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Gandhigram Rural University, Gandhigram.

acerP.Velankanni, B.Com 2006-09

Roll NO: 06203033

1

A STUDY ON THE FINANCIAL PERFORMANCEOF

HANDLOOM WEAVERS COOPERATIVES IN

CHINNALAPATTY

Project Report

Submitted in partial fulfillment of the requirements for the

award of Degree in Bachelor of Commerce (Cooperation)

Submitted by

P.VELANKANNI (Reg. No. 06203033)

B.VIJAYAKUMAR (Reg. No. 06203034)

G.VIGNESH (Reg. No. 06203035)

Department of cooperation

Faculty of Rural Social Sciences

Gandhigram Rural University(Accredited With Five Star Status by NAAC)

Gandhigram 624 302.

Dindigul District, Tamil Nadu

March 2009


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Dr.B.Tamilmani M.A., M.Com, M.Phil, PhD

Reader, Department of Cooperation

Gandhigram Rural University

Gandhigram 624 302

CERTIFICATE

This is to certify that this project report entitled A Study on the Personnel

Management Practices in Handloom Weavers Cooperative and Government Schemes

for Development of Weavers is a bonafide work done by P.Velankanni,

B.Vijayakumar, and G.Vignesh under my supervision and guidance and that this

report is genuine.

Place: Gandhigram

Date:

(Dr.B.Tamilmani)


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DECLARATION

We hereby declare that the project work entitled A Study on the Financial

Performance of Handloom Weavers Cooperatives in Chinnalapatty submitted by mein partial fulfillment of the requirement for the award of degree of bachelor of

commerce (cooperation)is our original work and that it has not previously formed the

basis for the award of any other Degree, Diploma, Fellowship or other similar titles.

Place: Gandhigram

Date:

Signature of the

Candidates

P.Velankanni

B.Vijayakumar

G.Vignesh


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ACKNOWLEDGEMENT

We are very much pleased to extend out sincere thanks to out beloved guide

Dr.B.Tamilmani, Reader, Department of Cooperation, Gandhigram Rural University,

Gandhigram for his delegated valuable guidance for the completion of the study.

We extend our sincere thanks to Dr.B.Subburaj, Professor and Head,

Department of Cooperation, Gandhigram Rural University, Gandhigram for his moral

support during our study.

Our sincere thanks are further extended to our faculty members

Dr.P.Sivaprakasam, Professor, Dr.K.Ravichandran, Reader, Dr.S.Manivel, Reader,

Sri.B.Baskar, Lecturer, Dr.C.Mangaleswari, Lecturer, Department of Cooperation,

Gandhigram Rural University, and Gandhigram for their valuable support during our

study.

We express our profound thanks to the secretary and other staffs ofAnjugam,

Anna, Gandhiji, Kamala Nehru, Namnadu, Sanjay Gandhi, Silambu, weavers

cooperative society, Chinnalapatty, for having provided the relevant data for

completion of our project report.

We express our sincere thanks to our parents and friends for their timely help

and cooperation.

P.Velankanni

B.Vijayakumar

G.Vignesh


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CONTENTS

CHAPTER

NO.TITLE

PAGE NO

I INTRODUCTION 6-9

II DESIGNOFTHESTUDY 10 11

IIIANALYSIS AND DISCUSSION

12 35

IV FINDINGS,CONCLUSIONSANDSUGGESTIONS 36 40

BIBLIOGRAPHY


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Chapter 1

Introduction

Handloom Cooperatives in India

The growth of these cooperative institutions in the last two decades is indeed

phenomenal and today the weavers cooperatives form the largest group of industrial

cooperatives in India. Employing on the handloom more number of people than the

mass of workers employed in the organized industries in our country.

In India the cooperatives have come to play a significant role in the handloom

industry. The primary societies take the role of master weavers. But the profits are

shared by the members of the society. The coopertivisation of handlooms has been

one of the major. Through of the government in

The last few decades so that the handloom weaving could be brought into an

organized form of production. To encourage more private to be brought under the

cooperative fold. The government have been extending credit facilities to the weaver

cooperatives societies for enlisting more members.

These weavers cooperative societies exist in rural and semi urban areas

where there is heavy concentration of handloom weavers. All the developmental and

welfare schemes of the state government indented for the handloom weavers are being

channelised through these primary weavers cooperative societies alone.

The Handloom sector plays a very important role in the countrys economy. It

is one of the largest economic activity providing direct employment to over 65 lakhs

persons engaged in weaving and allied activities. Due to effective Government

intervention through financial assistance and implementation of various

developmental and welfare schemes, this sector has been able to withstand

competition from the power loom and mill sectors. As a result of these measures,

the production of handloom fabrics registered more than ten fold increase from a

level of 500 million sq. meters in the early fifties to 7352 million sq. meters in

1999-2000. This sector constitutes nearly 19 per cent of the total cloth produced in

the country and also contributes substantially to the export earnings. Handloom

forms a part of the heritage of India and exemplifies the richness and diversity of

our country and the artistry of the weavers.


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The Office of the Development Commissioner for Handlooms has been

implementing since its inception in the year 1976, various schemes for the

promotion and development of the handloom sector and providing assistance to the

handloom weavers in a variety of ways.

