A STUDY ON PROFITABILITY ANALYSIS WITH

REFERNCE TO PANKAJA MILLS

PROJECT REPORT

Submitted by

S.SUJITHA
(Reg. No.088001604055)

In partial fulfillment for the award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

IN

DEPARTMENT OF MANAGEMENT STUDIES

Under the supervision and Guidance of

N.RAMYA, MBA

GNANAMANI COLLEGE OF TECHNOLOGY

PACHAL, NAMAKKAL-637018
MAY/ JUNE- 2010
Certificate
 GNANAMANI COLLEGE OF TECHNOLOGY

PACHAL-637018

Department of Management studies

PROJECT WORK

MAY/JUNE-2010

This is certify that the project entitled

A STUDY ON PROFITABILITY ANALYSIS WITH

REFERNCE TO PANKAJA MILLS

is the bonafide record of project work done by

S.SUJITHA

Register no: 088001604055

of MBA (Management Business Administration) during the year 2010

------------------- -----------------------------------
Project Guide Head of the Department

Submitted for the Project Viva- Voce examination held on _____________

---------------------- -----------------------
Internal Examiner External Examiner
Declaration
 DECLARATION

I affirm that the Project work titled ‘ A Study on Profitability analysis with reference
to Pankaja mills’ being submitted in partial fulfillment for the award of Master of
Business Administration (MBA) is the original work carried out by me. It has not
formed the part of any other project work submitted for award of any degree , either in
this or any other university.

-----------------------------------
Signature of the student

(S.SUJITHA)
(088001604055)

I certify that the declaration made above by the student is true

-------------------------------------
Signature of the guide

(N. RAMYA., MBA)

(Lecturer in Management studies)

Acknowledgement
 ACKNOWLEDGEMENT

I express my heartful gratitude and thanks to Dr.T.ARANGANNAL, Chairman, and

Smt.P.MALA LEENA Chairperson of GNANAMANI COLLEGE OF TECHNOLOGY,
Namakkal, who provide all the facilities and necessary encouragement during the course of the
study.

I ever remain our PRINCIPAL, Dr.V.BASKARAN, GNANAMANI COLLEGE OF

TECHNOLOGY, for granting me the permission to carry out my project work.

I wish to convey my sincere and Heartiest thanks to my head of the department

Dr.S.ASOK KUMAR, GNANAMANI COLLEGE OF TECHNOLOGY, for his constant
encouragement and valuable support throught the study.

I am grateful to Miss. N. RAMYA, Lecturer, Department of Management Studies,

GNANAMANI COLLEGE OF TECHNOLOGY, Namakkal for his able guidance and valuable
suggestions during the course of study.

Above all, I expresses my sincere thanks to my parents who provide all the necessities in
ensuring my successful completion of the project.

------------------------------------
(S.SUJITHA)
Content
Chapter Particular Page No

Abstract i
List of tables
ii
CONTENT
List of charts iii

1 Introduction
1.1 Introduction about the Industry 1
1.2 Profile of the company 2

2 Main theme of the Project

2.1 Introduction about the study 8

2.2 Objectives of the study 10
2.3 Scope of the study 11
2.4 Limitations of the study 12
2.5 Review of Literature 13
2.6 Research Methodology 15

3 Data Analysis and Interpretation 17

Findings and suggestions
4
4.1 Findings 62
4.2 Suggestions 65

5 Conclusion 66

APPENDIX

REFERENCES
Abstract
 i

ABSTRACT

Whether starting the new business , adding a new product or just seeking to improve
the company’s bottom line. Its important to perform basic profitability analysis on a regular
basis. Profitability analysis generally states the profitable conditions of the firm. The
profitability analysis reviews the profits and declines of the company. Short term creditor will
be interested in the current financial position of the firm, while a long term creditor will pay
more attention to the solvency of the firm .Profitability is an indication of the efficiency with
which the operations of the business are carried on. Poor operational performance may
indicate poor sales and hence poor profits . A lower profitability may arise due to the lack of
control over the expenses. Bankers, financial institutions and other creditors look at the
profitability ratios as an indicator whether or not the firm earns substantially more than its
pays interest for the use of borrowed funds and whether the ultimate repayment of their debt
appears reasonably certain. Owners are interested to know the profitability as it indicates the
return which they can get their investments. The purpose of study and analysis of profitability
ratios are to help assessing the adequacy of profits earned by the company and also to
discover whether profitability is increasing or declining. The profitability of the firm is the net
result of a large number of policies and decisions.
.

List of Tables
 ii

LIST OF TABLES

Table Page
Particulars
No. No.
3.1. A
Net Profit Ratio 20
3.1. B
Current Ratio 23
3.1.C
Reserve to equity share capital Ratio 25
3.1.D
Solvency Ratio 28
3.1.E
PAT to EBIT Ratio 31
3.1.F
Return On Investment 34
3.1.G
Administrative Expenses Ratio 37
3.1.H
Return On Asset 40
3.2.A
Trend Percentage of Sales 43
3.2.B
Trend Percentage of Total Income 45
3.2.C
Trend Percentage of Material consumption 47
3.2.D
Trend Percentage of Administrative exp 49
3.2.E
Trend Percentage of Reserve and Surplus 51
3.3
Break Even Sales 54
3.4
Comparative Statement 57
3.5
Common Size Balance sheet 60

List of Charts
 iii

LIST OF CHARTS

chart Page
Particulars
No. No.
3.1. A
Net Profit Ratio 21
3.1. B
Current Ratio 24
3.1.C
Reserve to equity share capital Ratio 26
3.1.D
Solvency Ratio 29
3.1.E
PAT to EBIT Ratio 32
3.1.F
Return On Investment 35
3.1.G
Administrative Expenses Ratio 38
3.1.H
Return On Asset 41
3.2.A
Trend Percentage of Sales 42
3.2.B
 Trend Percentage of Total Income 43
3.2.C
Trend Percentage of Material consumption 48
3.2.D
Trend Percentage of Administrative exp 50
3.2.E
Trend Percentage of Reserve and Surplus 52
3.3
Break Even Sales 55

Chapter-1
Introduction
 1

CHAPTER- I

1.1 INTRODUCTION ABOUT THE INDUSTRY

The Indian textile industry is one of the largest in the world with a massive raw material
and textiles manufacturing base. Our economy is largely dependent on the textile manufacturing and
trade in addition to other major industries. About 27% of the foreign exchange earnings are on account
of export of textile and clothing alone.
The textile and clothing sector contributes about 14% to the industrial production and 3% to
the gross domestic product of country .Around 8% of the total excise revenue collection is contributed
by the textile industry. So much so, the textile industry accounts for as large as 21% of the
employment generated in the economy in the year 2006.
Around 35 million people are directly employed in the textile manufacturing activities.
Indirect employment including the manpower engaged in agricultural based raw-material production
like cotton and related trade and handling could be stated to be around another 60 million. The textile
industry is expected to generate 12 million new jobs by 2010.It generates massive potential for
employment in the sectors from agricultural to industrial.
Employment opportunities are created when cotton is cultivated. It does no need any
exclusive Government support even at present to go further. Only thing needed is to give some
directors to organize people to get enough share of the profit to spearhead development.
At present, the textile industry is undergoing a substantial re-orientation towards other than
clothing segments of textile sector. This is commonly called as technical textiles. It is moving
vertically with an average growing rate of nearly two times of textile for clothing applications and
now account for more than half of the total textile output. The processes in making technical textiles
require costly machinery and skilled workers.

