PREFACE

A

Project Report

on

Study of Consumer

Perception

in

Liberty Shoes Limited,

Karnal-132001

(Haryana)

Submitted to : - Kurkushetra University Kurkushetra

In partial fulfillment of the requirement for the Degree of Bachlor of Business Adminitration on 2012-13Under Supevision of

Submitted By

Mr. Vishal Goel

Pooja Rani

(C.A)

Govt. P.G Collage for Women, Karnal-132001 (Haryana)CERTIFICATE OF ORIGINALITY

This is to certify that the project report entitled "Finance" Submitted to Govt. P.G Collage for Woman, Karnal in the patial fulfillment of the requirement for the award of the degree of BBA in an original work carried out by Pooja Rani under the guidance of Mr. Vishal Goel. The matter embodied in this project is a genuine work done by Pooj Rani to the best of my knowledge and belief and has been submitted neither to this university nor to nay other university for the fulfillment of the requirement of the course of study.

Signature of the Student

Signature of the Guide

Designation

CertificateThis is to certify that the project titled " Finance " is an academic work done by "Pooja Rani" submitted in in the partial fulfillment of requirement for requirement for the award of the degree of course form " Govt. P.G Collage for Woman, Karnal. It has been completed under the guidance of Mr. Vishal Goel and Mr. Prabhash Kumar Singh. We are thankful to Liberty Shoes Limited. For having allowed our student to undergo project work training. The authenticity of the project work will be examined by the viva examiner which uncludes data verification, checking duplicity of information etc. And it may be rejected due to non fulfillment of quality standard set by the Institude.

AcknowledgementAn individual cannot do project of this scale. I take this opportunity to express my acknowledgement and deep sense of gratitude to the individuals for rendering valuable assistant and gratitude to me. Their input have played a vital role in success of this project & formal piece of acknowledgement my not be sufficient to express the feeling of gratitude towards people who have helped me successfully completion of my training.

I would like to wish my sincere thanks to my project Mr. Vishal Goel ( C.A) studies for her keen interest and giving valuable guidance at every stage of this project. Lator on I would like to confer the flower of acknowledgement to the company guide Mr. Prabhash Kuamr Singh (Assistant) Ex-Imp, Department, who is my external guide.

I take this opportunity to thank all respondent who spared their precious time to provide me with valuable input for project without it would have been possible.

I firmly belive that there is always a scope of improvement. I welcome any suggestion for futher enrching the quality of this report.

Signature of Student

Preface

The Shoe industry is highly competitive. Product and services that are easily replicated, together with informed and demanding consumer markers, add to the complexity of the dynamic and fast changing shoe industry. The Companies try to diffrerentiate themselves on the basis of corporate indentity. The purpose of current study was to understand the customer needs and wands and waht a customer expects from the company, and how do and on what attibutes customer choose a particular brand, and what is their frequency of their purpose.

The review of literature focuses on the importance of safety products and customer preference. The questionnaire was made to fulfill all the set empirical objectives. The schedule had the question on different attributes to understand the complete perception of the customer.

The statistical analysis was done. The study and analysis can help the verious companies to understand that how much shoes in the market and what are those factors on the bases of which customers select those shoes.

Signature of StudentCertificate This is to certify that report entitled " Finance" submitted for the degree of BBA in subject of Summer Training Report, is a bonafide research project earned out by Pooja Rani " Govt. P.G Collage for Woman, Karnal student under my supervision and no part of this report has been submitted for any other degree.

The assistance and help received during the coures of investigation have been fully acknowledge.

Mr. Vishal Goel

(C.A)

ContentsChaper No.TitlePage No

1 Industry Profile

1.1Overview of industry as a whole

1.2Profile of Liberty Shoes Ltd

1.2.1History

1.2.2Corporate Philosophy

1.2.3Social Responsibility

1.2.4Corporate Goals

1.2.5Awards

1.2.6Product

1.2.7Mission & Vision

1.2.8Liberty Group of Companies

1.2.9Board of Directors

1.3.Competition information

1.3.1Corporate values

1.3.2Core strenght of Liberty

1.3.3Objective of the Company

1.3.5Corporate goals of the company

1.3.6National & International Awards

2.Re-search Methology

3.Balance Sheet

4.About Ratio Analsis

5.Calculation & Analysis of various Ratios and their comparison with various years.

6.Suggestion & Recommendations

Industry ProfileINTRODUCTION TO FOOTWEAR COMPANYFootwear has come out as one of the basic needs and necessities of todays human being. It is as important for a human being as clothes, bread and shelter. The importance of the said product has been highly recognized in the western and advanced countries. Footwear industry in these countries came in category of other developed industries as Nike and Reebok of America, Lapses of U.K, Goose of Italy are some highly reputed companies manufacturing hi tech shoes and having world wide acceptability. Scenario in India being the second largest populated country in the world, surplus manpower and resources of raw materials, whatever the reason being.

Till the mid of the 20th century, the bulk of shoe industry were in cottage sector. Professional cobblers were responsible for traditional shoes, Indian as well western styles.

In the post independence era the policies of government were slowly guided to provide protection to cobblers, who mainly come from schedule cast through direct or indirect regulations. In the past one decade the situation has completely changed because the new generation of professionals did not adopt this line as shoemaker and they preferred to join white-collar jobs. Now a majority of existing workers are working in the shoe industry at Agra. Evan in Agra the fewer servants of other class are taking over the job of shoemaking.

With the situation the growth of industry remained stagnant because of no availability of workers to keep the pace of demands. Plastic industry and Hawaii chaplets replace the shortage of footwear. National Bata remained the main source of supply to meet such demand.

