CHAPTER- I

FINANCIAL STATEMENT
ANALYSIS OF JAYA LAKSHMI TEXTILES

1.1 INTRODUCTION:
We know business is mainly concerned with the financial activities. In order to ascertain the
financial status of the business every enterprise prepares certain statements, known as
financial statements, Financial statements are mainly prepared for decision making purposes,
But the information as is provided in the financial statements is not adequately helpful in
drawing a meaningful conclusion, Thus, an effective analysis and interpretation of financial
statements is required, 27 FINANCIAL STATEMENTS ANALYSIS - AN
INTRODUCTION ACCOUNTANCY MODULE - 6A Notes Financial Statements Analysis -
An Introduction Analysis of Financial Statements 2 Analysis means establishing a
meaningful relationship between various items of the two financial statements with each
other in such a way that a conclusion is drawn.
By financial statements we mean two statements:
✔ Profit and loss Account or Income Statement
✔ Balance Sheet or Position Statement
These are prepared at the end of a given period of time, They are the indicators of
profitability and financial soundness of the business concern, The term financial analysis is
also known as analysis and interpretation of financial statements, It refers to the establishing
meaningful relationship between various items of the two financial statements ie , Income
statement and position statement, It determines financial strength and weaknesses of the firm.
You have already learnt about the preparation of financial statements ie , Balance Sheet and
Trading and Profit and Loss Account in the module titled ‘Financial Statements of Profit and
Not for Profit Organizations , After preparation of the financial statements, one may be
interested in analyzing the financial statements with the help of different tools such as
comparative statement common size statement, ratio analysis, trend analysis, fund flow
analysis, cash flow analysis. Analysis of financial statements is an attempt to assess the
efficiency and performance of an Enterprise Thus, the analysis and interpretation of financial
statements is very essential to Measure the efficiency, profitability, financial soundness and
future prospects of the business units

1.2 Meaning:
Financial Statements are the collective name given to Income Statement and Positional
Statement of an enterprise which show the financial position of business concern in an
organized manner, We know that all business transactions are first recorded in the books of
original entries and thereafter posted to relevant ledger accounts, For checking the
arithmetical accuracy of books of accounts, a Trial Balance is prepared.
Trial balance is a statement prepared as a first step before preparing financial statements of an
enterprise which record all debit balances in the debit column and all credit balances in credit
column, To find out the profit earned or loss sustained by the firm during a given period of
time and its financial position at a given point of time is one of the purposes of accounting,
For achieving this objective, financial statements are prepared by the business enterprise,
which include income statement and positional statement,

1.3Objective of financial statement analysis:

✔ Knowing Profitability of Business
✔ Knowing the Solvency of the Business:
✔ Judging the Growth of the Business
✔ Judging Financial Strength of Business
✔ Making Comparison and Selection of Appropriate Policy
✔ Forecasting and Preparing Budgets:
✔ Communicating with Different Parties

1.4 Types of Financial Statements Analysis:

Horizontal Analysis: The horizontal analysis measures the financial statements line of

items with the base year, That means, it compares the figures for a given period with the
other period,

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Vertical Analysis: The vertical analysis measures the line item of the income statement or
balance sheet by taking any line itseem of financial statement as a base and will disclose the
same in percentage from

Trend Analysis: Trend analysis means identifying patterns from multiple time period and
plotting those in a graphical format such that actionable information could be derived.

Liquidity Analysis: The short-term analysis focus on routine expenses, It analyses the
short-term capability of the company with respect to day-to-day payments of trade creditors,
short-term borrowings, statutory payments, salaries etc, Its main intent is to verify the
appropriate liquidity being maintained thoroughly for the given period and all the liabilities
are being met without any default, The short-term analysis is carried out using the technique
of ratio analysis, which uses various ratios like liquidity ratio, current ratio, quick ratio, etc

Solvency Analysis: The long-term analysis is also termed as Solvency analysis, Focus
under this analysis is to ensure the proper solvency of the company in the near future and to
check whether the company is able to pay all the long-term liabilities and obligations. It gives
stakeholders confidence about the survival of the entity with proper financial health,
Solvency Ratios like Debt to Equity ratio, Equity Ratio, Debt ratio etc give a correct picture
of the financial solvency and burden on the firm in the form of external debts.

Profitability Analysis : Profitability financial analysis helps us understand how the

company generates. The investment decision is one of the most important decisions to be
takenby all the businessperson, The main aim of all the investment decisions is to ensure the
maximum profit out of the investment made in the project, In order to verify the viability of
the decision, they Carry out profitability analysis, which will check the rate of return in a
given period, This will help the investor in obtaining assurance of safekeeping of funds

Scenario & Sensitivity Analysis : In business, day in and day out various changes
keep on coming, In addition based on the economic outlook various kinds of changes in tax
structures, banking rates, duties, etc, Each of this determinants highly affects the financials,
hence it is utmost important that treasury department does such sensitivity analysis with
respect to each factor and try to analyze the effect of the same with the company financials,

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Variance Analysis: Business runs on estimates and budgets, after the completion of
transactions, it is utmost important to check the variance in between budget and estimates
with the actual one, Such variance analysis will help in checking any loopholes in the process
and hence it will help an entity to take corrective actions for avoidance of the same in the
future, Variance analysis can be carring out by standard costing technique, comparing
budgeted, standard and actual costs,

Valuation Analysis: Valuation analysis means deriving the company’s fair valuation

Financial planning and Analysis: Every company will be having its own financial
planning and analysis (FP&A) department whose main work is to analyze the internal
organization’s various data points and to construct the Management Information System
(MIS), which will be reported to top management, Such MIS circulated by FP&A department
is of the highest importance for the company as there will be, both published as well as
unpublished information, Such analysis helps top management to adopt strategies, which will
be preventive in nature and can help in avoiding any major setback.

1.5Uses and Users of Financial Ratio Analysis:

Analysis of financial ratios serves two main purposes:
1. Track company performance: Determining individual financial ratios per period
and tracking the change in their values over time is done to 7spot trends that may be
developing in a company, For example, an increasing debt-to-asset ratio may indicate that a
company is overburdened with debt and may eventually be facing default risk.

2. Make comparative judgments regarding company performance:

Comparing financial ratios with that of major competitors is done to identify whether a
company is performing better or worse than the industry average, For example, comparing

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the return on assets between companies helps an analyst or investor to determine which
company is making the most efficient use of its assets.
 
1.6Users of financial ratios include parties external and internal to the
company:
External users: Financial analysts, retail investors, creditors, competitors, tax authorities,
regulatory authorities, and industry observers.

Internal users: Management team, employees, and owners.