2
1.2 PROFILE OF THE COMPANY
National textile corporation (NTC) is the single largest Textile Central Public Sector
Enterprises under Ministry of Textiles. NTC, with its Headquarters at New Delhi, was incorporated in
1968 with the main objectives of managing the affairs of 16 sick textile mills taken over by the
government. NTC took over more sick textile mills under 3 Nationalization IDA Acts (1974, 1986,
&1995), raising its number up to 125 mills in 1995. The operations of the mills were merged through
9 subsidiary companies spread all over India.
In the year 2002 BIFR? GOI approval revival of 53 viable mills and closure of 66
unviable mills. 65 unviable mills have so far closed under the Act, 2 mills (one viable and one
unviable) located in the state of Pondicherry have been transferred to the state Government of
Pondicherry.
NTC , with a view to modernize its 22 mills by itself , has drawn a schedule of old
machineries proposed to be retained and have also undertaken necessary civil, electrical and other
preparatory works for new machineries so that the machines are commissioned within the scheduled
time-frame. NTC is of implementation plan. Simultaneously these mills are carrying out renovation
projected to produce 600 lakhs Kegs, of yarn and 250 lakhs mltrs of clothe annually with a turnover
of more than Rs.931 in the year 2009-10.
BIFR has approved merger of its nine subsidiary companies with NTC Holding Company.
AA new corporate plan/ strategy has been formulated for growth / repositioning of the organization.
Two Regional offices, Viz., Southern Regional office with headquarters at Coimbatore and northern
Regional office with headquarters at Mumbai have been established for ensuring smooth operations of
the mill.

PANKAJA MILL:
Pankaja mill, one of the oldest mill in the city of Coimbatore, was incorporated in the year
1933 with a commissioned capacity of 15000 spindles. The mill, due to various managerial
inefficiencies coupled with financial irregularities, ceased its operations intermittently and was under
the industries development and regulation act on 22/11/1972 and started functioning again from
14/01/1973.

Subsequently, the mill was nationalized under sick textiles undertaking act, 1974 with effect
from 01/04/1974 and became a unit of national textile corporation limited, a subsidiary company of
national textile corporation limited, new Delhi. Upon merger of subsidiary companies by the holding
company, the mill is now placed under the control of southern Regional office at Coimbatore.
The mill has been identified as one of the viable unit of the corporation and hence a revival
package has been worked out for this mill as at an outlay of Rs. 17.69 crores. The Package, inter alias,
acquisition of new production machinery , augmenting working capital and compensation for surplus
workmen who would like to retired under voluntary retirement scheme of the corporation.
The commissioned capacity of the mills which is at present 30000 spindles would go up to 32000
spindles after modernization. The mill is capable of producing super fine cotton combed yarn and
medium /coarse polyester cotton and polyester viscose blended yarn.
After modernization, the mill is projected to produce 26.26 lakhs Kgs of yarn annually with a
turnover of more than Rs.37 crores . Taking advantage of the comprehensive modernization of the
production machinery , the mill is focusing on production of value added yarn for exports as well as
domestic markets.
 The mill, as a preclude to the export of yarn , has started implementing ISO 9001:2000 Quality
management system and the certification process is expected to be completed by September 2008
Quality Policy:
We at pankaja mills are committed to attain customer satisfaction and to build customer
confidence through pro-active approach in producing cotton, manmade fiber, blended yarn that
consistently meet their requirements cost effectively and supplying in time.
This is achieved by continually improving the products, quality management system, team
work of our dedicated employees and valued suppliers

PROCESS OF MANUFACTURING:
A brief note regarding the process of manufacture along with flow chart covering production,
utility and service department of the product.
Flow chart for Yarn Manufacture:
UTILITY
MIXING
Purchased Power from TNEB
BLOWROOM
Generated Power - HSO

CARDING Distributed to all Production

S.L.P M/C
R.LAP
Service cost center
DRAWING M/C
COMBING

SIMPLEX

SPINNING

WINDING
 PACKING

MIXING:
Cottons of different proportions are hand opened and laid into different layers according to the
quality of cotton and depending on the end use (yarn quality requirement).
BLOWROOM:
The cotton is well opened and cleared to remove the foreign matter such as seed bits, leaf bits etc,
and a thin uniform sheet of 40” width and rolled in lengths of about 40mins known as LAP.
CARDING:
The laps received from blow room is further opened and cleaned and a clean rope like material
known as card silver is produced and stored in cans.

COMBINING:
It is an optimal special process to remove short fibers ,neps etc. from the card silver to improve the
quality of yarn in order to produce COMBED YARN.
DRAWING:
The card silvers or combed silvers (6 to 8 nos) are passed through this machine , to make the fibers
in silver in parallel and more even , in order to improve the quality of the final yarn.
SIMPLEX:
The drawing silver is thinned and made to a strand of required size known as ROVE, and wound
into bobbins of 1 to 1.6 kg weight. The thinning process of material is known as drafting.
RING SPINNING:
The Roving bobbins received from simplex is fed in ring spinning frames, where the material is
further thinned down , twisted and yarn is formed which is wound on small copes of 50 to 60gms.
CONE WINDING:
The yarn in small cops is wound into bigger packages known as cones of required weight (1.25 kg)
after cleaning the impurities from Ring spinning yarn.
CONE PACKING:
 The yarn is packed in pre-stitched Polywoven bags ,with 40 cones of 1.25 kg ,to produce 50 kg
BAGS or according to market requirement ,in order to dispatch to various market centers/ depots for
sale.

ORGANIZATION CHART:

GENERAL MANAGER

Assistant
manager Assistant
Spinning Electrical engineer (Accounts) manager cost
Deputy
master manager(Personnel) co

ASM(Shift) ASM(Maint) ASM(QC) Store keeper

Production Main Spinning Wrapping

SQC Wrapping
Jobbers
operatives Fitter Assistant
operator Assistant Store boy
operatives boy
 workshop
operations

Generator Electrical
operator operatives Switch Brd
operator

GENERAL
MANAGER

Spinning Electrical Assistant

Master Deputy Assistant
Engineer Manager(Accounts)
Manager Manager(cost)

Head
Timekeeper

Cost
FF &ESI Assistant
Assistant Time
keepers(shift)

Accounts
Accountant Purchase Cotton Despatch
Sales Assistant
Assistant Assistant Driver Cashier Office boy
Assistant
Assistant
Chapter-2
 Main theme of
the
Project

