project on fixed assets management
TRANSCRIPT
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
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
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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
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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
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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:
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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
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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.
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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.
2003: Super 210s (13.2 microns) fabrics under the Chairman's Collection.
2004: Super 220s (12.7 microns) fabrics under the Chairman's Collection.
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,
Total assets turnover = 146015.70 131853.91
= 1.11 times
86
For the year 2009,
Total assets turnover = 147779.78 163269.72
= 0.91 times
For the year 2010,
Total assets turnover = 142706.48 155488.39
= 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,
Net assets turnover = 146015.70 236584.11
= 0.62 times
For the year 2009,
Net assets turnover = 147779.78 252129.18
= 0.59 times
For the year 2010,
Net assets turnover = 142706.48 244666.95
= 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,
Fixed assets turnover = 146015.70 73310.87
= 1.99
Current assets turnover = 146015.70 94342.30
= 1.55
For the year 2009,
Fixed assets turnover = 147779.78 106115.24
=1.39
Current assets turnover = 147779.78 98165.33
= 1.51
For the year 2010,
93
Fixed assets turnover = 142706.48 98206.13
= 1.45
Current assets turnover = 142706.48 92960.82
= 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,
Working capital turnover = 146015.70 58543.04
= 2.49 times
For the year 2009,
Working capital turnover = 147779.78 57154.48
= 2.59 times
For the year 2010,
Working capital turnover = 142706.48 57282.26
= 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,
Return on Investment = 8169.66 (0.7) 236584.11
= 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,
Return on Investment = 2004.34 (0.7) 244666.95
=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,
Equity to fixed assets ratio = 6138.08 73310.87
= 0.084 or (8.4%)
For the year 2009,
Equity to fixed assets ratio = 6138.08 106115.24
= 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