1.7The advantages of financial Statement analysis:

Pattern Detection and forecasting: Financial statements have the ability to reveal
earnings per year, sales and profits accrued, Though sales figures may vary, the financial
planners will be in a position to find a correlative pattern over a few years of data of sales-
figures, Take the example of a company which may reveal a trend of sales increases
whenever new products are marketed and released, Sales could drop after let’s say a year of
the product launch.This trend analysis is a huge company benefit as it forecasts a market life
of about a year is useful, as it shows sales patterns for product launches, a sales drop after a
year, and a need for new products in a year’s time,

Budget Outline in real-time: Decision making for planning the future, budget
estimations, corrective actions required for efficient budgeting, and many such decisions rely
heavily on financial statements, The statements reveal how much you can spend on marketing
or product launches, strategizing for marketing-campaigns, future expansions, requirements
of funding etc, Information is power in decision making and planning.

1.8Disadvantages:

Based on patterns of the market: A big disadvantage of the financial statement

analysis and use for making strategic decisions Based on figures and data pertaining to
current market conditions which may fluctuate past Performance is a good indicator and

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motivator it cannot however, guarantee the fluctuation And future demands A cautious
approach is called for in interpretation of financial ratios and Statement to prevent excessive
risk-taking based purely on forecasts
Analysis of At-One-Time basis As the name suggests the forecast and analysis is
applicable at that one time only, It does not reveal or compare the past performance or future
forecast at one glance One will need to exercise caution by generating and reporting on a
continuous basis rather than a one-time basis, Such extrapolation of data and financial
analysis undertaken frequently is crucial to the company’s health and decision-making
abilities,

1.9Limitations of Financial Statements Analysis:

✔ Manipulation or Window Dressing
✔ Use of Diverse Procedures
✔ Qualitative Aspect Ignored
✔ Historical
✔ Price Level Changes
✔ Subjectivity & Personal Bias

1.10 How ratio is used in financial statement Analysis:

Financial ratios are created with the use of numerical values taken from financial
statement to gain meaningful information about a company, The numbers found on a
company’s financial statements –balance sheet, income statement and cash flow statement  –
are used to Perform quantitative analysis and assess a company’s liquidity, leverage, growth,
margins, profitability, rates of return, valuation, and more.

1.11 Financial ratios are grouped into the following categories:

✔ Liquidity ratios
✔ Solvency ratios
✔ Efficiency ratios
✔ Profitability ratios
✔ Market value ratios

1.12 Objectives of study:

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The objective of the study is furnished below:
✔ To study the solvency position of the balance sheet
✔ To study profitability position of the balance sheet
✔ To compare the balance sheet of the company

1.13 Scopes of study:

✔ This study clearly defines the financial status of the concern during the working period.
✔ The study report being made here brings out the financial structure and the position of the
company from different years.
✔ The financial study helps us to analysis the financial background and income earned.

1.14 Tools used in study:

✔ Comparative of balance sheet
✔ Solvency ratio
✔ Profitability ratio
✔ Financial preference of the company

1.15 Limitations of study:

The limitation of the study is furnished below:
✔ The financial details of the company are Collected only for 2 years,
✔ Its limited only in Coimbatore.
CHAPTER II

REVIEW OF LITERATURE

A brief review of the different researches in the field is attempted in the following paragraphs

2.1 INTRODUCTION

Finance always being disregarded in financial decision making since it involves investment
and financing in short-term period, Further, also act as a restrain in financial performance,
since it does not contribute to return on equity, A well designed and implemented financial
management is expected to contribute positively to the creation of a firms value,

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Dilemma in financial management is to achieve desired tradeoff between liquidity,
solvency and profitability, Management of working capital in terms of liquidity and
profitability management are essential for sound financial recital as it has a direct impact on
profitability of the company, The crucial part in managing working capital is required
maintaining its liquidity in day-to-day operation to ensure its smooth running and meets its
obligation, Ultimate goal of profitability can be achieved by efficient use of resources, It is
concerned with maximization of shareholders or owners wealth, It can be attained
through financial performance analysis, where financial performance means firm's overall
financial health over a given period of time.

The word performance is derived from the word parfourmen , which means “to do” to
carry out‟ or „to render‟, It refers the act of performing; execution, accomplishment,
fulfillment, etc, In border sense, performance refers to the accomplishment of a given task
measured against preset standards of accuracy, completeness, cost, and speed, In other words,
it refers to the degree to which an achievement is being or has been accomplished, The
performance is a general term applied to a part or to all the conducts of activities of an
organization over a period of time often with reference to past or projected cost efficiency,
management responsibility or accountability or the like. Thus, not just the presentation, but
the quality of results achieved refers to the performance, Performance is used to indicate
firms success conditions and compliance.

2.2 LITERATURE SNAPSHOT:

The sector analysis is typically employed by investors who plan to select better stocks to
invest in, The investors normally identify the most promising sectors and review the
performance of companies within the sector to determine which individual stock would
provide better returns and purchase such stocks, The sector efficiency (market) is an
important concept which helps to understand the basic structure of capital and financial
strengths, Evaluation and performance measurement are among the most debated and
discussed issues in financial management, The goal of financial management is to use and
allocate capital in a proper way in order to create maximum value for both stockholder and
profit company owners, There are many different views explaining and extending these
concepts in financial management, The size is so vast, so only the relevant literatures

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are presented hereunder, Therefore, some of them, which are felt to be of greater
significance and motivating as well, are listed below, The studies already conducted in
the sector analysis in different periods are summarized below.

The first group of empirical viewpoints comprises accounting models that obtain a firms
value by multiplying firms profit to conversion coefficients with the value of (P/E ratio).The
second group comprises economic models that determine a firms stock value on the basis of
its earning power, potential investment and difference of return rate & capital costs

1. Maximizing a firms value requires implementing profitable projects:

In modern world because of the competitive nature of the market, determining methods
of proper finance for increasing profitability and company survival is a vital issue, Due
to ownership distance from management , we need extended finance and also attracting
the influx of fund owners toward the use of their own funds for increasing wealth,
analyzing firm performance and financial structure. Until a proper investment level is
achieved terms of financing sources firms are divided into categories according to their
financing policy:
Internal financial funds
external financial fund
In internal funds companies use gained profit for financing It means that instead of
dividends .Distribution they use profit for the company's operation in order to have
higher return In contrast external financing companies use debt and also issue securities

3. A process which leads to final decision is called financial structure

determining methods, Methods of determining financial structure should be chosen with
particular attention to the main features of securities influenced by internal factors within
the firm or other external factors, Financial managers choose policies related to the
financial structure of firms for increasing stockholders' wealth; they also consider solutions
such as debtor equity increased for financing their projects.

