51630203 project on fixed assets management

APROJECT REPORT

ON

“FIXED ASSETS MANAGEMENT”

UNDERTAKEN

AT

RAYMOND LIMITED.

VAPI.

1

2. OBJECTIVES:

MAIN OBJECTIVE:-

To Study the Fixed Assets Management System using At Raymond Limited.

SUBSIDIARY OBJECTIVE:- later

3. DESIGN/METHODOLOGY/APPROACH:

The project report includes the information regarding the company Fixed

Assets Data, of Raymond Ltd. (additional)

4. SAMPLING METHODS: later

5. STATISTICAL TOOLS:

For Analysis purpose, different charts and other observation data has

been studied, through which I came out with the interpretation for my

project.

6. THE FINDINGS OF THIS STUDY: later

2

INDEX

SR No.

PARTICULAR PAGE NO

1 Background of the company

2 Vision, Mission and Values

3 Company Profile

4 Group Companies

5 Joint Ventures

6 Brand Portfolio

7 Fabric Outlines

8 Plant Details

9 SWOT Analysis

10 Organization Structure

3

11 Milestones

12 Technological Breakthrough

13 Overview of other Departments

14 Production Department

15 General Store and Commercial Department

16 Supply Chain Management Department

17 Account Department

18 Project Report FIXED ASSETS

19 Introduction

20

29 Role of other functional Department

30 Analysis & Findings (Graphical Presentation)

31 Recommendation

32 Conclusion

33 Bibliography

4

BACKGROUND OF THE COMPANY

The Raymond Group was incorporated in 1925; and within a span of a few

years, transformed from being an Indian textile major to being a global

conglomerate.

RAYMOND deals in mainly three sectors:

1. Aviation:

Raymond ltd is one of the first co-operate house in India to launch Air

charter service in India in 1996 and since then it has been always a way

ahead of Raymond Aviation.

2. Engineering:

J.K.Files & tools and Ring Plus Aqua are the group companies that are

5

engaged in the manufacture of precision engineering product such as

steel

products, cutting tools, hand tools, agri tools & auto components.

3. Textile:

With a capacity of 33 million meters in wool and wool blended fabrics,

Raymond commands over 60% of market share in worsted suitings in

India

& ranks amongst the first four fully integrated manufactures of worsted

suiting in the world.

The Raymond’s endeavor to keep nurturing quality and leadership, they

always choose the path untraded - from being the first in 1959 to

introduce

a polywool blend in India to creating the world's finest suiting fabric, the

Super 230s made from the superfine 11.8 micron- wool.

Today, the Raymond group is vertically and horizontally integrated to

provide the customers total textile solutions. Few companies across the

globe have such a diverse product range of nearly 12,000 varieties of

worsted suiting to cater to customers across age groups, occasions and

styles.

Raymond manufacture for the world, the finest fabrics- from wool to wool

blended worsted suiting to specialty ring denims as well as high value

shirting.

After making a mark in textiles, Raymond step into garmenting through

highly successful ventures like Silver Spark Apparel Ltd. And Regency

Textile is Portuguesa Ltd (for fine Tailored Suits, Trousers and Jackets),

Ever Blue Apparel Ltd. (Jeanswear) and Celebrations Apparel Ltd. (Shirts).

Raymond also has some of the most highly respected apparel brands in

6

http://www.raymondindia.com/grp_evbl.asp

their portfolio: Raymond, Manzoni, Park Avenue, Color Plus, Parx, Be:

Zapp!

And Notting Hill.

The Raymond Group also has an expansive retail presence established

through the exclusive chain of 'The Raymond Shop' and stand-alone

brand

stores for Manzoni, Park Avenue, Color Plus, Parx, Be:, Zapp! And Notting

Hill.

With a 500 million US$ turnover, Raymond is today one of the largest

players in fabrics, designer wear, denim, cosmetics & toiletries,

engineering

files & tools, prophylactics and air charter services in national and

international markets. All Raymond plants are ISO certified, leveraging on

cutting-edge technology that adheres to the highest quality parameters

while also being environment friendly.

VISION & MISSION

HR Vision

“Raymond the most desired workplace for top talent”

HR Mission

We commit to the HR Vision of making “Raymond the most desired

workplace for top talent”, “We will strive to weave in the core Raymond

value

7

http://www.raymondindia.com/off_brnd_cp.asp

http://www.raymondindia.com/off_brnd_mz.asp

http://www.raymondindia.com/off_brnd_ry.asp

namely Quality, Trust, Leadership and Excellence in all our actions & HR

processes so as to make every Raymondiate a complete man.

VALUES

Trust

Quality

Leadership

Excellence

COMPANY PROFILE

Name of the company : Raymond Limited (Textile division)

Address of Registered Office : Plot 156/H No. 2, Zadgaon, Ratnagiri,

415 612.

Factory Location and Address : N .H. No.8, Khadki Udwada, Tal-Pardi,

8

Tel No : 0260-3252243

Fax No : 0260-2340322

Year of Establishment At Vapi : 2005

Business Activities : Manufacturing Process of Fibre to

Fabric

Board of Directors : Dr. Vijaypat Singhania Gautam Hari

Singhania B.K. Kedia Nana Chudasama

B.V.Bhargava U.V.Rao I.D.Agarwal

Nabankur Gupta P.K.Bhandari

Bankers : (1) Bank of India

(2) Bank of Maharashtra

(3) Bank of America

(4)Central Bank of India

(5) City Bank N.A.

(6) HDFC Bank Limited

(7) The Hongkong and Shanghai

Banking

9

Co-operation Limited

(8) Standard Chartered Bank

Stock Code : Bombay Stock Exchange Ltd -500330

National Stock Exchange of India-

Raymond EQ

Auditors : Dalal & shah

Website : Www.Raymondindia.Com

GROUP COMPANIES

There are 10 Companies in Raymond Group.

Raymond Ltd.

10

It is among the largest integrated manufacturers of worsted fabrics in

the world.

Raymond Apparel Ltd.

Raymond Apparel Ltd. has in its folio, some of the most highly

regarded apparel brands in India - Manzoni, Park Avenue, Color Plus,

Parx, Be: and Zapp! And Notting Hill.

Color Plus Fashions Ltd.

The company was acquired by Raymond to cater to the growing

demand for a high end, casual wear brand in the country for men and

women.

Silver Spark Apparel Ltd.

A garmenting facility manufacturing formal suits, trousers and jackets.

Regency Textile Portuguesa Ltd

A facility set-up in northern Portugal bordering Spain, in Caminha for

the manufacturing suits, jackets and trousers.

Ever Blue Apparel Ltd.

A state-of-the-art denim garmenting facility.

Celebrations Apparel Ltd.

A facility set-up for the manufacture of formal shirts

11

J.K. Files & Tools

A leading player in the engineering files & Tools segment and the

largest producer of steel files in the world.

Ring Plus Aqua Ltd.

A leading manufactures in the engineering automotive components.

J.K. Helene Curtis Ltd.

A leading player in the grooming, accessories and toiletries category.

J.K. Investo Trade (India) Ltd.

JKIT is an investment company registered with Reverse Bank of India

as Non-Banking Financial Company.

JOINT VENTURES

Raymond UCO Denim Pvt. Ltd.

The manufacturers and marketers of denim fabrics.

12

Raymond Zambaiti Pvt. Ltd.

A Greenfield facility manufacturing high value cotton shirting.

Raymond Woolen Outerwear Ltd.

A plant set up to manufacture carded Woolen fabrics and blankets.

Gas Apparel Pvt. Ltd.

The Joint venture with Grotto S.P.A launched the highly successful

'GAS' brand in India.

J.K. Ansell Ltd.

The manufacturers and marketers of Kama Sutra condoms and

surgical gloves.

J.K. Talabot Ltd.

Raymond has Joint venture with MOB Outillage SA. Manufacturing files

and rasps for international markets.

BRAND PORTFOLIO

Manzoni

13

Manzoni is a luxury lifestyle brand providing the best in contemporary

international style & luxury. The brand offers the discerning customer a

super premium range of suits, trousers, jackets, shirts, and accessories

such as ties, cufflinks, belts, socks, shoes and leather bags.

Park Avenue

Park Avenue is a premium lifestyle brand and has been the single

largest formal wear brand in India for the past two decades.

Color Plus

Color Plus is among the largest smart casual brands in the premium

category. The company, acquired by Raymond caters to the growing

demand for a high end, casual wear brand in the country.

Parx

Parx is a premium casual lifestyle brand comprising a range of semi

formal and casual cottons; blends and denim wear, reflecting the

vibrancy and attitude of the energetic 22 to 30 year old.

Be:

Be: offers fashion that captures the latest trends from across the

globe. Be: offers a wide range of apparel and accessories for both

men and women from well known Indian designers like Anshu Arora

Sen. Akbar Shahpurwalla, Krishna Mehta, Manish Arora, Preeti

Jhawar, Priyadarshini Rao, Rohit Bal, Savio Jon, Shantanu & Nikhil,

Varun Bhal, Vidhi Singhania and Wendell Rodricks across categories

namely - Women’s Western wear, Women’s Ethnic wear, Lounge

14

Wear and Club wear for both men & women.

Zapp!

The burgeoning children's wear market has now turned stylish with

Zapp! - a brand affording stylish and fashionable kids wear.

Children in the age group of 4-12 can choose from a wide range of

clothes, Accessories, bed and bath linen and more.

Notting Hill

Notting Hill reflects style and manifests originality of today's fashion-

conscious and discerning young professionals.

Color Plus Fashions Ltd.

Color Plus is among the largest smart casual brands in the premium

category. The company was acquired by Raymond to cater to the

growing demand for a high end casual wear brand in the country.

Set up in 1993, Color Plus is one of India's leading casual wear brands.

