A company can issue various types of shares as equity shares, preference shares and deferred shares. According to the Companies Act 1956, however, a public company cannot issue deferred shares. Preference share carry preferential rights in respect of dividend at a fixed rate and in regard to the repayment of capital at the time of winding up the company. b. Debentures- A debenture is an instrument issued by the company acknowledging its dept to its holder. It is also an important method of raising long term loans or permanent working capital. The debenture holders are the creditors of the company. A fixed rate of interest is given on debentures. The interest on debenture is a charge against Profit & Loss A/c. c. Public Deposit- Public deposits are the fixed deposits accepted by a business enterprise directly from the public. This source of raising short term and medium term financing was very popular in the absence of banking facilities. In the past public deposit were accepted by textile industries in Ahmedabad and Bombay for period of 6 months to 1 year. But the business houses accept now a days even long term deposits for 5-7 years.

d. Loans from Financial Institutions- Financial institutions such as commercial bank, Life Insurance Corporation, Industrial Finance Corporation of India, Industrial Development Bank of India etc also provide short term, medium term and long term loans. e. Ploughing Bach of Profits- Ploughing back of profits means the reinvestment by concern of its surplus earning in its business. It is an internal source of finance and is not suitable for an established firm for its expansion, modernization and replacement etc.

B. Temporary or Variable Working Capital-

a. Indigenous Bankers- Private money lenders and other country bankers used to be the only source of finance prior to the establishment of commercial banks. They used to charge high rate of interest and exploited the customer to the largest extent possible. b. Trade Credit- Trade credit refers to the credit extended by the suppliers of goods in the normal course of business. As present day commerce is built upon credit, the trade credit arrangement of a firm with its suppliers is an important source of short term finance. c. Installment Credit- This is another method by which the assets are purchased and the possession of goods is taken immediately but the payment is made in installments over a pre-determined period of time. d. Advances- Some business houses get advances from their customers and agents against order and this source is a short term source of finance for them. It is a cheap source of finance. e. Factoring or Account Receivable credit- Another method of raising short-term finance is through accounts receivables, credit offered by commercial banks and factors. A commercial bank may provide finance by discounting the bill or invoices of its customers. f. Accrued Expenses- Accrued expenses are the expenses, which have been incurred but not yet due and hence not yet paid also. These simple represent liability that a firm has to pay for the service already received by it. g. Deferred Income- Deferred incomes are incomes received in advance before supplying goods or services. They represent funds received by a firm for which it has to supply goods or services in future. Commercial Paper- Commercial paper represents unsecured promissory notes issued by firm to raise short-term funds. In India, the Reserve Bank of India introduced commercial paper in the Indian money market on the recommendation of the working group of money market. But only large companies enjoying high credit rating and sound financial health can issue commercial paper to raise short term funds.


Concept of Working Capital
Gross Working Capital
The gross working capital is the capital invested in total current assets of the enterprises. Current assets are those which in the ordinary course of the business can be converted into cash within a short period of normally one accounting year. Examples of current assets are:        

Cash in hand and bank balances Bills receivables Sundry debtors (less provisions for bad debts) Short-term loans and advances Inventories of stock Temporary investments of surplus funds Prepaid expenses Accrued incomes

Gross Working Capital = Total Current Assets


Company's current assets:
Value in lac Particulars Current Assets A) Inventories B) Accounts Receivable C) Cash D) Loans and Advances Gross Working Capital 69584.8 25241.1 21673.4 23300.7 139800 87036.3 27469.8 6269.97 30952.3 153628 62010.1 27566.8 35721.3 33945.2 161172 110745.92 39733.69 22207.01 30968.29 203655 159839.46 48847.09 4876.99 45237.67 258801.21 2006-07 2007-08 2008-09 2009-10 2010-11

Analysis and Interpretation:

From above we can interpret that gross working capital has increased a lot in 2010-11 as compared to last year. The basic reason for this is increase in level of inventories as substantial rise in price of raw material (cotton) compared to previous years. The company requires to maintain a stock as the raw material are seasonal.

Net Working Capital

Net working capital is the difference between the current assets and the current liabilities. Therefore, it is called net working capital. When current assets exceed current liabilities the working capital is positive otherwise negative. Examples of current liabilities are:


      

Bills Payable Sundry creditors Outstanding expenses Short term loans Dividend payable Bank overdraft Provisions for taxation, if it does not amount to appropriation of profits.

Company's current liabilities:

Value in lac Current Liabilities 2006-07 2007-08 2008-09 2009-10 2010-11

1) Liabilities 2) Provisions 3) Secured Loans

27985.1 -586.79 22500.2

24655.1 1549.77 29873.4

23902.4 239.72 28228.1

24828.93 -147.39 33063.15

24285 -1625 79838.75

Total Liabilities







Analysis and Interpretation: The total current liabilities are increasing from 2006 to 2011. In year 2008-09, company decreased its current liabilities major reason being decrease in provisions comparatively, in the years 2009-10 & 2010-11, where liabilities almost doubled owing to raw material purchase in 2010-11.

