INTRODUCTION TO TEXTILE INDUSTRY

The textile industry grew out of the industrial revolution in the 18th Century as mass production of yarn.
and cloth became a mainstream industry. The term 'Textile' is a Latin word originating from the word
'texere' which means 'to weave' Textile refers to a flexible material comprising of a network of natural or
artificial fibers, known as yarn: Textiles are formed by weaving, knitting, crocheting, knotting and
pressing fibers HARPREET together.
Textile industry is one of the oldest industries existing until date. For most of the recorded history,
humankind has relied on natural fibers, prominent ones being cotton and wool, for its textile products. In
India also, the textile industry revolved around these natural fibers. Gradually India mastered in the textile
industry and its product gained fame worldwide. It was only after industrial Revolution in England when
machine substituted man and production started on a large scale basis. However, the demand could not
grow up in same proportion and India ultimately resulting in lower prices. Nevertheless, Indian textile I
industry got momentum after independences due to open government policies and import of technical
expertiSe and machinery.
However, during the past few decades, the textile industry has gone through a number of changes. The
natural fibers have given place to man made fibers and today's consumers can choose from linen,
acrylic, polyester, rayon, silk, wool and also wide range of different blended fibers. Today the textile
industry applied the scientific parameters to produces the product commiserating with the consumers
needs. So changing fashions and desire for better quality has boosted the textile industry in recent years
with the result with that new units are being establish while the existing ones are going for mass
expansion and modernization.

VALUE ADDITION IN THE TEXTILE INDUSTRY

INTRODUCTION TO COMPANY

Rana Group of Companies made a humble beginning in mid 80's when Rana Gurieet Singh, group's
Managing Director, set-up Agro Boards Limited a Kraft Paper unit in Punjab Sucess of this maiden
venture was duly recognised by apex state owned industial promotion corporations and this led
venturs of Rana Group with different state owned corporations.
Rana Sugars Ltd. was founded in 1992 by collaboration with Punjab 'Agro Corporation. In year 2002
RSL has setup a Demonstration Co-generation Project to produce extra power from the Bagasse (byproduct) and export it to Punjab State Electricity Board.
Rana Polycot was set up in 1995 in collobration with Punjab State Industrial Development
Corporation. This Textile Venture of RANA GROUP is 100% ExportOrientedSpinningUnit.
The .Garments Division of Rana Polycot is the Group's venture in the field of textile. Products Include
ladies, men's & kids wear garments embellished with hand embroideries, computerized embroideries,
beads, sequins & crochet etc. This wassetupin2001.
Rana Informatics Ltd in the Group's foray into Information Technology. It is a Software Technology
Park of India (STPI) registered export oriented unit, set up in 1999.

RANA GROUP OF COMPANIES

Rana Paper Mill

'Rana Sugar Miff
Rana Textile Mill
Rana Polyeot Mill
Rana Globe Trade
Rana Informatics Ltd
Rana Fund? Investment
Rana Guru Teg Bahadur Forest Ltd

THE MANAGEMENT

Rana Gurieet Singh

56, Co-Founder and Member of Parliament

Rana Gurjeet Singh, 52, is the co-founder of the Rana Group. An arts graduate by background Mr. Rana
Gurjeet Singh joined the family business of contract farming upon graduation. Using his business
acumen and administrative capabilities Mr. Singh transformed the family business by moving up the
value chain the agro industry.
The group first set-up Agra Boards Limited a Kraft Paper unit in Punjab. The success of this venture was
followed by the group's diversification into sugar manufacturing and textiles. After achieving success in
the business world Rana Gurjeet Singh contested elections in order to serve the society and share his
vision for a prosperous and progressive India with the people. Rana Gurjeet Singh sits on various
committees at the national level that guide industrial development in India.

Rana Raniit Singh

50, Co-Founder .& Chairman, Rana Group
Rana Ranjit Singh, an Arts Graduate and a diploma holder in Hotel Management from the prestigious'
nstitute of Hotel Management, Delhi, control the group through a number of company.
Under the guidance of Rana Ranjit Singh, Rana Sugars set up the first power cogeneration plant in north
India. The project is recognized by UNFCCC and qualifies to earn carbon credits. Rana Ranjit Singh
today heads an organization that is among the most admired
companies in north India, reputed for the technological excellence that characterizes its projects and
products. Rana Inder Pratap Sinzh 27, Maria in2 Director, Rana Group.

Rana Inder Pratap Singh

27, Managing Director, Rana Group

Rana Inder Pratap, a promoter of Rana Group joined the management team as a director of Rana
Sugars in 2002. Rana lnder Pratap controls the daily affairs of the group and is _credited with thesuccessful expansion project that the group recently undertook. Under the management of Rana Inder
Pratap, Rana Sugars established 2 new sugar units within a span of 2 years. The capacity at Rana
Polycot (Textiles) has also in the phase of expansion to 72768 spindles from the current 40000. Rana
Inder Pratap displayed his entrepreneurial zeal by initiating a successful GDR (Global Depository
Receipts) issue under which Rana Sugars limited raised funds from global markets.
A man of tremendous foresight, the dynamic and enterprising Rana Inder Pratap has propelled Rana
Group to be one of the top business houses in north India. His proactive and personalized-approach
to business has helped the group grow from 150 crores in sales in 2002 to over 300 crores in 2007.
Apart from his business interests, Rana Inder Pratap enjoys shooting and has represented India in
international shooting championships. Rana Inder Pratap obtained his BAIA from Chapman
University, California and his M.B.A from University of Kent, United Kingdom.