CHAPTER- II

2.1 INTRODUCTION ABOUT THE STUDY

Profitability analysis generally states the profitable conditions of the firm. The
profitability analysis reviews the profits and declines of the company. Short term creditor will be
interested in the current financial position of the firm, while a long term creditor will pay more attention
to the solvency of the firm.
The long term creditor will also be interested in the profitability of the firm. The equity
shareholders are generally concerned with their return and may bother about the firm’s financial
conditions only when their earnings are depressed. In fact, it has to be realized and profitability of the
firm are must in every kind of financial analysis. But the emphasis is would differ.
 The financial analysis assists in identifying the major strengths and weakness of a business
enterprise. It can be also used to assess a firm’s viability as an ongoing enterprise and to determine
whether a satisfactory return is being earned for the risks taken. The information contained in the
financial statements is of major significance to a variety of interested parties who regularly need to
have relative measures of the company’s operating efficiency.
Profitability is an indication of the efficiency with which the operations of the business are
carried on. Poor operational performance may indicate poor sales and hence poor profits . A lower
profitability may arise due to the lack of control over the expenses. Bankers, financial institutions and
other creditors look at the profitability ratios as an indicator whether or not the firm earns
substantially more than its pays interest for the use of borrowed funds and whether the ultimate
repayment of their debt appears reasonably certain. Owners are interested to know the profitability as
it indicates the return which they can get their investments.
The purpose of study and analysis of profitability ratios are to help assessing the
adequacy of profits earned by the company and also to discover whether profitability is increasing or
declining. The profitability of the firm is the net result of a large number of policies and decisions.
The profitability ratios show the combined effects of liquidity ,asset management and debt
management on operating results. Profitability ratios are measured with reference to sales, capital
employed, total assets employed, shareholders funds etc.

Break even analysis is a widely used technique to study cost volume profit
relationship. The narrower interpretation of the term breakeven analysis refers to a system of
determination of that level of activity where total cost equals total selling price. The
interpretation refers to that system of analysis which determines probable profit at any level of
activity. It portrays the relationship between cost of production , volume of production and the sales
value.
Common size statement indicates the relationship of various items with some common item.
The common size analysis of current asset and current liability can be used to measure the relationship
of various elements of currents assets and current liability to it total. An attempt has been made for the
common size analysis of current asset and current liability.
 From this analysis it can be inferred that shareholders fund ands were considered to be the major
element in the source of fund of the company over the study period where as fixed asset, current asset
and & advances as well as investment were treated as the major application of funds. In this study the
income statements & balance sheet of the company for the past five years has been analyzed.
Comparative financial statement is prepared in a way so as to provide time perspective to the
consideration of various elements of financial position embodied in such statements. This is done to
make the financial data more meaningful. the statements of two or more years are prepared to show
absolute data in value and in terms of percentages comparative statement can be prepared for both
income statement as well as Balance sheet.
The preparation of comparative financial and operating statement is an important device of
horizontal financial analysis. Comparative financial statements are statements of position of a business
so designed as to provide time perspective to the consideration of various elements of financial position
embodied in such a statement.
Time series or trend analysis of ratios indicates the direction of change this kind of
analysis is particularly applicable to the items of profits and loss account. It is advisable that trends of
sales and net income may be studied in the light of two factors: the rate of fixed expansion or secular
trend in the growth of the business and the general price level.
 Objectives of the
study

10

2.2 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVES
To study and analyze the profitable position of Pankaja mill during the period of 2005-2009.
SECONDARY OBJECTIVES
 To study the profitability position of Pankaja mills from the year 2005-2009.
 To analyze the income & expenditure pattern and its impact on the total profits of the company.
 To calculate the break even sales .
 To analyze the comparative financial statements of Pankaja mill.
 To compare the past performance of the company with the present
 performance.
 To study the trend position of Pankaja mill by using the trend analysis.

Scope of the
study
 11

2.3 SCOPE OF THE STUDY

 Whether starting the new business , adding a new product or just seeking to improve the
company’s bottom line. Its important to perform basic profitability analysis on a regular basis.
 To make the Profitability analysis , maximize the potential of the business.
 To analyze the strength of the organization by evaluating the Profit analysis
of the company every year.
 To analyze the fluctuations of the profit or loss of the organization
Periodically.
Limitations of the
study

12

2.4 LIMITATIONS OF THE STUDY

1. The study is based on the results of limited period only i.e., years from 2004-05 to 2008-09.
2. This study is made using secondary data only.
3. The figure from the financial statements for analysis were historical in nature and the time
value of money its not considered.
4. Time has been a limiting factor and it has been difficult to analyze the various aspects with the
prescribed time.
5. This study is applicable only to Pankaja mill.
 Review of
Literature

13

2.5 REVIEW OF LITERATURE

Many of the research work have been conducted over the period to evaluate the Profitability
position of the Company with the help of various ratios or by applying multiple discriminate analyses
to predict the corporate failures.

PRASANNA CHANDRA A ratio is an arithmetical relationship between two figures

financial ratio analysis is a study of ratios between various items or groups of items in financial
statements. Ratio analysis involves methods of calculating and interpreting financial ratios to
analyze and monitor a firms performance. The basic inputs to ratio analysis are the firms income
statement and balance sheet. Ratio analysis is one of the techniques of the Profitability analysis where
ratios are used as a yardstick for evaluating the financial condition of various accounting ratios gives
a skilled and experienced analysts, a better understanding of the financial condition and
performance of the firm than what he could have obtained only through a perusal of financial
statements.
 According to Himpton John ,” A financial statement is an organized collection of data
according to logical and consistent accounting procedures. Its purpose of data according to convey an
understanding of some financial aspects of a business firm. It may show a position at a movement of
time as in the case of a balance sheet, or may reveal a series of activities over a given period of time,
as in the case of an income statement.
Comparative financial statements are statements of financial position of a business designed
to provide time perspective to the consideration of various elements of financial position embodied in
such statements.
Financial statements of two or more firms can also be compared for drawing inferences. This is
called ‘inter-firm comparison’.
A comparative income statement shows the absolute figures for two or more periods and the
absolute change from one period to another . since the figures are shown side by side , the user can
quickly understand the operational performance of the firm in different periods and draw conclusions.

14

The figures shown in profit and loss account and balance sheet are converted to percentages so
as to establish each element to the total figure of the statement and these statements are called
‘common size statement’ . These statements are useful in analysis of the performance of the company
by analyzing each individual element to the total figure of the statement. These statements will also
assist in analyzing the performance over years and also with figures of the competitive firm in the
industry for making analysis of relative efficiency.
In common size income statement , the sales figure is taken as 100 and all other figure of costs
and expenses are expressed as percentage to sales. When other costs and expenses are reduced from
sales figure of ‘100’, the balance figure is taken net profit. This reveals the efficiency of the firm in
generating revenue which leads to profitability and we can make analysis of different components of
cost as proportion to sales. Inter –firm comparison of common size statements reveal the relative
efficiency of costs incurred.
The method of trend percentages is a useful analytical device for the management since by
substituting percentages for large amounts , the brevity and readability are achieved. However , trend
percentages are not calculated for all the items in the financial statements . They are usually calculated
only for major items since the purpose is to highlight important changes.
Research
Methodology
 15

2.6 RESEARCH METHODOLOGY

INTRODUCTION
Research Methodology is a systematic way to solve a research problem; It includes various steps
that are generally adopted by a researcher in studying the problem along with the logic behind them.
The present study was conducted at Pankaja mill in puliangulam. The study depends mainly on the
secondary data namely the annual reports of the company. Five years annual reports had been collected
from the company. Data had also been collected from text books, journals, newspapers, magazines and
internet.

RESEARCH DESIGN
“A Research Design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with the economy in procedure”. In fact,
the research design is the conceptual structure with in which research is conducted; it constitutes the
blue print for the collection, measurement and analysis of data, the research design utilized in this study
is analytical research.