Net Working Capital


Current Assets – Current Liabilities


Schedule of Changes in Net Working Capital
Value in lac Particulars Current Assets A) Inventories B) Accounts Receivable C) Cash D) Loans and Advances Total Current Assets (T1) Current Liabilities 1) Liabilities 2) Provisions 3) Secured Loans Total Liabilities (T2) 27985.1 (586.79) 22500.2 49898.5 24655.1 1549.77 29873.4 56078.3 97550.2 23902.4 239.72 28228.1 52370.2 108802 24828.93 (147.39) 33063.15 57744.69 145910.22 69584.8 25241.1 21673.4 23300.7 139800 87036.3 27469.8 6269.97 30952.3 153628 62010.1 27566.8 35721.3 33945.2 161172 110745.92 39733.69 22207.01 30968.29 203654.91 159839.46 48847.09 4876.99 45237.67 258801.21 2006-07 2007-08 2008-09 2009-10 2010-11

24285 (1625) 79838.75 102498.75

Net Working Capital (T1-T2) 89901.5

Working Capital (in Rs. Lacs)
2006-07 2007-08 2008-09 2009-10 2010-2011 156302.46

145910.22 108802









Analysis: Net working capital requirement year 2010-11 has increased a lot. This is mainly due to increase in inventories of the company because of rise in prices of raw material (cotton) & curtailment in indigenous supply to the group units. Net working capital increase by almost 21 per cent in year 2008-09 in comparison to year 2006-07 & 12 per cent in comparison to year 2007-08. Company has changed policy of raw material procurement in anticipation in increase in prices of cotton in coming months. As a result of this net requirement of working capital on account of raw material has increase. s is due to return on current assets investment has increased by .0252%. The decrease in current liabilities is due to increase in price of raw materials in current financial year as result of which cash balance has also been substantially reduced.

Now in year 2007-08 net working capital increases by 7 per cent in comparison to 2006-07. This is mainly due to increase in current assets. Although current liabilities increases in this year but the effect of increase in current assets is pronounced more in comparison to increase in current liabilities. The reason for increase in current assets is that there is increase in inventory. The increase in inventory is due to increase in sales of the company in this year and company hopes for similar trend next year in sales that is why it has maintained more inventory. It should be noted that increase in inventory expenses is at the expense of decrease in cash and bank balance. As company bought more raw materials that resulted in decrease in cash and bank balance. As net sales increase in this year so there are more debtors from where company has to receive payment due to which debtors and advances recoverable increase in the current financial year. In year 2006-07 net working capital increases by 8 percent from 2005-06. This increase is mainly due to increase in current assets. The increase in current assets is due to increase in inventories. The increase in inventory is mainly due to increase in stock of raw materials which is might be due to fall in price of raw materials which tempts the company to buy more raw materials in year 2006-07.

In year 2005-06 there is increase in fixed deposit accounts of the company that resulted in increase in bank balances. This resulted in increase in current assets and ultimately increases in net working capital.


Operating Cycle:
Working capital refers to that part of firm‟s capital that is required for financing short-term or current assets such as cash, marketable securities, debtors and inventories. Funds, thus, invested in current assets keep revolving fast and are being constantly converted into cash and these cash flows out again in exchange for other current assets. Hence it is also known as revolving or circulating capital. The circular flow concept of working capital is based upon this operating or working capital cycle of a firm. The cycle starts with the purchase of raw material and other resources and ends with the realization of cash from the sale of finished goods. It involves purchase of raw material and stores, its conversion into stock of finished goods through work-in-progress with progressive increase of labour and service cost, conversion of finished stock into sales, debtors and receivables and ultimately realization of cash and this cycle continues again from cash to purchase of raw material and so on. The speed/time duration required to complete one cycle determines the requirements of working capital-longer the period of cycle, larger is the requirement of working capital.

OPERATING CYCLE ANALYSIS In order to understand the length of time which reports are committed to various components of working capital, operating cycle analysis has been done. The operating cycle of a firm begins with the acquisition of raw material and ends with the collection of receivable. There are four aspects of operating cycle, which involves commitment of resources, a material stage, and accounts finished stage.

Values in lac 44

Particulars Raw Material Conversion period WIP Conversion Period Finished Goods Conversion Period Total Conversion Period Debtors Collection Period Average Payment Period Operating Cycle

Year 2006-07 Year 2007-08 Year 2008-09 Year 2009-10 Year 2010-11 147 11 30 145 11 29 147 12 32 125 12 31

188 42 20

185 41 28

191 42 30

168 41 25





Operating Cycle

215 210 205 200 195 190 185 180 175 170 165

210 198 203






2007-08 Years




The operating cycle of Vardhman has decreased in year 2009-10 as it has not bought enough raw materials thus resulted in decrease in raw material conversion period. (Here it should be noted that company buys its raw material for whole year in 5months). While the WIP and Finished Goods conversion period has remain the same. As it is said earlier, the company has to store around 6 months of raw material i.e. cotton, since it‟s a seasonal crop, in its peak season for steady production run throughout the year. The company has a steady production cycle ranging from 6 month to 6.5 months throughout this period.