Some of the major programmes formulated by this office relate to:

a) Employment Generation Programmeb) Modernization and Up gradation of Technology

c) Input Support

d) Marketing Support

e) Publicity

f) Infrastructural Support

g) Welfare Measures

h) Composite Growth Oriented Package

i) Development of Exportable Products

j) Research & Development

All these measures aim at meeting the objectives enshrined in the Directives

Principles of State Policy for the growth of decentralized handloom sector. All the

schemes are weaver oriented. Concerted efforts are being made through the schemes

and programmed to enhance productivity, income and socio-economic status of

weavers by upgrading their skills and providing essential inputs.44 handloom

showrooms are selling products.

Over the centuries handlooms have come to be associated with excellence in

India's artistry in fabrics. Right from the ancient times, the high quality of Indianhandloom products like muslin of Chanderi, silk brocades of Varanasi, the tie and dye

products of Rajasthan and Orissa, the Chintas of Machhlipatnam, the himroos of

Hyderabad, the Khes of Punjab, the prints of Farrukhabad, the Phenek and Tongam

and bottle designs of Assam and Manipur, the Maheshwari sarees of Madhya Pradesh

and the Patola sarees of Baroda have been famous all over.


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The art and craft traditions since almost the dawn of civilization has been kept

alive despite sweeping changes due to continuous efforts of generations of artists and

craftsmen who weaved their dreams and visions into exquisite handloom products.

The handloom industry now provides livelihood to over 90 million people in

the country. It continues to be craft-oriented, even though it was circumscribed by a

limited choice of processing and technology. During the first half of the present

century there was very little effort to develop the handloom sector and the handloom

weavers were pitted against modern textile mills. They struggled to survive not only

against the unfair competition but also against the unscrupulous middlemen who did

everything to ensure that the weavers remained in perpetual debt trap. It is a tribute to

their ingenuity and skill that they succeeded in preserving the long tradition of

excellence in hand-weaving, dyeing, in-printing and craftsmanship.

Advantages

The Deemed Exporter supplies the yarn in the quality the buyer wants it.

This saves the weavers from investing in purchasing of yarn or for the cooperative to

get cash credit from DCCB to purchase yarn. This is an ideal business proposition for

PWCS that have lost CC facility with the DCCBs. The society does not require

working capital for

Purchasing yarn.

The Deemed Exporter decides which items are to be produced. The

weaverneednotworry about what the market demands. He can be contended if he

could weave and supply the items demanded by the Deemed Exporter. There is no

incidence of Deemed Exporters delaying payment to the weavers. They seem to be

sending Demand Draft within a fortnights time. There is no problem of marketing

because the Deemed Exporter procures the entire lot he placed order for. The wages

paid are also comparatively better, although it is on a declining trend over the Years.

Handloom forms a part of the heritage of Tamil Nadu and exemplifies the

richness and diversity of the State. Taking into account the present status of handloom

industry in Tamil Nadu, an attempt is made to analyze the problems and prospects of

this traditional industry by using SWOT Analysis.


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Strengths

Its rural base, low capital investment and employment intensive nature of

production not only help in providing livelihood to large number of people in the rural

non-farm sector but also strengthen its survival in the age of computerized weaving

technology.

It is eco-friendly in nature and inflicts no harm to health. It prevents distress

migration of rural artisans to the cities by providing work in the village itself. It

provides productive employment to the women, old and destitute in their households

(in the preparatory work) and thus serves an important social purpose, at virtually no

cost to the government.

Problems

The inherent weakness of handloom industry is low productivity. The sector is weak and need protection from the government by giving Rebate/concessions periodically during the festive seasons. It is relatively higher wage component of handloom products as compared to

the

Power loom products which affects their commercial viability. It grapples with problems like non-availability of good quality yarn, low

technology, lack of market intelligence and poor marketing facilities.

Another important weakness of the handloom industry is related to poorcapacity of the weavers to switch over to new products and designs according

to consumers tastes and Preferences on the short notice in comparison with

power loom products.

Chapter 2

Designing of the Study

Statement of the problem


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Hand loom cooperatives are gross root level cooperatives involved in

production and marketing of handloom cloths. Naturally this organization have to

financial management in good level once the financial management is good in

financial performance it also good in financial is associated in purchase of materials

and introduction activities on marketing activities. If the weavers cooperatives are

financially good and performance wise some they will objectives properly. Financial

performance therefore is an indicates of the health sites of the organization. Financial

performance can be assessed through ratios. The ratios like liquidity, solvency,

activity and profitability are very, much useful to measure the performance of the

weavers cooperatives. The researchers being the students of the cooperatives

including of financial performance of weavers cooperatives in Chinnala patty. Hence

the piece of study.

Scope of the study

The scope of the study covers the practices of the areas of working capital,

assets, inventory turnover, gross profit, net profit and expenses the study unit. The

study aims at analyzing the practice of the above areas and so assessing their

performance. To have holistic view of financial performance, the researchers have

attempted to analyze the business performance through ratio of weavers

cooperatives.

Objectives of the study

The study has the following objectives;

To analyze the financial performance of the weavers cooperatives throughrelevant financial ratios.