STRATEGY OF RANA POLYCOT

Rana Group, being a professionally run industrial house aims to become the most efficient
manufacturer in its industry. In order to achieve this vision, the group is constantly adapting new

technologies and processes. The group has launched a drive to move up the value chain in its every
industry that it is present in.
Rana Sugars Limited (RSL) with a combined capacity of 15,000 'fa) also has a co-generation
capacity of 68 MW. Co-Generation allows the company to turn a by-product (Baggasse) into power,
thus adding value to waste_
RSL has also set-up it's first alcohol distillery in Punjab:The distillery uses molasses., which is also a
by-product of the sugar manufacturing processes. Two more alcohol and ethanol distilleries, with a
combined capacity of 200 KLPD are slated to come up at the new units in Uttar Pradesh. Being a
completely integrates sugar producer will protect RSL from the cyclical effects of the sugar industry.
Rana Polycot Limited (RPL), set up with an initial capacity 25,000 spindles/day has grown to over
72,768 spindles/day. In order to move up the value chain RPL set up a dyeing plant and a garments
facility. Efficient manufacturing systems have allowed India to establish itself in the global textiles
industry. RPL intends to take' advantage of this growing sector and plans to scale up its capacities in
the near future. RPL is entering the weaving segmerit by installing 100 looms at its Lalru
7,

INFRASTRUCTURE OF RANA POLYCOT LTD

RANA POLYCOT LTD., (SPINNING DIVISION) LALRU

RPL is located in close proximity to the cotton belt of north India. The plant is located at I,alru, Punjab.
The unit was established with a capacity of 25,000 spindles in .1996. This capacity was scaled to 35,000
spindles in 2000. RPli currently has a capacity of 72,768 spindles.

RING SPINNING
Installled Capacity 72768 Spindles 50 tons per day of yarn The above spindles include spindles of
compact yarns and 30000 spindles with Murata link coners

VORTEX SPINNING
Latest Murata 4 MVS 861 and 1 MVS 810 machine to produce
3.5 tons per day of Vortex yarn

RA NA POLY COT LTD., (DYEING DIVISION)

The dyeing unit of RPL is also located in Lalru, Punjab. The dyeing unit commenced production in 2006
with a capacity of 5 tons/day. The company is proposing a capacity expansion up to 11 tons/day. Current
Capacity 4.8 tons per day Expansion planned 6 tons per day

RANA POLYCOT LTD_(KNITTING DIVISION

The knitting division was established in 2002 with an initial capacity of 1000 pieces/day. The division has
since expanded and now has an installed capacity of 3000 poeces/day.

Product Line
The Product line includes designer wear garments in Men's, Ladies & Kidswear range. We can make "(in
flat knit) Intarsia structure, Jacquard structure, etc.

Manufacturing Capacity
Rana Polycot's Knitting Division can make app. 60K-70K units/month (across all the ggs).
After setting up garment set-up in the year 2001-02 (with a capacity of making 22K-25K
units/month),,Rana Polycot has increased it's capacity to the tune of 3 times.

QUALITY POLICY OF RANA POLYCOT

We are committed to produce as per customer requirements by using specified yarn continues
improvement in process and optimum realization at all stages. Se shall achieVe this by:

Need fulfillment of customers.

Adherence to standards of norms
Human resourced development through continuous training.
Adoption of latest technology.

Responding fastest to customers countries.

Flexibility in product mix.
Application of environment friendly techniques.
Bringing sense of belongingness.
Reduction in rejects and waste.
Innovation in process.
Continuous vendor development through feedback.
Striving to minimization conforming products.

PROCESS OF SPINNING

SORTING AND MIXING

SORTING

The meaning of sorting "to examine in order clarify". Similary in spinning there is sorting 'section
in the start of process. In sorting section, heavy impurities like leaves, paper, wood, yellow cotton
etc 'are removal from cotton.

MIXING
Mixing is done to prepare a better quality of yarn by using desire able properties of different types
of cotton at minimum value.

BLOW ROOM
Blow room use for conversation of large tuft into smaller tuft by opening and cleaning of
cotton.

CARDII\ G
larding is main department of spinning for production of better quality of yarn. Card is known as the
heart of spinning because it is the only machines, which individualize the fiber & so can do cleaning to
max. extent.
The bards can be classified into two classes on the bases of their feeding style i.e. "Lap feed cards" &
"Chute feed cards". Lap feed System is used in old types of cards; in the latest cards the chute feed
system is used. Chute feed increase the production and decrease the production cost.

Objectives
Opening to individual fibers
Elimination of foreign matter
Elimination of dust
Disentanglement of neps
Fibet blending
Fiber orientation
Sliver formation

FINISHER DRAW FRAME

Objectives

High quality sliver at high throughput

Reliable sliver monitoring
Highest leveling accuracy
Delivery up to 500 m/min for efficiency

SPEED FRAME
Objectives
Attenuation of sliver to form Roving
To insert protective twist(False & True) on roving
Winding of Roving in a suitable package form

RING FRAME
Objectives
To impart. strength to the fibre, by inserting twist.
To wind up the twisted strand (yarn) in a form suitable for storage, transportation and
further processing.
To draft the roving until the required fineness is achieved.

