BHADRAK AUTO. COLLEGE, BHADRAK
DEPARTMENT OF COMMERCE
SESSION-2020-21
TITLE OF THE PROJECT
“RATIO ANALYSIS”
SUBMITTED BY: NIRANJAN PRUSTY
REGISTRATION NOROLL NO-8118B052
COLLEGE NO-BC18-055
PAPER – DSE-4
UNDER THE GUIDANCE OF: MR. PRATAP CH. SAHOO (ASST.PROF. COMMERCE)
CERTIFICATE
This is to certify that Mr. Niranjan Prusty has submitted the project titled RATIO
ANALYSIS, as per requirements of 6th semester Bhadrak Autonomous College for
the academic year 2018-21
Date:
Asst Prof. Mr. PRATAP CHANDRA SAHOO
(Project guide)
DECLARATION
As I hereby declared that the project report entitled the study of Ratio analysis in
India submitted by me to the Bhadrak Autonomous college in partial fulfillment of
requirement of award of the degree in commerce is a record of Bonafede project
work carried out by me under the guidance of Mr. Pratap Chandra sahoo. I further
declare that the work reported in this project has not been submitted and will not
be submitted either in part or in full for the award of any other degree in this
institute or any other institute or university.
Niranjan Prusty
DATE:
ACKNOWLEDGEMENT
It gives me immense pleasure to express my gratitude towards my sir Mr. Pratap
Chandra Sahoo, assistant professor in department of commerce, for his guidance,
support & encouragement to prepare the project, Ratio Analysis. Without the
help & support of him, the completion of this project wouldn’t have been
possible.
Niranjan Prusty
8118B052
+3 3rd Yr Commerce
BHADRAK AUTO COLLEGE,BHADRAK
INTRODUCTION
Raymond Ltd is largest integrated manufacturer of fabric in the world based in Mumbai, Maharashtra. It
has over 60% market share in suiting in India. It is also India's biggest woolen fabric maker.[4] Textile
division of the company has a distribution network of more than 4,000 multi-brand outlets and over 637
exclusive retail shops[5] in the domestic market itself. Suitings are available in India in over 400 towns
through 30,000 retailers and an exclusive chain is present in over 150 cities across India. Its products
exports to over 55 countries including US, Canada, Europe, Japan and the Middle East. It has more than
20,000 design and colours of suiting fabric which makes it one of largest collection of designs and colours
by single company. It was listed as India's most trusted apparel brand by The Brand Trust Report in 2015
1925-Setup of The Raymond Woollen mill in 1925 the area around Thane creek.
1944: Lala Kailashpal Singhania took over The Raymond Woollen Mill. The mill was primarily making cheap and
coarse woollen blankets, and modest quantities of low priced woollen 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 readymades, 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 woollen
fabrics.
1980: Vijaypat Singhania took over the reins of the company. He injected fresh vigour 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 1008 to
Super 140S).
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 denimwear 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 "Park", 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.
2002: Acquisition of ColorPlus.
2003: Setup of 'Silver Spark Apparel Ltd. for manufacturing suits and formal trousers catering largely to export
markets.
2004: Super 220S fabrics under the Chairman's Collection 2005: Setup of state-of-the art jeanswear facility
'Everblue 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 11.8 micron of wool. 2005:
Launch of Expressions' an exquisite collection of all wool and polywool suiting specially crafted using exotic fibres
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. 2006: Set up of world class carded woollen 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 kidswear brand with first store in Ahmedabad. .
2007 Entered into Joint Venture to retail premium brand GAS in India.
2009 Launch of new brands for women's wear.
2010 Launch of 'Raymond Finely Crafted Garments' readymade apparel under Raymond brand.
2014 Launch of 'Neckties & More" - New format store for accessories.
VARIOUS BRANDS OF RAYMOND
For over 80 years, Raymond is counted as one of the world's premier manufacturers of worsted witing fabric in
fine grade wool, in the same league as the finest that Hurope has to offer.
Today, the Raymond product range includes pure wools, wool blended with exotic fibres like camel hair. cashmere
and angora and innovative blends of wool with polyester, linen and silk. Offering suiting and trousering fabric for
all occasions and needs.