PERIOD OF STUDY
The duration taken by the researcher for the data collection and analysis regarding the profitability
analysis of PANKAJA MILL, Coimbatore for three months. The data used are of last five years from
2005-09.

METHOD OF COLLECTION
The study basically uses primary and secondary data. Primary data means data which is fresh
collected data. Primary data mainly been collected through personal interviews, surveys etc. Secondary
data means the data that are already available. Generally speaking secondary data is collected by some
organizations or agencies which have already been processed when the researcher utilizes secondary
data; The process of secondary data collection and analysis is called desk research. Secondary data
provides economy in time and cost. It is easily available and unbiased. Secondary data mat either be
published data or unpublished data For this study secondary data were collected from the annual reports
of the company and from the company website.

16

SAMPLING TECHINIQUE
Analytical Research Design study is used. Usually for those research studies having the computation
of problems or application of formulae for computations analytical research design technique is used.

TOOLS USED

 Breakeven analysis
 Ratio Analysis
 Comparative Income Statement Analysis
 Trend analysis
 Common size Statement
Chapter-3
Data Analysis
and
Interpretati
ons

17
 CHAPTER- III

DATA ANALYSIS AND INTERPRETATION

FINANCIAL TOOLS
3.1 RATIO ANALYSIS:

Ratio is a relationship between two figures expressed mathematically. Financial ratio

provides numerical relation between two relevant financial data. Financial ratios are calculated from the
Balance sheet and Profit & Loss A/c. The relationship can be either expressed as a percent on as a
quotient. Ratios summarize the data for easy understanding, comparison and interpretation.
The Ratio Analysis is the financial statement. It provides a yardstick to measure the
relationships between the variable of figures. In work the Financial Analysis is necessary to know
different angles.
The term Ratio Analysis simply means one number expressed in terms of another. It
describes in mathematical term as the quantitative relationship that exists between two numbers. Ration
Analysis and interpretation of Financial Statements through ratio. Nowadays it is used by all business
and industrial concern in their Financial Analysis. Ratios are considered to be the best guide for
different efficient execution of basis managerial functions like planning, forecasting & control.
Ratio Analysis is a powerful tool of Financial Analysis. A ratio is defined as “the indicated
quotient of two mathematical expression” and as “the relationship between two or more things”. In
financial Analysis ratio is used as used as a Benchmark for evaluating the financial performance of the
firm. The absolute accounting figures reported in a financial statement do not provide a meaningful
understating of the financial position of the firm; an accounting figure conveys meaning when it is
related to some other relevant information.

18

PROFITABILITY RATIOS:
 The purpose of study and analysis of profitability ratios are to help assessing the
adequacy of profits earned by the company and also to discover whether profitability is increasing or
declining. The profitability of the firm is the net result of a large number of policies and decisions. The
profitability ratios shows the combined effects of liquidity , asset management and debt management on
operating results. Profitability ratios are measured with reference to sales , capital employed ,total assts
employed etc. The major profitability rates are as follows,

3.1.A. NET PROFIT RATIO:

This ratio is designed to focus attention on the net profit arising from business
operations before interest and tax is deducted. This conversion is to express profit after tax and interest
and as a percentage of sales. This ratio measures the efficiency of operation of the company.
The ratio is calculated as follows:

Net Profit before Interest and Tax

Net Profit Ratio= ------------------------------------------- X 100
Sales

19
 3.1.A. Table showing Net profit ratio

Year Net profit Sales Net margin(%)

2005 (145106159.32) 1982888080.79 (75.22%)

2006 (168744358.94) 211164520.05 (79.91%)

2007 (198480945.70) 224425407.37 (88.43%)

2008 221565218.24 152540443.37 148.25%

2009 160925573.68 121756398.90 132.17%

Source: Pankaja mill annual report

Inference:
The above table shows that, the high net profit margin in 2008. it is because of high profit in the
year of 2008, from 0-09 it shows the increasing trend .From 2005 to 2007 it shows the low not profit
margin.

20

3.1.A. Chart showing Net Profit ratio

 NET PROFIT RATIO

200%
148.25%
150% 132.17%

100%
PERCENTAGE Year 2005 2006 2007 2008 2009
50%

0%
0
-50%

-100% -75.22% -79.91%

-88.43%

-150%
YEARS

21

3.1.B. CURRENT RATIO:

Current ratio is the most common ratio for measuring liquidity. The current ratio is the ratio
of total current assets to total current liabilities. Current ratio of affirm measures its term solvency i.e.
ability to meet short term obligations. Current assets mean assets that will either be used up or converted
into cash within a year’s time or during the normal operating cycle of the business, whichever is longer.
 Current liabilities mean liabilities payable within a year or during operating cycle, whichever
is longer , out of the existing current assets or by creation of current liabilities.

Current assets
Current assets ------------------------------
Current liabilities

22

3.1.B. Table showing current ratio

Year Current assets Current liabilities Ratio

2005 145599634.9 48816088.59 2.98

 2006 1456533878.1 36618215.22 4.00

2007 45096395.1 498984662.78 0.09

2008 69790005.35 44943287.71 1.52

2009 39448556.59 32864351.27 1.2

Source: Pankaja mill annual report

Inference:
The above table shows , for the two years i.e. from 05 to 06 the current ratio of the firm showed
and increasing trend, later in 2007 the current ratio got declined because of the increase in current
liability. The high current ratio shows the favorable condition of the firm. So in 2006, the firm got high
current ratio at 4.00.

23

3.1.B. Chart showing Current Ratio

 CURRENT RATIO

4
4
2.98
3.5
3
2.5
RATIO 2 1.52 1.2
1.5
1
0.09
0.5
0
2005 2006 2007 2008 2009
YEARS

24

3.1.C. RESERVE TO EQUITY SHARE CAPITAL RATIO

 A very high indicates a conservative dividend policy and increase plugging back of profits. Higher
the ratio better will be the position.

Revenue reserves
Reserves to equity capital ratio =-------------------------------x100
Equity capital

25

3.1.C. Table showing reserve to equity s. capital ratio

 Reserve and surplus
Year Share capital Ratio

2005 334534139.25 40414000.00 8.27

2006 334534139.25 40414000.00 8.27

2007 334534139.25 40414000.00 8.27

2008 253598494.25 40414000.00 6.27

2009 253598494.25 40414000.00 6.27

Inference:
The above table shows the reserve and surplus to equity capital ratio. From the year 2005-07
the ratio is 8.27. Later it had decreased at 6.27. . Higher the ratio better will be the position. But here it
was decreased. So there is no better position during the period of 08-09.

26

3.1.C. chart showing reserve to equity s. capital ratio

 27

3.1.D. SOLVENCY RATIO:

 Also known as dept ratio. So known generally refers to the capacity or ability of the business
to meet its short term and long term liabilities.

Total liabilities
Solvency ratio = -------------------------- x 100
Total assets

28

3.1.D. Table showing solvency ratio

 Year Total liabilities Total Assets Ratio

2005 77122280.59 155903751.45 49%

2006 65345784.22 161773635.53 40%

2007 533004823.78 521252213.93 102%

2008 81038435.71 71360257.89 113%

2009 75477776.27 40637986.09 185%

Source: Pankaja mill annual report

Inference:
The above table shows that , the firm’s ability to meet their liabilities. The above table

solvency ratio shows a increasing trend from the year 2007-09 and it has reached its maximum in the

year 2009 at 185%.Here the total assets less than the total liabilities. So it is the unfavorable position for

a firm in 2009.