To summarize findings and suggestion measures for strengthening thesocieties

Methodology

The study aims at analyzing the financial performance of the weavers

cooperative societies in a detailed manner. The chinnalapatty weavers cooperative

societies were selected for the study. There were seven weavers cooperatives, the

seven societies were selected. In this way, it is census study.


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The study will rely mainly on secondary data collected form the source of

audit reports, annual reports, with the officials responsible for financial and business

activities will be held to get further information and clarifications.

Handloom:

Handloom means any cloth woven and handloom from cotton, silk, woolen

yarn or a mixing of mill yarns. A handloom uses human power for undertaking all the

motion in weaving operating.

Chapter scheme

First chapter deals with Introduction of weavers Cooperatives. Second chapter deals with Design of the Study. Third chapter deals with Analysis and discussion Fourth chapter deals with Findings conclusions and Suggestions.


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Chapter 3

Analysis and Discussion

This chapter makes on attempt in analyzing the financial performance of thestudy units. The financial performance of each weavers society was analyzed through

major ratios namely (i) liquidity ratio, (ii) solvency, (iii) activity, (iv) profitability.

1) LIQUIDITY RATIOS

Liquidity refers to the ability of a concern to meet its current obligations as

and when these become due. The short-term obligations are met by realizing amounts

from current, floating or circulating assets. The current assets either be liquid or near

liquidity. These should be convertible into cash for paying obligation of short-term

nature.

a) CURRENT RATIO

Current ratio may 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.

Current Assets

Current Ratio =

Current Liabilities

The two basic components of this ratio are: Current assets and current

liabilities. Current assets include cash and those assets which can be easily converted

into cash within a short period of time generally, one year. Current liabilities are

those obligation which are payable within a short period of generally one year.


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Components of Current Ratio

Current Assets Current Liabilities

1. Cash in hand

2. Cash at bank

3. Marketable Securities

(Short-term)

4.

Short-term investments5. Bills receivable6. Sundry Debtors7. Inventories (Stocks)8. Work-in-process9. Prepaid Expenses

1. Outstanding expenses /

Accrued expenses

2. Bills payable

3. Sundry creditors

4. Short-term advances5. Income-tax payable

6. Dividends payable

7. Bank overdraft


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b) QUICK or LIQUID RATIO

Quick Ratio, known as Liquid Ratio, is a more rigorous test of liquidity than

the current ratio. The term liquidity refers to ability of a firm to pay its short-term

obligations as and when they become due. It is also called as acid test ratio.

Quick Assets

Quick Ratio=

Current Liability

Components of Quick Ratio

Quick/Liquid Assets Current Liabilities

Cash in hand Cash at Bank Bills Receivables

Sundry Debtors Marketable Security Temporary Investments

Outstanding Expenses Bills payable Sundry creditors

Short-term advances Income-tax payable Dividends payable Bank overdraft


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Table 2

Quick Ratio

It is clear from the table that the Namnadu society goes in first place with 3.06

followed by silambu (1.59). The societies namely Anna, Kamala maintained quick

ratio at below one. It means that the quick assets are less than the current liabilities.

The quick ratio was very high at 6.38 with Namnadu society in (2006-07) and the lowratio was witnessed in case of Anna society at 0.02 in (1999-00).

The reason for high quick ratio incase of Namnadu was because of the

maintenance of high current assets, wherein case of Anna society the low level was

attributed because of low quick assets.

Year Anna Gandhiji Namnadu Silambu Kamala Sanjay Anjugam

97-98 0.20 - 1.43 0.93 0.61 0.46 1.51

98-99 0.08 - 2.69 0.39 0.86 0.35 1.23

99-00 0.02 - 2.01 1.63 0.70 0.37 1.07

00-01 4.43 - 2.31 0.82 0.83 0.40 1.17

01-02 0.34 0.69 5.90 2.21 0.78 0.49 0.93

02-03 0.56 0.72 3.01 1.94 0.55 0.40 1.25

03-04 0.03 0.76 2.98 2.50 0.51 0.53 2.14

04-05 0.05 0.80 1.95 2.32 0.53 0.69 0.84

05-06 0.33 0.82 1.97 1.00 0.49 0.81 1.68

06-07 0.20 0.82 6.38 2.21 0.57 1.02 1.77

Avg 0.62 0.76 3.06 1.59 0.64 0.85 1.35


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2. a) Solvency Ratio

This ratio a small variant of equity ratio and can be simply calculated as

100 equity ratio, i.e., continuing the example taken for the equity ratio, solvency ratio

= 100.-66.67 or say 33.33%. The ratio indicates the relationship between the total

liabilities to outsiders to total assets of a firm and can be calculated as follows:

Total liabilities

Solvency ratio=

Total assets

Generally, lower the ratio of total liabilities to total assets, more

satisfactory or stable is the long-term solvency position of a firm.

Table 3

Solvency Ratio

It is clear from the table 7 that almost all the weavers cooperatives societies

were in solvent position. That is they are capable of settling their liabilities with the

help of assets.