Our domestic distribution is spread for and wide with more than 30,000 outlets that stock and sell our wide range
of fabrics
Fine products, wide range, superb distribution and intelligent advertising support have helped the company gain a
dominant share of the market. No wonder, premium labels from the world's fishin capitals peefer Raymond
Manzoni is a luxury lifestyle brand offering the discerning customer a super premium range of formal wear and
sportswear including shirts, suits, trousers, jackets, ties and leather accessories Our exclusive designs provide
customers the best in contemporary inlemational style & luxury. Each garment is crafted from the mest exotic
cotton silk, linen and supertine wool, the best-in-the-world linings, interlinings and threads sourced from around
the globe.
Launched in 1986, Park Avenue is today, India's most admired formalwear brand. It offers stylish and innovative
wardrobe solutions to gentlemen for all their dressing needs, be it Husiness, Evening Leisure, Invel or Heritage
Wear. The brand has received several awards. Recently, it had the honor of being the Most Admired Brand at the
Lycra Images Fashion Awards 2007 for the thind consecutive year. Crossing the gender divide, Park Avenue
launched Park Avenue Woman-a complete range of Business Wear for women, Park Avenue Woman' is designed
specially for the working women professionals of
ColorPlus is one of India's premium and most respected casual wear brands offering customers ange of shirts,
trousers, knits and survival gear. ColorPlus constantly innovates processes and technologies offering huyers new
worlds of comfort. Some of the technological innovations it is well known for, include thermo-fused buttons, golf
ball wash, soll jeans, wrinkle free technology. stain-free fabric, and the cone dyed technique Adding new color now
to the woman's wardrobe, ColorPlus recently launched ColorPlus Woman – An exclusive range of smart casual
clothing.
Parx is a 'premium casual lifestyle brand bringing customers a range of stylish semi formal and casual
clothes that reflects the easy, relaxed attitude of the energetic 22-30 year old. Parx was launched in
1999 to cater to the smart and fashionable clothing segment.
The burgeoning children's wear market has now turned stylish with Zapp! - our range of stylish and
fashionable kidswear. The brand brings to 4-12 years a wide range of clothes, accessories. bed and bath
linen and more. The first Zapp! store has been launched in Ahmedabad with ten more on their way for
kids across the country.
Notting Hill reflects style and manifests originality of today's fashion- conscious and discerning young
professionals at an affordable price. The brand collection features a spectrum of men's lifestyle products
comprising of suits, shirts, trousers, jeans, t-shirts and also accessories like ties, handkerchiefs and socks.
HOME is a specialty multi brand Home Retail Chain that present elegant, soft home furnishings &
accessories which are sourced from across the globe from reputed labels (private & International).
Spanning from a mid to premium pricing range, Be: HOME provides an assortment of quilts, blankets,
robes, apparels, wall décor, vases, candles, gourmet cooking range and much, much more under one
roof to provide the perfect look for your home.
The Raymond Shop is a premium retail store offering complete wardrobe solutions for men, which
includes top-of-the-line brands - Raymond, Manzoni, Park Avenue. ColourPlus and Parx
Ratio analysis is a powerful tools for financial analysis. A ratio is defined as a indicate quotient of the two
mathematical expression and on the relationship between two or more thing. In the financial analysis,
ratio is use for a benchmark for evaluating the financial position and performance of the firm The
absolute accounting figure reported in the financial statement do not provide a meaningful
understanding of the performance and financial position of a firm. An accounting figure conveys
meaning when it is related to some other relevant information the relationship between the two
accounting figure, expressed mathematically, is known as financial ratio, Ratio helps to summaries large
quantity of finical data and to make to quantitative judgment about the firm's financial performance
Strategic information is just as important to shareholder as it is the company management who will
select ratios that help them in their daily operation. But it is worth remembering that the management
usually has access the more information concerning the company and its competitors than person's
external to the company. It is a simple arithmetical expression of one number to another. The technique
of ratio analysis can be employed for measuring short term liquidity or working capital position of the
firm. The following ration may be calculated for this purpose
1. CURRENT RATIO
2. QUICK/ACID TEST RATIO 3. ABSOLUATE LIQUID RATIO
4. INVENTORY TURNOVER RATH) 5. DEBTORS TURNOVER RATIO 6. CREDITORS TURNOVER RATKO
7. WORKING CAPITAL TURNOVER RATIO
8. CURRENT ASSET TO TOTAL ASSET RATIO 9. CURRENT ASSET TO SALES RATIO
10. CURRENT ASSET TO FIXED ASSEL RAIL
1. Current ratio:
This compares assets which will become liquid within approximately twelve months with liabilities which
will be due for payment in the same period and is intended to indicate whether there are sufficient start
term assets meet the short-term liabilities, Recommended current ratio is 2: 1. Any ratio below indicates
that the entity may face liquidity problem but also Katso over 2: 1 as above indicates over trading, that is
the entity is under utilizing its current assets.
