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A STUDY ON FINANCIAL PERFORMANCE & ANALYSIS IN GARMENTS
BY
SURESH KUMAR.K
Reg. No.: 311411631!
OF
MEENAKSHI COLLEGE OF ENGINEERING
A PRO"ECT REPORT
S#$%''e( 'o ')e
FACULTY OF MANAGEMENT STUDIES
In partial fulfillment of the requirements
For the Award of the Degree
OF
MASTER OF BUSINESS ADMINISTRATIONIN
*HUMAN RESOURCE+
ANNA UNI,ERSITY
CHENNAI - 6 !
"ULY 1
1
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DECLARATION
I, K. SURESH KUMAR student ofMEENAKSHI COLLEGE OF ENGINEERING hereby
declare that theproject report entitled/A STUDY ON FINANCIAL PERFORMANCE &
ANALYSISIN GARMENTS has been done by me and is submitted in partial fulfillment of
the requirement for the award of degree in masters in business administration.
P02e: C)e *SURESH KUMAR. K+
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ACKNOWLEDGEMENT
I take an opportunity to express my thanks to our principal D. G. GUNASEKARAN B.S25 B.E5
M.E5 ( P).D who has given me the opportunity to do this project at KUTTI BABA
GARMENTS P,T LTD.
I am thankful to D. R.R. RA"A MOHAN5 B.E5 ( M.B.A. Head of the epartment !f
"usiness #dministration for extending his valuable in the preparation of a report.
I am also thankful to M.R.R. RA"A MOHAN5 B.E5 M.B.Awho has given me guidance and
support to do this project report. I also thank all our staff members who help to do this reportsuccessfully.
I am also thankful to M. MATHIAS 7 MANAGERand all my well$wishers who have assisted
me in successful completion of my %roject.
#nd above all, I would like to express my heartful thanks to all the members of the %ersonnel
epartment of KUTTI BABA GARMENTS P,T LTD, for their constant help & co$operationrendered during the project work.
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MEENAKSHI COLLEGE OF ENGINEERING
NO: 15 ,EMBULIAMMAN KO,IL STREET5
8EST K.K. NAGAR5 CH79
Bonafide Certificate
'ertified that this %roject report titled /A STUDY ON FINANCIAL
PERFORMANCE & ANALYSIS;5 undertaken in KUTTY BABA GARMENTS5
MR.BARAKATHULLAH.M.Ris the bonafide work of
M. SURESH KUMAR.K5who carried out the research work under my supervision. 'ertified
further, that to the best of my knowledge the work reported herein does not form part of any other
project report or dissertation on the basis of which a degree or award was conferred on an earlier
occasion on this or any other candidate.
M. R. SATHYA5 MBA5 *P.)(+.
F2#0'< g#(e
D. R.R. RA"A MOHAN
He( o= ')e (e>'%e'
D. G. GUNASEKARAN. B . S25 B.E5 M.E5 P).D
HEAD OF THE INSTITUTION
S#$%''e( =o ')e ??7?o2e 'o $e )e0( o@@@@@@@@@@@@@@@@@@@
I'e0 e%e E'e0 e%e
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TABLE OF CONTENTS
CHAPTER NO CONTENTS PAGE NO
1. INTRODUCTION
(.( Introduction)
(.* Importance of the study+
(. -cope of the study
(./ !bjectives of the study
(.0 1eview of literature2
(.) 'ompany profile(0
(.+ Industry profile()
. RESEARCH METHODOLOGY
*.( 1esearch design *3
*.* 4ools and techniques for analysis *3
*. 1atio analysis *(
*./ ata collection method */
*./ 1atio analysis and interpretation *0
3. F(g o= ')e '#(< /3
4. SUGGESTIONS AND RECOMMENDATIONS /3
!. CONCLUSION /(
6. BIBLIOGRAPHY /(
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1. INTRODUCTION:
F20 0
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International best practice in microfinance around the world suggests good financial analysis is
the basis for successful and sustainable microfinance operations. -ome would even say that
without financial analysis your 8:I will never achieve sustainability.