97-98 0.89 - 0.75 0.56 0.58 0.87 0.94

98-99 0.35 - 0.95 0.82 0.39 0.89 0.94

99-00 1.00 - 0.94 0.51 0.24 0.92 0.94

00-01 1.00 - 0.94 0.67 0.13 0.90 0.96

01-02 0.87 0.82 0.95 0.95 0.22 0.93 0.90

02-03 0.09 1.03 0.95 0.25 0.29 0.91 0.91

03-04 0.10 0.58 0.95 0.95 0.30 0.96 0.90

04-05 0.07 0.68 0.95 0.84 0.22 0.96 0.90

05-06 0.74 0.25 0.96 0.25 0.15 0.96 0.87

06-07 0.65 0.54 1.05 0.85 0.14 0.98 0.90

Avg 0.47 0.65 0.84 0.66 0.26 0.89 0.88


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DEBT EQUITY RATIO

Debt-Equity Ratio, also known as External Internal Equity Ratio is

calculated to measure the relative claims of outsiders and the owners (i.e.,

shareholders) against the firms assets. This ratio indicates the relationship between

the external equities or the outsiders funds and the internal equities or the

shareholders funds, thus:

Outsiders funds

Debt Equity ratio =

Shareholders fund

Table 4

Debt Equity Ratio


97-98 10.28 - 0.36 1.89 0.33 0.66 0.57

98-99 2.16 - 0.45 0.07 0.07 2.84 0.46

99-00 0.13 - 2.18 0.24 0.24 2.09 0.84

00-01 9.93 - 1.69 0.84 0.22 2.06 0.65

01-02 1.68 1.93 1.05 0.26 0.25 2.00 1.63

02-03 0.95 2.36 0.46 0.33 4.00 0.32 1.89

03-04 0.27 4.61 0.56 0.29 4.60 2.09 2.09

04-05 0.93 2.09 0.79 0.20 6.57 2.65 1.72

05-06 0.20 2.49 0.93 0.21 0.50 0.42 1.86

06-07 0.81 2.36 0.62 0.32 6.80 0.56 2.11

Avg 1.83 2.64 0.90 0.46 2.33 1.56 1.80


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The relationship between debt and equity is measured. Here debt includes loan

from outside agencies, including DCCB, creditors include suppliers of yarn, NHDC

and Cooptex. Equity denotes the members share capital and reserve fund. It signifies

the debt borrowed by the weavers cooperatives based on the equity. It is found that

Sanjay society and Gandhiji maintained the ratio of 4.5 times and 2.64 times

respectively, representing 4.5 times of debt than equity. The societies like Anna,

Kamala Nehru and Sanjay maintained this ratio at negative level indicating lower debt

than equity. The weavers cooperatives borrowing pattern is different from other

credit agencies resulting in very low borrowing.

Capital Gearing Ratio

The term capital gearing is used to describe the relationship between equity

share capital including reserves and surpluses to preference share capital and other

fixed interests-bearing loans. It equity share capita and other fixed interest on loans

exceed the equity share capital including reserves, the firm is said to be highly geared.

Equity share capital + Reserves and surplus

Capital gearing ratio=

Long term debt


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Table 5

Capital Gearing Ratio

Capital gearing ratio is indicated in the table 16. The ratio was high incasing

of Anna society with 1.84 and Silambu Salver the high ratio indicates that the equity

capital and Reserve fund to be over and above the long term debt. Sanjay Gandhi

maintained very low level with 0.19 times which indicates that the owned capital is

very low. High owned capital is also preferred and it is a signed of strength.

3. Activity Ratios

a) Inventory Turnover Ratio

Inventory turnover ratio also known as stock velocity is normally

calculated as sales/average inventory.

Cost of Goods Sold

Inventory Turnover Ratio =Average Inventory at Cost


97-98 0.14 0.09 0.20 1.26 0.23 1.20 0.13

98-99 0.19 0.20 0.19 1.33 0.53 1.40 0.53

99-00 0.24 0.46 0.18 1.30 0.10 4.12 0.76

00-01 0.28 0.59 0.14 1.87 0.12 3.38 0.89

01-02 0.22 0.18 0.13 1.34 0.09 3.99 1.11

02-03 5.89 0.20 1.76 1.27 0.05 0.02 1.07

03-04 0.13 0.13 2.46 1.28 0.05 0.07 1.62

04-05 -0.15 1.07 1.07 1.29 0.04 0.07 1.06

05-06 89.39 0.89 1.27 1.99 0.61 0.07 1.34

06-07 30.15 1.22 1.84 2.39 0.05 0.07 1.52

Avg 1.89 0.50 0.92 1.53 0.19 1.44 1.00


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Table 6

Inventory Turnover Ratio

It is understood from the table that the societies namely Gandhiji, Sanjay and

Kamala Nehru maintained Inventory Turnover Ratio at high level with 5.84, 4.21 and

4.4 respectively. It means cost of goods sold is less than the average inventory cost.

Other societies maintained below 4 times. It is felt that high turn over will lead

efficiency in production. That is it facilitates high production. Inventory Turnover

Ratio was maintained high at 12.86 time in case of Gandhiji society in (2005-06) and

Sanjay Gandhi society with 10.75 times in (2006-07). The low level inventory

turnover ratio at 0.33 in Gandhiji society (2001-02). High fluctuation is witnessed in

Gandhiji Society.