The shirts, trousers, knits, survival gear and accessories have always

met

international quality standards

FABRIC

Worsted suitings:

Pure wool, Polywool blended fabric

33 million meters

4 integrated plants in India

15

Raymond, with an installed capacity of 33 million meters of wool & wool

blended fabrics, is the leading integrated producer of worsted suiting fabric

in

the world. It has four plants located in the states of Maharashtra, Gujarat

and

Madhya Pradesh. The company exports its suiting fabric to more than 55

countries including USA, Canada, Europe, Japan and the Middle East.

Raymond, an innovator in the Indian textile industry, has developed a

heritage of in-house skills for research & development. This has resulted in

path-breaking developments of new products, which are today the corner

stones of the worsted suiting industry in India. The Group has mastered the

craft of producing suiting using, wool from 80s to 230s count, blends with

superfine polyester and other specialty fibers, like Cashmere, Angora,

Alpaca,

Silk, Linen etc.

Thane Plant

This is the mother plant and is the centre of competence for world class

manufacturing and design facilities. With decades and expertise and

16

finely honed skills, this plant is a treasure house of knowledge for

producing superfine worsted suiting fabrics.

Chhindwara Plant

The Raymond Chhindwara plant, set up in 1991, is a state-of-the-art

integrated manufacturing facility located 57 kms away from Nagpur in

Central India. Built on 100 acres of land, the plant produces premium pure

wool, wool blended and polyester viscose suiting.

This plant has achieved a record production capacity of 14.65 million

meters, giving it the distinction of being the single largest integrated

worsted suiting unit in the world.

Jalgaon Plant

A new manufacturing facility was set up at Jalgaon, to meet the

increasing demand for worsted woolen fabrics in 1979. In 2006, world

class carded woolen unit, Raymond Fedora Ltd, also set up.

Vapi Plant

Raymond has increased its worsted suiting capacity by 3 million

meters, as part of the second developmental phase of the Vapi plant.

After this expansion, Raymond will have a total capacity for

manufacturing 31 million meters of worsted suiting per annum.

Modeled to meet international standards, the Vapi plant has been set

up on 112 acres of lush green land with Hi-tech machinery such as

17

warping equipment from Switzerland, weaving machines from Belgium,

finishing machines, automatic drawing-in and other machines from

Italy.

This plant of Raymond is the youngest member in the family. The plant

is set up on lush green land. This was the property of Rohit Pulp &

Paper Mills Ltd, and after its closure, was acquired by Raymond with

vision to develop a world class unit to meet international standards.

The location’s advantages are:

Situated in Gujarat- known for its good governance

Situated on NH no.8 and near to industrial Hub

Well connected by Rail & Road

Proximity to Mumbai/Thane

Non-polluted

Accessibility of skilled manpower

Continuous availability of water

Urbanized and literate people

Multi- culture community with communal harmony

Currently the unit is engaged in manufacturing of premium worsted

suiting fabrics, and is equipped with state of the art technology with hi-

tech machineries viz. Warping equipment from Switzerland, Weaving

machine from Belgium, Finishing machines, automatic drawing-in and

other machines from Italy to produce 11 million mtr fabrics per annum

It is propose to manufacturing polyester wool, polyester viscose and all

suiting fabrics in near future.

Overall Organization Culture

Over all organizational culture of Raymond Vapi is governed by self -

discipline,and understanding. They work together and with

18

commonunderstanding try to achieve the objective of the organization.

Other activities undertaken for agood Organizational Climate are

shown below:

Good relation with government agencies and contractors

Good communication from top to bottom level and bottom to top

level;

Good communication between Management & Staff & Employees;

Discipline is maintain at all levels;

Good relation between Management & staff, between Staff &

workers;

Punctuality of Job - satisfaction, Loyalty.

SWOT ANALYSIS

Strength: Weakness:

19

Location Advantage Water availability Raw material Availability Skilled labour at low cost Modern world class

machineries Schematic Layout

Current Scenario of market Effect of government policies (Delay in Procedure)

Opportunities:

Increase focus on product development

100%capcity utilization Increase foreign market

business

Threats:

Competition in Domestic Market

& International market Ecological & social awareness Regional Alliances

ORGANISATIONAL STRUCTURE

20

MILESTONES

21

1925 - Setup of The Raymond Woolen mill in the area around Thane creek.

1944 - Lala Juggilal, Lala Kailashpat Singhania took over The Raymond

Woolen Mill. The mill was primarily making cheap and coarse woolen

blankets, and modest quantities of low priced woolen fabrics.

1950 - Setup of a new manufacturing activity for making indigenous

engineering files known as JK Files & Tools. This has now become the largest

facility of its kind in the world.

1958 - The first exclusive Raymond Retail showroom, King's Corner, was

opened in 1958 at Ballard Estate in Bombay.

1964 - Setup of a new Combing Division. This was followed by a phase of

vertical integration, facilitating in the processing of multi-fibres and

technology improvements to make blended fabrics.

1968 - Raymond setup a readymade garments plant at Thane. The

readymade garments division of Raymond has since then grown rapidly.

Raymond has now become the leader among ready-mades, in India,

achieving a business turnover of over Rs. 2000 million.

1979 - A new manufacturing facility was set up at Jalgaon, to meet the

increasing demand for worsted woolen fabrics.

1980 - Vijay pat Singhania took over the reins of the company. He injected

fresh vigor into Raymond, transforming it into a modern, industrial

conglomerate.

1986 - Launch of "Park Avenue", the premium lifestyle brand providing a

complete wardrobe solution to the men who like to dress well & be current

on styles & fashion.

1990 - The first showroom abroad for Raymond in Oman.

1991 - A new manufacturing facility was set up at Chhindwara, near Nagpur.

1995 - Superfine pure wool collection under the Lineage Line (Super 100S to

Super 140S).

1996 - The Renaissance Collection made of Merino wool blended with

polyester and specialty fibres (Super 100S to Super 140S).

22

1996 - Raymond's denim; focusing on quality, innovation and the creation of

exclusive products that have always caught the eye of some of the world's

leading denim wear brands. Its designs have always kept pace with the

changing styles and cuts found in every Youngster’s closet. With a 40 million

meters capacity, Raymond today ranks amongst the top 2 producers of ring

denim in India

1999 - The Chairman's Collection of Super 150S made from Merino Wool and

Cashmere followed by Super 160S to super 190S.

1999 - Launch of "Parx", a premium casual wear brand bringing customers a

range of semi-formal and casual clothes.

2000 - Launch of "Be:” exclusive prêt line of ready-to-wear designer clothing

for men and women.

2003 - Setup of 'Silver Spark Apparel Ltd.' for manufacturing suits and

formal trousers catering largely to export markets.

2003 - Acquisition of Color Plus

2004 - Super 220S fabrics under the Chairman's Collection.

2005 - Setup of state-of-the art Jeanswear facility 'Ever blue Apparel Ltd.'

near Bangalore.

2005 - Setup of state-of-the art facility 'Celebrations Apparel Ltd.' for the

manufacturing of formal shirts.

2005 - Raymond achieved a rare feat and a historical milestone with the

creation of the world's finest worsted-suiting fabrics from the finest wool ever

produced in the world- The Super 230s made up of 11.8 micron of wool.

2005 - Launch of 'Expressions' an exquisite collection of all wool and

Polywool suiting specially crafted using exotic fibers like Cashmere, Angora,

Mohair, Bamboo, Casein.

2006 - Set of Raymond's third worsted unit at Vapi in Gujarat. Raymond now

has 3 state of the art units with a combined capacity of 31 million meters of

worsted fabric.

2006 - Launch of design studio in Italy for cutting edge design capabilities

for exports and domestic brands.

23

2006 - Set up of world class carded woolen unit, Raymond Fedora Ltd, in

Jalgaon.

2006 - Set up of Greenfield shirting unit at Kolhapur producing high value

cotton shirting. This facility is set up as part of the company's JV with Gruppo

Zambaiti.

2006- Set up of J.K Talabot Ltd – JV with MOB, France for the manufacturing

of files and rasps.

2006- Launch of Zapp! Our kids wear brand with first store in Ahmedabad

2007- Entered into joint venture to retail premium brand ‘GAS’ in India.

2007- Launch of new brands for women’s wear.

2008- Launch of ‘ Raymond Finely Crafted Garments’- readymade apparel

under Raymond brand

2008-launch of ‘Neckties & More’- new format store for accessories.

24

TECHNOLOGICAL BREAKTHROUGHS

Raymond has been pioneering technological breakthroughs over the

years, and was the first to introduce Polyester-Wool and Polyester-

Wool-Viscose in the Indian market. During the last decade, many path

breakthroughs were made.

1995: Superfine pure wool collection under the Lineage Line (Super 100s to

Super 140s).

1996: The Renaissance Collection made of Merino wool blended with

polyester and specialty fibers (Super 100s to Super 140s).

1999: The Chairman's Collection of Super 150s made from Merino Wool and

Cashmere followed by Super 160s to Super 190s.

2002: Super 200s (13.5 microns) fabrics under the Chairman's Collection.

2003: Applause Wool-Rich Home Washable Suiting.



2005: Raymond achieved a rare feat and a historical milestone with the

creation of the world's finest worsted-suiting fabric from the finest wool ever

produced in the world- The Super 230s fabric made up of 11.8 micron of

wool.

2005: Launch of 'Expressions' an exquisite collection of all wool and

polywool suiting fabric specially crafted using exotic fibers like Cashmere,

Angora, Mohair, Bamboo, Casein.

25

OVERVIEW OF OTHER DEPARTMENTS

HUMAN RESOURCE DEPARTMENT .

Human resource management serves these key functions:

Recruitment & Selection

Training and Development (People or Organization)

Performance Evaluation and Management

Promotions/Transfer

Redundancy

Industrial and Employee Relations

Record keeping of all personal data.