1. IMPORTANCE OF THE STUDY
4he study location includes only with the company, the survey will be having a limit of the
working employees. 4his study focuses the major part of the analysis statements which has an
outflow of the figures.
4he study will be carried out mainly based on the information gathered from the
-econdary ata mainly "alance -heet and %rofit and =oss #ccount.
4he study will be limited to observations of the past. 4he observation made will be
related to laws operated in the past.
-ufficient data will not be made available to study the current operations being carried
out in the company.
4he company being under the >utti "aba ?arments and in the direct administration of
the government, it is not in a position to enjoy the full control of ownership. It is also not
in a position to fix prices for major products produced by it.
SIGNIFICANCE OF FINANCIAL PERFORMANCE ANALYSIS
Interest of various related groups is affected by the financial performance of a
firm. 4herefore, these groups analy@e the financial performance of the firm. 4he type of analysis
varies according to the specific interest of the party involved.T(e 2e('o: interested in the liquidity of the firm 5appraisal of firmAs liquidity6
Bo( )o0(e: interested in the cash$flow ability of the firm 5appraisal of firmAs capital
structure, the major sources and uses of funds, profitability over time, and projection of future
profitability6
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I?e'o: interested in present and expected future earnings as well as stability of these earnings
5appraisal of firmAs profitability and financial condition6
Mge%e': interested in internal control, better financial condition and better performance
5appraisal of firmAs present financial condition, evaluation of opportunities in relation to this
current position, return on investment provided by various assets of the company, etc6
1.3 SCOPE OF THE STUDY
4o show the status of any organi@ation or a firm at a given period of time. 4he study
finds out the operational efficiency of the organi@ation and suggests the proper utili@ation and
allocation of cash resources, to improve the efficiency of the organi@ation. 4he working
capital of the organi@ation will be further revealed through the adoption of various techniques
available for analysis. 4hese techniques reveal the measures that can adopt to improve the
existing trend.
1.4 OB"ECTI,ES OF THE STUDY
PRIMARY OB"ECTI,E:
4o study the financial performance of the organi@ation.
4he purpose of such an analysis is to assess a health and performance of the
organi@ation.
SECONDARY OB"ECTI,ES:
4o understand the strategy of the organi@ation.
4o calculate and soundly analy@e financial ratios.
4o benchmark the companyBs performance to their competitors in order to assess a
relative performance measure.
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4o predict the future performance and financial position
4o describe the sources of information for financial statement analysis
4o analy@e the comparative balance sheets.
1.! RE,IE8 OF LITERATURE:
FINANCIAL PERFORMANCE:
4he word B%erformance is derived from the word BparfourmenA, which means
Bto doA, Bto carry outA or Bto renderA. It refers the act of performing, execution, accomplishment,
fulfillment, etc. In border sense, performance refers to the accomplishment of a given task
measured against preset standards of accuracy, completeness, cost, and speed. In other words, it
refers to the degree to which an achievement is being or has been accomplished. In the words of
:rich >ohlar 4he performance is a general term applied to a part or to all the conducts of
activities of an organi@ation over a period of time often with reference to past or projected cost
efficiency, management responsibility or accountability or the like. 4hus, not just the
presentation, but the quality of results achieved refers to the performance. %erformance is used to
indicate firmAs success, conditions, and compliance. :inancial performance refers to the act of
performing financial activity. In broader sense, financial performance refers to the degree to
which financial objectives being or has been accomplished. It is the process of measuring the
results of a firm;s policies and operations in monetary terms. It is used to measure firm;s overall
financial health over a given period of time and can also be used to compare similar firms across
the same industry or to compare industries or sectors in aggregation.