97-98 1.16 - 0.88 2.84 0.36 2.88 1.34

98-99 3.58 - 3.44 0.23 1.66 5.35 1.47

99-00 3.53 - 4.02 3.87 4.51 4.01 1.20

00-01 2.33 - 2.62 2.04 5.76 3.86 1.72

01-02 2.69 0.33 3.02 2.04 4.04 3.80 1.12

02-03 3.43 2.71 4.10 1.13 4.02 4.41 1.75

03-04 3.70 0.52 2.98 2.68 4.80 4.70 2.01

04-05 4.13 9.69 7.33 - 5.69 4.64 2.41

05-06 4.74 12.86 5.72 - 3.17 4.30 2.22

06-07 1.36 8.93 5.32 - 10.75 4.19 2.38

Avg 3.06 5.84 3.94 1.48 4.47 4.21 1.71


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b) Debtors turnover Ratio

A concern may sell goods on cash well as on credit. Credit is one

of the important elements of sales promotion. The volume of sales can be increased

by following a liberal credit policy.

Debtors

Debtors turn over ratio=

Net Sales

Table 7

Debtors Turnover Ratio


97-98 1.35 - 6.93 0.46 1.17 2.73 1.14

98-99 2.40 - 9.70 6.96 1.84 4.22 3.39

99-00 2.54 - 3.97 9.40 2.56 3.43 2.81

00-01 1.94 - 2.86 8.54 0.31 4.22 2.37

01-02 1.96 1.10 2.78 1.89 3.82 3.31 2.78

02-03 1.95 1.41 2.12 2.20 2.46 2.97 2.16

03-04 0.03 1.98 3.25 3.24 3.21 2.52 4.01

04-05 3.86 2.17 4.96 - 4.29 3.30 4.52

05-06 3.70 5.36 4.16 - 1.18 4.11 5.34

06-07 6.11 4.26 7.14 - 0.52 7.24 4.54

Avg 2.58 2.71 4.78 3.26 2.13 3.04 3.30


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The ratio of debtors turnover of the sample units has been discussed in the

table 4. It was found that the Namnadu society and Anjugam society had maintained

the ratio at high level with 4.78 and 4.26 times respectively. The reason for such high

turnover was because of high showroom sales, participatory in emporium to push up

sales. The high turnover ratio indicates capably of making higher sales which

facilitates for profitability. On the other hand the lower ratio indicates the high

dependency on the debtors, and in number of debtors do not settle for the society.

The high debtor turnover was found maintaining in Namnadu society with 9.7 times

in (1998-99) and Silambu with 9.4 (1999-00) times. The lowest level was maintained

by the Anna society at 0.03 times in (2003-04).

c) Fixed Assets to Proprietary Fund Ratio

The ratio establishes the relationship between fixed assets and shareholders

funds, i.e., share capital plus reserves, surplus and retained earnings. The ratio can be

calculated as follows:

Fixed Assets (After depreciation)

Fixed Assets to Net worth Ratio =______________________________

Shareholders Funds


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Table 8

Fixed Assets to Proprietary Funds Ratio

It is clear from the table that excepting Gandhiji society and Silambu Salver

society all other societies maintained the ratio at below one. Gandhiji society was

capable enough in maintaining this ratio at more than 5 times, as the society is a

bigger society in the study area and possessing enough showrooms, own office

building, etc., All other societies did not own office building and other fixed assets.


97-98 0.12 - 0.15 2.67 0.47 0.01 0.11

98-99 0.03 - 0.18 0.55 0.25 0.03 0.23

99-00 0.01 - -0.61 0.51 -0.15 0.21 0.27

00-01 -0.15 - -0.84 1.39 -0.56 -0.08 0.63

01-02 0.02 1.63 -0.34 0.99 0.21 0.58 1.04

02-03 1.10 3.29 0.05 1.12 -0.57 -0.07 1.19

03-04 0.07 7.68 0.54 1.08 0.24 -0.06 1.37

04-05 1.63 8.11 0.47 1.17 0.26 1.22 1.79

05-06 1.08 5.69 0.38 1.06 0.54 1.73 1.46

06-07 -0.45 6.00 0.29 3.64 0.68 0.12 1.51Avg 0.34 5.40 0.02 1.41 0.13 0.39 0.96


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d) Current Assets to Proprietary Fund Ratio

The ratio calculated by dividing the total of current assets by the amount of

shareholders

Current Assets

Current Assets to Proprietary Fund Ratio = 100

Shareholders Funds

Table 9

Current Assets to Proprietary Funds Ratio

It is clear from the table10 that the Namnadu society maintained a high level

of current assets to proprietary ratio. The reason for such high in case of Namnadu

was it maintained of high current assets and low level of proprietary funds. Sanjay

Gandhi society comes in the 2nd

place with annual average of 11.95 times. The low

level was noticed in the case of Anjugam society with 1.53 times as because the low

level of current assets.