29

3.1.D. Chart showing Solvency Ratio

 SOLVENCY RATIO
185%
200%
180%
160%
113%
140%
102%
120%
RATIO 100%
80% 49% 40%
60%
40%
20%
0%
2005 2006 2007 2008 2009
YEARS

30

3.1.E. PAT TO EBIT RATIO:

The ratio expresses the percentage relationship of profit after tax to earnings before interest tax.
 PAT
PAT to EBIT RATIO =----------------X100
EBIT

31

3.1.E. Table showing PAT to EBIT ratio

Year PAT EBIT Ratio

 2005 (43472754.29) (45866657.46) 94.78%

2006 (23569387.62) (23550146.62) 100.08%

2007 (29187836.26) (29147836.26) 100.13%

2008 420061737.86 420098855.86 99.99%

2009 (60519402.56) (60482280.56) 100.06%

Source: Pankaja mill annual report

Inference:
The above table PAT to EBIT ratio shows a fluctuating trend and it has reached its maximum in

the year 2006 at 100.08%.

32

3.1.E. Chart showing PAT to EBIT Ratio

 33

3.1.F. RETURN ON INVESTMENT (BEFORE TAX):

 The profitability of the firm is also measured in relation to investments. The term investment
may refer to total assets, capital or the owners equity.

EBIT
ROT (Before tax) =----------------------------------------
Net assets/capital employed

34

3.1.F. Table showing Return on Investment ratio

 Year EBIT Capital Ratio
Employed

2009 (45866657.46) 563104769.66 (0.08)

2008 (23550146.62) 603839917.84 (0.03)

2007 (29147836.26) 527185320.87 (0.05)

2006 420098855.86 56956199.74 7.37

2005 (60482280.56) 217983278.95 (0.27)

Source: Pankaja mill annual report

Inference:
The above table indicates the ROI shows the earning capacity of the company in the year 2006
is maximum. This is because of high Earning before interest and taxes of a company.

35

3.1.F. Chart showing Return on Investment Ratio

 36

3.1.G. ADMINISTRATIVE EXPENSES RATIO:

 It enables as to find out a how far as the concern is able to save or is making over expenditure I
respect of administrative expenses. Thus this ratio reveals the relation administrative expenses to net
sales.

Administrative expenses
Administrative expenses ratio =------------------------------------------x100
Net sales

37

3.1.G. Table showing ADMINISTRATIVE EXPENSES RATIO

 Year Administrative Net sales Ratio
Expenses

2005 6013083.76 192888080.79 3.1 %

2006 5889013.19 211164520.05 2.78 %

2007 5748898.55 224425407.37 2.56 %

2008 1691381.61 152540443.37 11.08 %

2009 2305704.54 121756398.90 1.89 %

Source: Pankaja mill annual report

Inference:
The company has a low administrative expenses ratio. In 2005 to 2007 it shows that the
decline level of ratio. And later it got increased. This is be caused of increased in administrative
expenses. In the year of 2008, the company has maximum administrative expenses ratio to compare with
other years.

38

3.1.G. Chart showing ADMINISTRATIVE EXPENSES RATIO

 ADMINISTRATIVE EXP RATIO

12
11.08
10

8
RATIO
6
3.1
4 2.78 2.56
2 1.89
0
2005
2006
2007
2008
2009
YEARS

39

3.1.H. RETURN ON ASSET:

 Profitability can be measured in terms of relationship between net profits assets. This ratio
also known as profit to asset ratio. It measures the profitability of investments can be known. The
profitability of the firm is measured by establishing relation of net profit with the total assets of the
organization. This ratio indicates the efficiency of utilization of assets in generating expenses. This ratio
is calculated as follows:

Net profit
ROA = ---------------------------x100
Total assets

40

3.1.H. Table showing ROA

 Year
Net Profit Total Assets Ratio

2005 (145106159.32) 155903751.45 (93.09 )

2006 (168744358.94) 161773635.53 (104.30 )

2007 (198480945.70) 521252213.93 (38.07 )

221565218.24
2008 71360257.87 310.48

2009 160925573.68 40637986.09 395.99

Source: Pankaja mill annual report

Inference:
The above table shows the return on asset. It shows the maximum return on asset in the year of
2009. It is because of more net profit of the company. And it shows that the minimum return on assets
in the year of 2007 at (38.07). it is because of the high net loss of a firm.

41

3.1.H. Chart showing Return On Asset

 42

3.2. TREND ANALYSIS

 Time series or trend analysis of ratios indicates the direction of change this kind of
analysis is particularly applicable to the items of profits and loss account. It is advisable that trends of
sales and net income may be studied in the light of two factors: the rate of fixed expansion or secular
trend in the growth of the business and the general price level.
For trend analysis, the use of index numbers generally advocated. The procedure followed is
to assign the number 100 to items of the base year and to calculate percentage changes in each item of
other years in relation to the base year. This procedure may be called as “trend-percentage method”.
The comparative and common size statements suffer from a major limitation i.e. the absence
of a basic standard to indicate whether the proportion of an item is normal or abnormal. Trend analysis
overcomes the limitation. This method is also an important and useful technique of financial technique
analysis. The calculation of trend ratio involves the ascertainment of arithmetical relationship which
each item of several year to the same item of the base year. Thus one particular year of many years is
taken as base. The value of one particular item out of several items shown in the financial statements are
converts into ratio or percentage taken of that item in base year as equal to 100.

It is useful analytical device for the management since substituting percentages for large
amounts , the brevity and readability are achieved. However it is not calculated for all of the items in the
financial statements. They are usually calculated only for major items since the purpose is to highlight
important changes.

43

3.2.A. TREND PECENTAGE OF SALES:

 Here the trend percentages calculated for sales of the five years. 2005 has taken as a
basic year for this analysis.

5.2.A. TABLE SHOWING TREND PERCENTAGE OF SALES

Year 2005 2006 2007 2008 2009

192888080.79 211164520.05 224425407.37 152540443.37 121756398.90

sales

Trend %
100 109.47 116.35 79.08 63.12
of sales

Source: Pankaja mill annual report

Inference:
From the above table shows that sales percentage for every year. From the year 05-07 , it shows
the increasing trend in sales. But in 08 the sales comes to decline trend , because of less demand, high
price, high production cost etc. It marked that the minimum percentage in 2009 at 63.12

44
 5.2.A. Chart Showing TREND PERCENTAGE OF SALES

45

3.2.B. TREND PERCENTAGE OF TOTAL INCOME

 Here , the trend percentage calculated for other income of the organization.
5.2.B. TABLE SHOWING TREND PERCENTAGE OF TOTAL INCOME

Year 2005 2006 2007 2008 2009

200095319.79 204342249.82 237558927.62 177258767.00 159549577.65

Total income

Trend % 100 102.12 118.72 88.58 79.73

Source: Pankaja mill annual report

Inference:
Total income earned by the company shows on increasing trend from the year 05-07 and it

marked its maximum in the year 2006 which compared in the base year i.e.2005. 08 and 09 shows the

decreasing stage and it marked its minimum in the year 2009 at 79.73%.it is because of less sales ,and

decrease in stock in that year.