4. In context to this a study by RBI (2005-06) has observed that the Indian corporate
sector has mobilised a large share of resources from internal sources which accounts for
60,7% during post-liberlisation era, Capital market has been considered as a last resort which
contributed merely 9,9% during the time, The debt-equity ratio has also declined over the

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years as the corporate sector has been able to mobilise resources internally to a significant
level to meet its challenges of financial plans, programmes and policies, The aim of
determining financial structure is to distinguish structure of financial fund in order to
maximize shareholders' wealth, We can consider financial structure as an effective factor
on shareholders wealth, The more bonds a firm issues, the higher will be its breakeven point
and leverage, Otherwise, the profit per share will decline; therefore, financial managers
measure different impacts of different financial structures on shareholder’s wealth

5. This is strongly believed to be the ground reality of every aspects of financial

management
since inception applicable to every company, irrespective of shape size and age The
relationship between capital structure and financial performance of the companies is one that
received considerable attention in the finance literature all the time by everyone How
important is the concentration of control for the company performance or the type of
investors exerting that control are basic questions always that authors have tried to answer for
long time prior studies show that capital structure has relating with corporate governance
which is the key issues of state owned enterprise Study of the effects of capital structure on
financial performance will certainly help us to know the potential problems in context to
financial performance and capital size, Modigliani and Miller paper on the irrelevance of
capital structure inspired researchers to debate on this subject, The debate is still on,
However, with the passage of time, new dimensions have been added to the question of
relevance or irrelevance of capital structure . It stated that the increased expected rate of
return generated by debt financing is exactly offset by the risk incurred, regardless of
the financing mix chosen

6. Some researchers provide the theoretical framework that links capital structure
and market structure
Contrary to the profit maximization objective, these theories are similar to the
corporate finance theory in that they broadly assume that the firm's objective is to maximize
the wealth of shareholders, Furthermore, market structure is shown to affect capital
structure by influencing the competitive behavior and strategies of firms, Not a single firm is
over-exposed to greater risk factors by redesigning their either structure (capital & financial)
to experience with a high pressure from possible ends

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7. B. Nimalathasan & Valeriu Brabete
Have pointed out capital structure and its impact on profitability by a study of listed
manufacturing companies in Sri Lanka, The analysis of listed manufacturing companies
shows that dept-equity ratio is positively and strongly associated to all profitability ratios
(Gross Profit, Operating Profit & Net Profit Ratios), The proportion of the debt-equity in
the capital structure is also fairly responsible to design the financial structure of the firms to a
greater extent.

8. Anand Pandey
Tested the efficiency level of the three popular stock Indices of Indian Stock Market using
the Runs Test and the Autocorrelation Function of ACF, It is found from the
Autocorrelation and Runs Test that the time series of stock indices in the Indian Stock Market
were biased random time series. It is the attitude that is well addressed amongst the financial
researchers to set a new horizon on the investment pattern that redefine the company financial
pattern.

9.Kin-Yip Ho and Albert K C Tsui

Probed the applicability of volatility behavior of aggregate indices to the sectoral indices, The
study doubted the leverage effects of equity returns and also it’s bearing on the strategy of
portfolio diversification among various sectors, This also raised possible question mark on
the impact of capital structure on the financial framework in the long-run as because the
growth factor is always subject to forecast with un-certainit.

10. Tasneem Alam and Muhammad Waheed

Investigated the monetary transmission mechanism in Pakistan at the sectoral level, The
study assessed whether the reform process achieved notable impact on the monetary
transmission mechanism or not, The study found that there was significant change in the
transmission of monetary stock to real sector of the economy during the post-reform period,
11. Mufeed Rawashdeh and Jay Squalli
Tested market efficiency across the four sectors, namely, Banking, Industrial, Insurances
and Services in the Amman Stock Exchange (ASE), The study found that the random walk
and weak form efficiency hypotheses were rejected for all sample sectors Besides.The returns
of mean values were highly volatile and over inflated stock prices and frequent market

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 corrections formed a bubble effect .It indicates that investment in all sectors of the ASE may
be very risky in the short run.

12. Chin Wen Cheog

Investigated the weak form market efficiency by using daily return of nine sector indices in
Malaysian Stock Market, These empirical results were in sharp contrast with the traditional
unit root test which ignored the economic crisis and currency control, The study found that
sector indices of Malaysian Stock Markets were inefficient weak-form (except the property
index).

. 13. Selvam,M, Indhumathi,G and Rajesh Ramkumar,R

studied the market efficiency of the sample companies listed on the BSE PSU Index, The
study found that the PSU Index performed wellduring the study period and the investors of
PSU companies earned maximum return through stock market operations. Financial
performance analysis is vital for the triumph of an enterprise, Financial performance analysis
is an appraisal of the feasibility, solidity and fertility of a business, sub-business or
mission, A rich literature has tackled the issue of how the mix between internal and
external funds is linked with firm real performance

14. Almeida H Campello and M, & M, Weisbach

Have observed that the availability of internal liquidity is a key parameter of firms‟
ability to invest and accomplish the desired expansion plans, Companies need not to
seek the assistance of external financing source as it always has a higher cot to the capital,
thereby adversely affecting the profit and profitability of the firm.

15. In continuance and contrary to the above literature, Jenson

Has rightly pointed out that external debt can be considered as an effective way to reduce the
agency cost problems that may lead to the under-performance of firms, So, confusions
emerge in between internal and external source of financing to reach at a judicious
managerial decision,

16. In the views of Flkender and Petesen

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The dependence of investment on cash or debt largely depends on whether the firm is facing
an income shortage or, conversely, a high income state, The authors highlight that there is
interplay between firms‟ cash and debt policies as cash holdings have a significant
effect financing capacity and investment spending in low cash-flow states, while debt
reductions are a particularly effective way of boosting investment in high cash-flow states.

17. Ralf Elsas and David Florysiak

Write this paper with the aim of evaluating and summarizing capital structure in German
firms and indicate that even with the passing of 50 years from primary study of Lara
and Mesquita yet choosing optimal and ideal capital structure isn’t possible and is the
main challenge of researchers, In this study equity is as a positive and effective factor on
capital structure and long term debt shows the reverse position as compared .