97-98 1.10 - 14.02 11.91 2.14 8.37 0.65

98-99 8.07 - 19.09 1.46 2.01 7.39 1.52

99-00 4.97 - 11.05 7.96 2.32 9.50 2.38

00-01 2.13 - 14.35 9.21 3.38 7.40 2.50

01-02 4.72 5.56 17.06 6.79 4.28 13.60 0.87

02-03 6.02 6.97 18.97 4.43 7.95 14.22 1.11

03-04 3.34 6.84 15.53 6.06 8.56 15.29 1.76

04-05 2.92 6.93 18.06 6.08 10.13 18.20 1.44

05-06 3.84 5.26 16.33 6.92 12.23 13.47 1.66

06-07 11.07 4.21 17.97 6.14 13.81 12.10 1.16

Avg 4.81 5.96 16.24 6.70 6.68 11.95 1.53


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e) Working Capital Turnover Ratio

Working capital of a concern is directly related to sales, the current assets like

debtors, bills receivables, cash, stock etc., and change with the increase or decrease in

sales. The working capital is taken as:

Working Capital = Current Assets Current Liabilities

Working Capital turnover ratio indicates the velocity of the utilization of net

working capital. This ratio indicates the number of times the working capital is

turned over in the course of a year.

Cost of sales

Working capital turn over ratio=

Average working Capital

Opening Working Capital + Closing Working Capital

Average Working capital =________________________________________

2


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Table 10

Working Capital Turnover Ratio

The working capital turnover ratio indicates that the number of times the

working capital turned during the year. A reasonable turnover of the ratio will lead to

better business performance. It is found that the societies namely Anna and Sanjay

maintaining a reasonably acceptable ratio respectively of 2.46 times and 2.19 times. It

means that they utilize the net working capital properly in the business. The Kamala

Nehru society was found maintaining a negative working capital ratio, because of the

low working capital than cost of sales.


97-98 1.98 - 1.87 3.90 2.10 1.07 1.22

98-99 2.10 - 2.01 3.35 2.04 1.70 1.09

99-00 2.66 - 2.12 3.60 2.50 1.67 1.43

00-01 1.18 - 1.69 2.40 4.20 1.93 1.18

01-02 1.93 1.57 1.34 0.65 5.26 2.01 1.09

02-03 2.03 1.63 0.88 0.39 3.01 2.16 1.76

03-04 3.01 1.47 1.62 0.56 2.79 2.04 2.09

04-05 3.73 1.79 2.51 0.59 7.91 3.19 2.32

05-06 3.14 1.52 2.00 0.35 9.71 2.09 2.98

06-07 2.89 1.03 2.49 0.92 6.19 4.12 2.65

Avg 2.46 1.50 1.85 1.60 4.47 2.19 1.77


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f) Proprietary Funds Ratio

A variant to the debt-equity ratio is the proprietary ratio which is also known

as Equity Ratio or Shareholders to Total Equities Ratio or Net worth to Total Assets

Ratio.

Shareholders funds

Proprietary funds ratio=

Total Assets

Table 11

Proprietary Fund Ratio


97-98 0.07 - 0.09 0.08 0.07 1.06 0.30

98-99 0.10 - 0.06 0.68 0.10 0.47 0.57

99-00 0.90 - 0.02 0.12 0.23 2.06 0.79

00-01 0.87 - 0.01 0.10 0.22 1.71 0.48

01-02 0.90 0.03 0.03 0.16 0.37 1.03 0.56

02-03 0.60 0.09 0.05 0.14 0.46 0.26 0.76

03-04 0.65 0.10 0.05 0.22 0.30 0.73 0.46

04-05 0.70 0.08 0.05 0.16 0.54 0.82 0.70

05-06 0.60 0.12 0.04 0.16 0.49 0.52 0.43

06-07 0.63 0.20 0.05 0.05 0.57 0.41 0.62

Avg 0.06 0.10 0.04 0.18 0.33 0.90 0.56


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Proprietary fund ratio is calculated to find out the proprietary fund ratio which

was much lower than one (in fraction). So it indicates that the members share capital

was very low. The reason is that the weaver members are already financially very

poor. They cannot be expected to contribute much to the share capital.

4. Profitability Ratios

a) Gross Profit Ratio

Gross profit ratio measures the relationship of gross profit to net sales and is

usually represented as a percentage. Thus, it is calculated by dividing the gross profit

by sales:

Gross Profit

Gross Profit Ratio= 100

Net Sales


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Table 12

Gross Profit Ratio

The Gross profit ratio of study units is described in the table 11. It is found

that the Sanjay Gandhi society maintained a high level of Gross profit ratio (11.47)

than all the other study units. The 2nd

place was occupied by Anjugam society with

10.78%. It is therefore clear from the table that the Gross profit margin maintained

high incase of Sanjay Gandhi and Anjugam society. The Kamala Nehru societywhich found to be low among all the study units with 8.8%.


97-98 13.25 14.68 7.52 9.01 6.99 11.36 23.30

98-99 6.20 9.70 8.01 9.29 10.73 8.49 10.30

99-00 3.94 7.42 6.03 10.51 11.11 14.01 11.02

00-01 14.21 9.75 11.23 9.97 11.98 8.57 10.04

01-02 11.42 8.17 9.58 14.23 0.84 13.14 11.80

02-03 12.12 10.04 8.99 6.69 15.26 11.58 7.40

03-04 12.30 10.70 12.48 8.88 25.36 14.20 11.10

04-05 10.90 10.04 10.67 11.10 0.58 10.07 5042

05-06 0.10 7.44 13.79 10.24 15.36 12.13 6.27

06-07 10.94 9.90 14.47 10.46 16.03 11.23 11.20

Avg 9.53 9.78 10.47 10.03 8.88 11.47 10.78


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b) Operating Profit Ratio

This ratio is calculated by dividing operating profit by sales. Operating profit

is calculated as:

Operating Profit = Net Sales-Operating Cost (Or)

= Net Sales (Cost of goods sold + Administrative and

Office Expenses + Selling and distributive Expenses)

Operating Profit

Operating Profit Ratio = 100

Net Sale


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Table 13

Operating Profit Ratio

Operating profit ratio indicates that high ratio was witnessed incase of

Anjugam society with 86.31% and Silambu Salver 85.23% respectively. The lowest

was indicated incase of Gandhiji society with 29%. It is therefore inferred the

operating expenses were less incase of Anjugam and Silambu Salver whereas high

incase of Gandhiji society.

c) Net Profit RatioNet Profit ratio establishes a relationship between net profit (after taxes) and

sales, and indicates the efficiency of the management in manufacturing, selling,

administrative and other activities of the firm. This ratio is the overall measure of

firms profitability and it calculated as:

Net Profit

Net profit Ratio= 100

Net Sales


97-98 21.52 - 70.15 84.53 59.60 84.38 80.92

98-99 80.86 - 91.70 88.21 69.10 91.46 88.85

99-00 99.58 - 85.90 98.27 83.20 55.11 91.60

00-01 99.80 - 88.10 90.14 91.60 83.95 87.80

01-02 30.83 17.80 87.60 61.16 87.20 64.03 86.31

02-03 83.38 29.70 17.55 86.95 87.96 83.79 83.22

03-04 99.90 25.30 12.56 84.96 87.84 67.84 86.82

04-05 89.32 20.90 10.96 85.09 88.72 79.42 79.60

05-06 11.05 37.40 14.19 85.54 87.91 87.43 87.61

06-07 99.96 41.80 13.50 87.52 88.99 87.90 87.77

Avg 71.62 28.81 49.22 85.23 83.21 78.53 86.05


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Table 14

Net Profit Ratio

Net profit ratio is indicated in the table. It is found the Anjugam society

maintained high ratio of 3.31% followed by Anna society with 2.19 %. These two

societies maintained Net profit in most of the years. Gandhiji society also maintained

Net profit ratio but the quantum of Net profit is at reduced level. The Net profit was

negative incase of Kamala Nehru with (-4.7) and Sanjay Gandhi (-3.6).


97-98 0.14 0.09 0.20 1.26 1.20 0.23 0.13

98-99 0.19 0.20 0.19 1.33 1.40 0.53 0.53

99-00 0.24 0.46 0.18 1.30 4.12 0.10 0.76

00-01 0.28 0.59 0.14 1.87 3.38 0.12 0.89

01-02 0.22 0.18 0.13 1.34 3.99 0.09 1.11

02-03 5.89 0.20 1.76 1.27 0.02 0.05 1.07

03-04 0.13 0.13 2.46 1.28 0.07 0.05 1.62

04-05 -0.15 1.07 1.07 1.29 0.07 0.04 1.06

05-06 89.39 0.89 1.27 1.99 0.07 0.61 1.34

06-07 30.15 1.22 1.84 2.39 0.07 0.05 1.52

Avg 1.89 0.50 0.92 1.53 1.44 0.19 1.00


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d) Trade Charges Ratios

Trade charges ratio indicates the relationship of trade charges to net sales.

Trade Charges

Trade Charges Ratio= 100

Net Sales

Table 15

Trading Charges Ratio

The table gives the particulars of trading charges ratio. It is found that the

study units maintained the ratio from 0.39% to 2.20% (average). It is advisable that

the ratio must be as low as possible; that indicates the low trade charges incurred by

the cooperatives. Namnadu society maintained low ratio 0.39% and the Sanjay

Gandhi society maintained high ratio. The reasons for the high trade charges were,

low purchase high trade charges, high purchase but low sales.


97-98 0.56 3.20 0.52 6.40 0.06 2.20 4.11

98-99 0.32 4.11 0.26 0.42 0.09 3.95 1.48

99-00 0.96 3.20 0.21 0.07 0.93 3.47 1.87

00-01 1.15 2.22 0.27 0.03 0.11 3.00 1.39

01-02 0.39 2.01 0.35 0.03 0.49 4.10 0.71

02-03 0.81 1.37 0.41 0.04 0.75 3.80 1.62

03-04 0.51 1.40 0.49 0.04 0.99 0.68 1.46

04-05 0.28 1.52 0.43 - 0.70 0.19 0.55

05-06 0.72 1.61 0.51 - 0.85 0.27 1.68

06-07 1.15 1.86 0.49 - 0.52 0.42 1.68

Avg 0.68 2.03 0.39 1.00 0.54 2.20 1.65


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e) Establishment Expenses

Establishment expenses ratio indicates the relationship of establishment

expenses to net sales.

Establishment Expenses

Establishment Expenses Ratio= 100

Net Sales

Table 16

Establishment Expenses Ratio

Establishment expenses ratio is crucial ratio which correlates establishmentexpenses to net sales. Being expenses, it must be maintain at low level as possible.

High ratio indicates the livelihood expenses an establishment cost and it will be a

burden to the handloom weavers cooperatives. The table describes that the Namnadu

society maintained 7.94% followed by Gandhiji society with 6.76%respectively. The

kamala Nehru society maintains at the lowest level, among the study units (4.47%).