A ratio is an arithmetical relationship between two figures. Financial ratio analysis is a study of ratios between various items or group of items in financial statement; turnover ratios have been used for analysis. Ratio analysis is the powerful tool of financial analysis of accounting data. The relationship of the figures should be meaningful. Financial analysis & ratio is used as an index or yardstick for measuring performance of the firm.


Liquidity Ratio a) b) Current ratio Quick ratio


Activity Ratios a) b) Current asset turnover ratio Working capital turnover ratio




The liquidity aspect is essential for both the creditors as well as management of a business enterprise. These ratios are used to judge a firm‟s ability to meet short -term obligations. Liquidity ratio is the ability of a firm to satisfy its short-term obligations as they become due. The ratios that indicate the liquidity of a firm are a) Current Ratio:

Current ratio can be defined as the relationship between current assets and current liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm. It is calculated by dividing current assets by current liabilities aa It is the ratio of total current assets to total current liabilities. It is calculated by dividing assets by current liabilities

Current Ratio = Current Assets Current Liabilities
Values in lacs Particulars Current Assets Current Liabilities Current Ratio Year 2006-07 Year 2007-08 Year 2008-09 Year2009-10 139800 49898.52 2.8 153628.5 56078.29 2.74 161172.3 52370.18 3.08 203654.91 57744-69 3.52 Year2010-11 258801.21


Interpretation: From the above table it is clear that the company is not adhering to the thumb rule of 2:1 in any of the years. An insight in to the B/S of the company shows that major portion of current assets consists of inventories and sundry debtors till 2007-08, but the company has reduced its investment in inventories significantly in 2008-09, but the investment in cash has increased. This is a good indication of short-term solvency of the company but it also indicates idle funds lying with the company that could have been invested otherwise. In 2009-10, the current ratio has been increased i.e 3.52 due to higher inventories because company has increased their capacity with establishment of New Unit in M.P Zone. In 2010-11 , the current ratio has declined by 1% pursuant to scheme demerger of Vardhman special steel Limited from Vardhman textiles Limited w.e.f 1st Jan‟11 resulting in outflow of current assests.

Chart Title
4 3.5 3 2.5 2 1.5 1 0.5 0 2006-07

2007-08 C.R.

2008-09 C.A.(Rs in lakhs)

2009-10 C.L.(Rs. In lakhs)


b) Quick or Acid Test or Liquid Ratio : Although current ratio is a valuable indicator of liquidity yet it may lead to misleading conclusion, in case of inventories forms a major component of current assets, the quick ratio is a fairly stringent measure of liquidity. It is based on those current assets which are the highly liquid or which are easily converted into cash. Inventories and prepaid expenses are excluded from this category, because these are the best liquid component of and has the ability to pay its current liabilities in time when these are due, the ratio may be expressed as:-

Quick Ratio = Liquid assets Current liabilities

Values in lacs Particulars Quick Assets Current Liabilities Quick Ratio Year 2006-07 70215.18 49898.52 1.41 Year 2007-08 66592.12 56078.29 1.19 Year 2008-09 99162.24 52370.18 1.89 Year2009-10 92908.99 57744.69 1.6 Year2010-11 98961.75


Interpretation: Usually a high acid test ratio is an indication that the firm is liquid and has the ability to meet its current or liquid liabilities in time and on the other hand a low quick ratio represents that the firm‟s liquidity position is not good. The quick ratio of the company exceeds the rule of thumb of 1:1 indicating that the company is highly liquid so as to fulfill C.L well in time. From the analyses of B/S, it can be interpretated that the major portion of quick assets consists of sundry debtors. That is why there are chances of non realization of cash from the company‟s customers at the time of emergency. In 2009-10,liquid ratio has decreased from 1.89 to 1.6 as the major portion of current assets include inventories.

absolute turnover ratio
0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2006-07 2007-08 2008-09 2009-10 0.11 0.05 2010-2011 0.43 0.38 Quick ratio 0.68




Absolute Liquid Ratio or Cash Ratio:

Although receivables, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, some authorities are of the opinion that the absolute liquid ratio should also be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets. Absolute liquid assets only include cash in hand, at bank and marketable securities or temporary investments. It is calculated as:

Absolute liquid ratio = Absolute current assets Current liabilities

Values in lacs Particulars Absolute Liquid Assets Current Liabilities Absolute Liquid Ratio Year 2006-07 21673.36 49898.52 0.43 Year 2007-08 6249.97 56078.29 0.11 Year 2008-09 35721.3 52370.18 0.68 Year2009-10 22207.01 57744.69 0.38 Year2010-11 4877 102498.75 .047


As per the analysis made for the past 5 yrs the company is lacking in maintaining the optimum absolute liquid ratio. As we can see that company‟s liquid ratio is is decreasing. In 2007-08 company had very low ratio but there is nothing to be worried about the lack of cash as company has good borrowing powers. Again in 2008-09 they tried to came at optimum level but they could not maintain this ratio AS in 2009-10 the ratio has again decreased from 0.68 to 0.38 as the cash has being used for the purchase of raw material and further it has been reduced to .047 in the year 2010-11 which ensures optimum fund management on the part of the company as lower level cash/bank balances results in less working capital requirement from banks.

