FINANCE PROJECT

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1. Introduction:
Ratio analysis of financial statements stands for the process of determining and presenting
relationship of items and group of items in the statements .There are different ratios which an
analyst can employ depending on the purpose for which the analysis is made. A creditor, who likes
to know the ability to meet its current obligations, may think of current and liquid ratios. Similarly,
Managers and Investors who want to know operationally efficiency may think of return on
investments, turnover and fixed assets, earnings per share, book value per share and dividend per
share.
Ratio analysis is a powerful tool of financial analysis. It is a process of identifying the financial
strength and weakness of the firm by properly establishing relationship between the items of
Balance sheet and Profit and Loss a more meaningful understanding of the financial position and
performance of a firm.
A Ratio is a mathematical relationship between the two related items expressed in quantitative
form. A ratio is used as an index yard stick for evaluating the financial position and performance of
a firm.
Requisite for Ratio analysis
The requisition of Ratio Analysis to come in to being caused by the following facts:
Business facts displayed in Balance sheet and Profit and Loss account do not convey any pompous
individually. Their significance lies in the fact that they are inter-related. From this time on word,
there is need for fixing relationship between various but related items.
Ratio Analysis as a tool for the interpretation of financial statements is also important because
ratios help the analyst to have a profound cautiously in to the data given statements figure in their
peremptory forms shown in financial statements are neither significant nor to enable to the
compared.
Uses of ratio Analysis
The nature of ratio Analysis will differ depending on the purpose of the analyst. Ratio Analysis the
starting point for making plans before using any sophisticated fore casting and budgeting
procedures . The Ratio analysis is useful for the following reasons.

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Share Holders / Investors:
Investors or Shareholders, who have invested their money in the firm’s shares, are most concerned
about the firm’s earnings. They restore more confidence in those firms that show steady growth in
earnings .As such, they concentrate on the analysis of the firm’s present and future profitability.
They are also interested in the firm’s financial position to the extent it influences the firm’s
earnings ability. Owners or Investors desire primarily a basis for estimating capacity.
Creditors:
Creditors are concerned primarily with liquidity and ability and to pay interest on redeems loan
with a specified period.
Long-Term Creditors:
The Long term creditors are interested in the long term solvency and survival. They analyze about
firm’s solvency and profitability overtime, its ability to generate cash, to be able to pay interest and
repay principal and relationship between various sources of funds.
Employees:
The employees are also interested in the financial position of the concern especially profitability.
Their wages increase, the amount of fringe benefits are related to the volume of profits earned by
the concern. The employees make use of information available in financial statements.
Government:
Government is also interested to know the strength and weakness of the firm. Government makes
the future policies, plans on the basis of financial information available from various units of the
company
Management:
Finally management of the firm or Executives would be interested in every aspect of the financial
analysis. It is their overall responsibilities to see at the resources of the firm are used most
effectively, and the firm’s financial condition is sound. Through financial analysis they try to seek
answers to the following questions:

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Is the firm in a position to meets it current obligations.
What sources of Long-term finance are employed by the firm and what is the relationship between
them? Is there any danger to the solvency of the firm due to the employment of excessive debt how
efficiently does the firm uses its asses are the earnings of the adequate?
Do Investors consider the firm profitable and safe for the purpose of investing their money in the
shares of the firm?
Financial analysis may not provide exact answers to these questions, but it does indicate what can
be expected in the future.
Standards of comparison
A single ratio in itself does not indicate favorable or unfavorable condition. It should be compared
with some standards of comparison may consist of ratios calculated from the past financial
statements of the same firm. Ratios developed using the projected or proforma financial statements
of the same firm. Ratios of some selected firms, especially the most progressive and successful at
the same point of time.
Ratios of the industry to which the firm belongs
The easiest way to evaluate the performance of a firm is to compare its present ratios with the past
ratios. When financial ratios over a period of time are compared, it gives an indication of the
direction of change and reflects whether the firm’s financial position and performance has
improved, deteriorated constant over time. This kind of comparison is valid only when the firm’s
accounting policies and procedures have not changed over time. Sometimes, Future ratios are used
as the standard comparison. Future ratios can be developed projected or proforma financial
statements. The comparison of the past ratios with future ratios shows the firm’s relative strengths
and weakness in the past and the future. If the future ratios indicate weak financial position,
corrective actions.
Another way of comparison is to compare the ratios of one firm with some related firms in the same
industry at the same point of time. In most of the cases, it is more useful to compare firm’s ratios
with the ratio of a few carefully selected competitors who have similar operations. This kind of
comparison indicates the relative financial position and performance of the firm. A firm can easily
resort to such a comparison, as it is not difficult to get the published financial statements of the
similar firms. To determine the financial condition and performance of a firm, its ratios may be

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compared with average ratios of the industry of which the firm is a member. Industry ratios are
important standards in view of the fact that each industry as its characteristics which influence the
financial operating relationships
But there are certain practical difficulties in using industrial ratios.
It is difficult to get average ratios in the industry .Even if industry ratios are available they are
averages –averages of the ratios of strong and weak firms. Sometimes the spread may be so wide
that the average may not be little utility.
The averages will be meaningless and the comparison futile, if the firm with in the same industry
widely differ in their accounting policies and parties. If it is possible to standardize the accounting
data for the companies in the industry and eliminate extremely strong and extremely weak firms,
the industry ratios will prove to useful in evaluating the financial condition and performance of a
firm.
Types of Ratios
Several ratios can be calculated from the accounting data contained in the financial statements.
These ratios can be grouped in to various classes according to the financial activity or function to be
evaluated. As stated earlier, the parties that generally undertake financial analysis are short-term
creditors, Long-term creditors, owners and Management. Short-term creditor’s main interest is in
the liquidity position of the short -term solvency of the firm. Long-term creditors on the other hand,
are more interested in the long –term solvency and profitability of the firm. Similarly, owners
concentrate on the firm’s profitability analysis and analysis of the firm‘s financial conditions.
Management is interested in evaluating every activity of the firm. They have to protect the interest
of all parties and see that the firm grows profitability.
In view of the requirements of the user of ratios we may classifythem as follows:
Traditional classification
Balance sheet Ratios:
Balance sheet Ratios deal with the relation between two balance sheet items. Both the items must
however pertain to same Balance sheet.
Ex. Current Ratio

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Profit and Loss Account
These ratios deal with the relationship between two profit and loss account items, both the items
must belong to the same Profit and Loss Account.
Ex. Gross Profit Ratio
Composite or Mixed Ratios:
These ratios exhibit statement item and a Balance sheet item.
Ex. Stock Turnover Ratio
Classification Of Ratios:
RATIOS may be classified in a number of was keeping in view of the particular purpose. Rations
indicating profitability are calculated on the basis of the profit and loss account, those indicating
financial position are computed on the basis of the balance sheet and those which show operating
efficiency or productivity or effective use or resources are calculated on the basis of figures in the
profit and loss account and the balance sheet. This classification is rather crude and unsuitable to
determine the profitability and financial position of the business. To achieve this effectively, ratios
may be classified as:
1. Liquidity Ratios
2. Leverage Ratios
3. Activity Ratio
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 meets its current obligations. In fact, analysis of liquidity
needs the preparation of Cash Budgets and Cash flow statements .But liquidity ratios, by
establishing in a relationship between Cash and other Current obligations provide a quick measure
of liquidity.
Also that it is not too much meets its obligations, due to lack of sufficient liquidity, will result in
bad credit rating, loss of creditors’ confidence, or even in lawsuits resulting in the closure of the
Company. A very high degree of liquidity is also bad. Therefore, it is necessary to strike a proper
balance between Liquidity.