FINANCIAL PERFORMANCE ANALYSIS:
In short, the firm itself as well as various interested groups such as managers,
shareholders, creditors, tax authorities, and others seeks answers to the following important
questionso'o o= ')e =% ' g?e >o' o= '%e
. Ho ')e F20 Pe=o%2e o= ')e =% o?e g?e >eo( o= '%e
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4hese questions can be answered with the help of financial analysis of a firm. :inancial analysis
involves the use of financial statements. # financial statement is an organi@ed collection of data
according to logical and 'onceptual :ramework 03 consistent accounting procedures. Its purpose
is to convey an understanding of some financial aspects of a business firm. It may show a
position at a moment of time as in the case of a "alance -heet, or may reveal a series of activities
over a given period of time, as in the case of an Income -tatement. 4hus, the term Bfinancial
statementsA generally refers to two basic statements< the "alance -heet and the Income
-tatement. 4he B02e S)ee' shows the financial position 5condition6 of the firm at a given
point of time. It provides a snapshot and may be regarded as a static picture.
"alance sheet is a summary of a firmAs financial position on a given date that shows 4otal
assets C 4otal liabilities D !wnerAs equity.E
4he 2o%e ''e%e' 5referred to in India as the profit and loss statement6 reflects the
performance of the firm over a period of time. Income statement is a summary of a firmAs
revenues and expenses over a specified period, ending with net income or loss for the period.E
However, financial statements do not reveal all the information related to the financial operations
of a firm, but they furnish some extremely useful information, which highlights two important
factors profitability and financial soundness. 4hus analysis of financial statements is an
important aid to financial performance analysis. :inancial performance analysis includes analysis
and interpretation of financial statements in such a way that it undertakes full diagnosis of the
profitability and financial soundness of the business.E 4he analysis of financial statements is a
process of evaluating the relationship between component parts of financial statements to obtain
a better understanding of the firmAs position and performance.E 8etcalf, 1. F. and %. =. 4itard,
%rinciples of #ccounting, F. ". -aunders, 5%hiladelphia6(2+),'onceptual :ramework.
4he financial performance analysis identifies the financial strengths and weaknesses of the firm
by properly establishing relationships between the items of the balance sheet and profit and loss
account. 4he first task is to select the information relevant to the decision under consideration
from the total information contained in the financial statements. 4he second is to arrange the
information in a way to highlight significant relationships. 4he final is interpretation and drawing
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of inferences and conclusions. In short, financial performance analysis is the process of
selection, relation, and evaluation.E
AREAS OF FINANCIAL PERFORMANCE ANALYSIS
:inancial analysts often assess firm;s production and productivity performance,
profitability performance, liquidity performance, working capital performance, fixed assets
performance, fund flow performance and social performance. However in the present study
financial health of ?-14' is measured from the following perspectives'0 A0
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1ecent empirical studies have concluded that inappropriately sequenced financial liberali@ation
has been an important contributory factor to the boom and crash cycles in emerging economies
5Filliamson and 8ahar (226. ?ourinchas et al. 5(2226 studied lending boom episodes across
ninety$one countries during the period (2)3(22), and concluded that the probability of
experiencing a financial crisis was significantly greater following a lending boom, linking this to
financial liberali@ation. mpirical studies by emirguc$>unt and etragiache 5(226 and
Hutchison and 8cill 5(2226* found that a financial crisis was more likely in a liberali@ed
financial system, particularly when the institutional support was weak. >aminsky and 1einhart
5(2226 concluded that in eighteen of the twenty six banking crises in their sample, the financial
sector had been liberali@ed some time during the previous five years 51ajan *33(6.
#ccording to -undararajan 5(2226, orderly liberali@ation often requires implementation of
critical and massive reforms simultaneously. Fhat is needed is a package of reforms involving
different components of the financial sector, such as aspects of banking supervision, money
markets, monetary operations and central banking. He argues that, at the least, this is necessary
for financial stability reasons, and to be able to be effective in implementing stabili@ation
policies.