Compensation, pensions, bonuses etc in liaison with Payroll

Confidential advice to internal 'customers' in relation to problems at

work

Career development

Competency Mapping

26

ENGINEERING DEPARTMENT

Engineering department includes four major sub departments:

Mechanical

Electrical

Instrumentation

Civil

The major activities of Mechanical and Electrical department are to fulfil

the following requirement to the different textile departments:

Steam

Water

Electricity

Air

27

IT DEPARTMENT

Objectives

To provide computer system facility to all department.

To provide internet access facility to all department.

To facilitate company login ID creation to officers.

To facilitate printouts and Xerox in several department.

To facilitate networking of all computer system in the company.

To check and solve the problems related to computer system

accessing in the factory premises.

IT comprises in three parts:

Hardware

Software

Administrator

There are three types of server inside the IT room.

Database server

Windows server

Monitoring server

28

QUALITY CONTROL DEPARTMENT

Quality Control is concerned with evaluation of test data and its

application to the control of textile process raw material intermediate

product and final product. It is concerned not only with quality level

and the cost of maintaining this level, but also with the presentation of

tangible values to measure quality and changes in quality. The main

objectives are:-

Assistance in establishing quality controls at various points in the

manufacturing process.

Maintenance and calibration of process control equipment.

Investigation of defects and assistance in solving quality problem

during production

Implementation of quality control measures for incoming store.

Operating a testing laboratory to carry out required test and

analysis

There are different type of instrument used in QC department for

different type of material testing. Tests are done on the fiber stage,

yarn stage, fabric stage.

29

GENERAL STORE DEPARTMENT

Functions

Raw material that are required in the production are store in stores.

Indent is made for the material required by the department.

Purchase Requisition is received from the department and the demand

is send to purchase department. The purchase department will give

the order for the material. The material will be received in the general

stores and the verification of quantity is done by general stores and

quality is verified by respective department.

If the material is not according to the demand or the requirement than

it is rejected and for that purpose rejection note is prepared and

material will be returned to the supplier.

GRN (Goods Received Note) is Received for the material purchased on

behalf of departments and the material is verified with the note. After

receiving the material it is shifted to BIN.

BIN Card system is applied for keeping the record of materials.

30

COMMERCIAL DEPARTMENT

The raw Material that is demanded by the departments for production

is informed at Thane and is coordinated with Thane head office. The

material are procured here independently.

The material that are procured are Engineering item, spares,

packaging material, dyeing , Bearing for machines etc.

All the material are purchased from Vapi, Surat, Bombay.

31

PRODUCTION DEPARTMENT

PRODUCTION CAPACITY PER DAY

NAME OF THE

DEPARTMENTS

PHASE

1

PHASE

2

PHASE3

SCOURING 14000 Kg.

GRIEGE COMBING 1300

Kg.

7000 Kg.

CONVERTER 7000

Kg.

7000 Kg.

RECOMBING 3200

Kg.

14000 Kg.

DYEING 3200

Kg.

14000 Kg.

SPINNING 3200

Kg.

7500 Kg.

WEAVING 7000

mtrs

14000

mtrs

28000

mtrs

FINISHING 15000

mtrs

25000

mtrs

40000

mtrs

FOLDING 15000

mtrs

30000

mtrs

40000

mtrs

32

WAREOUSE 15000

mtrs

30000

mtrs

150000mt

rs

PRODUCTION PROCESS:

33

SCOURING (Wool)

GREY COMBING

DYEING

RECOMBING

SPINNING

YARN ROOM

WARPING

WEAVING

MENDING

FINISHING

CONVERTER (Polyester)

FOLDING

WARE HOUSE

SCOURING

Scouring is the process of cleaning the raw-wool which contains

natural Greece and foreign particles like dirt, dust-burrs and twigs, hey

and other vegetable matters. Normally fiber length is 5 to 9 cm and

above and fiber diameter is 17 to 26 micron. Here the raw material is

coming in form of bales. One bale weight has 150 to 160 kg. Bale

opening is done by manually spreading of fibers from bale on the floor

with the help of workers. A special mixture of lubrication, oil and water

is sprayed on the spreaded fibers. Here lubrication of fibers is done so

that wool will be going in to carding and avoids any static generation

further processing of the wool. After completing the process of

scouring, clean wool pass on to the next department.

34

SCOURED WOOL

BALE OPENING

PROCESSING OF WOOL

CLEAN WOOL

GREY COMBING

This department is the preparatory department before going for dyeing

or re-Combing. According to the raw material it has two sections (a)

Wool (b) Polyester. In this process the raw materials goes through

various sub processes like carding, gilling and combing with respect to

wool and sub processes like converter and gilling for polyester. The

basic aim of this department is to remove the impurities in the fibers

and create equal size fibers for further processing. From this

department the raw materials are converted into tops and sent to

Dyeing.

CARDING:

Parallelized fiber and sliver formation

To remove impurities such as vegetable matters, dust, dint etc.

To open the tiny lumps and hooks

To convert criss-cross and tough form of bulk and giving finally rope

like shape

GILLING

To improve evenness

To blend the fibre

To remove shorter staple fibre

To strengthen the fibre

COMBING:

To remove the short fibers

35

To remove the neps and impurities

To impart luster

The process flow of Grey Combing is given below:

36

CARDING

GILL BOX 1

GILL BOX 2

GILL BOX 3

COMBER

GILL BOX 4

GILL BOX 5

GREY COMBIN

G

CONVERTER:

Converter machine is only for polyester materials. The flat web of

continuous filament called TOW which is fed to the converter and cut

into the desired staple length so that it can be used to spin the staple

yarn finally the filaments are converted to sliver and fed to cans Then

sliver fed to gilling machines so that fiber becomes more parallel and

even.

37

CONVERTER

GILL BOX 1

GILL BOX 2

GILL BOX 3

CONVETER

DYEING

This is the one of most important department of all because here the

fibers are dyed to suitable shades as per the customer requirement.

Dyeing is the process of coloring textiles materials by immersing them

in an aqueous solution of dyeing called liquor consist of dye, water and

an auxiliary after dyeing the tops are dried through HTHP m/c and RF

m/c and further sent for the re-combing. Here before dyeing the

different shades are matched to customer requirement and passed

through quality inspection to avoid rework.

The Process flow of Dyeing is given below:

38

PREPARING OF DYE LIQUER

SAMPLE DYEING

SAMPLE MATCHING

COMPRESSING OF WOOL/

PLOYESTER BUMOP

TOP DYEING

HYDROEXTRACTOR

DYEING

RE-COMBING

After dyeing, the dyed materials are going to Re-combing department.

Input in terms of wool tops, polyester tops etc go to the Re-combing

section. Then they blend these according to their required quality. The

main objects of Re-combing are:-

To separate the fibers of dyed tops of wool.

Blending of fibers viz. wool, polyester

Ensuring homogenous blending

Removal of short fiber

Removal of entanglement at the time of dyeing

Removal of undesired elements like slubs, neps & pin point.

The process flow of Re Combing is given below:

39

RADIO FREQUENCY DRYER

RE-COMBING

DEFELTER

BLENDER

GILL BOX 1

GILL BOX 2

GILL BOX 3

COMBER

SPINNING:

Spinning is the process in which fibers are converted into yarn which is

actually used for the weaving and to make the fabric here, the Re-

combed tops are again passed through gilling machine to increase the

strength of the fiber and to prepare slivers that can be fad into rubbing

frame now the sliver is converted into roves by applying draft and

doubling operations and reduction of sliver’s cross sections. Now

roving spools are brought to ring frame and roving is converted into

yarn by roller drafting system. After the ring frame spinning is done,

yarn is subjected to steaming because highly twisted yarns are prone

to snarling during winding. After the spinning of the fibers on the ring

frames it is checked for the uniformity and breakages in the Auto-

Conner section and also remove the defects like slubs, neps, thick

place, thing place etc. and to obtain suitable packages for further

processing. The yarns in the corn and cheese form are received from

auto-winding machine here two yarns are just wound together without

any twist. Then twisting is done for improve the evenness, strength

and elongation. After the T.F.O the packages is again sent to steaming

to reduce snarling tendency and finally all yarn packages sent to the

yarn room department for storage.

40

GILL BOX 4

GILL BOX 5

The process flow of spinning is given below:

Count

Below 30 Nm

Siro

Lycra

Siro Lycra

and

Single Weft

41

SPINNING

GILL BOX 3

GILL BOX 4

VERTICAL GILL BOX

RUBBING FRAME

RING FRAME

STEAMING

STEAM

AUTO CONER

PLY WINDING

TWO FOR ONE

STEAMING

GILL BOX 1

GILL BOX 2

YARN ROOM:

This is the storage room for the yarn that are produced in the spinning

section and the yarn that are outsourced. It acts as a bridge between

the Spinning and the Warping stage of the production. The main

function of yarn room is to arrange all yarn packages according to

correct shade number, lot wise etc. The yarn is weighted and entry is

done in computer. Yarn needed for warping and weaving is determined

by S.C.M department. If yarn is not sufficient then it is imported from

various exporters like ELEGNT SPINNERS, BHIWANI, WELSPUN, NOVA

PETROCHEMICALS, SAGAR TWISTERS, VIKRAM WOOLEN etc or other

plants of RAYMOND. It is the only section that does not add value to

the inventory but despite that is critical for the smooth functioning of

the processes. The capacity of the yarn room is nearly about 130 tones

of the yarn.

Yarn Room is an intermediary storage location for yarns and it comes

in between the spinning department and the weaving department, in

the process flow. The yarn room at Raymond, Vapi currently stores 250

T of yarn, on an average. To make the storage and retrieval of the

yarns simpler and systematic, Warehouse Management System (WMS)

is trying to be implemented in Vapi. However, implementation of WMS

42

YARN ROOM

SPINNING PRODUCTI

ON

OUTSIDE YARN

RECEIPT

CHEESE DYEING RECEIPT

WEAVING RETURN

WEAVING ISSUE

DYR RECEIPTS YARN /STORES YARN /ISSUES YARN

OUTSIDE YARN ISSUES

PACKING & ISSUES

DSG / SPG / CD ISSUES

requires determination and standardization of the practices to be

followed in the yarn room.