AUTOCONER
It is an automatic winding machine whose standard features are quality & economy. The Autoconei:
provide the excellent unwinding properties of the quality package. The assumed package quality is due
to:-

1. Electronic monitoring of the running yarn 2. Sensitive tension device 3. Knot free electronically tested
yarn 4. Precise build up package
Auto coner winds the yarn from bobbin to cone. It is automatic winding machine. It works at very high
speed. It can remove the faults of yarn by yarn

T. F . 0
Twisting together two or more yarns to form one yarn is known as Doubling. The object of doubling is to
combine two or more yarns to get:- Much stronger yarn * Much regular yarn

YARN CONDITIONING
Moisture in atmosphere has a great impact on the physical properties of textile fibres and yarns. Relative
humidity and temperature will decide the amount of moisture in the atmosphere. High relative humidity
in different departments of spinning is not desirable. It will result in major problems. But on the other
hand, a high degree of moisture improves the

WEAKNESSES:

The price of the cotton yarn, which is the major raw material for our product, is subjected to the vagaries of
the nature. Being already in the industry for the past years we are experienced to fairly foresee and forecasts
the price movements and hence can hedge us against any negative trends.

OPPORTUNITIES:
Following are the opportunities of RANA POLYCOT.
1. Post quota regime i.e. after April 2005 the presently restricted market of United States and European
union shall open for imports from cheaper manufacturing nations, predominantly India, creating a supply
shortfall in the domestic market. This project is primarily to tap this opportunity.
2. Independent researches indicate the global demand is expected to increase by 5% to 6 % annually for
another 5 to 10yrs. It is true that the capacities for denim will increase and also there will be a simultaneous
growth in demand of the denim.
3. Shifiting down of capacities in expensive and uncompetitive US and EU countries shall contain the
supply pressure and result in higher outsourcing from cheaper manufacturing nations particularly India,
china, Pakistan and Bangladesh.
4. "Made in India" denim fabric has made a strong quality perception amongst the highly qUality cautious
customers of EU and US.
5. China still has four more years' quota restriction after 2005. This shall be a golden opportunity
for India to seize the initiative.
6. Large scale relocation of garment outsourcing from. Bangladesh to India due to the end of
preferential treatment in terms of quotas would result in a boom in the domestic. demand of denim
for garment exports. Already all the big names in retail viz. Wal-mart, target, VF, levis and Tommy
etc. have set up their outsourcing offices in India.

THREATS:
Fashion may change, impacting the demand for cotton yard. However none of the leading designer
of the world expects that to happen. on a permanent basis. Since already cotton is more than 300
yrs old and has stood the tests of the time. The major threat to the business is the trend of fashion
of the cloth may change. The likings and the preferences and the tastes of the people may change..
That can affect the business. The major reason is the plant requires lot of investment. It may effect
the business.

THE SOCIO- ECONOMIC ASPECT

As RANA POLYCOT LTD we understand fully our social responsibilities and our duties towards
the nation and the masses at large. In fact our worthy chairman and managing director SH. RANA
RANJIT SINGH message to the organization emphasizes on the - societal concept whereby he
visualizes a descent minimum standard of living for all his associates be it workers, suppliers,
customers and stake holders.
The commissioning of this project will also serve a lot in this direction. Some of the major
benefits that shall occur to the society at large are being mentioned below.
Increase in central and state revenue by way of excise, sales tax etc. although now there are
exceptions to encourage the industry, but these are for limited number of years and once these
exemption years expire, the govt. revenue shall increase allowing more govt. expenditure for
social infrastructure viz. schools, hospitals, housing, sanitation etc.
The project shall be employing around 500 people and hence shall be counted amongst the
biggest direct employers in the state improving the standard of living of the local population.
The next major benefit that the state get is the generation of skilled manpower as the more and
more educated technicians will come to the for our experience of the world wide best practices in
textiles shall immensely benefit the technician/workforce of the state in understanding and
learning the better ways of doing the job.
Further, with the improved standard of living, the children of the local population shall get better
education who in turn shall generate an opportunity to be well equipped for the employment, self
or otherwise. This shall initiate a spiral of improvement in the society.

The financial aspect of the company as a whole including the Spinning Project:

Projected profitability statement

Summary statement of the depreciation as per schedule xiv of the company act for the
company as a whole. Competition of the department as per income tax act for the

company as a whole.
Computation of income tax liability.
Projected balance sheet Projected cash flow.
Projected profitability and cash flow statement
Computation of coverage ratios.
Computation. of break even point

INTRODUCTION
TO RATIO
ANALYSIS

DEFINITION OF RATIO ANALYSIS

Ratio Analysis is a fundamental means of examining the health of a company by studying the
relationships of key financial variables. Many analysts believe ratio analysis is the most
important aspect of the analysis process. A firm's ratios are normally compared to the ratios of
other companies in that firm's industry or tracked over time internally in order to see trends. For
example, the debt ratio compares a company's total debt to its total assets. If a firm's debt ratio is
low relative to its competitors' ratios or has decreased since last year, the firm is less dependent
on debt and is therefore perhaps a less risky investment. To evaluate companies, analysts use
many ratios, including measures of liquidity, profitability, debt, operating performance, cash
flow, and valuation.
Significance and Usefulness of Ratio Analysis: Following are the significance & usefulness of
ratio analysis:

1. A useful tool in the hands of analyst:

Ratios are exceptionally useful tools with which one can infer the financial performance of the
enterprise.over a period of time, with the help of ratio analysis conclusions can be drawn
regarding several aspects such as financial health profitability and operational efficiency of the
undertaking. .