18 Vishnu and Nageswara

Clearly show that according to empirical evidence there is a relationship between
industrial pricing and type of industry with capital structure and firms performance is
in relation to debt ratios of firm, Comparing method of evaluating firm from the year,
Wide coverage of literature review enlists varieties of approaches to the study of
relevance, undertaken by different school of thoughts; not merely focusing on the
proposed study with specified objectives, The state of research relating to the financial
structure of the Indian Companies is not adequate. The literature is limited to the
growth, development, expansion, working and functional analysis of the units in relation to
Indian Companies, Only in a few studies, the problem of bottlenecks of the Indian
companies has also been highlighted. It is felt that in relation to Indian companies no pin
pointed study has been made on the problem of financial structure, No study has been
undertaken analyzing the problem of financial structure‟ on the basis of prescribed
norms, standards and managerial ratios and statistical tools, The proposed study will
focus the financial structure aspect of Indian Companies in India on which the available
literature is in scarcity,

The planning of the financial structure is a must for the measurement of the efficiency of the
Indian Companies, To evaluate the efficiency and performance of Indian Companies,
the measurement of the financial structure is resorted to, The performance and efficiency of
Indian Companies is directly related to financial structure, The poor financial structure may

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be due to diverse factors, The factors rendering financial structure poor would be sorted
out and highlighted with a view to suggesting remedial measures,

The inspiration for this research work is the generally based on simple observation of the
reality in most literature studies that firms (indeed, the industry-wise company sector) must
be able to finance their activities and grow over time if they are ever to play an increasing and
predominant role in enhancing value-added income in terms of profits, expanding their shape
and size in the economy; generating tax revenue for the government; and, all in all,
ensuring sustainability through scalable performance, So, now-a-days, the corporate houses
normally seek to have a well-structured capital and financial framework would be self-
sufficient to materialise the basic objectives of the enterprise.

2.3 REFERENCES:

1. Jahankhani, A, & Zarifard, A, (1995), Do Managers & Shareholders Use Proper

Measurement for Evaluating value? Financial research, Vol,7, 8}

2. Nikbakht, M, R, & Peykani, M, (2009), Reviewing Relationship Between Capital Structure

& Accounting Performance Measurement In Listed Firms Of Tehran Stock Exchange
Financial research, Vol,28, pp 89-10

3.Titman & Grinblatt, 1998), {Titman, S, M, (1998), Financial markets & corporate strategy,
Mcgrow-Hill.

4. (Asghari, 2009), {Asghari & et al, (2009), Evaluating Relationship Between

Financial Structure With Firms Profitability, Journal of Bource, 36-51}

5. (Peynor, 2000) {Peynor, R, (1379), Financial Management, translated by:

jahankhani,al,& Parsaiyan Ali, vol,2,Samt publication,6th Edition}

6. Modigliani, F,, Miller, M,, 1958, The Cost of Capital, Corporation Finance, and the Theory
of Investment, American Economic Review 48, 261–297

7. Nimalathasan, B,, Valeriu B,, 2010 Capital Structure and Its Impact on Profitability: A
Study of Listed Manufacturing Companies in Sri Lanka (2010), Revista Tinerilor
Economisti /The Young Economists Journal 13,55-61

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8. Anand Pandey,, 2003, “Efficiency of Indian Stock market”, Indian Economic Journal,
Vol, 36 No: 4, pp, 68-121,

9. Kin-Yip Ho,, and Albert K C Tsui,, 2004, “An Analysis of the Sectoral Indices of
Tokyo Stock Exchange: A Multivariate GARCH Approach with Time Varying
Correlations”, Stochastic Finance, Autumn School and International Conference,

10. Tasneem Alam,, and Muhammad Waheed,, 2004, “The Monetary Transmission
Mechanism in Pakistan: a Sectoral Analysis”, http://ssrn,com/abstract=971318.

11.Mufeed Rawashdeh,, and Jay Squalli,, 2005, “A Sectoral Efficiency Analysis of the
Amman Stock Exchange”, Working Paper No, 05-04.

12. Chin Wen Cheong, 2008, “A Sectoral Efficiency Analysis of Malaysian Stock
Exchange Under Structural Break”, American Journal of Applied Sciences, Vol 5 No:
10, pp, 1291- 1295,

13. Selvam M,, Indhumathi G,, and Rajesh Ramkumar R, (2010), “Analysis of Market
Efficiency of BSE- PSU Index”, SNS Journal of Finance, 1(3): pp, 1-10,

14.Almeida H,, Campello, M, & M, Weisbach, (2004), The cash-flow sensitivity of

cash, Journal of Finance, Vol - 59, Page 1777-1804

15. Jensen (1986), Agency costs of free cash flow, corporate finance, and takeover, American
Economic Review, Vol - 76, Page 323-329,

16. Flkender and Petesen (2006), Does the source of capital affect capital structure? Review
of Financial Studies, Vol - 19, Page 45-79.

17. Ralf, E, & David, F, (2008), Empirical capital structure research: new ideas, recent
evidence, & methodological issues discussion paper 2008-10 Munich Schoo of Management
University of Munichfakultat Fr betriebswirtschaft Ludwig Maximilians-universitat Munche

18.Nageswara, R, & Vishnus, R, (2007), Capital structure, industry pricing, & firm
performance, Proceeding of the 13th Asia pacific management conference Melbourne,
Australia, 2007,280-286

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 19.Tian, G, G, & Zeitun, R, (2007), Capital Structure & CorporatePerformance,
Australasian Accounting Business & Finance,N 4,P 4.

CHAPTER III
PROFILE OF THE COMPANY

3.1 COTTON TEXTILE INDUSTRY

The country’s cotton production has been steadily on the rise with better
farm practices. The average yield has increased to 500 kg per hectare. From a
level of importers of cotton, India has become an exporter of cotton earning a
name in the international market.

Besides individual mills are also simultaneously taking steps to improve

the cotton production along with Technology Mission on cotton (TCM), the
cotton development research Associations of organizations (CITI), South Indian
Textiles Mills Association (SIMA) and Tamilnadu State Textile Corporation
(TSTC). The resultant factor is quality and quantity of raw material supply has
substantially improved in the country. Due to globalization of our economy, the
conscious of quality inputs and pricing have become competitive to the
international standards and prices. Supply of quality raw material availability
sources of raw material from major cotton exporting countries.
In brief, good business is generally the result of good organization which can
emerge only if it consists of good people who work together as a team. The textile industry
occupies a unique place in our country. One of the earliest to come into existence in India, it
accounts for 14 per cent of the total industrial production, contributes to nearly 30 per cent of
the total exports and is the second largest employment generator after agriculture
The Indian textile industry is one of the largest in the world with a massive raw
material and textile-manufacturing base. Indian economy is largely dependent on the textile,
manufacturing and trade in addition to other major industries about 27 per cent of the in the
exchange earning are on account of export of textiles and clothing alone

Every organization is a deliberate and planned endeavour of people whose

common goal can be achieved through attainment of targets and goal by individual

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members in it. No organization can survive for long unless it takes care of prudent
utilization of resources particularly human resources.