46

5.2.B. Chart showing TREND PERCENTAGE OF TOTAL INCOME

 47

3.2.C. TABLE SHOWING TREND PERCENTAGE OF MATERIAL

CONSUMPTION:
 Year 2005 2006 2007 2008 2009

Material 123399129.98 101372878.39 118046061.83 100345056.90 88547351.25

consumption

Trend % 100 82.15 95.66 81.31 71.75

Source: Pankaja mill annual report

Inference:
From the above table shows that , the material consumption for five years. Material

consumption trend shows a decreasing trend and it marked its less in the year 20089. It because of the

decrease in production .

48

3.2.C. TABLE SHOWING TREND PERCENTAGE OF MATERIAL

CONSUMPTION
 49

3.2.D. TABLE SHOWING TREND PERCENTAGE OF ADMINISTRATIVE

EXPENSES:
 Year 2005 2006 2007 2008 2009

Admin. 6013083.76 5889013.19 5748898.55 1691381.69 2305704.54

Expenses

Trend % 100 97. 93 95. 60 28. 12 38. 34

Source: Pankaja mill annual report

Inference:
Administrative expenses also shows a deceasing trend and got a ratio of 28.12 in 2008. It is because

of the efforts made by company to control the expenses . It shows the minimum level of expenses in the

year of 2008.

50

3.2.D. Chart Showing TREND PERCENTAGE OF ADMINISTRATIVE

 EXPENSES:

51

3.2.E. TABLE SHOWING TREND PERCENTAGE OF RESERVE AND

SURPLUS
 Year 2005 2006 2007 2008 2009

Reserve and 334534139.25 334534139.25 334534139.25 253598494.25 253598494.25

surplus

Trend % 100 100 100 75.80 75.80

Source: Pankaja mill annual report

Inference:
Reserves and surplus shows a same level trend from the year 2005 to 2007. In the year 2008 , it
shows increasing trend at 75.80. In 2009 ,it shows the same level trend to compare with 2008. it shows
the unfavorable position for a firm.

52

3.2.E. Chart showing TREND PERCENTAGE OF RESERVE AND

SURPLUS
 53

3.3. BREAK EVEN ANALYSIS

Break even analysis refers to ‘ascertainment of level of operations where total revenue equals
to total costs’. Break even analysis is an analysis used to determine the probable profit or loss at any
level of operations. Break even analysis is a method of studying the relationship among sales revenue ,
variable cost and fixed cost to determine the level of operation at which all the costs are equal too its
sales revenue and it is the no profit no loss situation.
Break even point helps in assessing the viability of the organization and to take decisions in
profit planning and cost control breakeven point is the point of zero net income i.e., the level of sales
equal to its costs.
Contribution refers to the excess of sales over the variable cost. It is also known as gross
margin. The amount of profit can be ascertained by deducting the fixed cost from contribution. In other
words fixed cost plus profit equivalent to contribution.
It can be expressed by the following formula:-

Fixed cost
BREAK EVEN SALES: ----------------------------- X Total sales
Total contribution

54

3.3. Table showing Break Even Sales

Year Fixed cost Total contribution Total sales Break even

Sales
 2005 6013083.76 149753751.29 192888080 7745062.65

2006 5889013.19 162510080.81 211164520.05 7652144.64

2007 5748898.55 169854233.3 224425407.37 7595918.417

2008 1691381.69 104882854.08 152540443.37 2459926.50

2009 2305704.54 78669797.34 121756398.90 3568514.10

Inference:
The above table shows the breakeven sales for five years i.e. 2005-09. The breakeven level
means there is no profit and no loss. If the firm’s sales goes above the breakeven level , it shows that the
firm earn more profit and vice versa. Here the breakeven sales for four years shows decline from the
year 04 to o8. and it later increasing.
2008 is the favorable period for the firm. Because the breakeven sales very less in that year to
compare with others at 2459926.50. The firm got more profit due to more sales. If the firm sales goes
above this limit , it make chance to more profit. From the year 05-09, there are no big changes in their
breakeven sales. Again in the year of 2009, the breakeven sales got increase to compare with 2008. But
this increase not highly affects their profit.

55

3.3. Table showing Break Even Sales

 56

3.4. COMPARATIVE FINANCIAL STATEMENTS

 Comparative financial statement is prepared in a way so as to provide time perspective to
the consideration of various elements of financial position embodied in such statements. This is done to
make the financial data more meaningful. the statements of two or more years are prepared to show
absolute data in value and in terms of percentages comparative statement can be prepared for both
income statement as well as Balance sheet.
The preparation of comparative financial and operating statement is an important device of
horizontal financial analysis. Comparative financial statements are statements of position of a business
so designed as to provide time perspective to the consideration of various elements of financial position
embodied in such a statement. Generally balance sheet and income statement is which alone are
prepared in a comparative because they are the most important statements of financial position.
Comparative income statement discloses the net profit or net loss resulting from the operations of
the business such statement shows the operating results for a number of accounting periods so that
changes in absolute data from one period to another period may be stated in terms of absolute change or
in terms of percentage comparative balance sheet is prepared on two are more different dates can be
used for comparing assets and liabilities and to find out any increase in these terms this facilitates the
comparison of figures of two or more periods and provides necessary information which may be useful
in forming an opinion regarding the financial conditions as well as progressive outlook of the concern.

57
3.4 TABLE SHOWING CONSOLIDATED COMPARATIVE INCOME
STATEMENT (Amounts in Rs. In lakhs)
 Particulars 2004-2005 2005-2006 2006-2007 2007- 2008-2009
2008
INCOME
Sales 1928.88 2111 .64 2244.25 1525.40 1217.56
Income from jobwork 3.04 0.37 2.74 83.72 594.70
Interest and other income 29.69 32.11 78.96 17.78 22.88
Increase/decrease in Stock 32.73 ( 100.71) 49.63 145.46 (239.65)
profit on sale of Assets 6.58

Total income 2000.95 2043.42 2375.58 1772.58 1595.49

EXPENDITURE 1013.72
Materials consumed 1233.99 1180.46 1003.45 885.47
Purchase of finished 45.52 39.94
Goods 457.98
Employees Remuneration 469.29 545.45 555.61 509.09 564.24
Manufacturing,selling,admin 488.47 603.2 493.48 453.92
exp 237.98
Finance charges 232.70 246.53 135.59 295.38
Baddebts and provisions 2.20 7.55 82.75 0.078 0.079
Depreciation 9.01 5.04 17.84 9.08

Total Expenditure 2435.68 2262.68 2673.60 2205.04 2329.86

(219.2
PROFIT /LOSS FOR THE ( 434.72) 6) (298.01) (432.45) ( 734.36)
YEAR
Net Prior period income/exp (23.93) (16.50) (0.29) ( 0.018) ( 3.93)
Provisions written back 0.76 3823.55 128.24
Extraneous income 6.07 0.54 5.23
Reserve written back 809.89
Ordinary items
PROFIT BEFORE TAX (458.66) (235.50) (291.47) 4200.98 (604.82)
Benefit tax (0.19 ) (0.4) ( 0.37) (0.37)
Provision Wealth tax
Balance brought down from
last year (992.39) (1451.74) (1692.93) (198.49)
BAL 2214.44
ANCE OF PROFIT / (1451.06
LOSS(carried forward) ) (168.74) (1984.80) 2215.65 1609.25