Current ratio= current assets/current liability
The following are the statistic of last three year
Interpretation:
As we know the company's current ratio is 1.42, 1.60 and 2.00 in the year 2012-13, 2013-14, and 2014
15 respectively. The standard current rate should be 2:1. In the last year (2015) company reached up to
the standard which is satisfactory but it should remain at that level that is to be stable and should not
extend the ratio more than this
2. Quick/ acid test ratio:
This shows that provided creditors and dehtors are paid at approximately the same time, a view might
be made as to whether the business has sufficient liquid resources to meet its current liabilities. A
company in the service industry will not have inventories is such current ratio will not significantly be
different from the current ratio.
This ratio should ideally be 1 for companies with a slow inventory lumover. For companies with a faster
inventory tumover, a quick mio can be less than 1 without suggesting that the company should he in
cash flow trouble.
Both current and quick ratio offer an indication of the company's liquidity position, but the absolute
figures should not be interpreted too literally. It is often theorized that an acceptable figure should be
21 for current ratio and 1: 1 for quick ratin but these should only be used as a guide. Different
businesses operate in very different ways. A supermarket group for example might have a current ratio
of 5 and quick ratio of 17 Supermarkets have low receivables (as sales are usually made un credit), low
cash, medium inventuries (high inventories but quick turnover). While as in a manufacturing company
these ration may be regarded as showing solvency problems
Quick acid test ratio= quick liquid assets/current liability
The following are the statie's of last three years acid test ratios data.
GRAPH
Interpretation:
This ratio indicates the availability of quick assets to pay for current liabilities. It should be 1:1 as
we computed the company's acid to ratio as 0.76, 0.94, and 0.95 for the respected year at shown in
graph. That is growing from the last three year which is satisfactory but it was remains lower than
standard, need to be little improvement
.
3. Absolute liquid ratio:
Absolute liquid assets include cash in hand and at bank and marketable securities or temporary
investments. The acceptable norm for this ratio is 50% or 0.5:1. Absolute liquid ratio should also be
calculated together with current ratio and acid test rutio. As exclude receivables from the current
assets and find out the absolute liquid assets.
Interpretation:
As we know the company's absolute liquid ratio is 0.054, 0.027 and 0.05% in the year 2012-13,
2013-14,and 2014-15 respectively. The standard ratio should be 0.5:1. we see the graph, that this
ratio is not satisfactory, need to improve to make care liquidity position.
4. Inventory turnover ratio:
The ratio is aimed at checking how vigorous the entity is trading. It measures approximately the
number of times an ensity is able to acquire the investories and convert them imo sales. A
lengthening inventory tumover period from one accounting year to the next indicates:
1. A slowdown in trading, or
2. A build in inventory levels, perhaps suggesting that the investment in inventaries is heenming
excessive.
The higher turnover ratie is good for the firm but several aspects of inventory holding policy have
to be balanced Lead limes
• Seasonal fluctuations in onders
• Alternative use of warehouse space.
• Bulk discounts
• Inventory tumover ratio also known as stock velocity is normally calculated as sales average
inventory ur cust of goods sold.
Inventory turnover ratio =Net sales/Inventory
The following are the statie's of last three years Inventory tumover ratios data
Interpretation
From the graph, as we can see the inventory ratio is decreasing from 5.12 to 2.04 times from last
three years, it is not good indication for company Company should need to improve this rutio so
company can able to acquire the required inventories to convert them into sales.
5. Debtor's turnover ratio:
Another asset management ratio which is used estimates how long it takes for the credit customers
to serle their balances. As outlined above it is very difficult to establish the optimum level of
receivables
days, it will always depend with the nature of the business an enterprise is involved. For this
company receivable of 6 to 7 times will be considered as to operate on cash hasis. When setting the
receivable days, an enterprise should also consider how long its major suppliers demand their
payments, Increase in receivable days may also indicate overtrading especially when the profit
levels increases. together with receivable amounts but there is no improvement in collection of
receivables
The enterprise should always strive to be within the industrial averages because if they are too
loose with their customers they run a risk of increasing the bad debtor's levels. Some of the reasons
for improvement may be
a. Aggressive debt collection by the company.
h. Strict rules on credit transactions,
c. Offering cash discounts for early settlement
Debtors/receivable turnover ratio = Net credit annual sales / Average trade debtors
The following are the static's of last three years debtor's turnover ratios data.