The project “Implementation of Warehouse Management System in

Vapi” aims at studying the requirements, constraints, etc of the yarn

room and coming up with ways to improvise the management of the

yarn room.

43

Yarn room currently stores 250 T of yarn, on an average.

The breakup of this figure, on the basis of the type of yarn is shown

below.

Type of Yarn QuantityDeco Yarn 6 TViscose Yarn 6 TTexturised

Yarn6 T

PW Yarn 174 TPV Yarn 58 TAll wool 4 T

For bar coding purposes, a yarn is distinguished from another on the basis

of a combination of the following parameters:

1. Batch no.2. Count3. Blend4. Material5. Source6. Weight7. Date of receipt8. Date of delivery

Two yarns, though they may be of the same count, blend and material

cannot be used for the production of the warp of the same fabric,

unless they have the same batch no. Any violations to this are subject

to the discretion of the SCM department. Hence, batch no. is used as

the primary key for a bar code. Batch no. when fed in for a yarn, will

give other relevant details. A single sales order can have several batch

numbers, while a batch number will correspond to only one sales order.

Whenever a bar code is entered, it should return details of the yarn,

including the bin / trolley locations where it is stored. Similarly, the

44

WMS should be able to provide information of the yarns contained in

that bin/ trolley and how much capacity is remaining in it, when a bin

number is entered.

WARPING

The yarns which are coming from Spinning Section are going for

winding for preparing required amount of package. Then they are

creeled according to the warp pattern which is given by designing

department. The main object of the warping is to produce the warp

sheet according to the warp pattern and formation of warp beam.

Winding supply sufficient number of packages in form of cheese to

bencreel so that sectional warping would take place here number of

packages are determined according to length of fabric.

Creeling is a process of loading the packages on creel according to the

design given by designing department and drawing yarn from

respective packages to sectional warping machine through guiding

rollers and eyelets.

Sectional warping is a process of preparation of warp yarn for process

of creeling here length of warp yarn is determine by length of fabric

according to considering the factor like shrinkage, weight loss etc.

Waxing is done during warping and beaming process to make wrap

yarn smooth so that there will be minimum breakage on loom. Knotting

is a process of making knots of warp yarn on beam to achieve warp

length for particular length of fabric. Drawing in is the process of

passing of warp yarn through the eye of healds according to peg plan.

45

Denting, in this process this plan is describes the arrangement of the

warp ends in the reed. Denting plans are entirely dependent on the

end density and number of dents per centimeters

In the reed, though there are some fabrics that require precise

positioning of dent wires in relationship to weave.

The process flow of the warping is given below:

46

WARPING

WINDING

CREELING

SECTIONAL WARPING

SIZING (CELLULOSIC YARN)

BEAMING

WAXING

KNOTTING

GATTING

AUTO DRAWING

WEAVING

Weaving is the department, where by means of simple interlacement

of warp, weft and selvedge’s two sets of threads are converted in to

fabric. The beam from the warping section is used here to prepare the

real fabric that we know.

Passage of warp yarn through looms the warp yarns are contains on

weaver’s beam at the back of loom, each ends are successfully passed

through each of drop pin eyes which is an essential part in stopping the

loom in event of a break in any of the warp yarn then it is pass

through the eye of heads, through gaps between the wire of reed,

which is the comb light structure, in front of the reed warp and weft

yarns are combined together to form fabric, which is drown forward to

be store on the cloth roller. After completing pre-decides length of the

fabric the cloth roller is given to grey perching table. Here visible

inspection of fabric is done. The fabric is pass over the frosted glass

with light behind it and it inspect visually if any defects are there then

the worker give some mark on fabric with some marking material

which is easily removable. Then material is handover to mending

department.

47

The process flow of weaving is given below:

48

WEAVING

LOADING OF WARPING BEAM ON LOOM

SHEDDING

PICKING

BEATING UP

LET OFF

TAKE UP

GREY CHECKING

TAKE UP

GREY CHECKING

MENDING:

Mending is the process where the defects in the fabric from the

weaving section are visually inspect and manually removed and

maintain the quality of fabric. This department still follows the

conventional method of doing things manually. Fabrics are passing

through different table like mending tables, checking tables and extra

mending tables. After correcting all removable faults, fabrics are

arranged in lot size according to requirement of pieces like export,

domestic, exclusive etc.

The process flow of Mending is shown below:

49

GREY PERCHING

MENDING

GERY CHECKING

FOLDING

Mending

FINISHING:

After taking fabrics from mending department, the batch wise

arrangement is done in finishing department. The term finishing means

completing the manufacture of cloth by surface treatment. Finishing is

an essential process for textile goods before they are put on the

market. There are three types of finishing phases

Wet

Dry

Grey finish

The main objective of finishing are:-

To improve the appearance of the fabric that is make it more

attraction or lustrous.

To improve the feel of the fabric.

To cover faults in original fabric.

To increase the weight of the fabric.

To improve the weaving qualities.

To make sure fabric free from pills and soiling.

To impart special properties to the fabric for specific end uses.

To set the texture of certain fabrics and make others dimensionally

stable.

To produce stronger and more durable fabrics.

To produce novelty effects

50

The process flow of finishing is shown below,

51

FOLDING

52

Finishing

After completion of finishing process the fabric transfer to folding

department here the full finished fabric comes from finishing

department is being folded. The first step of folding process is to make

grey sample made for future use then samples are being matched with

the standard fabric sample from chhindwada plant. After that the fabric

is check on perching machine for their quality of finishing and any

defects which are left out. Here mending or correcting of faults are

done after that fabrics is go for lab testing in that pilling and shrinkage

test are done normally for export quality of fabric now both back side

as well as front side of fabric are inspected particularly in center to

selvedge inspection and end to end inspection. On that basis flags are

put on the fabric according to the faults.. After that individual piece

wise weighting is done. After that paper pasting process is start in that

paper transfer is used for pasting on the folded or rolled fabric in

contains company’s name, manufacturing site, blend information,

width, package date and length. Then brand tags are attached to

respective fabric for their respective brand

53

54

Folding

WAREHOUSE AND DISPATCH

After folding department fabric is transfer to warehouse for final

storage then final packing. The material is first divided into quality

wise, shade wise etc. with respect to civil, export, domestic.etc and

finally according requirements and order fabric are dispatch. In

warehousing fabrics are issue through scanner from folding

department which read the barcode on the tag of packed fabric. A

particular length of fabric is cut from each quality number to make the

sample so that its rate and price could be declared. Normally sample

size-110, 120, 130 cm after that booklet making is done in that

collection of fabric pieces of 2.5*2.5 inches each fabric pieces called

card there are 24 cards in a booklet. Rolls and folded fabric are further

stapled in an opaque plastic cover by using stapling machine. Staple

fabrics are dispatched from stocks to party. Warehouse manages to

search a particular piece number, shade number, quality number and

other information of fabric from stock. Maximum stock capacity of

fabric is 8 lacs mtr.

55

MATERIAL HANDLING

Material handling is defined as movement and storage of material at

the lowest possible cost through the use of proper methods and

equipments.

The main objectives of material handling are

Lower unit material handling costs

Contribute to better quality by avoiding damage to products by

inefficient handling.

Improve the working conditions and greater safety in the movement

of materials.

Reduction in manufacturing cycle time through faster movement of

materials which reduce work-in-progress inventory cost.

In RAYMOND, material handling equipments are used in various

Departments

SR.NO NAME OF THE DEPARTMENT MATERIAL HANDLING EQUIPMENTS

1 Scouring Duct (chute feed system)

2 Grey-Combing and Converter Roller cans Tow trolleys Pallets Top box trolleys

3

4

Dyeing

Recombing

Dyed top trolleys Cheese creel

trolleys Electrically operated

Cranes

Roller cans

56

Finish top trolleys Tractor-trailer

train(MEL) Pallets

5 Spinning Roller cans Creel trolleys Bobbin trolleys

6 Yarn room Creel trolleys Fork lift trucks Band trucks Stacker

7 Warping Beam lifter trolleys Heald shaft trolleys Bobbin trolleys

8 Weaving Gaiting trolleys Fabric beam trolleys

9 Mending Folding fabric trolleys

Wooden pallets

10 Finishing Folding fabric trolleys

11 Folding Trolleys

12 Warehouse Band trucks

Some of the miscellaneous handling equipments like pipe lines which are

closed tubes that transport water, air and steam.

57

SCM DEPARTMENT

Supply Chain Management

Definition:

In Raymond, SCM is the core Department which mainly deals with the

planning & control activities of each plan. It provides link between the

all other departments. Now a day, SCM works as owner of the

company. It is a value streams for business. In Raymond, SCM deals

with the following activities.

1. Strategy & Analysis.

Management Reporting & Analysis

2. Planning Processes

Supply Chain Planning

3. Core Processes

Procurement & Inbound Logistics

- Sales Orders

- Raw Materials

- Spare Parts

- Outsourcing Capacities

Factory Planning & Production

- Capacity Balancing

58

- Delivery Commitments

- Priority setting

- Internal Follow up

Sales & Outbound Logistics

- Ware House Stock Maintenance

- Delivery Planning

- Good Dispatching

4. Support Processes

Financial & Cost Management

Maintenance & Engineering

Quality Management

Human Resources

SCM also focuses on the civil & export marketing. SCM is done these

activities on the basis of Make To Stock & Make To Order. Vapi SCM

has following Key Result Areas.