2. Inter-Firm comparison:
Ratio analysis provides inter-firm comparison or comparison with industry averages by
comparing the firms ratios with those of other competitive and progressive firms. If comparison
shows a variance, the possible reasons of variations may be identified and if results are negative
the corrective actions may be initiated immediately bring them in line. It is helpful in
forewarning the corporate sickness and helps the management to take corrective action.

3. Trend Analysis:

Ratio analysis enables a firm to take the time dimension into account. In other words, it facilitates
the management to know whether the firms financial position is improving or __deteriorating or
is constant over the years by setting a trend with the help of ratios. The analyst with the help of
ratio analysis can know the direction of movement whether favourable or unfavourable.

4. Decision Making:
Mass of information contained in the financial statements may be unintelligible a confusing.
Ratios help in highlighting the areas deserving attention and corrective action facilitating decision
making.

5. Financial Forecasting and Planning:

Planning and forecasting can be done only by knowing the. past and the present. Ratio help the
management in understanding the past and the present of the unit. These also provide .useful idea
about the existing strength and weaknesses of the unit. This knowledge is vital for the
management to plan and forecast the future of the unit.

6. Communication:
Ratios have the capability of communicating the desired information to the relevant persons in a
manner easily understood by them to enable them to take stock of the existing situation.

7. Co-ordination is Facilitated:
Being precise, brief and pointing to the specific areas the ratios are likely to attract immediate. grasping
and attention of all concerned and is likely to result in improved coordination from all quarters of
management.

8.Control is more Effective:

.System of planning and forecasting establishes budgets, develops forecast statements and lays down
standards. Ratios provide actual basis. Actual can be compared with the standards. Variances to be
computed an analyzed by reasons and individuals. So it is great help in administering an effective system
of control.

9.Usefulness to the ONN ners/Shareholders:

Existing as well as prospective owners or shareholders are fundamentally interested in the (a) long-term
solvency and (b) profitability of the unit. Ratio analysis can help them by analyzing and interpreting both
the aspects of their unit.

10.Usefulness to the Creditors:

Creditors may broadly be classified into short-term and long term. Short-term creditors are trade
creditors, bills payables, creditors for expenses etc., they are interested in analyzing the liquidity
of the unit. Long-term creditors are financial institutions, debenture holders, mortgage creditors
etc., they are interested in analyzing the capacity of the unit to repay periodical interest and
repayment of loans on schedule:

11.Usefulness to Employees:
Employees are interested in fair wages: adequate fringe benefits and bonus linked with
productivity/profitability. Ratio analysis provides them adequate information regarding
efficiency and profitability of the unit. This knowledge helps them to bargain with the
Management regarding their demands for improved wages, bonus etc.

12.Usefulness to the Government:

Govt. is interested in the financial information of the units both at macro as well as micro levels.
Individual unit's information regarding production, sales and profit is required for excise duty,
sales tax and income tax purpOses. Group information for the industry is required for
formulating national policies and planning. In the absence of dependable information, Govt.
plans and policies may not achieve desired resultsRatio analysis is very useful tool of
management accounting.

FOLLOWING ARE THE MAIN ADVANTAGES OF RATIO ANALYSIS.

.1. Helpful in Decision Making
All our financial statements are made for providing information. But this information is not
helpful for decision making because financial statements provide only raw information. When
we calculate different ratios in ratio analysis, at that time, we get useful information. I can
explain it with simple example. Suppose, we calculate our interest coverage ratio which is l
Otimes but our competitor company's interest coverage ratio is 15 times.

2. Helpful in Financial Forecasting and Planning

Every year we calculate lots of accounting ratios. When we make trend of all these ratios, we can
get useful information for our future forecasting and planning. For example, we can tell five year
collection period with following way

2007 = 90 days

2008 = 70 days
2009 = 60 days
2010 = 50 days
2011 = 30 days
From this trend, we know that we are decreasing the days for collection money from our debtors.
With.this information, we can make two plans. One is effective use of money which we are
getting from our debtors more fastly and second we can also check the behavior of our debtors by
comparing this with sales trend.

3. Helpful in Communication
Ratio analysis are more important from communication point of view. Suppose, we have to appoint
new sales agents for our company. At that time, we can communicate them by using our company's
sales and profit related ratios. There is no need of hi-tech for understanding the meaning of any
specific ratio. For example, our gross profit in 2010 is 26.6% and in 2011, it is 28.55%.

4. Helpful in Co-ordination
No company has all the strength points. Company's financial results shows some strength points
and some weak points. Ratio analysis can create co-ordination between strength points and weak
points.

5. Helps in Control
Ratio analysis can also use for controlling our business. We can easily create the standard of - each
financial item of our balance sheet and profit and loss account. On this basis, we can also calculate
standard ratios. By comparing standard ratios with actual accounting ratios, we can find variance. '

6. Helpful for Shareholder's decisions

For example, I am a shareholder. I want to invest in any company's shares. Before buying any company's
shares, I will be interested to know company's long term solvency. So, I have to calculate long term solvency
ratios. In which, I have to calculate fixed assets to net worth ratio, fixed assets to long term debt ratio. On this
basis, I can know the level of fixed assets and its main resource.

7: Helpful for Creditors' decisions

Creditors are those persons who provide goods on credit to company or provides short period loan to
company. All the creditors are interested to know whether company will repay their debt or not. For this,
they calculate current ratio and quick liquid ratio and average payment period. On this basis, they take
decisions.

8. Helpful for employees' decisions

Every employee wants to increase his salary. He also wants to get more and more incentives from company.
For this, he takes help from company's profitability ratios. Profitability ratios will be helpful for employees
to pressure on the company for increasing their salary.