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The ratios, which measured and indicate the extent of firm’s liquidity, are known was liquidity
ratios or short-term solvency ratios commonly used liquidity ratios included.
a. Current Ratio (OR) Working Capital Ratio
b. Quick Ratio (OR) Acid Test Ratio
c. Cash Position Ratio (OR) Super Quick Ratio
2. Leverage Ratio:
The long term creditors like Debentures holders, financial Institutions, etc., are more concerned
with the firm’s long -term financial strength. To judge the long-term financial position of the firm,
Leverage or capital structure ratios are calculated. These ratios indicate the funds provided by the
owners and creditors. As a general, there should be an appropriate mix of the debt and owner’s
equity in financing the firm’s assets.
Firm with low leverage have less risk of loss, but they also have lower expected returns. Conversely
firms high leverage ratios have risk of large losses .But also have a chance of earning huge profits.
Therefore, before deciding whether a firm should have debt, must balance with higher expected
returns against increased risks. The most commonly examined leverage ratios are:
i) Debt Equity Ratio
ii) Fixed Assets Ratio
iii) Current Assets To Fixed Assets Ratio
3. Activity Ratios
The funds of creditors and owners are interested in various kinds of Assets to generate sales and
profit. The better the management of Assets, the larger will be 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 Turn over ratios because they indicate the speed with which assets are being
converted or turn over in to sales. Activity ratios thus involve a relationship between sales and the
various assets .A proper balance between Sales and Assets generally reflects that assets are
managed well.
Following are some of the important activity ratios.
i) Total assets turnover ratio
ii) Fixed assets turnover ratio
iii) Current assets turnover ratio

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iv) Stock turnover ratio
v) Debtors turnover ratio
vi) Creditors turnover ratio
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 the company should
be aimed at maximizing profits, irrespective of social consequences.
Profit is the difference between total Revenues and total Expenses over a period of time. Profits are
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.
Besides management of the company, creditors and owners are also interested in the profitability of
the firm.
Generally, two major types of profitability ratios are calculated.
1. Profitability in relation to sales.
2. Profitability in relation to Investment
i) Gross profit ratio
ii) Operating ratio
iii) Operating profit ratio
iv) Net profit ratio
Significance of Ratio Analysis
The ratio Analysis is the most powerful tool of the financial analysis. The many diverse groups of
people are interested in analyzing the financial information to indicate the operating efficiency and
the various aspects of the firm’s financial position. These people use ratios to determine a particular
financial characteristic of the firm in which they are interested. With the help of ratios one can
determine.
1. The ability of the firm to meet its current obligations.
2. The extent to which the firm is utilizing its long-term solvency by borrowing funds.
3. The efficiency with which the firm is utilizing its various assets in generating sales
Revenue.

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4. The overall operating efficiency and performance of the firm.
A short-term creditor will be interested in current financial position of the firm, while a long-term
creditor will pay more attention to the solvency of the firm and also be interested in profitability of
the firm.
The equity shareholders are generally concerned with their return and many bother about the firm’s
financial condition only when their earnings are depressed. In fact, it has to be realized that the
short-term and the long-term financial position and the profitability of the firm are based on every
kind of financial analysis, the emphasis would differ.
In credit Analysis, the analyst will usually select a few important ratios. He may use the Current
Ratio or Quick- Asset Ratio to judge the firm’s liquidity or Debt-paying ability.
The ratio Analysis is also useful in security analysis. The major focus on security analysis is on the
long-term profitability. From time to time, Management uses ratio Analysis to determine the firm’s
financial strength and weakness and accordingly takes action to improve the firm’s position.
The ratio of a firm in itself does not reveal anything. For meaningful interpretation, the ratios of the
firm should be compared with the ratios of similar firms and industry. This comparison will reveal
whether the firm is significantly out have like. The firm should undertake a detailed analysis to
spot out the trouble areas.
The Ratio Analysis will reveal the financial condition of the firm more reliably when trends in
ratios over time are analyzed. The significance of trend analysis of ratios lies in the fact the analyst
can know the direction of movement, i.e., whether the movement is favorable or unfavorable.
1.1 Objectives of the study
The main objective of the present study is to obtain a true in sight in to financial position of Precot
Meridian Ltd, Kodigenahali. The Ratio Analysis is a tool which helps to study the changes that
take place over a given period of time .It helps to 0judge the profitability, liquidity, stability and
turnover with the comparison of present ratios with the past ratios.
1.2 Scope of Study
It helps in evaluating the firm’s performance:
With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial
health, profitability and operational efficiency of the undertaking. Ratio points out the operating
efficiency of the firm i.e. whether the management has utilized the firm’s assets correctly, to

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increase the investor’s wealth. It ensures a fair return to its owners and secures optimum utilization
of firms assets
It helps inter-firm in comparison:
Ratio analysis helps in inter-firm comparison by providing necessary data. An interfere comparison
indicates relative position .It provides the relevant data for the comparison of the performance of
different departments. If comparison shows a variance, the possible reasons of variations may be
identified and if results are negative, the action may be initiated immediately to bring them in line.
It simplifies financial statement:
The information given in the basic financial statements serves no useful Purpose unless it’s
interrupted and analyzed in some comparable terms. The ratio analysis is one of the tools in the
hands of those who want to know something more from the financial statements in the simplified
manner
Advantages
1. To work out the profitability: Accounting ratio help to measure the profitability of
the business by calculating the various profitability ratios. It helps the management to know
about the earning capacity of the business concern. In this way profitability ratios show the
actual performance of the business.
2. To work out the solvency: With the help of solvency ratios, solvency of the company
can be measured. These ratios show the relationship between the liabilities and assets. In
case external liabilities are more than that of the assets of the company, it shows the
unsound position of the business. In this case the business has to make it possible to repay
its loans.
3. Helpful in analysis of financial statement: Ratio analysis help the outsiders just
like creditors, shareholders, debenture-holders, bankers to know about the profitability and
ability of the company to pay them interest and dividend etc.
4. Helpful in comparative analysis of the performance: With the help of ratio
analysis a company may have comparative study of its performance to the previous years. In
this way company comes to know about its weak point and be able to improve them.
5. To simplify the accounting information: Accounting ratios are very useful as they
briefly summarize the result of detailed and complicated computations.