absolute turnover ratio
0.68 0.43 0.38 0.11 0.05 2006-07 2007-08 2008-09 2009-10 2009-10

2010-2011 2010-2011







ACTIVITY RATIOS: The funds of creditors and owner are invested in various kinds

of assets to generate sales and profits. Activity ratios measure how efficiently the firm employs the assets. It indicates the speed with which assets are being converted into cash.. The important turnover ratios are:

a) Current assets turnover ratio: The idea of the current assets turnover is to ascertain the contribution of the current assets to sales. The relationship indicates efficiency or otherwise of the utilization of current assets to attain the maximum sales. It is a relative measure as it is compared with previous year. Lower ratio tells us that the company is employing more current assets for a given level of sales and vice-versa, the ratio may be expressed as:-

Current Assets Turnover Ratio = Sales Average Current Assets

Values in lac Particulars Sales Average Current Assets Current Asset Turnover Year 2006-07 Year 2007-08 Year 2008-09 Year 2009-10 274295.35 182413.6 1.5 Year 2010-11 360681.16 231228.06 1.55

209677.73 132189.22 1.59

229466.61 146714.23 1.56

245364.51 157400.37 1.56

Interpretation: The Current Assets Turnover is almost 1.5 times to sales in all years, which shows that the firm adopts the policy of high current assets. The firm has been maintaining a constant ratio which they find suitable for them.


current assets turnover
0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2006-07 2007-08 2008-09 2009-10 0.11 0.05 2010-2011 0.43 0.38 2006-07 2007-08 2008-09 2009-10 2010-2011 0.68

b) Working capital turnover ratio:

Net working capital turnover ratio indicates the velocity of the utilization of working capital. This ratio indicates the number of times the working capital is turned over in the course of a year. A higher ratio indicates the effective utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio is not a good situation for any firm and hence care must be taken while interpreting the ratio. The ratio may be expressed as:

Working capital turnover ratio =Net Sales [In times] Net working capital
Values in Lac 54

Particulars Sales Net Working Capital Working Capital Turnover

Year 2006-07 Year 2007-08 Year2008-09 Year2009-10 209677.73 89901.48 2.33 229466.61 97550.16 2.35 245364.51 108802.11 2.26 274295.35 145910.22 1.87

Year2010-11 360681.16 156302.46 2.30

Working Capital Turnover Ratios
0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2006-07 2007-08 2008-09 2009-10 0.11 0.05 2010-2011 0.43 0.38 Quick ratio 0.68

Interpretation: This ratio indicates the velocity of the utilization of net working capital. It shows the number of times the working capital is turned over in the course of a year. It measures the efficiency with which the working capital is being used by firm. The above analysis indicates that the sales as compared to the working capital are nearly two times indicating that the company is trying to utilize the available working capital to the maximum and is not blocking much of capital in the working capital. They have tried to maintain optimum level of working level as there is not much change in their working capital as compared to sales.As compared to increase in sales, they have year by year increased its working capital also. But in year 2009-10,the net working capital has increased much more due to increase in secured loans which has resulted in decrease in working capital ratio to 1.87.

C) Inventory Turnover Ratio: Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirements of the business. But the level of inventory should

neither be to high as it would unnecessary block capital which can otherwise be profitably used somewhere else and inventory should neither be too low as it would mean loss of business opportunities. This ratio indicates whether the inventory has been efficiently used or not. The purpose is to see whether only the required minimum funds have been locked up in inventory. Inventory Turnover Ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. It is calculated as:

Inventory Turnover Ratio = Cost of [In times]



Average Inventory at Cost


Inventory Conversion Period: This ratio shows the average time taken for clearing the stocks. It is calculated as: -

Inventory Conversion Period = Days [Holding Period in Days]




Inventory Turnover Ratio

Values in lacs Particulars C.O.G.S. Average Inventory Inventory Turnover Ratio Holding Period Year 2006-07 106699.33 37619.28 2.8 130 Year 2007-08 123660.75 46505.59 2.6 140 Year 2008-09 137944.71 41216.25 3.34 109 Year2009-10 150208.81 51614.42 2.91 125 Year2010-11

Interpretation: 56

The ratio indicates how fast inventory is sold. A high ratio is good from the viewpoint of liquidity. A low ratio signifies that inventory does sell fast and stays on the shelf for a long time. The ratio is such due to high level of inventory. This ratio should be compared with the industry average.


Debtor’s Turnover Ratio: This ratio indicates the velocity of debt collection of firm. It indicates the number of

times average debtors are turned over during a year. Generally higher the value of debtors turnover the more efficient is the management of debtor/sales or more liquid are debtors. Similarly a low debtor turnover implies inefficient management of debtors.

It is calculated as: Debtor’s Turnover Ratio=Net Credit sales Average debtors

Average Collection Period: It represents the average number of days for which a firm has to wait before its receivables are converted into cash.