9. Helpful for Govt. decisions

Different companies analyze their accounting ratios and publish on the net and print newspapers. Govt.
collects all these information. On this basis, Govt. makes policies. If ratios will wrong, Govt. policies will
become wrong. For example, Govt. collects income data of all companies in different industries for
calculation the national income.

TYPES OF RATIOS

Some of the different types of ratios that can be. calculated from data in the financial -statements and used
to evaluate a business include:

Liquidity ratios
Solvency ratios
Activity ratios
Profitability ratios

LIQUIDITY. RATIOS
Liquidity ratios measure a business's ability to cover its obligations, without having to borrow or invest
more money in the business. The idea is that there should be sufficient cash and assets that can be readily
converted into cash to cover liabilities as they come due.
One of the most common liquidity ratios is:

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

'Current assets basically include cash, short-term investments and marketable securities, accounts
receivable, inventory, and prepaid expenses. Current liabilities include 'accounts payable to vendors and
employees, and installments on notes or loans that are due within one year. This ratio could also be seen as
a measure of working capital the difference between - current assets and current liabilities. A company
with a lot of working capital will be in a better position to expand and improve its operations. On the
contrary, a company with negative working capital does not have sufficient resources to meet its current
obligations, and therefore is not in a position to take advantage of opportunities for growth.
Another stringent test of liquidity is the:
ACID TEST RATIO = CURRENT ASSETS MINUS INVENTORIES I CURRENT LIABILITIES
Inventory IS a current agggt that may or may not be quickly converted into each. This depends ri .the
rate at whi8h inventory i3 being turned over. By excluding inventory, the acid-test ratio only considers
that part of current assets that can be readily converted into cash. This ratio, also culled the Quick Ratio,
tells how much of the 1111611105513 short-term debt can he met by using the company's liquid assets at
short notice.
If you want an even clearer idea of exactly hQw much ready cash is on hand to cover current liabilities;
you can use the:

CASH 'RATIO = CASH + MARKETABLE SECHRMES / (11/MENT LIABILITIES

The cash ratio measures the extent to which a business could quickly cover short-terin liabilities, and
thPrd4rQ is of particular interest to short-term creditors. A ratio of 1.0 would indicate that all current

liabilities would he covered at,any average point in time by cash and marketable securities that could be
readily sold and converted to cash. A ratio of less than 1.0 would mean that other assets, such as accounts
receivable or inventory, would have to be 'converted to cash to cover short-term obligations. A ratio, of
greater than 1.0 means that there
k more than enough cash on hand.

SOLVENCY RATIOS:
Solvency ratios are measures IQ assess a company's ability to meet its long-term obligations and thereby
fOrridin solvent and avoid bankruptcy. Two general, overall solvency ratios include: .
SOLVENCY RATIO = TOTAL ASSETS / TOTAL LIABILITIES and SOLVENCY RATIO = NET
WORTH (TOTAL CAPITAL OR EQUITY) / TOTAL LIABILITIES
These ratios basically tell whether a company owns more than it owes. The higher the ratio, the
more solvent the company.
Another ratio that can tell how much a company relies on debt to finance its assets is:
DEBT RATIO = TOTAL DEBT / TOTAL ASSETS
Traditionally,. both short-term and long-term debts and assets are used in determining this ratio. In
general, the lower a company's reliance on debt to finance its assets, the less risky the company.
In assessing solvency, it is also important to take into consideration the breakdown of a company's
liabilities. Not all liabilities are debt in the form of bank loans or notes payable, for example. There are
also accounts payable to vendors, salaries and wages payable, taxes payable, and accrued liabilities,
among others.

ACTIVITY RATIOS:
Many useful gauges of operations can be calculated from data reported in the financial statements: For
example, you can determine the average number of days it takes to collect on customer accounts, the
average number of days to pay vendors, and how much of the operation is effectively being financed
with payment terms extended by vendors:
ACCOUNTS RECEIVABLE TURNOVER = TOTAL CREDIT SALES / AVERAGE .ACCOUNTS
RECEIVABLE

This tells you the average duration of accounts receivable for credit sales to customers. This in turn can
be expressed in terms of the collection period, as follows:

Average Collection Period = Days in Year / Accounts Receivable Turnover

or
DAYS TO COLLECT = TRADE ACCOUNTS RECEIVABLE / CREDIT SALES X
To determine how much of a company's accounts receivable and inventory 81T 6ff66tiyely being financed by
the credit extended to the company by its vendors:

PROFITIBILITY RATIOS;
One of the moss common profitability ratios is the profit martin. This can be expressed as the gross profit
margin or riot profit iliargin? and it can be expressed by company, by uggtur, by product, or by individual unit..
The infimation reported on the Malmo 6tfitOment will engbig

yet

to determine the overall profit If

additional breakdowns are provided, MON detailed Marg1115 n1n be calculated.

Gross Profit Margin = Gross profit /Net Sales X 100
Net Profit Margin = Net profit / Net Sales X 100

Chapter-2
RESEARCH
METHODOLOGY

RESEARCH PROBLEM:

Research Methodology is a systematically solve the research problem. It has

many dimensions and research methods constitute a part of the research
methodology. Thus when we talk about research methodology, we do not only
talk of the research methods but also consider the logic behind the methods.
We use in context of our research study, so that research results are capable of
being evaluated either by researcher himself or by others. To effectively carry
out in research, I would use the following research process, which consists of
series of actions or steps.
TYPES OF RESEARCH

This research employed three types of research:

Descriptive Research
Analytical Research
Quantitative Research .