Commitment to Sales

Timely Delivery

Raw Material Availability

Maximum Production by using minimum Capacity

Help Production Departments to improve quality

Vapi SCM receives yearly/monthly plans from the main THANE Central

SCM. After that, Vapi SCM analysis that plans and as per the production

capacity of each department they prepare Master Production Schedule

& Material Requirement Planning

They set the production target monthly/weekly/daily basis and those

targets are to be E- Mail to each department through SAP system. The

updates of various departmental Reports are E-Mail to the main THANE

59

unit. Further more, the requirement and transfer of raw materials from

one department to the other department i.e. from fibre to fabric, is also

managed by SCM.

ACCOUNT DEPARTMENT

INTRODUCTION:

This company has finance cum account department which is mainly

deal with all transactions like wages, salary, expenditure, making

Chelan and invoice, all receipt and payments etc. all this activity is

done in SAP system and through this system all accounting report

access at all locations of Raymond. All major financial decision is taken

by THANE head office.

OBJECTIVES

To reduce cash transactions

To record and maintain all monetary transactions of unit in SAP

To provide required schedule for fund

To provide necessary information to all internal and external

customers.

To provide MIS report monthly to management for accurate decision

making

To prepare annual revenue budget for proper control

To create cost control awareness by providing training

FUNCTIONS

1. Accounts payable management

60

Invoice Verification

Payment scheduling

Disclosure

Bank reconciliation

Vendor reconciliation

Budget

2. Cash Management

Cash reconciliation

IOU reconciliation

Fund Management

Statutory Payment

Accounts Payable Management

Invoice verification

Invoices are verified against the purchase orders made. The quantity

and quality of the materials received as per the purchase order or not

is seen. If materials are not according to the purchase order made then

amount is deducted and then payment is made. Invoices are also

verified for the duties charged or whether CENVAT credit is received or

not or whether that material is excise able or not. Payment is only

made after the detail verification of invoice. If the material sent is

rejected then quantity rejected is deducted from the actual quantity

and payment is made for the approved material.

Payment Scheduling & preparation of Cheque

Payment is made to the vendors as per the auto scheduling of overdue

invoices.

61

Vendor Reconciliation

If any payment is due even after the due date then the ledger balances

is reconciled if money is not received by the vendors.

Disclosure

Acknowledgement from the vendors is received by the accounts

Department. Accounts department verify about the payment made

whether it is received by the vendors or not through this

acknowledgement.

Bank Reconciliation

Bank book and pass book is maintained is by the accounts

department. Difference in bank charges is reconciled by the accounts

Budget

The expenses which are incurred for production, the estimation of

these expenses is sent by various plants to the accounts department.

After getting estimation from the entire plants budget is prepared by

the accounts department and sent to the head office for approval.

2. Cash management

A certain level of cash is maintained for working capital requirement.

The amount of cash maintained in the company should be neither too

high nor too low. If it’s too low then day to day activities can be

hampered and if it’s too high there is a risk.

Cash reconciliation

62

Cash balance is matched daily against the amount disbursed. Person

to whom amount is disbursed submits a voucher as a proof of the

expenses made.

IOU reconciliation

Any employee takes IOU for the office use or personal use. That

employee submits a voucher for the amount spent and left money is

returned. This amount is also reconciled against the voucher received.

Fund Management

Every department estimates the expense to be incurred in the coming

month and gives this estimate to the accounts department. Some

statutory payments like electricity bills, water bills also included in

these. Accounts department intimate this to head office and ask for

funds for these expenses.

At the end of every month stock shown in SAP should be matched with

the physical stock. Audit for that is conducted on any day in a month.

Statutory Payments

Statutory payments like GEB bills, water bills, and ETP bills are also

made by the accounts department.

FINANCIAL HIGHLIGHTS:

63

Particulars BSE NSE

No. of Shares911249

41059629

3Highest Share Price(Rs.In Lacs) 303.95 302Lowest Price Share(Rs.In Lacs) 68.1 67.95Closing Share Price as on 31.3.09 76.45 76.15Market Capitaliation as on 31.3.09 (Rs. In

Lacs) 46926 46742

2006 2007 2008 2009 2010 years0.00

50,000,000.00

100,000,000.00

150,000,000.00

200,000,000.00

250,000,000.00

300,000,000.00

195,782,000.00214,377,000.00

229,591,000.00249,292,000.00242,562,000.00

total assets

total assets

This graph shows the continuous increase in the total assets of the last five years.It

indicates the company has good investments in both fixed and current assets as well.

64

2006 2007 2008 2009 2010 years

-40000000

-30000000

-20000000

-10000000

0

10000000

20000000

30000000

16226000

23883000

8108000

-29920000

1774000

profit before tax

profit before tax

In 2009,company facing loss as per the calculation of profit before tax. We can see that in

2007, the company has more than 200 Lacs Rs. Profit before tax.

65

2006 2007 2008 2009 2010 years

-30000000

-20000000

-10000000

0

10000000

20000000

30000000

12100000

20212000

7242000

-27155000

2506000

reported net profit

reported net profit

The reported net profit is good in last 4 year.But in current year 2009,the company facing

loss of more than 200lacs. This happens because of the heavy loss in export business and

due to recession.

66

BALANCESHEET

Particular

March 2010

March 2009

March 2008

March 2007

March 2006

SOURCES OF FUNDS : Share Capital 61.38 61.38 61.38 61.38 61.38

Reserves Total 1,111.531,065.6

0 1,336.901,294.7

8 1,128.56

Total Shareholders Funds 1,172.911,126.9

8 1,398.281,356.1

6 1,189.94

Secured Loans 756.96 868.85 502.04 566.86 546.68

Unsecured Loans 495.75 476.22 374.72 220.75 221.2

Total Debt 1,252.711,345.0

7 876.76 787.61 767.88

Total Liabilities 2,425.622,472.0

5 2,275.042,143.7

7 1,957.82

APPLICATION OF FUNDS :

Gross Block 1,713.401,700.6

4 1,345.411,230.0

3 1,366.73

Less : Accumulated Depreciation 772.98 701.6 625.88 553.98 677.66

Less: Impairment of Assets 0 0 0 0 0

Net Block 940.42 999.04 719.53 676.05 689.07

Lease Adjustment 0 0 0 0 0

Capital Work in Progress 41.64 62.11 13.58 85.69 156.05

Investments 891.79 888.59 1,047.30 984.47 736.6

Current Assets, Loans & Advances

Inventories 284.5 340.4 329.74 283.66 319.04

Sundry Debtors 296.95 304.48 289.89 268.77 248.47

Cash and Bank 26.56 46.8 21.82 25.62 25.03

Loans and Advances 321.6 289.97 291.37 246.86 177.57

Total Current Assets 929.61 981.65 932.82 824.91 770.11

Less : Current Liabilities and Provisions

Current Liabilities 303.67 350.44 282.11 290.84 262.28

Provisions 53.12 59.66 75.54 80.63 67.7

Total Current Liabilities 356.79 410.1 357.65 371.47 329.98

Net Current Assets 572.82 571.55 575.17 453.44 440.13

Miscellaneous Expenses not written off 0 0 0 0 0

67

Deferred Tax Assets 78.32 71.61 22.1 18.91 19.61

Deferred Tax Liability 99.37 99.98 81.77 74.79 83.64

Net Deferred Tax -21.05 -28.37 -59.67 -55.88 -64.03

Total Assets 2,425.622,492.9

2 2,295.912,143.7

7 1,957.82

Contingent Liabilities 285.93 382.12 291.78 332.71 379.81

Profit & loss Account

Particulars Mar-10 Mar-09 Mar-08 Mar-07 Mar-06

INCOME :

Sales Turnover 1,350.8

9 1,402.1

6 1,342.4

8 1,306.8

4 1,340.4

5

Excise Duty 4.3

9 14.06 14.79 15.59 20.32

Net Sales 1,346.5

0 1,388.1

0 1,327.6

9 1,291.2

5 1,320.1

3

Other Income 155.81 111.16 147.51 195.43 107.87

Stock adjustment

-47.62

26.17

50.89

40.96 18.22

Total Income 1,454.69 1,525.43 1,526.09 1,527.64 1,446.22

EXPENDITURE : Raw Material

s 381.17 440.02 481.79 391.41 407.43

power & fuel cost

89.66

89.84

82.15

85.33

93.81

Employee Cost 249.71 256.72 227.78 218.19 199.64

Other Manufacturing Expenses

169.55

199.72

205.65

185.66

199.64

Selling and Administration Expenses 213.84 231.93 217.2 190.76 152.26

Miscellaneous 123.6 432.5 89.2 107.8 123.8

68

Expenses 9 8 7 9 9

Less: Pre-operative Expenses Capitalised 0 0 0 0.51 0.71

Total expenditure 1,227.62 1,650.81 1,303.84 1,178.73 1,175.96

Operating Profit 227.07 -125.38 222.25 348.91 270.26

Interest 98.03 85.01 60.1 47.12 35.28

Gross Profit 129.04 -210.39 162.15 301.79 234.98

Depreciation 111.3 88.81 81.07 62.96 72.72

Profit Before Tax 17.74 -299.2 81.08 238.83 162.26

Tax 0 0.5 -4.91 42.11 27.68

Fringe Benefit tax 0 3.15 3.42 2.75 3.58

Deferred Tax -7.32 -31.3 10.15 -8.15 10

Reported Net Profit 25.06 -271.55 72.42 202.12 121

Extraordinary Items 15.21 -222.04 32.12 93.58 23.29

Adjusted Net Profit 9.85 -49.51 40.3 108.54 97.71

Adjst. below Net Profit 0 0 0 0 0

P & L Balance brought forward 55.19 326.74 278.89 167.17 106.01

Statutory Appropriations 0 0 0 0 0

Appropriations 0 0 24.57 90.4 59.84

P & L Balance carried down

80.25

55.19

326.74

278.89

167.17

Dividend 0 0 15.35 30.69 30.69

Preference Dividend 0 0 0 0 0

69

Equity Dividend % 0 0 25 50 50

Earnings Per Share-Unit Curr

4.08 0

11.37

32.08

19.01

Earnings Per Share(Adj)-Unit curr 4.08 0 11.37 32.08 19.01

Book Value-Unit Curr 191.09 183.61 227.81 220.94 220.94

Cash Flow Statement

Particulars Mar 06 Mar 07 Mar 08 Mar 09 Mar 10

Net Profit Before Tax 116.50 173.65156.9

986.15 -58.75

Net Cash From Operating Activities

109.45 157.56 57.18 15.52 120.54

Net Cash (used in)/fromInvesting Activities

-154.86 -287.35 -194.22 -13.11 -361.13

Net Cash (used in)/from Financing Activities

31.89 141.58137.6

2-6.20 265.57

Net (decrease)/increase In Cash and Cash Equivalents

-13.51 11.78 0.58 -3.79 24.97

Opening Cash & Cash Equivalents 26.76 13.25 25.03 25.61 21.82

Closing Cash & Cash Equivalents 13.25 25.03 25.61 21.82 46.80

70

FIXED ASSETS MANAGEMENT

Fixed Assets (Definition)Fixed asset is an asset held with the intention of being used for the purpose of

producing or providing goods or services and is not held for sale in the

normal course of business.