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6. To work out the operating efficiency: Ratio analysis helps to work out the operating
efficiency of the company with the help of various turnover ratios. All turnover ratios are
worked out to evaluate the performance of the business in utilizing the resources.
7. To workout short-term financial position: Ratio analysis helps to work out the
short-term financial position of the company with the help of liquidity ratios. In case short-
term financial position is not healthy efforts are made to improve it.
8. Helpful for forecasting purposes: Accounting ratios indicate the trend of the
business. The trend is useful for estimating future. With the help of previous years’ ratios,
estimates for future can be made. In this way these ratios provide the basis for preparing
budgets and also determine future line of action
1.3 Limitations
The Ratio Analysis is a widely used technique to evaluate the financial position and performance of
a business. But there are certain problems in using ratios. The following are the limitations of the
Ratio Analysis.
 It is difficult to decide on proper basis for comparison:
 The comparison is rendered difficult because of differences in situations of two companies or
one company over years.
 The price level changes make the interpretations of ratios invalid.
 The differences in definitions of items of Balance sheet and income statements make the
interpretation of ratios difficult.
 The ratios calculated at a point of time are less informative and defective as they suffer from
short-term changes.
 The ratios are generally calculated from past financial statements and thus are no indications
of the future.
 Ratio Analysis is merely a tool of financial statements. Hence, ratios become useless if
separated from the statements from which they are computed.
 Ratios are only means of financial analysis and not an end in itself. Ratios have to be
interpreted and different people may interpret the same ratio in different

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Company Profile
Precot meridian is one of the oldest groups which started its mill in 1958, promoted by
N.Damodaran. Precot Meridian limited (PML) was incorporated in 1962 in Palakkad, Kerala, to
produce cotton yarns with an initial capacity of 12096 spindles. Precot Meridian limited made its
maiden issue in 1962. Production of cotton yarns commenced during 1964.The Precot has
symbolized Quality and Trust in the textile industry. With four decades of spinning experience
and a diverse range of products that include cotton yarns, sewing threads, fabrics and garments;
Precot is one of the few totally integrated textile players with a total turnover of 90 million US
Dollars. The Group has state of the art infrastructure facilities and skilled personnel to rise up to
customer expectations. The group has been accorded the status of „Export House‟ by The Cotton
Textile Export Promotion Council of India (TEXPROCIL).Precot exporting its products to
Belgium, China, Italy, Japan, Malaysia, Portugal, South Korea, Turkey and U.K.
Key mile stones
From an initial capacity of 12,096 Spindles at Kanjikode, Kerala (A-Unit) in 1964, now the
capacity of the unit is 57,600 spindles.
In 1983, the second unit (B-Unit) was set up at Hindupur, Andhra Pradesh with an initial
capacity of 28,800 Spindles and the current capacity is 69,120 spindles.
In 1992, the third unit (C-Unit) was set up at Walayar, Kerala as a 100% Export Oriented Unit
with a capacity of 12,096 Spindles and the current capacity is 25,344 spindles.
In 1995, an OE Unit (D Unit) was set up at Walayar adjacent to its third Unit with a capacity of
1344 Rotors.
In 1998, a yarn dyeing Unit (K Unit) was set up at Kolar, Karnataka to manufacture polyester
sewing threads and its capacity is 7 tons per day.
In 2001, a modern weaving plant at Sethumadai near Pollachi was set up to manufacture yarn-
dyed fabrics.
In January 2004, yarn dyeing operations were started at Perundurai, which caters to the needs of
the Sethumadai unit.
In 2006, Meridian Industries merged with Precot Mills and the name was changed to Precot
Meridian Ltd., and the current capacity is 66,154 spindles.
Precot Meridian is looking towards green power generation and has invested in 17 Windmills.
These windmills cater 50% of the power requirements of units located in Tamil Nadu.
Quality Systems
Precot Meridian being an ISO 9001 certified company is focused on providing the

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finest quality y yarns and fabrics. In order to meet customer requirements and to ensure
their satisfaction, Precot Meridian implemented
TQM in all the units for executing „5S‟ m methods of housekeeping and 3M methods to
control wastage of resources. Quality y S system is achieved through total employee
involvement, technical Innovation and continual improvement
Meridian Industries Limited merges with Precot
Meridian Industries Limited has been merged with Precot Mills Limited with effect from 01st
April, 2006. Meridian Industries Ltd (MIL) which was incorporated in the year 1993 was
promoted by Precot Mills Limited and around 70% of the shares of MIL were held by the
shareholders of Precot. To have larger capacity in a single company, instead of the capacities
being spread over in two companies having common shareholders, the merger was proposed.
This has been approved by the High Court of Madras vide its order dated 30th August and 1st
Sept, 06. As per the scheme of Merger, the shareholders of MIL are entitled for one share of
Precot for every two shares of MIL. Accordingly the share certificates of Precot were dispatched
in Dec, 06 to those shareholders who have surrendered the certificates of MIL. Shareholders of
MIL, who are yet to claim the certificates of Precot can, do so by sending the MIL certificates
along with the following application duly filled in to the register.
Product Profile
Precot Meridian B-Unit manufactures and markets high quality yarns like Slub Yarn, Organic
Yarn, Compact Yarn, Elitwist Yarn, etc. to domestic and international clients.
Slub Yarn
Slub yarn is manufactured with the technical support of CAIPO, Italy and LAKSHMI, India.
Precot Meridian manufactures all types of slub yarn - short, medium long, extra-long and reverse
slub yarn. Slub yarn comes under the fancy yarn domain as it creates certain visual effects in the
resulting fabric. Slub yarn fabric is characterized by an uneven surface; simple colors seem
appealing because of the regular change in texture right through the fabric.
Organic Yarn
Producing yarn that is certified as being organic involves a long procedure committed to eco-
friendly practices at various levels. The cotton used to produce organic yarn is grown on farms
that adhere to farming practices wherein chemical herbicides, growth-stimulants and pesticides

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are not used. Sustainable agricultural practices are put into use to ensure that the cotton used is
100% organic.
Precot Meridian sources this organic cotton at premium prices in order to ensure that the yarn
manufactured is also organic. This is certified by Control Union, Netherlands. This certificate is
renewed each year under the guidance of Control Union Netherlands after a strict audit process.
Apart from the measures taken to ensure the organic quality of the yarn, due care is taken to comply
with safety, labor and other mandatory issues, while producing organic yarn.
CompactYarn
Precot Meridian has introduced a novel way of reducing the extra hairiness that characterizes
conventional yarn. Conventional yarn spinning techniques result in low strength and irregular
appearance. This is overcome by the world class suessan Compact which uses the compact
spinning technique. This ensures that the yarn produced has quality characteristics such as
evenness, tensile strength and lowered hairiness.
Elitwist / CompactYarn
Elitwist / Compact yarn is used in specialist applications. The technology used has the tendency
to reduce the twisting triangle in the spinning machine. Elitwist yarn can withstand heavy loads
because of its increased strength and elongation. It maintains a good luster as the hairiness is
fairly low.
The enhanced strength of Elitwist yarn makes it a favored product with customers. Warping
breaks are reduced a great deal and sizes can be changed without too many cost implications. It
also lends itself to extensive dyeing possibilities.
Precot Meridian as one of the most well-known manufacturers of polyester sewing thread,
produces a wide range that suit the varied needs of end users. Both two ply and three ply yarns
that range from Ne 20 to Ne 60 are manufactured.
Polyesters CottonBlend
Precot Meridian manufactures a wide range of polyester cotton blends ranging from Ne 30 to 40.
Two different cotton blends manufactured include 40/60 and 50/50 poly cotton. These products
are well known for their quality and the ultimate fabric appearance is an important factor for PC
blends.
Cotton is grown in more than 60 countries and utilizes nearly 5% of total cultivatable land. More
than 25% of the worldwide pesticides production is used in cultivating cotton. As cotton is not a
food product, the pesticides used are more toxic. Indiscriminate use of such pesticides cause

Depletion of nature insect population in cotton growing countries

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
Pesticides going into river and affect drinking water seriously.