DESCRIPTIVE RESEARCH OR EX-POST FACT RESEARCH:

Descriptive research has been conducted to describe the various characteristics
related to working capital. It includes the facts finding inquiries of different
kinds. It has done to know the following facts: What is the position of ratio
analysis in company? What are the various sources of raising the funds are
adopted the Company?

ANALYTICAL RESEARCH:
In it, we have to use facts and information already available and analysis these to make an evaluation
for project. It is conducted also to.know how effectively the company deals with financing ratios.

QUANTITATIVE RESEARCH:

Quantitative research is obtained to evaluate the different parameters relating to the working capital
management. It includes the study of
How effectively the company deals in their collection policies?
How much quickly the company rotates their working capital?
How many times the companies rotate their inventory during the year?

METHODOLOGY
The project includes both primary and secondary sources of data. The data collected through these
sources has been organized, analyses and interpreted so as to draw conclusion and arrive at
appropriate recommendations

PRIMARY DATA

first hand inforination collected, is called primary data. I have collected the first hand
information during my six weeks training in the RANA POLYCOT LTD. I have adopted the method at
petsonal interviewed for the purpose, so the database is limited and the study is based.upon this data
only.
PERSONAL INTERVIEW WITH COMMERCIAL MANAGER OF THE CONCERN:

I have personally interviewed the accounts manner of the concern mr.sHAm

SU/sTBERSHARMA and have gathered all the important information regarding my project work.

P E R S O N A L I N T E R VI E W WI T H VAR I O U S O F F I C E R S O F T H E
'CONCERN
I have also personally interviewed various oners who guided me a lot during my training sessions,

SECONDARY DATA;

In order to collect the secondary information for the. analysis of the study, I have studied number of books on
working capital management. In addition to this I have consulted the following records in order to gather proper
information about the company.

1 Information from the accounts section.

2.Company Annual Report
3. Company Audit Report
4. Books of different writers on the management and financial accounting.

I conducted my research on the basis of available data and tried my best to make an effective use of
primary '-and secondary data for completion of this project report on "RATIO ANALYSIS AT
RANA POLYCOT LTD."

STEPS. OF METHODOLOGY

A) COLLECTION OF DATA:

Both the primary and secondary data has been collected from the market and the company
respectively. The secondary data was .provided through the annual report, website etc. of the company
and the primary data was collected through the medium of face to face interactions / interviews with
the accounts and finance officers in the company and examinations of records.

B) ORGANISATION OF DATA:
Data once collected needed to be organized for further processing. Data collected by me
was carefully gone through then the relevant and useful matter was assorted and properly
organized.

C) PRESENTATION OF DATA:
The data collected is of no use unless and until it is given in a presentable form. Thus, after proper
organization, the data is given in a presentable form with complete details with the help of bar
diagrams, charts and tables.

D) ANALYSIS OF DATA:
The data is carefully analyzed keeping in consideration both the pros and cons for the
purpose of arriving at concrete conclusions. Ratios analysis technique is adopted for the
analySes. All the important ratios relating to the working capital is explained for the analyses of
the working capital.

E) INTERPRETATION OF DATA:
After carefully analyzing the data, it has been aptly interpreted in order to give concrete
conclusions and proper recommendations. Proper interpretation of the charts and financial results
has been explained so that one can easily take the decision and interpret the position of the
company relating to the working capital

OBJECTIVE OF STUDY

"Success is achieved by those who try where there 15 limiting to be loose by trying and a great
deal to gain if sueeesithi by all means try"
Nothing in the world is done without any 011j0CtiVO whot.hor it in of constructive nature or of
destructive nature. This StUtlY IS also done While keeping .in mind certain objectives, The
ottiootivO which were taken in consideration of the study are follow:

PRIMARY OBJECTIVE;
To analyze the financial position of RANA POLYCOT and interpret the swine using various
filittilMal took.

SECONDARY OBJECTIVE

1. To analyze the financial statement of RANA POLYCOT LTD.

2. To simplify and summarizes a long arrangement of accounting data and. makes them
understandable.
3.To helps in forcasting and in preparing financial plans for the future.
4.To establish ideal standerds of the different items of the business.
5.To provide useful financial information to the management.
6.To knoW the firms ability to meet its current obligations.
7. To analize balance sheet of the company as compared to the previous year and conducting
the ratios and making interpretation.
8.To reveal the trend of costs,sales,profit,and other important facts.
9. To know about the financial position, risk bearing capacity of the company.
10. 10.To study the changes in the turnover of the Company over two years.

SCOPE OF STUDY

Studies due With the details that affect the profit of the company along with that
the -Mancini ratio% will ihr help ak to know the financial povitiQ11 and liquidity .01
thi; 'ompany ?WM 11WIT rusuns art: as follows". The pr6filo provides detailed financial ratios for the past five years as well as interim
.ratios for the last five interim Mods for major companies.
Exainines key information about company for business intelligence.
3. The company's core strengths and Weaknesses and areas of development or decline are analyzed
and presented objectively. Business,' strategic and operational lAwmv are
taken into account.
4. Opportunities available to the company are sized up and its growth potential assessed. Competitive
and/or technological threats are highlighted.
5. The profile contains valuable and critical company information ' business structure and
operations, the company history, major products and services, prospects, key competitors, .
key employees, executive biographies, important locations and subsidiaries.
Product & Services which is offered by the company.