Fixed assets often comprise a significant portion of the total assets of an

enterprise, and therefore are important in the presentation of financial

position. Furthermore, the determination of whether an expenditure

represents an asset or an expense can have a material effect on an

enterprise's reported results of operations.

RATIO ANALYSIS

Types of Ratios

Several ratios, calculated from the accounting data, can be grouped into various

classes according to financial activity or function to be evaluated. The

parties interested in financial analysis are short-term and long term creditors,

owners and management. Short term creditors’ main interest is in the

liquidity position or the short term solvency and profitability of a firm.

Similarly, owners concentrate on the firm’s profitability and financial

condition. Management is interested in evaluating every aspect of the firm’s

performance. They have to protect the interest of all parties and see that the

firm grows profitably. In view of the requirements of the various users of

ratios, we may classify them into the following four categories:

71

1. Liquidity ratios

2. Leverage ratios

3. Activity ratios

4. Profitability ratios.

1. Liquidity ratios

It is extremely essential for a firm to be able to meet its obligations as they

become due. Liquidity ratios measure the ability of the firm to meet its

current obligations. In fact, analysis of liquidity needs the presentation of

cash budgets and cash and fund flow statements; but liquidity ratios, but

establishing a relationship between cash and other current assets to current

liabilities, provide a quick measure of liquidity. A firm should ensure that it

does not suffer from lack of liquidity, and also that it does not have excess

liquidity. The failure of a company to meet its obligations due to lack of

sufficient liquidity, will result in a poor credit worthiness, loss of creditors’

confidence, or even in legal tangles resulting in the closure of the company.

A very high degree of liquidity is also bad; idle assets earn nothing. The

firm’s funds will be unnecessarily tied up in current assets. Therefore, it is

necessary to strike a proper balance between high liquidity and lack of

liquidity.

The most common ratios, which indicate the extent of liquidity or lack of it, are

(i) Current ratio

(ii) Quick ratio

72

Current Ratio

Current ratio is calculated by dividing current assets by current liabilities;

Current ratio= Current assets Current liability

Current assets include cash and those assets that can be converted in to cash

within a year, such as marketable securities, debtors and inventories. Prepaid

expenses are also included in current assets as they represent the payments

that will not be made by the firm in the future. All obligations maturing

within a year are included in current liabilities. Current liabilities include

creditors, bills payable, accrued expenses, short-term bank loan, income-tax

liability and long-term debt maturing in the current year.

The current ratio is a measure of the firm’s short-term solvency. It indicates the

availability of current assets in rupees for every one rupee of current

liability. A ratio of greater than one means that the firm has more current

assets than current claims against them.

Quick Ratio

Quick ratio, also called acid test ratio, establishes a relationship between quick,

or liquid, assets and current liabilities. An assets is liquid if it can be

converted into cash immediately or reasonably soon without a loss of value.

Cash is the most liquid asset. Other assets are considered to be relatively

liquid and included in quick assets are debtors and bills receivables and

73

marketable securities. Inventories are considered to be less liquid.

Inventories normally require some time for realizing into cash; their value

also has a tendency to fluctuate. The quick ratio is found out by dividing

quick assets by current liabilities.

Quick ratio= Current assets – Inventories Current liabilities

Net Working Capital Ratio

The difference between current assets and current liabilities excluding short-

term bank borrowing is called net working capital (NWC) or net current

assets (NCA). NWC is sometimes used as a measure of a firm’s liquidity. It

is considered that, between two firms, the one having the larger NWC has

the greater ability to meet its current obligations. This is not necessarily so;

the measure of liquidity is a relationship, rather than the difference between

current assets and liabilities. NWC, however, measures the firm’s potential

reservoir of funds. It can be related to net assets:

NWC ratio = Net working capital (NWC) Net assets (NA)

2. Leverage Ratios

The short-term creditors, like bankers and suppliers of raw material, are more

concerned with the firm’s current debt-paying ability. On the other hand,

long-term creditors, like debenture holders, financial institutions etc. are

more concerned with the firm’s long-term financial strength. In fact, a firm

should have a strong short-as well as long-term financial position. To judge

the long-term financial position of a firm, financial leverage, or capital

74

structure ratios are calculated. These ratios indicate mix of funds provided

by owners and lenders. As a general rule, there should be an appropriate mix

of debt and owners’ equity in financing the firm’s assets.

The manner in which assets are financed has a number of implications. First,

between debt and equity, debt is more risky from the firm’s point of view.

The firm has a legal obligation to pay interest to debt holders, irrespective of

the profit made or losses incurred by the firm. If the firm fails to pay to debt

holders in time, they can take legal action against it to get payments and in

extreme cases, can force the firm into liquidation. Second, use of debt is

advantageous for share holders in two ways:

(a) They can retain control of the firm with a limited stake and

(b) Their earning will be magnified, when the firm earns a rate of return on the

total capital employed higher than the interest rate on the borrowed funds.

The process of magnifying the shareholders’ return through the use of debt is

called “financial leverage” or “financial gearing” or “trading on equity.”

However, leverage can work in opposite direction as well. If the cost of debt

is higher than the firm’s overall rate of return, the earning of shareholders

will be reduced. In addition, there is threat of insolvency. If the firm is

actually liquidated for non payment of debt-holders’ dues, the worst suffers

will be shareholders- the residual owners. Thus, use of debt magnifies the

shareholders’ earnings as well as increases their risk. Third, a highly debt-

burdened firm will find difficulty in raising funds from creditors and owners

in future. Creditors treat the owners’ equity as a margin of safety; if the

equity base is thin, the creditors risk will be high. Thus, leverage ratios are

calculated to measure the financial risk and the firm’s ability of using debt to

shareholders’ advantage.

75

Leverage ratios may be calculated from the balance sheet items to determine the

proportion of the debt in total financing. Many variations of these ratios

exist; but all these ratios indicate the same thing-the extent to which the firm

has relied on debt in financing assets. Leverage ratios are also computed

from the profit and loss items by determining the extent to which operating

profits are sufficient to cover the fixed charges.

3. Activity Ratios

Funds of creditors and owners are invested in various assets to generate sales

and profits. The better the management of assets, the larger the amount of

sales. Activity ratios are employed to evaluate the efficiency with which the

firm manages and utilizes its assets. These ratios are also called turnover

ratios because they indicate the speed with which assets are being converted

or turned over into sales. Activity ratios, thus, involve a relationship between

sales and assets. A proper balance between sales and assets generally reflects

that are managed well. Several activity ratios can be calculated to judge the

effectiveness of asset utilization. Here we will take different activity ratio:

(i) Net assets turnover,

(ii) Total assets turnover

(iii) Fixed and current assets turnover and

(iv) Working capital turnover.

Net assets turnover

The firm can compute net assets turnover simply by dividing sales by net assets.

Net assets turnover= Sales Net assets

76

It may be recalled that net assets include net fixed assets and net current assets,

that is, current assets minus current liabilities. Since net assets equal capital

employed, net assets turnover may also be called capital employed turnover.

A firm’s ability to produce a large volume of sales for a given amount of net

assets is the most important aspect of its operating performance. Unutilized

or under-utilised assets increase the firm’s need for costly financing as well

as expenses for maintenance and upkeep. The net assets turnover should be

interpreted cautiously. The net assets in the denominator of the ratio include

fixed assets net of depreciation. Thus old assets with lower book values may

create a misleading impression of high turnover without any improvement in

sales.

Some analysts exclude intangible assets like goodwill, patents etc., While

computing the net assets turnover. Similarly, fictitious assets, accumulated

losses or deferred expenditures may also be excluded for calculating the net

assets turnover ratio.

Total assets turnover

Some analysts like to compute the total assets turnover in addition to or instead

of the net assets turnover. This ratio shows the firm’s ability in generating

sales from all financial resources committed to total assets.

Total assets turnover= Sales Total assets

Total assets (TA) includes net fixed assets (NFA) and current assets (CA). so

(TA=NFA+CA)

77

Fixed and Current assets turnover

The firm may wish to know its efficiency of utilizing fixed assets and current

assets separately.

Fixed assets turnover= Sales Net fixed assets

The current assets turnover is:

Current assets turnover= Sales Current assets

The use of depreciated value of fixed assets in computing the fixed assets

turnover may render comparison of firm’s performance over period or with

other firms meaningless. Therefore, gross fixed assets may be used to

calculate the fixed assets turnover for a meaningful comparison.

Working capital turnover

A firm may also like to relate net current assets to sales. It may thus compute

net working capital turnover by dividing sales by net working capital.

Net current assets turnover= Sales Net current assets

4. Profitability Ratios

A company should earn profits to survive and grow over a long period of time.