High level of pesticides in the soil affect food products if grown in that soil.

Cattle feed from these cotton leaves and seeds get affected/even poisoned some times.
Promoters of the organic movement
A) Food and agricultural organization of United Nation (1963)
b) International Federation of organic Agricultural movement (1972)
Global and Indian statistics:
18 counties produce organic cotton. India's organic cotton production is 11,500 tons in 2006.
GOTS:(Global Organic Textile Standard)
The standards are developed by international working group on the global textile standards as
part of the International textile conference. GOTS is intended to allow organic textile
manufacturer to export their product using this one certificate that will be well accepted in all
countries.
Inspection at site by certifying agency
Control Union is an organization with their base in Netherland's, carry out inspection at
manufacturer's sites for compliance to GOTS.

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Product Range
Combed Cotton Yarn
100% Organic combed cotton yarn for Knitting and
Weaving Ne 30/1 to 40/1
100% Organic combed cotton slub yarn for Knitting
and Weaving Ne 30/1 t40/1
Elitwist yarn for knitting and Weaving
Knitting Yarn Ne 30/1 to Ne 60/1 includes both
domestic and international cotton
Weaving Yarn Ne 40/1 to Ne 80/1
Doubled Yarn on TFO Ne. 50/2, 56/2, 66/2, 74/2
and 80/2 Gassed Yarn Ne.40/2 to 80/2 Compact
spun yarn for Weaving Ne 40/1 to Ne. 60/1 Fancy
yarn, Normal Slub yarn, Reverse Slub yarn Ne 24/1
to Ne 60/1 for Knitting and Weaving
Open End Spun Yarn Ne 2 to Ne 10
PolyesterSewing Thread
Bulk cones in raw white and optic white
as per shade card Around 600 shades
have been manufactured with the help of shade card
leaf lot Polyester sewing yarn ranges from Ne 20/2,
20/3, 48/2, 55/2, 55/3 and 60/3

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Corporate / Central office
Corporate office is situated at “Suprem” P.B No: 7161737, Pulikulam Road,
Coimbatore-641 045.Corporate office deals with raw material purchase, testing, approval and
allotment to group mills. In addition to that finalization of sales contract, approval of production-
planning, policy decisions etc. are also taken at corporate office.
A-Unit
Unit A is located at Kanjikode west, Palghat, Kerala and was established in the year 1964.the
area used is 2 Hectors surrounded by 15 Hectors of its own land. Present Spendlage of the
Factory is 57600,working 24 hours in a day and 7 days in a week and Spinning Hosiery yarns,
warp and weft yarns and doubled yarns counts ranging from 30s to 100s combed and cradle
varieties. All are ring spun yarns only.
B-Unit
B unit is at Kodigerahalli, H.S.Mandir, Hindupur (post), and Andhra Pradesh and won
established in the year 1983.Mill is located in an area of around 5 Hectars. Present installed
capacity of the mill is 72000 spindles engaged in manufacturing of ring spun yarn and working
24 hours a day and 7 days a week continuously.
Precot“B” at Glance
Precot Meridian Limited ‘B’ unit was established near Kodigenahalli, Hindupur, as ‘Precot
Mills Limited’ on 26th March 1983, with an installation capacity of 28,800 spindles which
was expanded to 51,840 spindles in 1991. It is nearly 5-kms from Hindupur. The founder of
Precot Meridian was late Sri. N.Damodaran Garu. Meridian Industries Limited has been
merged with Precot Mills Limited with effect from 01st April, 2006. Today the company
covered in 50 acres area. Around the company a lush green was developed so as to make the
environment free from pollution. The total number of employees working in the Precot
meridian are 1400 out of which 60 are staff, 641 are permanent, 525 casual workers and 174
are scheme workers. The Precot has symbolized Quality and Trust in the textile industry with
four decades of spinning experience and a diverse range of products that includes cotton
yarns, sewing threads, fabrics and garments; Precot is the one of the few totally integrated
textile players with a total turnover of 90 million US dollars
Company is recently awarded with “Parivathan Sustainability Awards 2011”
For “Water conservation through leadership” from textile and apparel sector.
C-Unit

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C-Unit is at Chandrapuram, Walayar Dam (post), Palghat (Dist), Kerala. Unit was established in
the year 1992.Factory is build up in an area of 9600 square meter. Present spindlage of the unit is
24720 company produces yarn ranging between 20s Ne to 40s Ne in both 100% Cotton Combed
varieties to suit different end uses. At present the yarn produced from the mil is being widely
used for knitting (Banians and Knitwear).
D-Unit
D-Unit is situated at Chandrapuram, Walayar Dam (post), Palghat (Dist), Kerala and was
established in the year 1995. This is located in an area of around 5.3 Hectors. Present capacity of
the factory is 1344 rollers, manufacturing yarn ranging between 60s Ne in both 100% Cotton and
Processed wastes in carded and combed varieties to suit different end uses. At present the yarn
produced from the mill is being widely used for Industrial fabrics and bed sheets.
About Precot C
1. Founder of the Group: Sri.V.N Ramachandran (Late) Sri.N.Damodaran
2. Chairman &Managing Director: Sri.D.Sarath Chandran
3. Starting of the Mill: January 92
4. Total Spindles Installed: 24288 Spindles (23*1056)
5. Raw-material: Cotton and Polyster staple fiber
6. Count of yarn processed: 20s to 40s cotton combed knitting yarn
7. End use of products: Sportswear, Casual wears
8. Raw-material used: Raw cotton, Polysters staples
9. Exporting countries: U.K, Germany, Isreil ,Mauritius, Singapore, Malaysia and Portugal
10. Number of workers in the mill: 126 permanent workers
About Precot D
1. Mill started on: October 95
2. Total rolors installed: 1344 (7*192)
3. Count of yarn manufactured: 10s OE,16s OE, 20s OE
4. End use of products: Weaving, knitting
5. Raw-material used: Raw cotton and Noils/Flat strips
6. Yarn sold in Local: 30% Export: 70%

18. P a g e 18 | 57
Board of Directors
The company has a very balanced structure of the board of directors, which primarily takes
care of the business needs and stakeholders' interest. The composition of the board also
complies with the provisions of section 149 of the Act, and regulation 17 of the listing
regulation.
The board comprises of eleven directors which includes three executives and eight non-
executive directors as on 31-Mar-2016.
During the year 2015-16, the board of directors met five times at the registered office of the
company on 15-May-2015, 07-Aug-2015, 06-Nov-2015, 09-Feb-2016 and 18-Mar-2016.
The last annual general meeting (AGM) was held on 28-Aug-2015.