LIMITATIONS OF STUDY

How so ever impeccable a .thing may seem to be, there always dwell some possibilities of failure and
incompleteness. Some of the limitations of the report are as follows:

1.Six weeks training is not sufficient to know the details of the organization.
2. Due to shortage of time the study is conducted on very small scale i.e. based upon material and
information provided by the company. .
3. The data and the other information provided by the company have been relied upon and have
been used as the secondary source of data.
4. Manager some time denied disclosing some important financial matters, which can be helpful in the
study.
5. Some information related to the study which had been collected from the company was
rounded off because of some influence.
6. At some plaCe approximate figures had been taken as per instructions of the company officers. .
7. The staff members of the company were too much busy in their audit work because that was for
audit time. I could have gained a lot if he could have spared more time for me.
8.Limited knowledge of the mine is the limitation.

LIMITATIONS OF STUDY

How so ever impeccable a .thing may seem to be, there always dwell some possibilities of failure
and incompleteness. Some of the limitations of the report are as follows:

1.Six weeks training is not sufficient to know the details of the organization.
2. Due to shortage of time the study is conducted on very small scale i.e. based upon material
and information provided by the company.
3. The data and the other information provided by the company have been relied upon and
have been used as the secondary source of data.
4. Manager some time denied disclosing some important financial matters, which can be helpful
in the study.
5. Some information related to the study which had been collected from the company was
rounded off because of some influence.
6. At some place approximate figures had been taken as per instructions of the company officers. .
7. The staff members of the company were too much busy in their audit work because that
was for audit time. I could have gained a lot if he could have spared more time for me.
8.Limited knowledge of the mine is the limitation.

CHAPTER-3
ANALYSIS
&
INTERPRETATION

RATIO ANALYSIS OF RANA POLYCOT LTD.

LIQUIDITY RATIOS:1. CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITIES

TABLE:1
Rs. In '000'
Particulars

2011

Inventory

65 1406233

Debtors

175473547

2010
.

337994204
112934245

Cash

& 81318922

66991014

Batik
Loans

4 637764464

534208709.

908198702

517919463

Advances
Total
Current
Assets
Total

365071478

Current

Liabilities
Current
Ratio

2.31:1

223350836

2.48:1

Interpretation: The minimum of 2:1 ratio is referred to as ideal according to Bankers Rule of thumb.
Since the current ratio of the firm is greater than 2:1 therefore the firm has been in good liqid position.
2. LIQUID ASSETS RATIO= LIQUID ASSETS
CURRENT LIABILITIES

(-) Advance tax paid

8196324

5915872

Total liquid Assets

256792469

179925259

Total Current Liabilities

365071478

223350836

Liquid Ratio

0.7:1

0.8:1

LIQUID RATIO

0.8

0.75
LR

LR
0.7
0.65
2011

2010
YEAR
Figure:2

Interpretation: The table reveals that quick ratio of the company has decreased in
comparison to previous year .Thus there is need to make improvement in short term financial
position of the firm.

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITIES

Table:3
Particulars
Cash
Bank

2011

& 81318922

2010
66991014

Interpretation: The acceptable norm for this ratio is 0.5:1. In 2010 it is 0.29and in 2011 it is 0.22,which
is less than from satisfactory ratio. It means that the company is not in a position to meet its short-term
obligations.

EFFICIENCY RATIOS:1, INVENTORY TURNOVER RATIO = COGS

AVG. INVENTORY
Table:4
(Rs. In '000'
Particulars,

2011

2010

Inventory

651406233

337994204

Avg,

1042740.5

857596.5

Inventory
Cost

of 1042700507

801267349

Material
( ) Munuf.

365624839

317411888

16149214

1730101X

COGS

1139034414

1318497731

ITR

10.78 times

12.47 times

Inventory
Conversion

365
10.78

165
12.47

Period

= 34 days

--- 29 days

Expenses
(+) Employ.
Cost

Figure:3
Interpretation:The acceptable norm for this ratio is 0.5:1. In 2010 it is 0.29and in 2011 it
is 0.22,which is less than from satisfactory ratio. It means that the company is not in a
position to meet its short-term obligations.

INVENTORY TURNOVER RATIO

12.51211.5ITR 11 10.5109.5

Interpretation: . In 20 10,the 1TR was12.47 and in 2011, the ITR of the company was 10.78 This
indicates efficient management of the inventory of the company & over investment in the
inventory.

2. DEBTORS TURNOVER RATIO = NET SALES

AVG. DEBTORS
TABLE 5
Rs. In '000'
Particulars

2011

2010

Avg.

175471547

112934245

Debtors
Sales

1697681702

1409220257

DTR

9.66 limes

12.47 times

DT
R

14
1
2
1
0
8
6
4

ACR

DEBTORS TURNOVER RATIO

2011

2010
YEAR
Figure:5

Interpretation: By comparing the debtor turnover ratio of the current year with the previous
year, it may be assessed whether the sales policy of the management is efficient or riot. The
table reveals that 'debtor turnover has reduced. in comparison to previous year which means
debtors are not collected efficiently and collection policy of firm is defective.

3. CREDITOR'S TURNOVER RATIO = PURCHASES

AVG. CREDITORS
Tahle:6
(Rs. In '000')
Particulars 2011

2011

Avg.

2843.47284

143212791

creditors
Purchases

1075268789

CFR

3.78 times

537 times

APP

96 days

67 days

769925403

Interpretation : In 2011, CTR has decreased from 5.37 to 3.78, which shows that now companyis
efficieny in managing its creditors

4. Working Capital Turnover Ratio = Sales

Avg. W. Capital

Table:7

WORKING CAPITAL TURNOVER RATIO

Interpretation: In 2011. The working capital has been decreasing which shows the inefficient
utization of working capital.