Profits are essential, but it would be wrong to assume that every action

initiated by management of a company should be aimed at maximizing

profits, irrespective of concerns for customers, employees, suppliers or

social consequences. It is unfortunate that the word ‘profit’ is looked upon as

78

a term of abuse since some firms always want to maximize profits at the cost

of employees, customers and society. Except such infrequent cases, it is a

fact that sufficient profits must be earned to sustain the operations of the

business to be able to obtain funds from investors for expansion and growth

and to contribute towards the social overheads for the welfare of the society.

Profit is the difference between revenue and expenses over a period of time

(usually one year). Profit is the ultimate ‘output’ of a company and it will

have no future if it fails to make sufficient profits. Therefore, the financial

manager should continuously evaluate the efficiency of the company in term

of profits. The profitability ratios are calculated to measure the operating

efficiency of the company. Besides management of the company, creditors

and owners are also interested in the profitability of the firm. Creditors want

to get interest and repayment of principal regularly. Owners want to get a

required rate of return on their investment. This is possible only when the

company earns enough profits.

Generally, two major types of profitability ratios are calculated:

Profitability in relation to sales

Profitability in relation to investment.

Here we will consider two profitability ratio:

(i) Return on investment and

(ii) Return on equity

Return on Investment

The term investment may refer to total assets or net assets. The funds employed

in net assets are known as capital employed. Net assets equal net fixed assets

79

plus current assets minus current liabilities excluding bank loans.

Alternatively, capital employed is equal to net worth plus total debt.

The conventional approach of calculating return on investment (ROI) is to

divide PAT by investment. Investment represents pool of funds supplied by

shareholders and lenders, while PAT represent residue income of

shareholders; therefore, it is conceptually unsound to use PAT in the

calculation of ROI. Also, as discussed earlier, PAT is affected by capital

structure. It is, therefore more appropriate to use one of the following

measures of ROI for comparing the operating efficiency of firms:

Return on Investment= EBIT(1-T) Total assets

Or

Return on Investment= EBIT(1-T) Net assets

Where above formula is for return on total assets and second formula is for

return on net assets. Return on net assets is equivalent of return on capital

employed.

Return on Equity

Common or ordinary shareholders are entitled to the residual profits. The rate of

dividend is not fixed; the earnings may be distributed to shareholders or

retained in the business. Nevertheless, the net profits after taxes represent

their return. A return on shareholders’ equity is calculated to see the

80

profitability of owners’ investment. The shareholders’ equity or net worth

will include paid-up share capital, share premium and reserves and surplus

less accumulated losses. Net worth can also be found by subtracting total

liabilities from total assets.

The return on equity is net profit after taxes divided by shareholders’ equity

which is given by net worth. If a company has both preference and ordinary

share capital, ROE should be calculated after deducting preference dividend

from PAT, and using only the ordinary shareholders’ capital.

Return on Equity= Profit after taxes Net worth (Equity)

Return on Equity indicates how well the firm has used the resources of owners.

In fact, this ratio is one of the most important relationships in financial

analysis. The earning of a satisfactory return is the most desirable objective

of a business. The ratio of net profit to owners’ equity reflects the extent to

which this objective has been accomplished. This ratio is, thus, of great

interest to the present as well as the prospective shareholders and also of

great concern to management, which has the responsibility of maximizing

the owners’ welfare.

The returns on owners, equity of the company should compared with the ratios

for other similar companies and the industry average. This will reveal the

relative performance and strength of the company in attracting future

investments.

81

Here certain ratios are calculated according to the data of balance sheet of last

five years of RAYMOND TEXTILE, INDIA.

Raymond TextileBalance sheet

As on 31st March(Rs. In lacs)

2009-10 2008-09 2007-08 2006-07 2005-06

sources of fund share holders' fund shar capital 6138.08 6138.08 6138.08 6138.08 6138.08share warrant 2086.95 2086.95

reserve & surplus 111153106560.

3133690.

4129477.

9112856.

5 Loan Funds

secured loans75695.6

186884.8

150204.1

656686.0

554667.5

6

unsecured loans43575.2

447621.8

537472.2

122074.9

622120.2

8deffered tax liability 2105.03 2837.2 5967.58 5587.73 6402.73

total = 244667252129.

2235559.

4219964.

7202185.

1

Application Fixed Assets

gross block171339.

4170064.

1134540.

3123003.

5136672.

8

Less: depreciation 77297.570159.5

862587.7

655397.8

4 67765.8

net block94041.8

594041.8

571952.5

167605.6

4 68907

capital work in progress 4164.28 4164.28 1358.36 8568.5115604.8

1

Investment 89178.5

688859.4

6104730.

2 98447.573660.2

8current assets, loans & advances

82

Inventories28450.3

834040.3

632974.1

828366.3

631904.1

6

Debtors29694.3

530447.6

128988.5

626877.0

724846.7

4Cash 2656.16 4679.94 2182.48 2561.4 2503.17Others 4332.3 5066.34 5775.49 2969.9 3315.06

Loans27827.6

323931.3

323361.3

821715.8

614442.0

6less: current liabilities and provisions

current liabilities30367.14

35044.23

28210.03 29083.9

26227.34

Provision 5311.42 5966.62 7553.73 8063.66 6770.84

net assets57282.2

657154.4

857518.3

345343.0

344013.0

1

total = 244667252129.

2235559.

4219964.

7202185.

1

Ratio AnalysisCurrent ratio Current ratio= Current assets

Current liability

For the year 2006,

= 77011.19 32998.18

= 2.33:1

For the year 2007, = 82490.59 37147.56

=2.22:1

For the year 2008, = 94342.30

83

35799.26

=2.63:1

For the year 2009, = 98165.33 41010.85

=2.39:1

For the year 2010, = 92960.82 35678.56

=2.61:1

Interpretation of Current Ratio

Figure showing Current ratio

84

2006 2007 2008 2009 2010 years0

2000000000

4000000000

6000000000

8000000000

10000000000

12000000000

77011190008249059000

94342300009816533000

9296082000

329981800037147560003579926000

41010850003567856000

current assetscurrent liabilities

As a conventional rule, a current ratio of 2 to 1 or more is consider satisfactory. Company’s current asset for the year 2006 was Rs 77011.19 and a current liability was Rs 32998.18. So the current ratio of a company for the year 2006 is 2.33:1.

In year 2007, company’s current assets increase up to Rs 82490.59 with increase in current liabilities up to Rs 37147.56. So the current ratio for the company reduced to 2.22:1 in that year.

In year 2008, company’s current assets increased up to Rs 94342.30 with decrease in current liabilities up to Rs 35799.26. So the ratio for the year is 2.63:1.

In year 2009, there is an increase in current assets of a company up to Rs 98165.33 and also increase in current liabilities up to Rs 41010.85. So the ratio for that year reduced to 2.39:1.

In year 2010, there is a reduction in current assets of a company in comparison of last year and it reduced Rs to 92960.82. But current liabilities of a company also reduced to Rs 35678.56. So the ratio for the year 2010 is increased to 2.61:1.

This trend of current ratio interprets that there is no significant change in the current ratio of a company during last five years. It shows that there is no

85

significant impact of current assets and liabilities of a company on the fixed assets of a company.

The ideal current ratio for a company is 2:1. Company has a current ratio more than 2:1 for all the years. It interprets that company have more working capital than its actual requirements. So company should invest in fixed assets rather than investing in such non performing working capital. Company can earn interest by investing such working capital in any other investments. Company should invest money in such way that it can get some return on such investment.

Total Assets Turnover

Total Assets Turnover = sales Total assets

For the year 2006,

Total assets turnover = 140637 128524.82

= 1.09 times

For the year 2007,

Total assets turnover = 137497.17 121517.18

= 1.13 times

For the year 2008,


= 1.11 times

86

For the year 2009,


= 0.91 times

For the year 2010,


= 0.92 times

Interpretation of net assets turnover figure shows net assets turn over

87

2006 2007 2008 2009 2010 years0

2000000000

4000000000

6000000000

8000000000

10000000000

12000000000

14000000000

16000000000

18000000000

14063700000137497170001460157000014777978000

14270648000

1285248200012151718000

13185391000

1632697200015548839000

salestotal assets

The firm can compute net assets turnover simply by dividing sales by net assets.

Net assets turnover may also be called capital employed turnover.For the year 2006, sales of a company was Rs 140637 and the total assets of a

company for a year was Rs 128524.82. So the ratio for the year was 1.09 times.

It interprets that company is producing Rs. 1.09 of sales for one rupee of capital

employed.

For the year 2007, sales of a company decreased to Rs 137497.17 but the total

assets of a company also decreased to Rs 121517.18. So the ratio for the year

increased to 1.13 times. It interprets that company is producing Rs. 1.13 of sales

for one rupee of capital employed in net assets.

For the year 2008, sales of a company shows increased to Rs 146015.70 and also

increased in its total assets. So the ratio shows decreased to 1.11 times because

increase in total assets is higher in proportion of increase in sales.

88

For the year 2009, sales of a company increased to Rs 147779.78 and also increase

in total assets of a company to Rs 163269.72. The growth of total assets was

higher in comparison of sales because of capital formation of assets. So there is

a reduction in ratio even there is an improvement in sales. So the ratio for the

year was 0.91.

For the year 2010, there is a decline in both sales and total assets of a company to

Rs 142706.48 and Rs 155488.39 respectively. But the reduction in sales was

lower in proportion of reduction of total assets. So there is a slight increase on

ratio up to 0.92 times in the year.