Average Collection Period=No. Of Days in a Year Debtors Turnover Ratio

Values in lac Particulars Year 2006-07 Year 2007-08 Year 2008-09 Year2009-10 Year2010-11

Net Sales Average Debtors

209677.73 23722.64

229466.61 26355.46

245364.51 27518.31

274295.35 33650.23

360681.16 44290.39

Debtors Turnover Ratio Average Collection Period

8.84 41.3

8.71 41.92

8.92 40.94

8.15 44.78

8.14 44.84


Generally higher the value of the debtor turnover, more efficient the management would be. From the above data it is clear that debtor‟s turnover ratio is increasing continuously, although, in the initial years the company was not able to manage its collection period. However, being a textile industry, the collection period of 41 days is normal and quite efficient. Overall high debtor‟s turnover ratio and reduced average collection period of the company represent efficient credit and collection performance.


Creditors Turnover Ratio: This ratio indicates that how much time a firm is likely to

take in repaying its trade creditors. It also indicates the velocity with which the creditors are turned over in relation to purchases. Generally higher the creditor‟s velocity better it is otherwise lower the creditor‟s velocity, less favorable are the results. This ratio is calculated as:-

Creditors Turnover Ratio= Net Credit Annual Purchases [In times] Average Trade Creditors

Average Payment Period: It represents the average number of days taken by the firm to pay its creditors. Generally lower the ratio; the better is the liquidity position of the firm and higher the ratio, less liquid the position of the firm. This ratio is calculated as:

Average Payment Period= No. [In days]




Creditors Turnover Ratio
Values in lacs

Particulars Net Credit Purchases Average Creditors Creditors Turnover Ratio Average Payment Period

Year 2006-07 102864 7993 12.87 28 days

Year 2007-08 123186 9961 12.37 30 days

Year 2008-09 107147 7359 14.56 25 days

Year2009-10 176870 5650 31.30 12days

Year2010-11 222712.33 7204 30.91 12 days


Generally, lower the ratio; better the liquidity position of the company because the higher creditors turnover ratio signifies that creditors are being paid promptly. Thus it shows that the business is not taking full advantage of credit facilities. But the company has managed to increase its average payment period to take the advantage of credit facilities available. From the above table it is clear that the ratio is much higher in 2005-06. The company has increased payment period in 2006-07 which resulted in increase in average creditors therefore turnover ratio decreased. Company is increasing its payment period as it is utilizing it efficiently by investing it in fixed deposits account.

3: Profitability Ratios:


Gross Profit: The Gross profit ratio reflects the efficiency with which a firm

produces its product. This also indicates the extent to which selling prices of goods per unit may decline without resulting in losses on operations of a firm. As the gross profit is found by deducting cost of goods sold from the net sales, therefore higher the G.P. ratio better is the result. It is calculated as:b)

Gross Profit Ratio=Gross Profit Net Sales

Where Gross Profit= Net Sales-COGS

Values in lac Particulars Gross Profit Net Sales Gross Profit Ratio Year 2006-07 102063.67 208763 48.8 Year 2007-08 105805.86 229466.61 46.10 Year 2008-09 107419.8 245364.51 43.77 Year 2009-10 124086.54 274295.35 45.23 360681.16 Year2010-11


Interpretation:A low ratio is a sign of bad management as it implies that the cost of production of the firm is high. It may also be indicative of a lower sales price with a corresponding increase in COGS. A firm should have a reasonable gross margin to ensure adequate coverage for operating expenses of the firm and sufficient returns to the owners of the business, which is reflected in the net profit margin. The above table shows that our gross profit and net sales are increasing year by year. Gross Profit Ratio Trend shows that G.P % as compared to Net Sales is decreasing due to increase in Raw Material Price but on the same time sale price is not increasing in same proportion.

c) Net Profit: Net profit establishes a relationship between net profit (after tax and excluding non operating and other incomes) and sales, and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio also indicates the firm‟s capacity to face adverse conditions such as price competition, low demand, etc. Therefore higher the ratio, the better is the profitability. This ratio is the overall measure of firm‟s profitability and is calculated as: Net Profit [In %age] =Net Profit (after tax) Net Sales

Values in lac Particulars Net Profit (after tax ) Net Sales Net Profit Ratio Year 2006-07 13767.27 208763 6.59 Year 2007-08 8966.98 229466.61 3.91 Year 2008-09 10724.09 245364.51 4.37 Year2009-10 15879 274295.35 5.78 Year2010-11 42572.65 360681.16 11.80

Net Profit ratio shows that it has been increased in 09-10 i.e 5.78 as compared to last year mainly due to decreased in Admin Expenses i.e Rs 50.0 crore in 09-10 as compared to Rs 98.00 crore in 08-09 due extra ordinary expenses (Exchange Rate Fluctuation ).



