10-04-2017, 08:26 PM
INTRODUCTION
Finance is one of the basic foundations of all kinds of economic activities. It is the master key which provides access to all the sources for being employed in manufacturing and merchandising activities. It has rightly being said that business needs money to make more money. However it is also true that money generate more money, only when it is properly managed. Hence, efficient management of every business enterprise is closely linked with the efficient management of its finance. Financing of a firm means providing money for investment in the form of fixed assets and also in the form of working capital for day to day operations.
Business finance mainly involves, rising of funds and thus effective utilisation keeping in view the overall objective of the firm. This requires great caution and wisdom on part of management. The management makes use of various financial techniques, devices etc for administering the financial affairs of the firm in most efficient way.
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STATEMENT OF THE PROBLEM
An analysis of financial statements of The Co-operative Spinning Mills is selected to analyse the financial and operational performance of the company which is facing some difficulty in managing the funds, assets and experience in recent years. The study is to be conducted to evaluate the performance and market standing of the company in order to give better scope to investors, shareholders, creditors and the management themselves about the rating of the company and its performance in the market.
OBJECTIVES
To ascertain the liquidity of the company.
To measure the profitability of the organization.
To examine the factors effecting financial and operational performance.
To analyse the present financial positions as well as the future.
To measure the efficiency of management in administering / monitoring the assets of the company.
THEORETICAL PERSPECTIVE
Financial Statements
The information generally expected from an accounting system is presented through financial statements. Financial statements are the result of accounting process, which starts with identification of accounting information and recording thereof in the books of primary entry. A financial statement is a collection of data organized according to the logical and consistent accounting procedure. Financial statements are prepared for the purpose of presenting a periodical review or report on the progress by the management and deal with
(a) The status of investment in business and,
(b) The result achieved during the period under review.
The term financial statement generally refers to the two statements,
1. Income statement or The Trading and P&L account.
2. Position Statement or the Balance Sheet.
The statement which discloses status of investments is known as Balance Sheet and the statement which reflects the result of operation is known as Profit & Loss account. The statements are used to convey to the owners and other interested outsiders, the profitability and financial position of a firm.
Uses of Financial Statements
1) Management
Management refers to the process of getting things done through others. This requires that the subordinates are doing work properly.
2) Creditors
The creditors supply goods and services on credit to the firm. They are interested in knowing firm s short term financial positions, i.e., whether firm will be able to pay off their debts on demand.
3) Bankers
The banker is interested to see that the loan amount is secure and the customer is also able to pay the interest regularly. The bankers analyse the balance sheet to determine the financial strength and profit earning positions of the concern.
4) Employees
Employees are interested in the financial position of a concern in which they work, particularly when the payment of bonus depends upon the size of profit earned.
5) Investors
6) Government
7) Research Scholars
8) Consumers
9) Trade Association
10) Stock Exchange
Financial Analysis
Financial Statement analysis is the most important part of Financial Analysis. It is based on statements, which are the end product of accounting system. It is based on statement analysis. It is largely a post-mortem of the transactional activities of a business firm, as recorded in the account books so as to judge the operational ability, profitability and financial soundness.
The important methods of financial analysis are:
1) Comparative Financial Statements:-
The comparative financial statements are statements of the financial position of different periods of time. The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods.
2) Trend Analysis:-
The financial statements may be analysed by computing trends of series of information. This method determines the direction upward or downward and involves the computation of the percentage relationship at each statement item bears to the same item in the base year.
3) Common Size Statement:-
In common size statements, balance sheets and income statements are shown in analytical percentages. The figures are shown as percentage of total assets, total liabilities and total sales.
4) Fund Flow Analysis:-
Fund flow Analysis studies the changes in the corporate financial management methods and to improve the quality of the diagnosis of the economic health of an enterprise so that the quality of economic management improves year after year.
5) Cash Flow Analysis:-
Cash flow analysis is based on the cash flow statement, which describes the inflow and outflows of cash and cash equivalents in an enterprise during a specific period of time.
6) Ratio Analysis:-
Ratio Analysis is technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions.
INDUSTRY PROFILE
The size of the textile industry in Kerala is rather than compared to the rest of the country. It comprises of around 30 textiles as against a total of 1767 textile mills in the country. The textile industry of Kerala comprises handloom, power loom and the mill sector.
Handloom is the major traditional industry in the state. Among the mills there are 40 power loom co-operative and 170 private units in the states concentrated in Kannur, Eranakulam, Thrissur and Trivandrum districts. Capacity of 500 looms providing employment to 3000 personnel.
Above 30 mills, 18 come under the government sector, comprising 5 in the central public sector, 7 in the state public sector, 5 in the co-operative sector and 1 in the joint sector.
Most of the mills in central and state public sector are units taken over from the private sector at different times, when they turned sick.
Central Conditions Of The Textile Mill
The public sector units in the textile sector were mainly engaged in the activities of yarn manufacturing. The 9 units including the four companies around 7979 personnel and accounts for 10% of total employment in enterprises under industries department.
Major Problems of Textile
1) Cotton exports & Price.
2) Delay in cotton yarn exports.
3) Lack of modernisation.
4) Non-availability of credit.
5) Increase in cost of production.
6) Low productivity.
7) Power problems.
Company Profile
Aleppey Co-operative Spinning Mills registered on 21-7-1981 by number D/7934/81 was commissioned on 31-10-1999 with capacity of 6000 spindles. The commissioning had done after a long lapse of 18 years because of financial crisis.
The government acquired 7.9 hectare i.e., 19.5 c of land in Pathiyoor Village, Kareelakulangara, Kayamkulam in Aleppey District with an estimated value of 26.9 lakhs. The project report was prepared by the All India Federation of Co-operative Spinning Mills ltd Bombay with an ultimate capacity of 25000 spindles. The total cost of the project was Rs 1136 lakhs
(due to financial stringency the project has to be curtained to of its proposed stage of its full fledged capacity). The second stage towards commissioning of this mill for another 6048 spindles is in progress even though sluggishly. The third phase towards coming of the balance 12000 and old spindles will be launched only after the second phase is commissioned.
The initial membership if the society was 34 members and was registered as a Public Ltd Company in the co-operative sector.
At first mill was registered as a co-operative society under Kerala Co-operative Societies Act 1969.
The board of Directors shall compete to delegate the power and duties of the Chairman, General Managers or any other officer of the mill for the efficient management of the business of the mill.
Methodology
Research Methodology
Research methodology means the scientific method of conducting a research. It is the research which can be selected for conducting a study according to nature and scope of the subject. The result of the research is capable of being evaluated either by the researcher himself or by others. Both primary and secondary data are used for the project work.
Collection of Data
Primary Data: for this project work primary data are collected through discussion with staff and conducting personal interview with the higher level official especially with the financial manager.
Secondary Data: the secondary data used are mainly published audited financial statements of the past 5 years ( ), periodical journals and some daily reports of the company.
Analysis and Interpretation:
This study is extended to analyse the financial statement of the company. For analysing the solvency, liquidity and profitability of the company. For this the researcher used two important methods i.e., Ratio Analysis and Comparative Statement. For the meaningful and successful completion of the projectwork tables and graphs are used.