4he influential views on the sequence of liberali@ation of dwards 5(22a6 and 8c>innon
5(226 assert that domestic financial market liberali@ation and current account liberali@ation
should be implemented first, followed by capital account liberali@ation. 8oreover, early
literature on the optimal sequencing of economic reform also suggests the importance of capital
controls during the process of development. In this view, liberali@ation of the capital account
should not be undertaken until the end of the process7 freeing up capital flows prematurely
before domestic and trade liberali@ation could lead to economic instability 58c>innon (2+,
(227 dwards (2/7 "alassa (2237 ?lick and Hutchison *3336.
8c>innon 5(226 and "urkett and =otspeich 5(226 argue that there are at least two reasons why
capital account liberali@ation should be delayed until the end of the reform sequence. :irst, if
inflows occur prior to the completion of trade reforms, the domestic allocation of foreign savings
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may not be efficient. -econd, whether or not trade reforms are initially in place, a rapid inflow of
capital will cause real appreciation of the exchange rate, which makes it difficult for domestic
tradable producers to adjust to the removal of protection. 4hus, a massive influx of capital at the
time liberali@ation occurs, finances an unusual increase in imports while decreasing exports and
gives out the wrong long$run price signals to private market participants 5dwards (2/6. In
addition, other elements of a supporting %olicy package for orderly capital account liberali@ation
are restructuring weak and insolvent banks. Indeed, where banks are weak or insolvent, one
would want to restrict their access to international capital flows, and so there may be a case for
imposing controls on selective capital movements. :urthermore, there would be a need to
strengthen auditing, accounting and disclosure practices 5-undararajan 8c>innon 5(226 has
attempted to account for institutional capabilities and weaknesses, with Bthe optimal order of
economic liberali@ationA. It is thus argued that how fiscal, monetary, and foreign exchange
policies are sequenced is of critical importance. ?overnment cannot, and perhaps should not,
undertake all liberali@ing measures simultaneously. Instead, there is an BoptimalA order of
economic liberali@ation, which may vary for different liberali@ing economies depending on their
initial conditions.
58c>innon (22, p. ++6 8c>innon elaborates by suggesting that the speed of adjustment is
sluggish in the goods markets, and faster in the financial markets. 4hus, financial markets could
not be reformed in the same manner and at the same time as other markets, without creating
awkward difficulties. 1ecognition of these problems has led to the proposition of sequencing in
financial reforms. -uccessful reform of the real sector is seen as a prerequisite to financial
reform. 4hus, financial restraint would have to be maintained during the first stage of economic
liberali@ation. :urthermore, different aspects of reform programs may work at cross$purposes,
disrupting the real sector in the process.
4his is precisely what -achs 5(226 labeled as Bcompetition of instrumentsA. -uch conflict can
occur when abrupt increases in interest rates cause the exchange rate to appreciate rapidly thus
damaging the real sector. -equencing becomes important again. It is thus suggested that
liberali@ation of foreign markets should take place after liberali@ation of domestic financial
markets. In this context, proponent views on financial liberali@ation suggest caution in
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sequencing in the sense of a gradual process of liberali@ation emphasi@ing the achievement of
macroeconomic stability and adequate bank supervision as preconditions for successful financial
reform. It is also argued by proponent views of financial liberali@ation that the authorities should
move more aggressively on financial reform in good times, and rather slowly when borrowersA
net worth is reduced by negative shocks, such as recessions and losses due to changes in the
terms of trade 5Forld "ank (22b7 #restos and emetriades (2226.
FINANCIAL PERFORMANCE
:inancial performance analysis is vital for the triumph of an enterprise. :inancial
performance analysis is an appraisal of the feasibility, solidity and fertility of a business, sub$
business or mission. #ltman and berhart 5(22/6 reported the use of neural network in
identification of distressed business by the Italian central bank. Jsing over (,333 sampled firms
with (3 financial ratios as independent variables, they found that the classification of neural
networks was very close to that achieved by discriminate analysis.