Jaya Lakshmi Textiles Details

Name Of The Company Jaya Lakshmi Textiles

Date Of Incorporation 02 Jun, 1989

Status Active

Company Category Company limited by Shares

Company Sub-category Non-govt company

Company Class Private

Business Activity Manufacturing (Textiles)

Authorized Capital 175,0 lakhs

Paid-up Capital 175,0 lakhs

Paid-up Capital % 100,0

Registrar Office City Coimbatore

Registered State Tamil Nadu

Registration Number 2449

Registration Date 02 Jun, 1989

Listing Status Unlisted

AGM last held on 30 Sep, 2017

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Balance Sheet last updated on 31 Mar, 2017

3.4 BOARD OF DIRECTORS:

✔ Sri S V Arumugam - Chairman & Managing Director
✔ Sri K N V Ramani - Director
✔ Sri C S K Prabhu - Director
✔ Dr K R Thillainathan - Director
✔ Sri S Palaniswami - Director
✔ Sri K Sadhasivam - Director
✔ Sri V Sihamani – Director
✔ Sri A Senthil- chief executive officer
✔ Sri N Krishnaraj -company secretary
✔ Sri C S Balakumar-chief financial officer

3.5 Auditors:
M/s N Raghavendra Rao & Co
Chartered Accountants
INTERNAL AUDITORS:
M/s B M & Associates
Chartered Accountants

3.6 Bankers:

✔ The Karur Vysya Bank Limited

✔ Corporation Bank
✔ ICICI Bank Limit
✔ Oriental Bank of Commerce
✔ Indian Overseas Bank
✔ Bank of Maharastra
✔ Indian Bank

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✔ Allahabad Bank
✔ Kotak Mahindra Bank
✔ Bank of Bahrain and Kuwait B,S,C
✔ Industrial Finance Corporation of India Limited
✔ Tamilnadu Industrial Investment Corp, Limited

3.7 VARIOUS DEPARTMENTS:

The company had different departments and every department operations are different from one
another, All departmental functions are very useful to this study,

Departments operation in the company:

✔ Purchase Department
✔ Stores Department
✔ Production Department
✔ Quality Control Department
✔ Personnel Department
✔ Accounts & Finance Department
✔ Sales Department

Purchase department: Purchase is one of the most important functions of the industry, The
objective of purchase department is to ensure continuous availability of raw materials, The
organization has separate purchase department,

Store Department:

The following term are involved in the stores department,

Material Requisitions
Stores Intending
Register
Purchase order
Store
Purchase
Material Inward

19
Stores Ledger
Bin Card

QUALITY CONTROL:

Quality assurance department is the watch ward in the mills as it affects the user need as well as
profitability, The basic problem in cotton textile mill is to manufacture of a standard product from
as essentially not standard and highly variable raw materials, The quality of yarn should confirm
to certain accepted norms depending on the end use, Its function of the quality control to ensure
that the objective is realized, Quality controls are exercised at all key stages of processing, So that
the variation in the final product can, if necessary were traced back to the variation in raw
material from the process from which it originated, It’s also essential to keep the product under
continuous to obtain immediate warning of any new source of variation as may be caused by the
development of defect in the machine.

PERSONNEL & ADMINISTRATION:

Administration department consists of two distinctive functional areas namely

✔ Personnel Training and Development

✔ General Administration

Personal, Training and Development:

The operation coverage of this section includes

✔ Requirements
✔ Establishments Function
✔ Training & Development

They plan and recruit the requisite human Resources with necessary qualification, Skills, aptitude
to achieve the organization goals a settlement has been made with workers and the workload is
allotted to the workers as per the settlement, The settlement is for five year

20
PRODUCTION DEPARTMENT

The function performed in the production department is shown in the following flow chart
production department

Cotton/fiber bales

Removal of contamination

Mixing

Blow Room

Carding

Drawing

Simplex

Spinning

Cone Winding

Packing

ACCOUNTS & FINANCE:

ACCOUNTS:

21
 In accounts department they have well versed accountants to engage in maintaining the day to
day transaction of all the departments i,e,, Cotton Production, Stores, Sales, Time office and
other departments At the head office accounts departments include the following functions,
which are manned by, qualified and experience Mangers and officers

✔ Taxation
✔ Sales Taxes
✔ Internal Audit
✔ Banking
✔ Branch Accounts
✔ Consolidations of Accounts

The bank balance on each and every day is maintained, Bank balance statement and stock
statements at every day is maintained and the same is submitted to Managing Director on
every day. The company’s account and vouchers printings are computerized, The daily
transaction vouchers and bills are verified and signed by one of the director of the company,
The signed vouchers and the records are maintained properly

The company is maintaining the books are

✔ Cash Book
✔ Bank Book
✔ Purchase Journal
✔ Sales Journal
✔ Debtors & Creditors Ledger
✔ General Journal

The company Auditor verifies the account at the time of auditing, The accountant prepares
the balance sheet and profit and loss account of the company at the end of every year.

FINANCE:

Finance manager controls finance department and prepare the budget for every
months and the Managing Directors approves the same, Accordingly the amount is drawn from
the bank,

✔ Creditors

22
 ✔ Debtors

SALES:

Sales department handled by the sales manager, and also act as a marketing manager, The
company sells its finished product to local and international markets, The company mainly
produces following counts range for its production and change counts depending upon the market
demand and requirements,

✔ Ne 30s Combed / Carded 100 % Cotton Yarn

✔ Ne 32s Combed / Carded 100 % Cotton Yarn
✔ Ne 40s Combed / Carded 100 % Cotton Yarn
✔ Ne 52s Combed / Carded 100 % Cotton Yarn
✔ Ne 60s Combed / Carded 100 % Cotton Yarn
✔ Ne 80s Combed / Carded 100 % Cotton Yarn

Stock register is maintained to maintain the physical stock of the above counts are produce both
Knitting and Warping and also double and Hanks Yarns as per depends upon order. The counts of
30’s to 40’s Yarn produce in Unit II and Export their whole production to Hong Kong, China,
Singapore, and Malaysia, The counts of 40’s and above mainly produce in Unit I and sale made
directly and through consignment agents and Merchant Exports. As and when the stock s is ready
for consignment the sales manager dispatches the yarn as per sales, Contract under invoicing and
delivery notesRegarding export sales the samples are sent along with the test result, After getting
approval from the foreign buyer order pleased against L/C payment and accordingly the goods are
exported, The sales particulars are computerized and direct sales entries are entered at the time of
sales and dept sales invoices, consignment invoices are entered as and when bills are received from
the agents, Separate yarn at dept consignment agent’s places at the end of every month, Yarn
outstanding positions is taken once and the same is reported to Managing Director,

3.8 PERFORMANCE AND FUTURE PROSPECTS:

The performance of the company during the financial year is improved in spite of the recessionary
trend in the textile Industry, The turnover of the company has increased from Rs, 19,62 Crores to
Rs, 26,37 Crores. The above increase is due to increase in spindle in the unit II, The profitability of

23
the company is severely affected due to the heavy interest burden, Power cost and volatile
fluctuations in cotton price, To overcome this, they expect the remunerative price to yarn during
the current year, The export turnover is increased from 7,46 Crores to 13,96 Crores during the
year, Their product is well accepted in the overseas marked and hence they hope to improve the
turnover and profitability in the coming year.