A high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declining, cost of production is rising and demand for the product is falling. This ratio increased initial years, which indicates that the company was being managed efficiently but now it seems they facing some problem. The interest expensed have increased about 90% from 3769 to 6388 lakh which resulted decrease in net prcofits. Also depreciation increased by 11944 to 15456, which shows over investment in capital assets. Also sale on discontinued operations increased last year from 4806 to 14139lakh. Also last year interest liability almost doubled itself as compared to previous year.

net profit ratio(in %)
0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0.05 0.11 0.43 0.38 2006-07 2007-08 2008-09 2009-10 2010-2011 0.68


c) Operating Ratio: This ratio establishes the relationship between cost of goods sold and other operating expenses on one other hand and the sales on the other. In other words, it measures the cost of operation per rupee of sales. It is calculated as: Operating Ratio=Operating Cost * 100 Net Sales

Operating Cost=COGS + Operating expenses

Values in lacs Particulars Operating Cost Net Sales Operating Ratio Year 2006-07 176521.65 208763 84.55 Year 2007-08 198260.58 229466.61 86.40 Year 2008-09 213060.08 245364.51 86.83 Year2009-10 225777.32 274295.35 82.31 Year2010-11

Operating Ratio
88.00 87.00 86.00 85.00 84.00 83.00 82.00 81.00 80.00

Value in %age

86.40 84.56 82.73





2007-08 Year



Interpretation: This ratio indicates the percentage of net sales that is consumed by operating cost. Higher the ratio, the less favorable it is because it would have a small margin {operating profit} to cover interest, income tax, dividend and reserves. There is no thumb rule but 75 to 80% is considered good for the company.

This ratio is between the standard so it will be favorable for the firm as it will provide a margin to convert interest, income tax, dividend and reserve. But company needs to have control over this ratio as it is exceeding the desired level. Also company should have a control over administrative expenses as in year 2008-09 they had major impact on this ratio as loss in exchange rate fluctuation amounted to 5985 lakh. Also raw material purchases have increased heavily.

d) Operating Profit Ratio: This ratio indicates the profitability of a company before cost of financing and tax and other misc. income. It is arrived by deducting operating expenses from gross profit. It is calculated as:

Operating Profit Ratio=Operating Profit*100 Net sales

Operating Profit=Net Sales- (COGS + Operating Expenses) Operating profit = net sales – (COGS + Selling Expenses)

Values in lac Particulars Operating Profit Net Sales Operating Profit Ratio Year 2006-07 32241.35 208763 15.44 Year 2007-08 31206.03 229466.61 13.59 Year 2008-09 32304.43 245364.51 13.16 Year2009-10 48518.03 274295.35 17.6 Year2010-11

Interpretation : Operating profit ratio is the indication of management‟s ability to operate the business with sufficient success. This ratio expresses the cost price effectiveness of the operations. From the table, it is clear that there is a burden on the profits of company due to increasing costs and declining sales. However, the declining sales can be attributed to recession world wide, but the company must manage its costs effectively.


e) Cash Profit Ratio: The net profits of the firm are affected by the amount of depreciation charged. Further, depreciation being a non-cash expense, it is better to calculate cash profit ratio. This ratio measures the relationship between cash and net sales.

Cash Profit=Cash Profit * 100 Net Sales

Where Cash Profit = Net Profit + Depreciation

Values in lac Particulars Cash Profit Net Sales Cash Profit Ratio Year 2006-07 25711.8 208763 12.32 Year 2007-08 24423.27 229466.61 10.64 Year 2008-09 31456.5 245364.51 12.82 Year2009-10 37966.57 274295.35 13.84 Year2010-11 65175.01 360681.16 18.06

Cash profit ratio
20 18.06 15 12.32 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-2011 12.82 10.64 2006-07 13.84 2007-08 2008-09 2009-10 2010-2011

Interpretation: Cash Profit ratio was around 13% in the year 05-06 but then it decreases uptil 2007-08 and then it start improving and has reached upto13.84%in year 2009-10. Seeing general position of related companies , this much can be considered to be good for the firm.


Debt Equity Ratio:The Debt Equity Ratio is calculated to measure the extent to which debt financing has been used in the business. Debt equity ratio = Total Debt Net Worth

Total Debt = Secured loans + Unsecured Loan + Current Liabilities and Provisions Net Worth = Share Capital + Reserves and Surplus

Values in cr

Particulars Total debt Shareholder‟s equity Debt equity ratio

2006-07 1998.23 1092 1.82

2007-08 2653.27 1172 2.26

2008-09 2734.74 1273 2.14

2009-10 2887.82 1455 1.98

2010-11 3091.89 1918 1.61

Standard Ratio= 1:1

Interpretation: Debt is outsider‟s fund thus own funds are essential which leads to equity

in an organisation. But debt is a cheaper source thus a mix of debt & equity should be there. Acc. To standard ratio debt & equity proportion should be same but debts are more than equity n every year.

The interest coverage ratio or simply debt service ratio is used to test the debt servicing capacity of a firm. Whether a company has sufficient capacity to meet fixed interest charges out of its profit is calculated from this ratio.