19. P a g e 19 | 57
Composition of directors and their attendance
Name of the director Category
Attendance No. of
director
ships in
other
compani
es*
No. of
committees**
Boar
d
Meeti
ngs
Las
t
AG
M
Mem
ber
Chair
man
D Sarath Chandran
(DIN : 00001885)
Chairman - Executive – Promoter 5 Yes 6 3 -
Vijay Mohan
(DIN : 00001843)
Non-Executive – Promoter 4 No 6 2 -
Sumanth Ramamurthi
(DIN : 00002773)
Non-Executive – Independent 5 No 7 1 -
A Ramkrishna
(DIN : 00001886)
Non-Executive – Independent 5 Yes 4 - 2
Jairam Varadaraj
(DIN : 00058056)
Non-Executive – Independent 4 No 8 3 1
Ashwin Chandran
(DIN : 00001884)
Vice Chairman and Managing
Director - Executive - Promoter
5 Yes 4 1 -
Vijay Venkatasamy
(DIN : 00002906)
Non-Executive – Independent 5 No 4 1 1
C N Srivatsan
(DIN : 00002194)
Non-Executive – Independent 5 No 1 2 -
Suresh Jagannathan
(DIN : 00011326)
Non-Executive – Independent 3 No 3 2 -
Prashanth Chandran
(DIN : 01909559)
Joint Managing Director -
Executive – Promoter
4 Yes 1 - -

20. P a g e 20 | 57
Organization Structure
Managing Director
Executive Director
Financial Purchase Production Marketing Public
Manager Manager Manager Manager Relation
Officer
Production Machine Quality
Supervisor Technician Control Officer
Foreman Machine Operator Lab Technician

21. P a g e 21 | 57
Research Methodology
Objectives of the study
This study is mainly focused to examine to the overall financial variability of Precot
Meridian. Ltd has started below
 To analyze the change in the financial position over a span of five years.
 To evaluate the financial position of the company in terms of solvency,
profitability, turnover and earnings ratios.
 To suggest effective measures in the existing system of the company.
Scope of the Study
The study has great significance and provide benefits to various parties who directly
or in directly interact the company.
 It is benefits to the top management of the company by providing crystal clear
picture regarding to the important financial aspects of the Precot Meridian .Ltd
1. The study mainly attempts to analyse the financial performance of the company
selected for the study. The financial authorities can use this for evaluating their
performance in future, which will help to analyse financial statements and help to
apply the resources of the company properly for the development of the company and
IT employees to bring overall growth.
Need For the Study
• The study mainly attempts to analyse the financial performance of the company
selected for the study. The financial authorities can use this for evaluating their
performance in future, which will help to analyse financial statements and help to
apply the resources of the company properly for the development of the company and
IT employees to bring overall growth
Research Design
In view of the objective of the study listed above an exploratory research design has been
adopted. Exploratory research is one which is largely interprets already available

22. P a g e 22 | 57
information and it lays particular emphasis on analysis and interpretation of the existing
and interpretation of the existing and available information it makes use of secondary
data.
Sources of Data
The data collected related to the study was divided into two parts.
1. Primary data
2. Secondary data
Primary data
The primary data was collected mainly with the interactions and discussions with the
company’s executives.
Secondary data
 Secondary data refers to data that was collected by someone other than the users.
Common sources of secondary data for social science include censuses,
information collected by government departments, organisational records and data
that was originally collected for other research purposes.
 Company’s annual report
 Company’s website
 Manual
Limitations of the study
 The research is confined with the time limitation for one month the study is one
for academic purpose and cannot be generalized to the entire industry.
 The research is confined with the time limitation for one month the study is one
for academic purpose and cannot be generalized to the entire industry.
 All statement is prepared by financial accounted any analysis done and conclusion
reached is influence by personal judgment.

23. P a g e 23 | 57
1. Liquidity Ratios:
a. Current Ratio:
This is the most widely used ratio. It is the ratio of current assets and current liabilities.
It shows a firm’s ability to cover its current liabilities with its current assets. Generally 2:
1 is considered ideal for a concern Le. Current assets should be twice of the current
liabilities. If the current assets are two times of the current liabilities, there will be no
adverse effect on business operations when the payment of current liabilities is made.
If the ratio is less than 2, difficulty may be experienced in the payment of current
liabilities and day to day operation of the business may suffer if the ratio higher then to it
is very comfortable for the creditor but, for the business concern, it is indicator of the idle
funds a lack of enthusiasm for work. It is calculated as follows:
Current Ratio =
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭𝐬
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Current Assets: Inventories
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Current liabilities: Creditors
Bank Overdraft
Other Current Liabilities and Provisions

24. P a g e 24 | 57
Table: 4.1.1
Current Ratio
Years Current assets Current liabilities Current ratio
2012-13 247.28 106.81 2.31
2013-14 297.17 130.12 2.28
2014-15 219.86 99.12 2.21
2015-16 216.1 116.65 1.85
2016-17 237.41 142.95 1.66
Graph: 4.1.1
Current Ratio
Interpretation
The firm’s current ratio refers that the company’s short-term solvency. The standard
current ratio is 2:1; the current ratio is not equal to standard ratio in the entire study
period from 2012-13 to 2016-2017.the ratio is too low then the standard ratio 2:1.the
above chart indicates that the current ratio of the PRECOT MERIDIAAN LIMITED is
decreased year by year except in the year 2014-15 because of high current liabilities.
0
0.5
1
1.5
2
2.5
2012-13 2013-14 2014-15 2015-16 2016-17
2.31 2.28 2.21
1.85
1.66
YEARS
Current ratio

25. P a g e 25 | 57
b. Quick ratio (or) Acid test ratio:
This is the ratio of liquid assets to liquid liabilities. It shows a firm’s ability to meet
current liabilities with its most liquid or quick assets.
The standard ratio 1: 1 is considered ideal ratio for a concern. Liquid assets are those,
which can be easily converted into cash within a short period of time without loss of
value. This ratio can be calculated by using the formula.
Quick Ratio =
𝒒𝒖𝒊𝒄𝒌 𝑨𝒔𝒆𝒕𝒔−𝑰𝒗𝒗𝒆𝒏𝒕𝒓𝒊𝒆𝒔
𝒒𝒖𝒊𝒄𝒌 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Quick assets I: Sundry Debtors,
Cash & Bank Balance
Loans & Advances
Table: 4.1.2
Quick Ratio
years QUICK ASSETS
QUICK
LIABILITIES QUICK RATIO
2012-13 98.61 102.61 0.68
2013-14 110.64 124.8 0.76
2014-15 122.39 96.22 1.27
2015-16 87.68 114.09 0.88
2016-17 89.67 131.86 0.96

26. P a g e 26 | 57
Graph: 4.1.2
Quick Ratio
Interpretation:
From the above table, we see that the quick ratio was standard during the study period.
The ratio was 0.68 1 in 2013, which increased to 1.27 in 2015. The highest liquid ratio
was recorded as 1.27 during the year 2014-15, which is also higher than the standard ratio
that is 1: 1.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2012-13 2013-14 2014-15 2015-16 2016-17
0.68
0.76
1.27
0.88
0.96
YEARS
Quick Ratio