CHAPTER -IV

ANALYSIS AND INTERPRETATION

4.1 The financial analysis of the company are analyses using the following tool:

 Solvency Ratio

 Short term solvency

 Long term solvency

 Profitability Ratio

24
  Comparative analysis

4.2 SOLVENCY RATIO:

The solvency ratio measures the extent to which assets cover commitments for future
payments, The solvency ratio indicates whether a company’s cash flow is sufficient to meet
its short term and long term liabilities.

The short term solvency ratio of the company can be analysed by calculating the following
ratios.

✔ Current Ratio

✔ Liquid Ratio

✔ Absolute liquid Ratio

CURRENT RATIO:

Current ratio is a liquidity ratio that measures whether or not the company has an enough
resources to meet its short term obligations. It compares a firm’s current assets to current
liabilities. The standard current ratio is said to be 2:1

FORMULA:

Current Ratio= Current Assets / Current Liabilities

For the year 2015,

Current ratio = Current assets / Current liabilities

=2,695,821,466/30,764,676,199

25
 =0.876 times

For the year 2016,

Current ratio = Current assets / Current liabilities

=3,209,012,583/3,969,763,686

=0.808 times

4.2.1 Table showing the current ratio of the company

Particulars 2018 2019

Current assets 2,695,821,466 3,209,012,583

Current liabilities 30,764,676,199 3,969,763,686

26
 Current ratio

SOURCE: secondary data

INTERPRETATION:

The above table shows a current ratio for the year 2017-2018 is 0.876 times and for 2018-2019 is
0.808 times. As per the current ratio is deceased from 0.876 to 0.808 in 2019 hence the company
is below the standard ratio.

4.2.1 CHART SHOWING CURRENT RATIO OF THE COMPANY:

27
 current ratio
0.9

0.88

0.86

0.84

0.82

0.8

0.78

0.76
2017-2018 2018-2019

4.2.2 LIQUID RATIO:

28
In finance the liquid ratio which is also known as acid –test ratio is a type of liquidity ratio which
measures the ability of a company to use its near cash or quick assets to extinguish or retire its
current liabilities immediately. A normal liquid ratio is considered to be 1:1

FORMULA:

Liquid ratio= Liquid assets / Current Liabilities

For the year 2018.

Liquid Ratio = Liquid assets / Current Liabilities

Liquid assets = Current assets – stock

=2,695,821,466-68,042,356

=3, 72, 759,474

Liquid Ratio = Liquid assets / Current liabilities

=3, 72, 759,474/3, 076, 476,199

=1.335 times

For the year 2019.

29
Liquidity Ratio = Liquid assets / Current Liabilities

Liquid Assets = Current Assets – Stock

=3,209,012,583-7,710,042,945

= 4,501,030,362

Liquidity Ratio = Liquid Assets/ Current Liabilities

=4,501,030,362/3,969,763,686

=1.133 times

4.2.2 TABLE SHOWING THE LIQUID RATIO OF COMPANY:

30
 Particulars 2017-2018 2018-2019

Liquidity assets 3,209,012,583 4,501,030,362

Current Liabilities 7,710,042,945 3,969,763,686

Liquidity Ratio 1.33 times 1.13 times

SOURCE: secondary data

INTERPRETATION:

The above table shows liquid ratio of 2017-2018 as 1.33 times and in 2018-2019 is 1.33 times as
the liquid ratio is decreased from 1.33 to 1.13 in 2019 .Hence the liquidity position of the
company above the standard ratio. It has to be focus on obtaining quick assets by meeting the
liabilities to increase its liquidity.

4.2.2 CHART SHOWING LIQUIDITY RATIO OF THE COMPANY:

31
 Liquity ratio
1.4

1.35

1.3

1.25

1.2

1.15

1.1

1.05

1
2017-2018 2018-2019

4.2.3 ABSOLUTE LIQUID RATIO:

The relationship between the absolute liquid assets and current liabilities is established by this
ratio. The most favourable and apt value for this ratio should be 1:2 .It means absolute liquid
assets worth one half of the value of current liabilities are sufficient for satisfactory liquidity
position of the company .

FORMULA:

32
 Absolute liquid ratio =Absolute liquid assets/ current liabilities

For the year 2015,

Absolute liquid ratio = Absolute liquid asset / Current liabilities

=3, 60, 553, 657/3,076,476,199

=0.117times

For the year 2016,

Absolute liquid Ratio = Absolute liquid assets / Current Liabilities

=3, 75, 688,178/3,969,763,686

=0.094 times

4.2.3 TABLE SHOWING ABSOLUTE LIQUID ASSETS OF THE

COMPANY

Particulars 2017-2018 2018-2019

33
 Absolute liquid assets 3,60,553,657 3,75,688,178

Current liabilities 3,076,476,199 3,969,763,686

Absolute liquid ratio 0.117 time 0.094 times

SOURCE: secondary data

INTERPRETATION:

The above table shows absolute liquid ratio of 2017-2018 as 0.117 times and in 2018-2019 is
0.094 times hence the absolute ratio is decreased from 0.117 to 0.208 in 2019.Since there is only
a slight difference in a absolute liquid ratio of the company. But that slight decreased in a ratio
cannot contribute more in company’s liquidity.

4.2.3 TABLE SHOWING THE ABSOLUTE RATIO OF COMPANY

34
 0.14 Absolute liquid ratio

0.12

0.1

0.08

0.06

0.04

0.02

0
2017-2018 2018-2019

4.3 LONG –TERM SOLVENLY RATIO:

35
 Solvency refers to the long-term financial stability of a company and its ability to cover
its long-term obligations. In other words it's the ability of a company to meet short and long-
term debts as they become due.

✔ Debt-equity ratio

✔ Fixed assets ratio

4.3.1 DEBT-EQUITY RATIO:

The Debt Equity ratio is the total value of debt or total liabilities divided by the total value of
equity. These values come from the balance sheet. An alternative calculation uses only long
term debt instead of total debt. This is the long term debt to equity ratio.