Interest Coverage Ratio = Net Profit (before Int. & Tax) Fixed Interest Charges
Values in Lakh 65


Year 2006-07

Year 2007-08

Year 2008-09



P.B.I.T Fixed Interest Charges

26347.00 3769.50

23287.00 6389.00

16405.00 10234.00

37375.29 8673.29

71866.92 10981.22

Interest Coverage Ratio






Interpretation: Interest coverage ratio indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to service its interest payments would not be adversely affected. The ratio has significantly reduced over the years, in 2008-09, its just 1.6. This is because of the expansion activities undertaken by the company in Budhni and Satlapur, last year. PBIT has decreased mostly due to reasons like exchange rate fluctuations, increase in raw material consumption as compared to sales and over investment in fixed assets. Fixed interest charges have increased because they have been increasing their term loans therefore their interest on these is increasing yearly. The company should try to improve this ratio by having a match with its interest charges.

Interest coverage ratio
8 7 6 5 4 3.64 3 2 1.6 1 0 2006-07 2007-08 2008-09 2009-10 2010-2011 4.3 2006-07 2007-08 2008-09 2009-10 2010-2011 6.99 6.54


This ratio popularly known as ROI is the relationship between net profits9after int.& tax) and the proprietor funds. This ratio is generally calculated as a percentage. The two basic components are net profits and shareholders funds. Shareholders funds include equity capital, preference share capital, free reserves such as share premium, revenue reserve, capital reserve, retained earnings and surplus less accumulated losses. Net profits are arrived at after deducting interest on long-term borrowing and income tax because those will be the only profits available for shareholders. This ratio measures the return on the owners (both preference and equity shareholders investment in the firm. It is calculated as follows:

Return on total shareholders’ equity= net profit after taxes * 100 Total shareholders’ equity
Values in Cr
Particulars Year 2006-07 Year 2007-08 Year 2008-09 Year2009-10 Year2010-11

Net Profit (after Int. & Tax) Shareholders Funds

13767.27 1092.03

8966.98 1172.14

10724.09 1272.75

15879 1455.

42572.65 1918

Return on shareholders Inv.






Interpretation: Earning on shareholder‟s equity expresses the profitability of a firm in relation to the funds supplied by the owners. This ratio is one of the most important ratios used for measuring the overall efficiency of a firm. As the primary objective of the firm is to maximize its earnings, this ratio indicates the extent

to which this objective is achieved. This ratio reveals how well the resources of a firm are being used, higher the ratio, better are the results. The owners were earning a fair 15% return in 2005-06, which has reduced to 8% in 2008-09. The reason for such reduction has been the increase in interest and financial charges because of setting up of new units. Other reasons may be misutilisation of equity funds. Net profit decreased due to factors like exchange rate fluctuations and interest charges. In 2009-10 the net profit has increased due to decrease in admin expenses which resulted in increase in ratio to 10.75%.

Proprietary ratio is one which tell the proportion of total assets which are financed out of proprietor‟s funds. This ratio is important for determining long-term solvency of the firm. It is calculated as follows: Proprietary ratio= Proprietor‟s funds Total assets

Values in lacs Particulars Proprietor’s funds Total assets Proprietary ratio Year 2006-07 109202.86 318538 Year 2007-08 117213.9 396538.74 Year 2008-09 127275.03 418736.4 Year2009-10 Year2010-11 145584.96 454005.2 191826.15 520696.44

34 %

29.5 %

30 %



Interpretation: This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of the creditors of the company. As this ratio represents the relationship of owner‟s funds to total assets, higher the ratio or the share of the shareholders in the total capital of the company, better is the long-term solvency of the company.

Out of the total assets, only 32.5% of assets have been financed through owner‟s funds in 2009-10, this indicates too much reliance of the company on borrowed funds. The company should make efforts to reduce it by repayment of debt or issue of fresh capital if it does not want to impair its ability to borrow in future.


Quick ratio
0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0.05 0.11 0.43 0.38 2006-07 2007-08 2008-09 2009-10 2010-2011 0.68


To study the management of working capital by the corporations.

    

To study the working capital policy. To study the sources of financing of Working capital. To study the estimation of working capital requirement. To study the actual position of the working capital of the company. To analyze and determine the operating cycle.
To study the relationship between current assets and current liabilities.

SWOT Analysis
1. The biggest strength is that Vardhman is the price setter for the buying of raw material in the market. 2. Vardhman is the largest producer of Cotton, Synthetics and Blended yarns in the country and has the largest spinning capacity with over 8,00,000 spindles.

3. It is very cash enrich company which puts it in a better buying position than its competitors and maintain sufficient amount of inventories. 4. It has a very diverse product portfolio due to which it is not facing any direct threat with any particular competitor. 5. Vardhman follows the unique policy of TPM (Total Productivity Maintenance) which helps in maximizing efficiency by reducing the information retrieval time.

1. Lesser degree of promotional activity.

2. Longer lead time particularly for the milange products

1. As quality is good and prices are comparatively high, Vardhman can always easily liquidate stock pressure by slight reduction in prices. 2. As brand image is very good and production is too wide, Vardhman can have some good customers with whom direct business can be established. With this Vardhman will have better and regularity of sales. 3. Strict payments are strengths at times as well as weaknesses. If a moderate policy, as per present conditions is adopted, the dealers and customers shall be attracted to buy more regularly. 4. Shortened hierarchy shall provide scope for better customer service.