27. P a g e 27 | 57
Cash Ratio
The cash ratio is the ratio of a company's total cash and cash equivalents to its current
liabilities. The metric calculates a company's ability to repay its short-term debt; this
information is useful to creditors when deciding how much debt, if any, they would be
willing to extend to the asking party. The cash ratio is generally a more conservative look
at a company's ability to cover its liabilities than many other liquidity ratios because other
assets, including accounts receivable, are left out of the equation
Cash ratio=
𝐶𝑎𝑠ℎ 𝑜𝑟 𝐵𝑎𝑛𝑘 𝑏𝑎𝑙𝑎𝑛𝑐𝑒
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Table: 4.1.3
Cash Ratio
Years Cash Current liabilities Cash ratio
2012-13 10.36 106.81 0.09
2013-14 3.66 130.12 0.02
2014-15 3.09 99.12 0.03
2015-16 2.66 116.65 0.02
2016-17 4.83 142.95 0.03

28. P a g e 28 | 57
Graph: 4.1.3
Cash Ratio
Interpretation
High cash ratio indicates the ideal cash resaves in the company but lo cash ratio is not
favorable to company by studying the above data The Company has in sufficient cash
reserves with it. In the study period company’s average cash ratio is 2012-13 year is 0.09
only. It has to maintain the fluctuation of cash ratio.
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
2012-13 2013-14 2014-15 2015-16 2016-17
0.09
0.02
0.03
0.02
0.03
AxisTitle
Axis Title
Cash ratio

29. P a g e 29 | 57
Debt- Equity Ratio:
The Debt-Equity measures the long term financial solvency of a business concern. The
ratio is
 Also popularly known as external internal equity ratio. This ratio relates the
owner’s stake in the
 Business vis-à-vis that of outsides. Alternatively it reflects the relative claims of
creditors and share
 Holders against the asset of the unit. This ratio can also be viewed as indicating
the relative proportion
 Of debt amends equity in financing the assets of the business unit. Debt-equity
(DE) ratio is directly
 computed by dividing total debt by net worth:
Debt equity=
𝐷𝑒𝑏𝑡
𝐸𝑞𝑢𝑖𝑡𝑦(𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ)
Table: 4.2.1
Debt Equity Ratio: 4.2.1
Years Debt Equity Debt equity ratio
2012-13 399.4 139.75 2.85
2013-14 403.29 160.01 2.52
2014-15 339.75 134.65 2.52
2015-16 351.93 79.14 4.44
2016-17 315.59 79.46 3.97

30. P a g e 30 | 57
Graph: 4.2.1
Debt Equity Ratio
Interpretation:
Debt-Equity ratio of the company is fluctuating year by year. It various from 2015-16
ratio is High i.e.…, 4.44 and remaining years 2012-13-2.85, 2013-14-2.52, 2014-15-2.52,
2016-17-3.97 this years are fluctuated the ratio
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2012-13 2013-14 2014-15 2015-16 2016-17
2.85
2.52 2.52
4.44
3.97
YEARS
Debt equity ratio

31. P a g e 31 | 57
Proprietary Ratio
The proprietary ratio (also known as net worth ratio or equity ratio) is used to evaluate
the soundness of the capital structure of a company. It is computed by dividing the
stockholders’ equity by total assets.
Proprietary ratio =
𝑺𝒉𝒂𝒓𝒆 𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝒇𝒖𝒏𝒅𝒔
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Table: 4.2.2
Proprietary Ratio
Years
Shareholders fund or
Net worth Total Assets Proprietary Ratio
2012-13 139.75 539.18 0.25
2013-14 160.01 563.28 0.28
2014-15 134.65 474.39 0.28
2015-16 79.14 431.08 0.18
2016-17 79.46 395.05 0.2

32. P a g e 32 | 57
Graph: 4.2.2
Proprietary Ratio
Interpretation:
Proprietary ratio is in the year of 2013-14, 2014-15 are equal in the ratio of 0.28, and
remaining years are fluctuating. A low Proprietary include greater risk for the company.
0
0.1
0.2
0.3
2012-13 2013-14 2014-15 2015-16 2016-17
0.25
0.28 0.28
0.18 0.2
AxisTitle
Years
ProprietaryRatio

33. P a g e 33 | 57
Debt Ratio
The debt ratio compares a company's total debt to its total assets. This provides creditors
and investors with a general idea as to the amount of leverage being used by a company.
The lower the percentage, the less leverage a company is using and the stronger its equity
position. In general, the higher the ratio, the more risk that company is considered to have
taken on.
Debt Ratio=
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
Table: 4.2.3
Total Debt
Years Total debt Capital employed Total debt Ratio
2012-13 399.4 432.37 0.92
2013-14 403.29 433.16 0.93
2014-15 339.75 375.27 0.9
2015-16 351.93 314.43 1.11
2016-17 315.59 252.1 1.25

34. P a g e 34 | 57
Graph: 4.2.3
Total Debt Ratio
Interpretation:
The average debt ratio from the study period 2016-17 is 1.25, it means the owners have
provide remaining finance of 44.7% which is lower than the standard ratio.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2012-13 2013-14 2014-15 2015-16 2016-17
0.92 0.93 0.9
1.11
1.25
AxisTitle
YEARS
Total debt Ratio

35. P a g e 35 | 57
Fixed Assets Turnover Ratio
1. The firm may wish to know its efficiency of utilizing fixed assets and current assets
separately
Fixed assets turnover Ratio=
𝑆𝑎𝑙𝑒𝑠
𝐹𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
Table: 4.3.1
Fixed Assets Turnover Ratio
Years Sales
Net fixed assets or
net block
Fixed assets turnover
ratio
2012-13 667.17 208.33 3.2
2013-14 738.19 363.65 2.02
2014-15 731.61 335.22 2.18
2015-16 683.69 313.23 2.18
2016-17 679.3 279.02 2.43

36. P a g e 36 | 57
Graph: 4.3.1
Fixed Assets Turn Over Ratio
INTERPRETATION:
The above table shows the Fixed Asset Ratio during the study period. The Lowest Ratio
was recorded as 2.02 in 2013-14 and the highest ratio was recorded as 3.2 in 2012-13. It
means the firm does not raised adequate long-term funds to meet its Fixed Asset
requirements.
0
1
2
3
4
2012-13 2013-14 2014-15 2015-16 2016-17
3.2
2.02 2.18 2.18 2.43
AxisTitle
Years
Fixed assets turn over ratio

37. P a g e 37 | 57
TotalAssets Turnover Ratio
Asset turnover ratio measures the value of a company’s sales or revenues generated
relative to the value of its assets. The Asset Turnover ratio can often be used as an
indicator of the efficiency with which a company is deploying its assets in generating
revenue.
Asset Turnover =
𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Table: 4.3.2
Total Assets Turnover Ratio
Years Sales Total assets
Total Assets turnover
ratio
2012-13 667.17 539.18 1.24
2013-14 738.19 563.28 1.31
2014-15 731.61 474.39 1.54
2015-16 683.69 431.08 1.59
2016-17 679.3 395.05 1.72

38. P a g e 38 | 57
Graph: 4.3.2
Total Assets Turnover Ratio
Interpretation
The high turnover ratio tells the efficiency of the management and utilization of assets.
The low turnover ratios are indicative of underutilizing of available resources and
presence of idle capacity. The total asset turnover ratio is gradually increasing from 2012-
13 to 2016-17 it shows the firm maximum utilization of its assets.
0
0.5
1
1.5
2
2012-13 2013-14 2014-15 2015-16 2016-17
1.24 1.31
1.54 1.59
1.72
AxisTitle
Years
TotalAssets turnover ratio