58
Inference:
From the above comparative income statement it is inferred that sales increased in every year
and maximum in the year 2006-07 at 2244.25, other income shows a increase in the year 07-08 and 08-
09 but it marked its greatest increase in 2008-09. This greatest increase make the big change in their
profit. Due to this income the firm got profit to compare with other years.
In the year 05-06 and 08-09 the stock level got decreased position. Material consumption shows
a through out increase or decrease of the every year and in the year 2004-05 got maximum at 1233.99.
The employee cost shows increase in every year . An interest and financial change shows its decline
from 2004-05 to 2005-06 and 2007-08 got increase. it is maximum in the year 08-09. Depreciation
shows its decline for 2004-05 and 2006-07 and it later increasing.
In the case of profit and loss before interest and taxes shows the increase of losses in the year
from 06-09. The extra-ordinary items maximum in the year 2007-08 at 3823.55.ordinary income highest
in the year 07-08 at 809.35. It shows the ability of the company to raise the profit from external as well
as internal sources.
Due to this , the firm got profit for the year 07-8 at 4200.98. after deducting taxes it shows the high net
profit in the year
In the case fixed asset shows its decline trend in year 05-06 at (-0.51) and later increasing in the
year 06-07 at 5715. C.A showed its decline in year 05-06 at 3.87 and later increase in the year 06-07 at
20.05 C.L showed it increase or decrease for every year 07-08 at 2215. from the year 04 – 07 the firm
got losses. Then in the year of 09 , the profit is 1609.25. It is the favorable condition for the
organization.

59
3.5. COMMON SIZE BALANCESHEET:

The common size balance sheet shows the percentage of each asset item to the total asset
and each liability item to the total liabilities. Similarly a common size of income statement shows each
item expense as a percentage of net sales. With common size statements comparison can be made
between two different size firms belonging to the same industry.
The common size analysis of current asset and current liability can be used to measure the
relationship of various elements of currents assets and current liability to it total. An attempt has been
made for the common size analysis of current asset and current liability.
From this analysis it can be inferred that shareholders fund ands were considered to be the
major element in the source of fund of the company over the study period where as fixed asset, current
asset and & advances as well as investment were treated as the major application of funds. In this study
the income statements & balance sheet of the company for the past five years has been analyzed.

60
 3.5..COMMON SIZE BALANCE SHEET FROM 2005-2009

Particulars 2005 2006 2007 2008 2009

SOURCE OF FUNDS
Shares 6.31 6.03 3.81 29.28 13.7
Reserve and surpluses 52.25 49.99 31.85 183.77 86.41
Loan funds 29.38 34.20 14.35 (171.78) 25.90
Current liability and provisions
12.04 9.76 50.27 58.72 25.71
Total
100 100 100 100 100
APPLICATION OF FUNDS
Fixed assets
Investment
Current assets, loan advances 68.51 67.67 39.50 81.5 90.62
Total 0.0017 0.0017 0.0010 0.0002 0.0002
31.48 32.32 60.49 18.58 9.37

100 100 100 100 100

61
Inference:
Common size statement indicates the relationship of various items with some common
item. From the above common size balance sheet we can see that reserve and surplus as well as loan
finds forms the major items source of finds for company. Fixed asset forms a major part of the
application of finds of the company followed by current assets, loan a advance. Out of current assets,
inventories forms a major element followed by sundry debtors and cash and bank. Provision form an
insignificant position out of current liabilities.

From the above statement the share capital amount for five years are same, but while calculating
the percentage of share capital over the sources of funds it will differ from year to year. It is applicable
for all the items in the balance sheet. According to this , in the year of 2008 the percentage of reserve
and surplus is high, and the loan funds comes down in negative effect.
In case of application of funds there is no huge changes in the additional investment. And the
current assets are decreased in every year..but in the case of fixed assets, it was increased from the year
2008 to 2009.
Chapter- 4
Findings and
Suggestions

62
 CHAPTER-IV

FINDINGS AND SUGGESTIONS

4.1.FINDINGS:

 In the year 2005 to 2007 the company showed a low Net Profit margin. In the year 2008 it
showed the highest net profit margin. It is because of high profit in the year of 2008, from 08-09
it shows the increasing trend .

 From 05 to 06 the current ratio of the firm showed an increasing trend, later in 2007 the current
ratio got declined because of the increase in current liability.

 ROI shows the earning capacity of the company in the year 2006 is maximum. This is because of
high Earning before interest and taxes of a company.

 PAT to EBIT ratio shows a fluctuating trend and it has reached its maximum in the year 2006 at
100.08%.

 solvency ratio shows a increasing trend from the year 2007-09 and it has reached its maximum
in the year 2009 at 185%.Here the total assets less than the total liabilities. So it is the
unfavorable position for a firm in 2009.

 The company has a low administrative expenses ratio. In 2005 to 2007 it shows that the
decline level of ratio. And later it got increased. This is be caused of increased in administrative
expenses.

63
 The maximum return on asset in the year of 2009. It is because of more net profit of the
company. And it shows that the minimum return on assets in the year of 2007 at (38.07). it is
because of the high net loss of a firm.

 From the year 05-07 , Sales Trend shows the increasing trend . But in 08 the sales comes to
decline trend , because of less demand, high price, high production cost etc. It marked that the
minimum percentage in 2009 at 63.12.

 Total income earned by the company shows on increasing trend from the year 05-07 and it
marked its maximum in the year 2006 which compared in the base year i.e.2005.

 Material consumption trend shows a decreasing trend and it marked its less in the year 20089. It
because of the decrease in production .

 Administrative expenses also shows a deceasing trend and got a ratio of 28.12 in 2008. It is
because of the efforts made by company to control the expenses .

 Reserves and surplus shows a same level trend from the year 2005 to 2007. In the year
2008 , it shows increasing trend at 75.80. In 2009 ,it shows the same level trend to compare
with 2008.

 The breakeven sales for four years shows decline trend from the year 04 to o8. and it later
increasing. 2008 is the favorable period for the firm. Because the breakeven sales is very less
(2459926.50) in that year to compare with base year.

 Comparative financial statements of two or more years are prepared to show absolute data in
values. sales increased in every year and maximum in the year of 2006-07 at 2244.25, other
income shows a increase in the year 07-08 and 08-09 but it marked its greatest increase in 2008-
09. In the year 05-06 and 08-09 the stock level got decreased position.

64
 In the case of profit and loss before interest and taxes shows the increase of losses
in the year from 06-09. The extra-ordinary items maximum in the year 2007-08. In the case fixed
asset shows its decline trend in year 05-06 at (-0.51) and later increasing in the year 06-07.

 From the common size balance sheet we can see that reserve and surplus as well as loan finds
forms the major items source of finds for company. Fixed asset forms a major part of the
application of finds of the company followed by current assets, loan a advance.

Out of current assets, inventories forms a major element followed by sundry debtors and
cash and bank. Provision form an insignificant position out of current liabilities. In case of
application of funds there is no huge changes in the additional investment. And the current assets are
decreased in every year. but in the case of fixed assets, it was increased from the year 2008 to 2009.