SOLVENCY RATIO

DEBT EQUITY RATIO = OUTSIDER;S FUND

SHAREHOLDERS FUND

DEBT EQUITY RATIO

Interpretation: In 2010, DER was 3.078:1 & further decreased to2.089:1 in 2011. A low ratio is
considered favorable from the long-tenn creditor's point of view. Because' a high proportion of
owner's fund provide a larger margin of safety for them. A high DER indicates that the claifns of
the outsiders are greater than those of owners, which may not be considered by the creditors;
because this gives lesser margin of safety for them at the time of liquidation of the company.

2.Funded Debt to Total Capitalization Ratio = Funded Debt X 100

Total capitalization

Interpretation: In 2011, it is 34%. At 55%, this ratio is considered to be tolerable. Since this ratio
of the company is below this limit therefore the company is in better solvency position as lesser
reliance on outsiders, the better it is for the company
3. Equity Ratio = Shareholder's Fund X 100
Total Assets

Interpretation : In 2010 ER was 29% &in 2011 it was 35%.The higher the ER is better for the
long term solvency of the organisation.

4. RATIO OF TOTAL LIABILITIES TO TOTAL ASSETS = TOTAL LIAB. TO OUTSIDERS

TOTAL ASSESTS

Interpretation: Further in 2010 it was 59.4% & in 2011 it was 60.3% which means that the ratio
of-the company is not satisfactory.

5. FIXED ASSETS TO NET WORTH RATIO = FIXED ASSETS X 100

Interpretation: When the ratio is less than 100% it implies that owner funds are more than total
fixed assets 8z a part of working capital is provided by the shareholders. When the ratio is more
than 100% it implies that owner's funds are not sufficient to finance the fixed assets & the firm
has to depend upon outsiders to finance fixed assets. In 2010 and 2011 it was below 100%.
6. FIXED ASSETS RATIO = FIXED ASSETS X 100 TOTAL LONG TERM FUNDS

Interpretation: In 2011 it came down to 42%. Basically, 100% is considered to be satisfactory.

But in case of this company the ratio is less than 100%, which implies that a part of working
capital requirement is met out of the long-term funds of the firm.

PROFITABILITY RATIOS:-

1. GROSS PROFIT RATIO = GROSS PROFIT X 100 NET SALES

Interpretation:. In 2011 GP Ratio decreased because percentage increase in sales is more than.
percentage increase in Gross Profit.

NET PROFIT RATIO

Interpretation: In 2010 the NPR of the company was 0.53% & it increased to 1.14% due to
increase in sales. .

3. OPERATING RATIO = OPERATING COST X 100

NET SALES

Interpretation: In 2011 OR increased to 58% because % change in operating cost is higher than
percentage change in sales.

CHAPTER -4
Findings,
Conclusion &
Suggestions

FINDINGS
During the study I deeply analyze the RATIO ANALYSIS of Rana Polycot nearly two months to
understand whole procedure how ratio is managed.
My major findings are:
1. CoMpany is going with good current ratio it provides the information about the good turnover
of the company.
2. The quick ratio of Rana Polycot is less ideal. The reason for declining quick ratio can be
increase in current liabilities as compared to assets.
3. The stock turnover ratio of Rana Polycot is quite good. The reason for this can be major
increase in costs of goods sold.
4. The working capital turnover is showing declining trend which implies the inefficient
utilization of working capital.
5. Rana Polycot Ltd. suffers from cash problems and the running of day to day operations is
going to be difficult.
6. The internal check and control on the inventory is very good in the organization.
7. The Company is more dependent on outside funds.

CONCLUSION
Despite various measures taken up by the RANA POLYCOT the performance of current ratio
provide information about good turnover of the company & quick ratio is less than ideal ratio
.The internal check and control on inventory is very good in the organisation .The company
suffers from cash problems and running of day to day operations is going to be difficult. The
company is more dependent on outsides funds. In this project, I have been tried to cover all the
relevant area in which there is a margin improvement.

SUGGESTIONS
1. Due to competition prices are market driven and for earning more margin company should
give the more concentration on cost reduction by improving its efficiency.
2. The investments of surplus funds are made by the corporate office and the unit is ngenerally
involved while taking decisions with regard to structure of investment of surplus funds. The
corporate office should involve the units so as to better ascertain the future requirements of funds
and accordingly the investments are made in different securities..
3. The company is losing its overseas customers due to decrease in exports so the sufficient
amount of exports should the maintained.
4. Company. expenditure is continuously increasing in respect to employees cost and other
manufacturing cost which put the adverse effect on the cash flow of the company. So by
controlling expenditure company can improve their cash position.
5. To maintain strict quality checks so that the failures can be minimized and there by reduce
extra costs involved in doing the repairs.

BIBLIOGRAPHY
BOOKS: Management accounting by R.K Mittal Financial management by Shashi k Gupta -11 th
Addition.

INTERNET SEARCH:
ran apolycotltd @rana.com www.google.com http://www.corporateinfonnation.com/C om_p a
nv-Snapshotaspx?cusip=C356A5C00 http ://www.ranapolycotinkanaindust.html
http://vvwwrana.com/fabrics.html http://Www.docstoc.com/docs
http://www.moneycontrol.com/stocks/company_info/locations.php?sc_did=

ANNEXTURE