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)

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.

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

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

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

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.”

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.

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.

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

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

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.

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.

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

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:

(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

(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.

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.

(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.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.)

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

N

U

F

A

C

T

U

R

E

R

I

N

D

U

S

T

R

Y

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.

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.

(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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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

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)

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’.

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.

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

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

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.

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

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

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

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

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

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

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

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

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

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.

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.

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,..