4hey concluded that the neural network is not a clearly dominant mathematical technique
compared to traditional statistical techniques. ?epp and >umar 5*336 incorporated the time
biasE factor into the classic business failure prediction model. Jsing #ltman 5(2)6 and!hlsonAs 5(236 models to a matched sample of failed and non$failed firms from (23As, they
found that the predictive accuracy of #ltmanAs model declined when applied against the (23As
data. 4he findings explained the importance of incorporating the time factor in the traditional
failure prediction models.
'ampbell 5*336 constructed a multivariate prediction model that estimates the probability of
bankruptcy reorgani@ation for closely held firms. -ix variables were used in developing the
hypotheses and five were significant in distinguishing closely held firms that reorgani@e from
those that liquidate. 4he five factors were firm si@e, asset profitability, the number of secured
creditors, the presence of free assets, and the number of under$secured secured creditors. 4he
prediction model correctly classified +.0K of the sampled firms.
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1.6 COMPANY PROFILE: Kutti Baba ?arment 'ompany is a new business that will begin sales in ecember
of *3(*. 4he company would manufacture quality children;s clothing and accessories and sell
them through retail stores. I would like to start this business so I can offer parents; children;s
items that do not currently exist, along with a line of quality clothing. I have (* years experience
in sales and really enjoy working with the public, so the selling end of the business is what
appeals to me. #s a consumer it is important that I get a high quality product. 4his is a big
emphasis for me in creating these garments. I want to produce top quality product at affordable
prices. I also want to work in -quamish and to be able to offer local people work. 4o this end, it
is my goal to find local suppliers, such as the "rush & "obbin and Insight -igns for my
production and other needs. I believe this is a good business to be in and can;t wait to get started.
,o ( Mo S''e%e':
Kutti Baba Garment'ompany is a manufacturer of quality children;s products. Fe
offer our customers top quality clothing and accessories at excellent prices. !ur goal is to
produce the majority of our product locally. Fe will be introducing an average of * new
products per quarter, based on customer requests and the need in the marketplace.
O$e2'?e:
!ur primary objectives over the next year are to'?e B02e S)ee' S''e%e':
4he comparative balance sheet analysis is the study of the trend of the same items, group
of items and computed items in two or more balance sheets of the same business enterprise on
different dates. 4he changes in periodic balance sheet items reflect the conduct of a business.
4he changes can be observed by comparison of the balance sheet at the beginning and at the end
of a period and these changes can help in forming an opinion about the progress of an enterprise.
"alance sheets as on two or more different dates are used for comparing the assets, liabilities and
the net worth of the company. 'omparative balance sheet analysis is useful for studying the
trends of an undertaking.
A(?'ge
'omparative statements help the analyst to evaluate the performance of the company.
'omparative statements can also be used to compare the performance of the firm with theaverage performance of the industry between different years.
It helps in identification of the weaknesses of the firm and remedial measures can be
taken accordingly.
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Co%%o Se B02e S)ee' A0
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4he data collected is secondary in nature. 4his is due to the nature of analysis, which only
call for secondary data
SOURCE OF DATA
4he source of data is the various yearAs balance sheet, profit and loss account and
statements provided by the company. 4hey were used for the analysis and for preparing reports.
4he records maintained by the company where referred to get the required information.
.! RATIO ANALYSIS AND INTERPRETATION
GROSS PROFIT RATIO*R. I L2+
Ye Go Po=' Ne' S0e R'o *I J+
97 ).(02 23.) ++.*2
7 /*./3* (3*.+ ++.3
71 2*2.2/+ ((2).)2 ++.+(
1711 (3++.+/ (0/./) +2.0+
1171 (/(./+ ().(( +2.+3
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GRAPHICAL REPRESENTATION OF CHANGE OF DIRECTION OF
GROSS PROFITRATIO
76
76.5
77
77.5
78
78.5
79
79.5
80
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
RATIO
RATIO
INTERPRETATION
4he ?ross %rofit for the financial year *33+$*33 was recorded as per the ratio is ++.*2K, where
as the years between *33$*332 went through a change in the ratio of ++.3Kand the companyAs
profit went upward in *332$*3(3 with the ratio of ++.+(K, 4hus, it is showing the steady
growth in the company profile.