39. P a g e 39 | 57
Net Working Capital Turnover Ratio:
Working capital turnover is a measurement comparing the depletion of working
capital used to fund operations and purchase inventory, which is then converted into sales
revenue for the company. The working capital turnover ratio is used to analyze the
relationship between the money that funds operations and the sales generated from these
operations. For example, a company with current assets of $10 million and current
liabilities of $9 million has $1 million in working capital, which may be used
in fundamental analysis
Net Working Capital Turnover Ratio=
𝑆𝑎𝑙𝑒𝑠
𝑁𝑒𝑡 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙
Table: 4.3.3
Net Working Capital Turnover Ratio
Years Net sales net working capital
Working capital
turnover ratio
2012-13 667.17 140.47 4.74
2013-14 738.19 167.05 4.41
2014-15 731.61 120.74 6.05
2015-16 683.69 99.45 6.87
2016-17 679.3 94.46 7.19

40. P a g e 40 | 57
Graph: 4.3.3
Net Working Capital Turnover Ratio
Interpretation:
The net working capital turnover ratio shows the amount of sales generated with the
investments in the Net working capital. The net working capital turnover ratio of the
company is increasing which signifies that the company is able to utilize its net working
capital effectively in generated the sales.
The working capital turnover ratio is highly increased in 2016-17 so the company has to
maintain the stability.
0
1
2
3
4
5
6
7
8
2012-13 2013-14 2014-15 2015-16 2016-17
4.74 4.41
6.05
6.87 7.19
AxisTitle
Axis Title
Net Working capital turn over ratio

41. P a g e 41 | 57
Debtors Turn Over Ratio:
The receivables turnover ratio is an accounting measure used to quantify a firm's
effectiveness in extending credit and in collecting debts on that credit. The receivables
turnover ratio is an activity ratio measuring how efficiently a firm uses its assets.
Receivables turnover ratio can be calculated by dividing the net value of credit sales
during a given period by the average accounts receivable during the same period.
Average accounts receivable can be calculated by adding the value of accounts receivable
at the beginning of the desired period to their value at the end of the period and dividing
the sum by two.
Debtors Turn Over Ratio=
𝑵𝒆𝒕 𝒄𝒓𝒆𝒅𝒊𝒕 𝒔𝒂𝒍𝒆𝒔
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒆𝒃𝒕𝒐𝒓𝒔
Table: 4.3.4
Debtors Turnover Ratio
Years Total sales
Closing stock or
Inventory Debtors turnover ratio
2012-13 667.17 148.67 4.48
2013-14 738.19 186.53 3.95
2014-15 731.61 97.47 7.5
2015-16 683.69 128.42 5.32
2016-17 679.3 147.74 4.59

42. P a g e 42 | 57
Graph: 4.3.4
Debtors Turnover Ratio
Interpretation
Debtor’s turnover ratio indicates the number of times sales to its debtors each year the
higher the value of debtors turnover the more efficient is the management of credit. The
Debtors turnover ratio of the company is decreasing which signifies that the company is
not able to manage its debtor’s efficiency. From the above table and chart it can be
known that the year 2012-13 and 2013-14 will be decreased then 2014-15 again will be
increased.
0
2
4
6
8
2012-13 2013-14 2014-15 2015-16 2016-17
4.48
3.95
7.5
5.32
4.59
AxisTitle
Years
Debtors turn over ratio

43. P a g e 43 | 57
Inventory Turnover Ratio
Inventory turnover is a ratio showing how many times a company's inventory is sold and
replaced over a period of time. The days in the period can then be divided by the
inventory turnover formula to calculate the days it takes to sell the inventory on hand. It
is calculated as sales divided by average inventory.
Inventory Turnover Ratio=
𝑪𝒐𝒔𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒔𝒐𝒍𝒅
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
Table: 4.3.5
Inventory Turnover Ratio
Years Cost of goods sold
Average inventory
or Average stock
Inventory turnover
ratio
2012-13 574.99 140.42 4.09
2013-14 699.03 167.6 4.7
2014-15 674.68 142 4.75
2015-16 672.14 112.94 5.95
2016-17 649.86 138.08 4.7
.

44. P a g e 44 | 57
Graph: 4.3.5
Inventory Turnover Ratio
Interpretation:
Usually a high inventory turnover ratio indicates efficient management of inventory
because more frequently the stock are sold, the lesser amount of money is required to
finance the inventory. The inventory ratio in the financial year 2013-14 is 4.7 & 2014-15
is 4.75 & 2015-16 is 5.95 they increased year by year. In 2016-17 the ratio will be
decreased at 4.7.
0
1
2
3
4
5
6
2012-13 2013-14 2014-15 2015-16 2016-17
4.09
4.7 4.75
5.95
4.7
AxisTitle
Years
Inventary turn over ratio

45. P a g e 45 | 57
Net Profit Ratio
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. As such, it is one of the best measures
of the overall results of a firm, especially when combined with an evaluation of how well
it is using its working capital. The measure is commonly reported on a trend line, to judge
performance over time. It is also used to compare the results of a business with its
competitors.
Net profit is not an indicator of cash flows, since net profit incorporates a number of non-
cash expenses, such as accrued expenses, amortization, and depreciation.
The formula for the net profit ratio is to divide net profit by net sales, and then multiply
by 100. The formula is:
Net Profit Ratio=
𝑷𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙
𝑵𝒆𝒕 𝒔𝒂𝒍𝒆𝒔
Table: 4.4.1
Net Profit Ratio
Years Net profit Net sales Net profit Ratio
2012-13 76.06 667.17 11.4
2013-14 80.82 738.19 10.94
2014-15 20.89 731.61 2.85
2015-16 28.59 683.69 4.81
2016-17 28 679.3 4.12

46. P a g e 46 | 57
Graph: 4.4.1
Net Profit Ratio
Interpretation
The above table shows the net profit percentage. 2012-13 the net profit is high in the year
2013-14 decrease few percentage. And 2014-15 net profit decreased compare to previous
year. The company maintaining the smooth growth percentage in net profit.
0
2
4
6
8
10
12
2012-13 2013-14 2014-15 2015-16 2016-17
11.4 10.94
2.85
4.81 4.12
AxisTitle
Years
Net profitRatio

47. P a g e 47 | 57
Gross Profit Ratio
Gross profit margin is a financial metric used to assess a company's financial health and
business model by revealing the proportion of money left over from revenues after
accounting for the cost of goods sold (COGS). Gross profit margin, also known as gross
margin, is calculated by dividing gross profit by revenues. Also known as "gross margin."
Gross Profit Ratio=
𝑮𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝒔𝒂𝒍𝒆𝒔
Table: 4.4.2
Gross Profit Ratio
Years Gross profit Net sales Gross profit ratio
2012-13 92.18 667.17 13.81
2013-14 39.16 738.19 5.3
2014-15 56.93 731.61 7.78
2015-16 11.55 683.69 1.68
2016-17 29.44 679.3 4.33