FORMULA:

Debt equity ratio=total liabilities/shareholder’s funds

For the year 2015

Debt equity ratio = total liabilities/ shareholders' s funds

=3,088,665,300/2,533,971,751

=1.21 times

For the year 2016

Debt equity ratio= total liabilities/shareholders 'a funds

=4,013,420,501/2,689,136,821

=1.499 times

4.3.1TABLE SHOWING THE DEBT EQUITY RATIO OF THE

COMPANY

36
 Particulars 2017-2018 2018-2019

Total liabilities 3,088,665,300 4,013,420,501

Shareholder ‘s funds 2,533,971,751 26,891,368,211

Debt equity ratio 1.21 times 1.49 times

SOURCE: secondary data

INTERPRETATION:

The above table shows the debt equity ratio of year 2017-2018 as 1.21time and in 2018-2019 is
1.49 time. Hence the debt equity ratio is increased from 1.21 times to 1.49 times in 2019. Hence
the total liabilities of the company is also increased from 2018 - 2019. Therefore company as to
look after the liabilities

4.3.1 CHART SHOWING DEBT-EQUITY RATIO OF THE COMPANY:

37
 debt-equity ratio

1.5

1.45

1.4

1.35

1.3

1.25

1.2

1.15

1.1

1.05
2017-2018 2018-2019

4.3.2 FIXED ASSTS RATIO:

38
A fixed asset is a long-term tangible piece of property or equipment that a firm owns and uses in
its operations to generate income. Fixed assets are not expected to be consumed or converted into
cash within a year. Fixed assets most commonly appear on the balance sheet as property plant and
equipment

FORMAUL:

Fixed asset ratio =fixed assets/long term funds

For the 2015

Fixed assets ratio =fixed assets/long term funds

= 4,396,597,458/5, 33,504,510

=8.24 times

For the 2016

Fixed assets ratio =fixed assets/long term funds

=4, 99, 329, 292, 668/6, 03, 363, 172

= 8.27 times

4.3.2 TABLE SHOWING THE FIXED ASSETS OF THE COMPAY

39
 Particulars 2017-2018 2018-2019

Fixed assets 4,396,597,458 49,9,329,292,668

Long term funds 5,33,504,510 6,03,363,172

Fixed assets ratio 8.24times 8.27times

SOURCE: secondary data

INTERPRETATION:

The above table shows the fixed assets ratio of year 2017-2018 as 8. 24 times and in 2018-2019 is
8.27 times .Hence the fixed assets is increased from 8.24 times to 8.27 times in 2019. Since the
fixed assets of the company is increase from year to year.

4.3.2 CHART SHOWING FIXED ASSETS RATIO OF THE COMPANY:

40
 Fixed assets ratio
8.275

8.27

8.265

8.26

8.255

8.25

8.245

8.24

8.235

8.23

8.225
2017-2018 2018-2019

4.4 PROFITABILITY RATIOS:

Profitability ratio is used to evaluate the company’s ability to generate income as compared to its
expenses and other cost Associated with the generation of income during a particular period .This
ratio represents the final result of the company.

TYPES OF PROFITABITIY RATIO:

41
✔ Gross profit ratio
✔ Net profit ratio
✔ Operating profit ratio
✔ Return on investment

4.4.1GROSS PROFIT RATIO:

Gross profit ratio is a profitability ratio that shows the relationship between gross profit and total
net sales revenue. It is a popular tool to evaluate the operational performance of the business.

FORMULA:

Gross Profit Ratio= Gross profit /Sales *100

For the year 2015,

Gross profit ratio = Gross profit / Sales * 100

=2,079,099,301/6,804,235,673*100

=30.5%

For the year 2016,

Gross profit ratio = Gross profit / Sales * 100

=2,471,578,231/7,710,042,945*1

=32.05%

4.4.1 TABLE SHOWING GROSS PROFIT RATIO OF THE COMPANY:

Particulars 2017-2018 2018-2019

42
 Gross profit 2,079,099,301 2,471,578,231

Sales 6,804,235,673 7,710,042,945

Gross profit ratio 30.5% 32.05%

SOURCE: secondary data

INTERPRETATION:

The above table shows the gross profit of year 2017-2018 as 30.5% and 2018-2019 is 32.05%
hence the gross profit is increased from 30.5% to 32.05% in 2019 thus it shows the tremendous
increased in the profitability of the company .This has an positive impact on both the growth and
life of the company

4.4.1CHART SHOWING GROSS PROFIT RATIO OF THE COMPANY:

43
 GROSS PROFIT

32.5

32

31.5

31

30.5

30

29.5
2017-2018 2018-2019

4.4.2 NET PROFIT RATIO:

44
The net profit percentage is the ratio of after – tax profits to net sales .It reveals the remaining
profit after all costs of production. Administration and financing have been deducted from sales
and income taxes recognized .Net profit is an indicator of cash flow.

FORMULA:

Net Profit Ratio = Net Profit / Sales * 100

For the year 2018,

Net profit ratio = Net profit / Sales * 100

= 1, 28, 263, 775/6,804,235,673*100

= 1.88%

For the year 2019,

Net profit ratio = Net profit / Sales*100

= 1, 85, 503, 418/7,710,042,945*100

= 2.40%

4.4.2 TABLE SHOWING NET PROFIT RATIO OF THE COMPANY

45
 Particulars 2017-2018 2018-2019

Net profit 1,28,263,775 1,85,503,418

Sales 6,804,235,673 7,710,042,945

Net profit ratio 1.88% 2.40%

SOURCE: secondary data

INTERPRETATIO:

The above table shows the net profit ratio of year 2017-2018 as 1.88% and for the year 2018-
2019 is 2.40% hence the net profit is increased from 1.88% to 2.40% in 2019.

4.4.2 CHART SHOWING NET PROFIT RATIO OF THE COMPANY:

46
 NET PROFIT RATIO

2.5

1.5

0.5

0
2017-2018 2018-2019

4.4.3 OPERATING PROFIT RATIO:

Operating profit ratio is an profitability or performance ratio is used to calculate the percentage of
profit a company produces from its operations. Prior to subtracting taxes and interest charges

FORMULA:

47
 Operating profit ratio = Operating profit / sales *100

For the year 2015,

Operating profit ratio= operating profit/sales*100

Operating profit = Gross profit – Operating Expenses

Gross profit = 2,079,099,301

Operating Expenses = 6,637,167,283

Operating profit = 2,079,099,301-6,637,167,283

=4,558,067,982/6,804,235,673*100

=66.9%

For the year 2016

Operating Ratio = Operating profit / Sales * 100

Gross profit =2,471,578,231

Operating expenses =7,441,168,703

Operating profit =2471578321-7,441,168,703

=4,969,590,472/7,710,042,945*100

=64.4%

4.4.3 TABLE SHOWING THE OPERATING RATIO OF THE COMPANY

Particulars 2014-2015 2015-2016

48
 Operating profit 4558067982 4969590472

Sale 6804235673 7710042945

Operating ratio 66.9% 64.4%

SOURCE: secondary data

INTERPRETATION:

The above table shows the operating profit of 2017-2018 as 66.9% and 2018-2019 as 64.4%.
Hence the operating profit is decreased from 66.9% to 64.4% in 2019 thus its operating profit is
decreased from one year to another year it’s not in stand position.