Interpretation:
As we can see the debtors turnover ratio, it shows the decreasing trend from last three year. The
debtor's tumover ratio comes down from 7.04 times to 3.10 times and again slight fall in this and
comes down to 3.34 times in year 2007 and 2008 respectively. When the debtor's sumover
decreases the average credit period of company lengthened
6. Creditor's turnover ratio:
Measures how long it takes for an entity setile its creditors. The payable days should always be
more than the receivable days. Remember the cash received from the customers will be used in
settling the suppliers so it is imperative that the company should always ensure than they secure
mare payable days than the days they allow their customers.
Increase in payable days may indicate that the business is facing cash flow problems and will deter
new and old suppliers from extending credit applies to the business. On the other hand the business
with short payable days indicates that it is not trusted by its suppliers. Usually if the payment
record of the business has been bad suppliers will always insist cash purchmes from the business in
service industries the rutio is of little relevance than in trading organizations. The service industries
purchase consumables which are not the core of the business unlike in truding activities where the
performance is based on the level of purchases made.
Creditors/payable turnover ratio= Net credit annual purchase / Average trade creaters
Interpretation:
As we can see the creditors turnover ratio 3.15, 1.73 and 1.88 times in 2006, 2007, 2008
respectively,The creditor's turnover ratio is satisfactory because the average payable period is
more than average collection period.
7. Working capital turnover ratio:
Working capital of a concem is directly related to sales. The current assets like debtors, bilis
receivable, cash, stock etc. change with the increase or decrease in sales. The ratio indicates the
number
of times the working capital is turned over the course of a year. This natio measures the efficiency
with which the working capital is being used by a firm
Working capital turnover ratio= Cost of sales / Net working capital
The following are the static's of last three years Working capital turnover ratios data
Interpretation:
As we can see in graph, the working capital ratio is decreasing year by year. It was decreased by 2% in
2013 and 3% approx. in year 200 and 2007-08 respectively. A higher ratio indicates efficient utilization of
working capital and vice-versa. But it is decreasing, need to improve.
8. Current asset to total asset ratio:
Current assets play an important role in day-to-day functioning of an organization. So every inn should
maintain adequate current assets so as to meet the daily requirements of business. If the proportion of
curent assets in total assers excoeds then the required limit, there will be some idle investments on such
assets. Al the time, the proportion of current assets in totul should not less than requirements. Se, every
firm should maintain the adequate quantity of current sels. But during the situations of peak demand,
should employ more current assets and vice-versa. Particularly in case of production organizations,
there is heavy importance to the current assets than fixed assets. This kind of analysis will emble the
managers to understand the working capital position of the firm
Data relating to the proportion of working capital in total assets is depicted as follows
Interpretation:
From the current asset to total asset ratio graph, it can be inferred that the proportion of current assets
to total assets had constant from last three years while we can see slight fall in nitio in 2015.
9. Current asset to sales ratio:
The current assets are used for the purpose of generating sales. A ratio of current assets to sales
reveals that how host the assets are applied in business for turnover. As per the above said ratio, a
low proportion of current assets in relation to sales indicates better turnover of the company and
vice-versa. which will show positive impact on profitability.
The data relating to this aspect is provided as follows and it is calculated is follows.
Interpretation:
As per the shove said ratio, a low peoportion of current assets in relation to sales indicates better
tumover of the company and vice-versa but the actual figure 0.42, 0.50 and 0.56 in the year 2013,
2014 and 2015 respectively are contradicting this statement.
10. Current asset to fixed asset ratio:
Total sets in any business contain buth fixed and current ussels. For properly functioning of the
organization in terms of production and marketing it is necessary to maintain a properly balance
between them. If the properam of fixed assets increases, it will be a negative impact on the firm's
liquidity and if current assets increase, prockaction increases and which causes impact on the
demand for the product In view of effective management of funds and to invest on both fixed and
current assets, it is necessary to take the decision as soon as possible.
Data relating to the ratio between current assets to fixed assets is depicted as follows
GRAPH