Net Assets Turnover

Net assets turnover = Sales Net assets

For the year 2006,

Net assets turnover = 140637 202185

= 1.66 times

For the year 2007,

Net assets turnover = 137497.17 219964.68

=0.63 times

89

For the year 2008,


= 0.62 times

For the year 2009,


= 0.59 times

For the year 2010,


= 0.58 times

Interpretation for net assets turnover

Figure showing net assets turnover

90

2006 2007 2008 2009 2010 years0

5000000000

10000000000

15000000000

20000000000

25000000000

30000000000

1406370000013749717000146015700001477797800014270648000

2021850000021996468000

236584110002521291800024466695000

sales net assets

This ratio shows the firm’s ability in generating sales from all financial

resources committed to net assets. The firm can compute net assets turnover

by dividing sales by net assets.

for the year 2006, sales of a company was Rs 140637 and net assets of a

company was Rs 202185. So the net assets turnover for the company for that

year was 1.66 times which interprets that company was generating a sales of

Rs. 1.66 for one rupee investment in fixed and current assets together.

For the year 2007, sales of a company decreased to Rs 137497.17 and net assets

of a company increased to Rs 219964.68. It creates a decrease in the ratio of

a company. Ratio of the company for that year was 0.63 times. This was

happen mainly because of decrease in sales and increase of a net assets.

For the year 2008, sales of a company increased up to Rs 146015.70 and net

assets of a company also increased. But the ratio of a company slightly

decline because the growth of net assets was little more in proportion of

growth of sales. The ratio for the year was 0.62 times.

91

For the year 2009, sales of a company increased to Rs 147779.78 and net assets

also increased up to Rs 252129.18. But same as previous year ratio decline

to 0.59 times.

For the year 2010, both sales and net assets has reduced up to Rs 142706.48 and

Rs 244666.95 respectively. So the ratio decline for this year up to 0.58

times.

Fixed and Current assets turnover

Fixed assets turnover = Sales Fixed assets

And

Current assets turnover = Sales Current assets

For the year 2006,

Fixed assets turnover = 140637 84512

= 1.66

Current assets turnover = 140637 77011.19

= 1.82

For the year 2007,

92

Fixed assets turnover = 137497.17 76174.15

= 1.81

Current assets turnover = 137497.17 82490.59

= 1.67

For the year 2008,


= 1.99


= 1.55

For the year 2009,


=1.39


= 1.51

For the year 2010,

93


= 1.45


= 1.54

Interpretation of Fixed and Current asset turnoverThe firm may wish to know its efficiency of utilizing fixed assets and current

assets separately. A firm can compute fixed assets turnover simply by dividing

sales by fixed assets and can compute current assets turnover by dividing sales

by current assets.

In year 2006, the reciprocal of a company’s fixed assets turnover ratio was 0.60

and reciprocal of current assets turnover was 0.55. So it implies that company’s

fixed assets is faster than current assets and for generating sale of one rupee, the

company needs respectively Rs. 0.60 investment in fixed assets and Rs 0.55 in

current assets.

In year 2007, current asset of a company exceeds the value of fixed assets. A

current asset of a company was Rs 82490.59 lacs while a fixed asset was Rs

76174.15 lacs. So the reciprocal of a fixed asset turnover ratio was 0.55 and

reciprocal of current assets turnover ratio was 0.60. It implies that company’s

current assets is faster than its fixed assets and for generating a sale of one

rupee, the company needs respectively Rs. 0.55 investment in fixed assets and

Rs. 0.60 in current assets.

In year 2008, trend was also same. Current assets of a company was increased up

to Rs 94342.30 lacs and a fixed asset was further reduced to Rs 73310.87 lacs.

So the reciprocal of a fixed assets turnover was 0.50 while the reciprocal of a

94

current assets was 0.65. so it implies that company’s current assets is faster than

its fixed assets and for generating a sale of one rupee, the company needs

respectively Rs. 0.50 investment in fixed assets and Rs. 0.65 in current assets.

In year 2009, both fixed and current assets of a company were increased but fixed

assets increased more than current assets. So the reciprocal of the fixed assets

turnover was 0.72 and reciprocal of current assets turnover was 0.66. It implies

that fixed assets of a company is faster than the current assets of a company and

for generating a sale of one rupee, the company needs respectively Rs. 0.72

investment in fixed assets and Rs. 0.66 investment in current assets.

In year 2010, both fixed and current assets of a company reduced. But current

assets reduced more in proportion of fixed assets. So the reciprocal of a fixed

assets turnover was reduced to 0.69 and reciprocal of current assets turnover

was reduced to 0.65. So it implies that fixed assets of a company is faster than

current assets and for generating a sale of one rupee, the company needs

respectively Rs. 0.69 investment in fixed assets and Rs. 0.65 investment in

current assets.

Working Capital Turnover

Working capital turnover = Sales Net current assets

95

For the year 2006,

Working capital turnover = 140637 44013.01

= 3.20 times

For the year 2007,

Working capital turnover = 137497.17 45343.03

= 3.03 times

For the year 2008,


= 2.49 times

For the year 2009,


= 2.59 times

For the year 2010,


= 2.49 times

96

Interpretation of working capital turnover

Figure shows working capital turnover

2006 2007 2008 2009 2010 years0

2000000000

4000000000

6000000000

8000000000

10000000000

12000000000

14000000000

16000000000

14063700000137497170001460157000014777978000

14270648000

44013010004534303000

585430400057154480005728226000

salesnet current assets

A firm may like to relate net current assets to sales. It may thus compute net

working capital turnover by dividing sales by net working capital.

For the year 2006, a sale of a company was Rs 140637 and a current asset was Rs

44013.01. So the reciprocal of the ratio implies that for one rupee of sales, the

company needs Rs. 0.31 of working capital.

For the year 2007, a sale of a company was reduced to Rs 137497.17 and a current

asset was increased up to Rs 45343.03. So the reciprocal of the ratio was 0.33.

The ratio increased because of the increase in current assets of a company.

For the year 2008, a sale of a company was Rs 146015.70 which is more than

previous year and current assets was also more than previous year that is Rs

58543.04. so the reciprocal of the ratio was 0.40 which implies that for one

rupee of sales, the company needs Rs. 0.40 of working capital.

97

For the year 2009, a sale of a company increased to Rs 147779.78 but the current

assets of a company reduced to Rs 57154.48.So the reciprocal of the ratio

slightly decline to 0.39.

For the year 2010, a sale of a company reduced to Rs 142706.48 and there is a

slight increase in current assets of a company which leads to little increase in

ratio. Ratio for the year is 0.40.

The gaps for all these years are met from long term sources of funds of a company.

Return on Investment

Return on Investment = EBIT (1-T) Total assets

For the year 2006,

Return on Investment = 16370.48 (0.7) 202185

= 0.056 or (5.6%)

For the year 2007,

Return on Investment = 23823.28 (0.7) 219964.68

= 0.075 or (7.5%)

For the year 2008,


= 0.024 or (2.4%)

98

For the year 2009,

Return on Investment = (-29755.06) (0.7) 252129.18

= -0.083 Loss or (-8.3%)

For the year 2010,


=0.006 or (0.6%)

Interpretation of return on investmentFigure shows return on investment

2006 2007 2008 2009 2010 years

-5000000000

0

5000000000

10000000000

15000000000

20000000000

25000000000

30000000000

11459330001667630000571876000

-2082854000

140304000

2021850000021996468000

236584110002521291800024466695000

PATtotal assets

The conventional approach of calculating return on investment is to divide PAT by investment. Firm can compute the return on investment which is yield by investing in total assets simply by dividing PAT by total assets. Company pays 30% tax on profit every year.

In year 2006, company earns Rs 16370.48 lacs profit before tax. After the payment of 30% tax. Company has PAT of Rs 11459.33 lacs. And the total asset of the

99

company was Rs 202185 lacs. So the return on investment for the company for the year 2006 was 5.6%.

In year 2007, PAT of a company was Rs 16676.30 lacs. And the total asset of a company was Rs 236584.11 lacs. So the company got 7.5% return on investment for that year.

In year 2008, PAT of a company was Rs 5718.76 lacs. There was a huge reduction in the profit of a company because of recession. The total asset of a company was Rs 236584.11 lacs. Because of the reduction in profit, the return on investment breakdown to 2.4% in that year.

In year 2009, effect of recession continues and because of that company faced loss of Rs 20828.54 lacs. So the ratio became negative for that year. The ratio for that year was -8.3%.

In year 2010, company overcomes from the effect of recession. Company has made PAT of Rs 1403.04 lacs. And the total assets of a company are Rs 244666.95 lacs. Because of the low profit and high rate of investment. Return on investment is very low but in positive nature. The return on investment for the year is 0.6%.

Equity to Fixed Assets Ratio

Equity to fixed assets ratio = Total equity shares Fixed assets

For the year 2006,

Equity to Fixed assets ratio = 6138.08 84511.81

= 0.076 or (7.6%)

For the year 2007,

Equity to fixed assets ratio = 6138.08 76174.15

= 0.081 or (8.1%)

100

For the year 2008,


= 0.084 or (8.4%)

For the year 2009,


= 0.058 or (5.8%)

For the year 2010,

Equity to fixed assets ratio = 6138.08 98206.13 =0.063 or (6.3%)

Interpretation of Equity to Fixed assets ratioMany times, firm compute the equity on fixed assets ratio to know its equity in

relation with fixed assets simply by dividing its equity shares by its fixed assets. If equity shares are low and fixed assets is high than ratio is low and vice-e-versa. Equity of a company is same or unchanged from last 5 years. Equity of a company from last 5 years is Rs 6138.08 lacs.

For the year 2006, the fixed asset of a company was Rs 84511.81 lacs. So the ratio for the year was 7.6 %.

In year 2007, the fixed asset of a company was decreased up to Rs 76174.15 lacs. Because of such reduction, ratio increase up to 8.1%.

In year 2008, the fixed asset of a company was further reduced to Rs 73310.87 lacs. This creates further improvement in ratio up to 8.4%.

In year 2009, the fixed asset of a company was increased to Rs 106115.24 lacs because of capital formation. This leads to decline in ratio up to 5.8%.

In year 2010, the fixed asset of a company again reduced in comparison of previous year up to Rs 98206.13 lacs. So ratio increase up to 6.3%.

101

51630203 project on fixed assets management

Documents