65
4.2. SUGGESTIONS:

 Company should make efforts to improve the profitability condition of the business through
increased sales .since the company showed a low profit balance in PAT in the years 2005 and
2007.
 Company should undergo in efforts to increase their production , then only they can achieve
more profit..
 Company should be able to maintain a safe position of current ratio as 2:1. but by reducing the
current liabilities it is possible for the company to maintain a better liquidity position and this in
turn helps the company for its efficient performance.
 Company should introduce a better policy for the Reserves maintained by the company. If the
company is able to maintain an improved level of reserve it helps the company to phase the
future contingencies of losses modernization expansion of the business. Here the company
maintained a less level of Reserves to compare with previous years.
 Company should introduce measures to cut down the administrative expenses of the company.
But at the same time it should be possible for the company to withhold the experienced and
skilled employees by providing them attractive remuneration. The joining of qualified
professionals with the company will improve the productivity of the business.
 The company should improve their total income to meet their expenses.
Chapter- 5
Conclusion

66
 CHAPTER-V

CONCLUSION

By considering the industry performance this year was a difficult year for the textile
industry . profitability analysis is the vital part of Financial Management of any business like Pankaja
mills. However the profitability of this Company was adversely affected by the various factors. This
study helps the “Pankaja mills” to control over the financial areas and the smooth functioning of the
business. This study and analysis of profitability and financial statement gives a thorough insight to the
research and how the financial statements should be analyzed which will help in the improvement of
profitability and liquidity of the business.

The study will enable the company to plan for future financial analysis and Helps to analyze
the firm’s profitability over time, its ability to generate more profit. It’s of responsibilities financial
Manager to see that the sources of the funds are used effectively and Efficiently. . By considering the
above suggestions that the Company will be improve and for the better management of finance in near
future
 Appendix

APPENDIX-1
Name of the unit : Pankaja mills
Balance sheet as at 31st march 2005 and 2006
PARTICULARS SHED.NO AS AT 31-3-2005 AS AT 31-3-2006
SOURCES OF FUNDS
Shareholders funds
Share capital 1 40414000.00 40414000.00
Advances against Equity
Reserve and surplus 2 334534139.25 334534139.25
Loan funds
Secured loan 3 14707660.98
Un secured loan 4 173448969.43 228891778.59
TOTAL 563104769.66 603839917.84
APPLICATION OF FUNDS
Fixed Assets 5
Gross Block 444541753.48 444667674.38
Less: depreciation 105333424.00 106126570.00

Net Block 339208329.48 338541104.38

Capital W.I.P 117793.21
TOTAL 339208329.48 338658897.59
Investments 6 8810.00 8810.00
Current assets, loans & advances
Inventories 7 36713955.50 28393715.19
Sundry debtors 10855891.99 9901077.68
Cash and bank balances 1693521.93 73550.62
Other current assets 96337246.47 108165534.59
Loans and advances 10234323.56 15239757.45
TOTAL A 155834939.45 161773635.53
Less:
Current liabilities and Provisions
Current liabilities 12 48816088.59 36618215.22
Provisions 13 28306192.00 28727569.00
TOTAL B 77122280.59 65345784.22
Net current Assts/liabilities[A-B] 78712658.86 96427851.31

Deferred Rev. Exp..

Profit & Loss A/C 145174971.32 168744358.94

(Balance as per Annexed Account)

TOTAL 563104769.66 603839917.84

APPENDIX-2
Name of the unit : Pankaja mills
Balance sheet as at 31st march 2007and 2008
PARTICULARS SHED.NO AS AT 31-3-2007 AS AT 31-3-2008
SOURCES OF FUNDS
Shareholders funds
Share capital 1 40414000.00 40414000.00
Advances against Equity
Reserve and surplus 2 334534139.25 253598494.25
Loan funds
Secured loan
Un secured loan 4 152237181.62 (237056294.51)
TOTAL 527185320.87 56956199.74
APPLICATION OF FUNDS
Fixed Assets 5
Gross Block 447659171.53 406905607.30
Less: depreciation 108721070.00 1150055317.56
Net Block 338938101.53 291900289.74
Capital W.I.P 1510073.49 22795494.62
TOTAL 34044inte8175.0 314695784.36
Investments 6 2 8810.00 1000.00
Current assets, loans & advances
Inventories 7 30598931.70 51503839.66
Sundry debtors 3488474.00 7897608.00
Cash and bank balances 2380601.95 2965400.59
Other current assets 8628387.44 7414157.10
Loans and advances 476155818.84 1570252.54
TOTAL A 521252213.93 71360257.89
Less:
Current liabilities and Provisions
Current liabilities 12 498984662.78 44943287.71
Provisions 13 34020161.00 36095148.00
TOTAL B 533004823.78 81038435.71
Net current Assts/liabilities[A-B] - 11752609.85 (9678177.82)

Deferred Rev.exp
Inter unit current Account 14 A (26497188.56)
Profit & Loss A/C 198480945.70 (221565218.24)

(Balance as per Annexed Account)

TOTAL 527185320.87 56956199.74

APPENDIX-3
Name of the unit : Pankaja mills
Balance sheet as at 31st march 2008and 2009
PARTICULARS SHED.NO AS AT 31-3-2009 AS AT 31-3-2008
SOURCES OF FUNDS
Shareholders funds
Share capital 1 40414000.00 40414000.00
Advances against Equity
Reserve and surplus 2 253598494.25 253598494.25
Loan funds 253598494.25
Secured loan
Un secured loan 4 ( 76029215.30) (237056294.51)
TOTAL 217983278.95 56956199.74
APPLICATION OF FUNDS
Fixed Assets 5
Gross Block 475594369.19 406905607.30
Less: depreciation 87711066.00 1150055317.56

Net Block 387883303.19 291900289.74

Capital W.I.P 4837505.00 22795494.62
TOTAL 392720808.19 314695784.36
Investments 6 34044inte8175.021000.00 1000.00
Current assets, loans & advances
Inventories 7 21584044.11 51503839.66
Sundry debtors 5306940.00 7897608.00
Cash and bank balances 5619427.48 2965400.59
Other current assets 6938145.00 7414157.10
Loans and advances 1189429.50 1570252.54
TOTAL A 40637986.09 71360257.89
Less:
Current liabilities and Provisions
Current liabilities 12 32864351.27 44943287.71
Provisions 13 42613425.00 36095148.00
TOTAL B 75477776.27 81038435.71
Net current Assts/liabilities[A-B] (34839790.18) (9678177.82)

Inter sub-office current account 14 635612.50

Inter unit current Account 14 A 20391222.12 (26497188.56)
Profit & Loss A/C (160925573.68) (221565218.24)

(Balance as per Annexed Account)

TOTAL 217983278.95 56956199.74
 References

REFERENCES

1. Premavathy , N. and Inbalakshmi, M.(2008) ‘ Financial Management’, Sri Vishnu

Publications ,Chennai.
2. Maheswari, S.N. (1994) ‘ Principles of management Accounting’ , sultan Chan & sons,

Educational publishers, New Delhi.

3. Gupta, S.P. ‘Management Accounting’, sultan Chan & sons, 8th Edition, Chennai.