The year wise performance of the study units indicates that high percent of expenses

was maintained in the first year of the study.


97-98 13.90 - 17.90 16.76 8.06 3.87 3.60

98-99 5.45 - 4.10 7.69 7.57 4.03 4.25

99-00 8.46 - 6.30 2.97 1.46 4.17 5.29

00-01 8.70 - 7.00 3.92 1.09 4.29 4.95

01-02 1.05 7.92 6.20 4.33 0.47 5.19 7.62

02-03 6.10 12.28 8.67 5.20 5.03 5.30 6.02

03-04 5.70 6.33 7.12 5.22 5.24 5.60 6.79

04-05 4.80 4.80 6.26 - 4.99 5.43 3.02

05-06 5.35 3.65 6.62 - 5.64 5.16 7.12

06-07 4.48 5.59 9.26 - 5.22 3.53 6.86

Avg 6.39 6.76 7.94 4.61 4.47 4.66 5.55


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Chapter 4

Summary of Findings, Conclusions and Suggestions

The chapter is designed to present key findings and the conclusions drawn on

financial performance through ratio analysis in the selected weavers cooperatives.

The study was conducted with the following objectives.

To analyze the financial performance through established ratio. To compare the actual accounting ratios with available standard norms

wherever possible and draw meaningful interpretations.

The findings of the study are presented in two sections. In the first part,

findings are pertaining to the general profile of the weavers cooperatives. In the

second section, the findings are relating to the financial and functional aspects

through ratio analysis.

i) Findings on General Working profile

Except Kamala Nehru society all the societies registered on 7.12.1973and commenced on the same date.

The area of operation of the societies was with in Chinnala patty. The liability of the societies was limited to share capital. The share capital of the societies showed in a fluctuating trend during

the study period.

The reserve funds (both statutory and non-statutory funds) showed afluctuating trend.

The borrowing position of the societies shows ups and downs over astudy period. This was classified into four sections like, Government

loans, cash credit I, II and ST loan.


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ii) Findings on financial performance

Current Ratio: The Namnadu society has maintained high current ratio compared

with other societies (4.00). The Sanjay society maintained low current ratio (0.71).

Quick ratio: The Namnadu society maintains a high level of quick ratio (3.06). The

Anna society maintained low quick ratio (0.64).

Inventory turnover ratio: The Gandhiji society maintained high inventory ratio and

the Silambu Salver society maintained lower ratio (1.48).

Debtors turnover ratio: In case of debtors turnover ratio the Namnadu society had

high with 4.78 times compared with other societies and the Anna society maintained a

low ratio.

Working capital turnover ratio: The Kamala Nehru society had adequate working

capital with 4.47 times and the Gandhiji society maintained low ratio at a 1.50 times.

Debtors equity ratio: The Gandhiji society maintained high level outsiders funds

(2.64). And the Silambu Salver society maintained low level outsiders fund (0.46).

Proprietary fund ratio: The Sanjay society maintained 0.90 times proprietary funds

and the Anna society maintained low level proprietary funds.

Solvency ratio: The Sanjay society maintained 0.89 times liabilities to capital.

Kamala society maintained low level funds at 0.26 times.

Fixed assets to proprietary funds ratio: The Gandhiji society maintained high fixed

assets and the Namnadu maintained low level fixed assets 0.02.


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Current assets to proprietary fund ratio: The Namnadu society maintained high

level current assets at 16.24 and the Anjugam society maintained very low level

current assets.

Gross profit ratio: The Anjugam society earned high level gross profit as it earned

profit in many of period. And the Kamala Nehru society had low level gross profit.

Operating profit ratio: The Anjugam society earns high level operating profit (78.5

percent) and the Gandhiji society has low level operating profit (28.81 percent).

Trade charges ratio: The Sanjay society maintained a high ratio with (2.03) and the

Anna society maintained low ratio (0.39)

Establishment expenses: he Namnadu maintained high level establishment expenses

(7.94) and the Silambu Salver society maintained low level establishment expenses

ratio (4.47).

Net profit ratio: The Anna society maintained a high net profit ratio (1.89) and the

Sanjay had low level net profit ratio (0.19).

Capital gearing ratio: The Anna society maintained high capital gearing ratio at 1.89

and the Sanjay maintained a low 0.19.

Conclusion

After having analyzed the financial performance of the sample societies

through relevant financial ratios, it is concluded that which society has been good inthe areas like Sales, purchase, current assets and borrowings aspects. The societies

operational analysis indicted certain areas need to be concentrated well, namely

capital, trade charges, establishment expenses and working capital. Nevertheless of

the many passive features, which society has been successful in any of the financial

and functional areas?


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Suggestions

The society should undertake promotional activities like advertisement,incentives to sales personnel and so on to enhance sales.

The present purchase policy of the society should be revised. Steps must be taken to reduce operating expenses by minimizing wastages. The society should organize seminars, conferences among the employees as

well as weavers members.

The present management system of the society should be revised. Membership derive must be encouraged so as to have large membership. Profitable new showrooms should be opened to increase sales and get profit. The Government introduces new schemes for development of members

economic.

Vels Financial Management

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