4.4.3 CHART SHOWING OPERATING RATIO OF THE COMPANY:

49
 Operating ratio
67.5

67

66.5

66

65.5

65

64.5

64

63.5

63

62.5
2014-2015 2015-2016

4.5 COMPARATIVE ANALYSIS:

Comparative statement used to measure the financial relationships between variables over two or
more reporting periods. Businesses use comparative statement as a way to identify their

50
competitive positions and operating results over a defined period. The item-by-item comparison
of two or more comparable alternatives Processes, product, qualifications, sets of data.

COMPARATIVE BALANCE SHEET OF JAYA LAKSHMI TEXTIAL

FOR THE YEAR 2018 & 2019

Particulars 2018 2019 Increase/decrease Percentage

Fixed assets

Tangible assets 4,39,65,97,458 4,99,32,92,668 -59,66,95,210 -13.57

Capital work in 49,83,85,325 20,11,93,974 297,191,351 59.63

progress

Fixed asset 4,894,982,783 5,194,486,642 2,99,503,859 46.06

Noncurrent 26,91,28,857 27,02,25,966 -1097109 -0.407

53,35,04,510 60,33,63,172 -69858662 -13.09

Investment
2,34,91,545 2,34,91545 NIL NIL

Long term loans

and advances

Noncurrent assets

Non-current 8,26,124,912 8,97,080,683 -70,955,771 -12.68

Fixed assets

+
5,721,107,695 6,091,567,325 2,28,548,088 33.38
Noncurrent

51
assets

Current assets

Inventories 1,53,45,60,583 1,96,19,55,116 -427,394,533 -27.85

Trade Receivables 73,99,23,234 87,91,41,936 -139,218,702 -18.81

Cash and cash 13,57,51,987 9,90,83,670 773,331,683 569.66

equivalents
22,48,01,670 16,70,95,943 57,705,727 25.66
Short term loans
6,07,83,992 10,17,35,918 -40,951,926 -67.37
and advances

Other current assets

Total current 1,963,297,466 8,209,012,583 -1,245,715,117 -63.45

assets

Total assts 7,684,405,161 14,300,579,908 -1,222,857,029 -30.07

Current liabilities

Short term 1,72,82,66,435 2.37,03,69,075 -642,102,640 -360.192

borrowing
-
Trade payables 59,46,08,596 86,18,63,329 267,254,733 -44.94

Other current 70,97,43,455 73,29,63,990 -23,220,535 3.271

liabilities
4,38,57,713 4,56,73,292 -1,815,579 -4.139
Short term
provisions

Total curren t 3,076,476,199 4,010,869,686 -934,393,487 -30.37

liabilities

52
 Long Term debt

Long term 2,05,84,25,109 1,76,57,75,655 292,649,454 14.21

borrowings
73,20,60,385 82,38,41,597 -91,781,212 -12.53
Deferred tax liabilities
1,21,89,101 25,50,815 9,638,285 79.07
(net)

Other long term

liabilities

Total long term 2,802,674,595 2592168067 210,506,528 75.10

debt

Total liabilities 5,879,150,794 6,603,037,753 5,216,113,041 88.72

Equity

Share capital 15,75,42,690 15,75,42,690 NIL NIL

Reserves and 2,37,64,29,061 2,53,15,94,131 -155,165,070 6.529

surplus

Total equity 2,533,971,751 2,689,136,821 -155,165,070 6.123

INTERPRETATION:

In this analysis the company’s financial position has developed while comparing the present
year statement with the past year statement, There is an increase of Rs.155,165, 070 in 2019

53
 CHAPTER – V

FINDINGS, SUGGESTION & CONCLUSION

5.1 FINDINGS:

A finding made on the financial analysis of Jaya Lakshmi textile is as follows:

RATIO ANAYLSIS:

Short term solvency:

✔ The current ratio reveals the ratio decreased in the year 2018-2019 which is 0 .808 times

and by the difference From the year 2017-2018 which is 0 .876 times and it’s below the
standard ratio of 2:1
✔ The liquidity ratio reveals the ratio decreased in the year 2018-2019 which is 1.33 times
and by the difference from the year 2017-2018 which is 1.13 times and it’s above the
standard ratio of 1:2
✔ The absolute liquid ratio reveals the ratio was decreased in the year 2017-2018 which is
0.117 times and by the difference from the year 2017-2018 which is 0.094 times

Long term solvency:

✔ The debt- equity ratio reveals the ratio was increased in the year 2018-2019 which is
1.211 times and by the difference from the year 2017-2019 which is 1.499 times
✔ The fixed assets ratio reveals the ratio was increased in the year 2018-2019 which is 8.24
times and by the difference from the year 2017-2018 which is 8.27 times

Profitability ratio:

✔ The gross profit ratio reveals the ratio increased in the year 2018-2019 which is 30.5% and
by the difference from the year 2017-2019 which is 32.05%

54
✔ The net profit ratio reveals the ratio increased in the 2018-2019 which is 1.88% and by the
difference from the year 2017-2018 which is 2.40%
✔ The operating profit ratio reveals the decreased in the 2018-2019 which is 66.9% and by
the difference from the year 2017-2018 which is 64.4%

5.2 COMPARITIVE BALANCE SHEET:

✔ The comparative balance sheet reveals that the total assets of 2018 is 7,684,405,161 when
compared with the next year 2019 is increased to 14,300,579,908
✔ This comparative balance sheet reveals that the total liabilities of 2018 is
5,879,150,794when compared with the next year 2019 is increased to 6,603,037,753
✔ The comparative sheet reveals that the total equity of 2018 is 2,533,971,751 when
compared with the next year 2019 is increased to 2,689,136,821

5.3 SUGGESTIONS:

✔ The company have low current ratio so it should increase its current ratio where it can
meet its short term obligation smoothly,

✔ Company should adopt suitable policies and measures to sell the products obtained during
the production process so that it will generate additional source of revenues.

✔ The profitability ratios of the company is not good. So the company wants to improve its
profit margin by expand the market.

✔ The company’s liquidity position is not better in the past two years. So I suggest that the
company maintain proper liquid funds like cash and bank balance.

✔ The company’s current assets should be increased.

5.4 CONCLUSION:

The financial analysis of Jaya Lakshmi textile is fair enough. The company is maintaining
good financial performance and the performance can improve further if the operating
administration and distribution expenses are controlled. Ratio analysis has a major

55
significance in analysing the financial performance of a company over a period of time.
Efforts should be made to increase the sales volume as well as the gross profit. Constant
efforts are required to maintain its liquidity position too. The company should focus on
getting of profits in the coming year by taking care internal as well as external factors. The
central focus of the study was to conduct a detailed study of the financial state of the
company by using ratio investigations and comparative financial statement by taking into
accounts the past years of the company’s financial statements. Examination and explanation
of financial statements shows that. the present financial position of the company. Thus the
financial analysis of Jaya Lakshmi textiles it seems to satisfactory.

56