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NET PROFIT RATIO: *R. I L2+
Ye Ne' Po=' Ne' S0e R'o *I J+
97 *(*.0/ 23.) *.+
7 (03.+ (3*.+ (.2*
71 **).+0 ((2).)2 (.20
1711 *20.* (0/./) *(.+2
1171 00./0 ().(( *(.((
GRAPHICAL REPRESENTATION OF CHANGE OF DIRECTION OF
NET PROFITRATIO
RATIO
23.87
13.92
18.95 21.79 21.11
0
5
10
15
20
25
30
2007-
2008
2008-
2009
2009-
2010
2010-
2011
2011-
2012
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
INTERPRETATIONutti
"aba ?arments =imited has shown (,)(.)2 51s. in lakhs6 during the year *332$*3(3.Fhile the
Oet 'ash from investing activities depicts 1s.0+2.)0 in the year *332$*3(3.4here was a
increase in net stock on hire during the financial year *332$*3(3 of )+,3. 51s. in lakhs6.4he
financial year *332$*3(3 depicts the Oet cash from financing activities amount of 1s.*(+(2./2
shows upward profit in the company. 'ash and cash equivalents at the end of the year were
1s./2.0 it shows that the company position in the year *332$*3(3. 'ash and cash equivalents
at the end of the year were 1s. *).+( it shows that the company position in the year *3(3$*3((.
'ash and cash equivalents at the end of the year were 23.3 it shows that the company position
in the year *3(($*3(*.
PROFIT & LOSS ACCOUNT
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BALANCE SHEET:
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CHAPTER !
!.1 FINDINGS
%rofitability indicates the efficiency and effectiveness with which the operations arebeing carried on. It has been found out that the profitability and investments being made
by the firm are sound and showing an increasing trend.
4he fixed asset of the company contributes more than 03K of the total asset position of
the company. 4he company indicating good asset position of the company. 4he company
has also got sufficient reserves and -urplus to meet the future financial contingencies of
the company.
!. SUGGESTIONS
4o avoid fluctuation in working capital value of sundry creditors should be under
controllable.
?rowth rate of the company will be improved by maintaining the stocks.
Forking capital is very essential for an organi@ation by calculating trend analysis the
working capital need is increasing year by year. 4he company should increase the current
asset and decrease the current liability to meet the future working capital needs.
4he ratio between sales and fixed asset turnover, capital employed is changing year by
year because of changes in sales so organi@ation has to increase the sales.
4o avoid gradual increase in current assets the company should concentrate on the
customer debt 5debtors6.
4he company can reduce the cost of production and try to improve its profitability.
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6. CONCLUSION:
In this study an attempt has been made to analy@e the overall financial performance ofmadras industries lining limited. 4he study shows that the overall performance of the company is
not satisfactory. 4hrough the company is a profit making organi@ation, its profit is not up to the
mark with respect to the asset employed in the organi@ation. 4he analysis and interpretation of
various data relating to financial performance helped to reach into a conclusion that the
efficiency of the analysis is not sufficient. It is also reveals that the company is not having a
satisfactory liquidity and profitability position.
4he overall success of any company depends upon the working capital position. -o it
should be handled properly because it shows the efficiency and financial strength of the
company. 4herefore the company should adhere to strict measures in every sphere of its
activities to bring the company back to sufficient working capital position and improve its
financial performance.
BIBLIOGRAPHY:
4he Impact of 'orporate ?overnance on :inancial %erformance