1. Similar players in the market are using its price as a shield to push their products in the market. 2. Companies from South are entering in the Ludhiana market. 3. Capacity of yarn spinning is increasing rapidly in comparison to the increase in market size, resulting into the addition of new players with added capacities in the same market. This would result in price cuts, liberalization of payment terms and conditions etc. This shall disturb an honest, sincere and growth oriented group like Vardhman.



FY09 5776 121498 127275

 0 4285 10062


FY09 5776

FY10 5776 139808 145585

 0 18310 18310


FY10 5776

FY11 6365 18546 0 19182 6

 


SHAREHOLDER FUND Share capital 5776 Reserve & surplus Total shareholders 111436 117213

3.84 8.58

121498 127275

15.07 14.4

139808 145585


fund LOAN FUNDS 0 212374 Unsecured loans Total loans 239123 Minority interest Deferred tax liability 249332 10209 4.27 249332 262079 12747 5.11 262079 26748 212387 36945 13 10197 .006 38.12 212387 36945 222670 39409 10283 2464 4.84 6.67 222670 39409 27654 5 6654 28320 0











CURRENT LIABILITIES Creditors Provision Total current liabilities TOTAL OF LIAB. SIDE ASSETS SIDE Net Fixed assets 202222 Capital WIP Investment Total Fixed Assets CURRENT ASSETS Inventories Sundry debtors Cash & bank 6269 Loan & advances Total assets current 153628 396537 161172 418736 7544 22199 4.91 5.60 161172 418736 203654 454003 42482 35267 26.36 8.42 203654 454003 32852 35721 35874 29452 3022 470 9.19 35721 35874 22207 30968 32759 7928 242909 218187 5878 33497 257564 15965 (26881) 25569 14655 7.89 (82.05) 322.51 6.03 218187 5878 33497 257564 218238 4063 28048 250349 51 (1815) (5450) (7215) .02 (30.87) (16.27) (2.80) 218238 4063 28048 250349 21256 5 14064 35264 24655 1549 23902 240 (753) (1309) (3.05) (84.5) 23431 710 24828 1873 1397 1163 5.96 163.8 24828 1873 24285 1704 (543) (2.18) (169) (9.02)

87036 27469

62010 27566

(25026) 97

(28.75) .35

62010 27566

110645 39733

48735 12167 (13514 ) (4906)

78.6 44.13 (37.8) (13.67)

110645 39733 22207 30968

15983 9 48847 4876 45237 25880 1





The financial analysis of the company reveals that the liquidity position of the company is


Sales of the company are improving with high pace

The use of outsiders fund is increasing, company is raising more debts.

Current ratio and quick ratio has been increased which indicate company has more of current

assets than current liabilities and current ratio is more than 2:1 which shows that cash is not blocked in current assets but quick assets is accurate.

Inventory turnover and debtors turnover ratio has also increased with respect to last year; this

means company realizes cash debtors early than last year.

Gross Profit has been continuously declining over past 5yrs. Net profit and cash profit were

also declining but they increased last yr.


Overall profitability of VTL increased with increased debtors turnover ratio and

decreased creditors turnover ratio, which is very much favorable for company, but creditors turnover period should be high so that company can take full advantage of this.


The company should put some check on its increasing expenses specially the selling &

distribution expenses as they have high COGS each year which is further increasing.

Company should reduce its manufacturing expenses and try to increase its sales.

The company is maintaining low cash, so it should try to maintain more cash to support its

increasing operations, as its absolute liquid ratio is inconsistent.


The company should not rely more on outsider‟s funds and should try to raise finance

through internal resources as it increases its interest obligations. 

Since the input costs are constantly increasing, it is imperative for the company to increase its

cash flows to be able to maintain the leadership position. This has to be done by improving the product mix of the company and more importantly by using current assets more efficiently. This would mean a reduction in the level of debtors and inventories. This would also improve the liquidity ratios of the company. 

Since current ratio is more than arbitrary standards 2:1 so there is need to reduce slow paying

and doubtful debtors and company should invest more and more in marketable securities. 

There is a need to concentrate on low working capital ratios since low ratio indicate inefficient

utilization of working capital. 

Company should try to reduce its debtor collection period to about 1 month as this would be

satisfactory. 

Company should try to lower down its interest charges and should also keep a tight control

over its exchange rate fluctuation losses.




Limitations of the study are all those which a student has to face while completing such projects. However, following are the main limitations.

  

Limitations of the time and resources may have narrowed the scope of study.

The accuracy of data cannot be achieved due to various restrictive of the company.

Managerial staff was quite busy in their work, so due to their tight schedule of work, I was not

in a position to discuss some important aspect in detail. 

Calculations are difficult to do.

The Finance Department doesn't disclose the proper and required information.

Analysis is only a means and not ends in itself. The analyst has to make interpretation and draw

his own conclusion. Different people may interpret the same analysis in different ways.


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