48. P a g e 48 | 57
Graph: 4.4.2
Gross Profit Ratio
Interpretations
The above table shows the Gross Profit Ratios. The Highest Gross Profit Ratio was
recorded as 13.81 in 2012-13 and the Lowest Gross Profit Ratio was recorded as 1.68 in
2015-16 by seeing this ratio, we can say that the Gross Profit of the Firm is bad because
the cost of goods sold is fluctuating every year.
0
2
4
6
8
10
12
14
2012-13 2013-14 2014-15 2015-16 2016-17
13.81
5.3
7.78
1.68
4.33
AxisTitle
Years
Gross profit ratio

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Operating Profit Ratio
Operating Profit margin measures how much profit a company makes on a dollar of sales,
after paying for variable costs of production such as wages and raw materials, but before
paying interest or tax. It is calculated by dividing a company’s operating profit by its net
sales.
Operating Profit Ratio=
𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝒑𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝒔𝒂𝒍𝒆𝒔
Table: 4.4.3
Operating Profit Ratio
Years Operating cost Net sales Operating profit Ratio
2012-13 76.06 667.17 0.11
2013-14 80.82 738.19 0.1
2014-15 20.89 731.61 0.02
2015-16 28.59 683.69 0.04
2016-17 28 679.3 0.04

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Graph: 4.4.3
Operating Profit Ratio
Interpretation:
Higher operating profit ratio indicates better performance and lower operating profit ratio
is unfavorable. By seeing the graph it is clear that the company’s performance is high in
the year 2012-13 – 0.11 and it decreased year by year.
0
0.05
0.1
0.15
2012-13 2013-14 2014-15 2015-16 2016-17
0.11
0.1
0.02
0.04 0.04
AxisTitle
Years
Operatingprofit ratio

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Return on Equity Capital
Return on equity (ROE) is the amount of net income returned as a percentage
of shareholders equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders have
invested.
ROE is expressed as a percentage and calculated as:
Net income is for the full fiscal year (before dividends paid to common stock holders but
after dividends to preferred stock.) Shareholder's equity does not include preferred shares.
Return on Equity Capital=
𝑷𝒓𝒐𝒇𝒊𝒕 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙
𝑵𝒆𝒕 𝒘𝒐𝒓𝒕𝒉
𝑿𝟏𝟎𝟎
Table: 4.5.1
Return on Equity Capital
Years Profit after tax Net worth Return on equity
2012-13 20.69 139.75 14.8
2013-14 30.45 160.01 19.03
2014-15 -32.64 134.65 -24.24
2015-16 -55.51 79.14 -70.14
2016-17 0.32 79.46 0.4

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Graph: 4.5.1
Return on Equity Capital
Interpretation:
The return on equity shows the amount of return earned for the equity shareholders. If the
return on equity is constant it indicates that the investments in the company is
unfavorable and if the return is low it is not favorable to invest the return on equity of the
company is fluctuating from year to year.
-80
-60
-40
-20
0
20
2012-13 2013-14 2014-15 2015-16 2016-17
14.8 19.03
-24.24
-70.14
0.4
AxisTitle
Years
Return on equity Capital

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Return on Investment
Return on Investment (ROI) is a performance measure, used to evaluate the efficiency of
an investment or compare the efficiency of a number of different investments. ROI
measures the amount of return on an investment, relative to the investment’s cost. To
calculate ROI, the benefit (or return) of an investment is divided by the cost of the
investment. The result is expressed as a percentage or a ratio.
The return on investment formula:
ROI = (Gain from Investment - Cost of Investment) / Cost of Investment
In the above formula, "Gain from Investment” refers to the proceeds obtained from the
sale of the investment of interest. Because ROI is measured as a percentage, it can be
easily compared with returns from other investments, allowing one to measure a variety
of types of investments against one another.
Return on Investment=
𝑷𝑩𝑰𝑫𝑻
𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔 𝒐𝒓 𝑵𝒆𝒕 𝒂𝒔𝒔𝒆𝒕𝒔
X100
Table: 4.5.2
Return on Investment
Years PBDIT
Net Assets or Net
Block Return on investment
2012-13 89.38 208.33 42.9
2013-14 92.38 363.65 25.4
2014-15 38.1 335.22 11.36
2015-16 20.14 33.23 6.42
2016-17 73.11 279.02 20.26

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Graph: 4.5.2
Return on Investment
Interpretation:
Low return on investment implies efficient use of assets, the companies return on
investment is decreasing year by year.
0
10
20
30
40
50
2012-13 2013-14 2014-15 2015-16 2016-17
42.9
25.4
11.36
6.42
20.26
Years
Return on investment

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Findings
The firm’s Current ratio refers that the company’s short-term solvency. The standard
current ratio is 2:1; the current ratio is not equal to standard ratio in the entire study
period from 2012-13 to 2016-2017.the ratio is too low then the standard ratio 2:1.the
above chart indicates that the current ratio of the decreased year by year except in the
year 2014-15 because of high current liabilities.
The Quick ratio indicates the ability of the company to meet its current liabilities in time.
The company’s quick ratio standard ratio is 1:1 in the year 2014-15 is equal to ideal ratio
But Before and previous year are fluctuated and is not equal to ideal ratio.
The company’s performance is high in the year 2012-13 and 2015-16. The Gross profit
ratio is more than the 100% of normal profit. Here the company is maintaining good
gross profits for all years.
The net profit ratio shows the portion of net profit earned by the company out of its sales.
The company profitability position is not satisfactory but strictly fluctuating from 11.4 to
10.94 and again 2014-15 to 2015-16 2.85 to 4.81 like this. But the net profit ratio is
fluctuating.
The higher gross profit ratio is increased better performance in 2012-13 is 13.81 and the
remaining years it will be decreased low gross profit ratio un favorable. The company
gross profit position are fluctuating gross profit ratio.
Usually a high inventory turnover ratio indicates efficient management of inventory
because more frequently the stock are sold, the lesser amount of money is required to
finance the inventory. The inventory ratio in the financial year 2013-14 is 4.7 & 2014-15
is 4.75 & 2015-16 is 5.95 they increased year by year. In 2016-17 the ratio will be
decreased at 4.7.

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Suggestions
The current ratio is decreased in the year 2016-17 of the company. Here the company
should not pay the company obligations. The company cannot maintain the standard ratio.
The company must be decrease the short term loans then only the company can increase
the standard norms.
The quick ratio indicates the ability of the company to meet its current liabilities in time.
The company’s quick ratio standard ratio is 1:1 in the year 2014-15 is equal to ideal ratio
The company’s performance is high in the year 2012-13 to 2016-17 and. The gross profit
ratio is more than the 100% of p. Here the company is maintaining good gross profits for
all years.
The company’s revenue was more than the company’s expenses. Here the company
revenue is increased in the present financial year.
Debt ratio indicates the proportion of a company's debt to its total assets. It shows the
company relies on debt to finance assets. From the period of the study the debt ratio shows
the decreasing trend.

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Conclusion
I am very glad to get my project in the company which is one of the leading company in
Coton-Textail industry.
I have learnt a lot in this one month period about the company strategies and its
objectives, which are going to fulfill all its requirements of the company.
I have given my best in this one month span to improve the company’s standards to my
best and I really very happy to hear about their customer satisfactory that they were
providing good service to the customers.
Bibliography
WWW.google.com
WWW.moneycontrol.com