The present scenario of shoe industry has changed by the Liberalization of Economic Policy. Many national and international brands have emerged in Indian footwear industry. Rate of production is not adequate to meet the requirements. Even the combined strength of total output of plastic, canvas, rubber and other categories shoe donor make up the populated requirement of this country.

Taking Indian shoe industry in consideration all modernization as anticipated would remain in the small-scale sector because of low availability of capital.

We can look towards Italy which is the leader of footwear trader bulk of production is from the small-scale sector and unit having about 20 to 30 workers could produce 200 to 500 pairs per day. The total capital in machinery and raw material is few lakh rupee whereas in India one person can produce pair of high quality of shoe in a day. In cottage small scale industry the production is quite low in comparison to the international standards.

With the mechanization of shoe industry production of footwear in 1980s have been increased in almost each of the state where as earlier it used to be mainly in Agra. But now in Karnal, Agra, Saharanpur, Gharaunda, Liberty Puram and at many other places production centers have been set up for various production activities.

It is an ideal industry for entrepreneurs and the profits are assured. Availability of raw material and manpower is no problem. So the small-scale sector has to play a vital role for the industry development.

ROLE OF FOOTWEAR INDUSTRYThe main aim of footwear industry is to provide footwear to all human beings and in any of its variety. Footwear is a necessity and the industry ought to succeed on this front. Times are changing and so in the urban and rural requirements. The industry is working to cater to the requirements and demands of the people.

INDIAN FOOTWEAR INDUSTRYMany people still seem to think that shoe warring is comparatively a new thing in India. On the contrary it can be attributed to the past. In the Rig Veda mention is made of the treatment of leather. In the Ramayana and Mahabharta there is not only clear mention of shoes but description of richly ornamented and bejeweled shoes. And in the Indian society there has been since the olden times a particular class of the people who made shoes from leather.

However this industry could not develop itself despite the fact that India has surplus manpower and resources of raw materials.

Although there is a sea change in the overall studies of industry with corporate entering the field and setting up a number of modern production facilities in different parts of the country but due to reservation increase in the price of leather in international market most of the corporate players are focusing more on the production of non-leather footwear. Therefore the bulk of industry output of leather footwear comes from the small-scale and cottage sector.

India ranks first among major livestock holding countries in the world but this has hardly been a guarantee for steady availability of raw hides and skins. There is a considerable gap between demand and supply of leather that is expected to wide further.

There is also going to take place revolution in the footwear consumption patterns within the country the signs of which are clear ever in the last five to six years.

The present scenario of shoe industry has changed by the liberalization of economic policy. Many national and international brands have emerged in Indian footwear industry. Rate of production is not adequate to meet the requirements. Even the combined strength of total output of plastics, canvas, rubber and other categories shoe donor make up the populated requirement of this country. The industry held enough if expansion opportunity with the massive availability of natural resources and simultaneous consumption of the products being produced.

It is an ideal industry for entrepreneurs and profits are rest assured.

POINEERING BRANDS IN FOOTWEAR INDUSTRYLIBERTY

RELAXO

WOODLAND

LAKHANI

BATA

ACTION

RED TAPE

NIKE

REEBOK

These are having the infrastructure, the competence, the budget and the potential to take the industry in the global way.

INTRODUCTION: -Liberty Group come a long way since it began its operations a little over 50 years ago in the city of Karnal, Haryana. The emphasis since the very beginning has been to offer great products at value for money/affordable prices. This led to the development of Liberty Patented Humantech approach which synergies traditional workmanship with state of the art technology to provide the best quality at the most competitive price.

Liberty group companies set various benchmarks in Footwear manufacturing within the Groups Production facilities and also to industry Liberty Shoes Limited Gharaunda and Libertypuram units are having state of the art manufacturing technologies.

HISTORY: -Liberty Group started operations in 1954 and today comprises of give firms, namely Liberty Footwear Company, Liberty Enterprises, Liberty Leathers, Liberty Group Marketing Division and Liberty Shoes Limited. The group has an annual turnover of Rs.500 crore approximately.

Liberty has its own studio for design and development of footwear. It manufactures footwear both for export and domestic markets. The company has carved a name for itself in the international market and is India largest exporter of footwear to Germany.

Liberty Shoes Limited., the public company of the group started commercial production in 1993 and is the countrys leading footwear manufacturers today. The company has the state of the art production facilities at Libertypuram to manufacture high quality footwear and its contribution in Liberty Groups total sale is over 30% and its rising steadily.

CORPORATE PHILOSOPHY: -Steeped in a philosophy that has at its core innovation, technology and advancement, Liberty, pride itself over and above everything else on healthy and heart-felt respect for the human ethos.

That which projects itself in the expectancy and excitement with which one greets the arrival of the new combined with a sincere and deep regard for the old. That which is appreciative of and adopts at every stage the unique balance between modernization and tradition.

Liberty as a brand is constantly evolving to keep pace with the changing trends, styles, beliefs and aspirations of people while maintaining the sanctity of certain traditions like workmanship and good value.

COMPANY CREDO :-1. To ensure that the method we use is the latest technology world over

2. To follow the highest standards of honest workmanship in whatever we make.

3. To walk that extra mile to ensure customer satisfaction worldwide, to remain a true cosmopolitan to the spirit, to know that we are about people

MANUFACTURING : -What gives Liberty the edge is vertically integrated manufacturing infrastructure on technology basis with completely in-house state of the art production facilities which includes & DESMA machines for PU Direct Injection, 15 machines for PVC Direct Injection, 3 machines for EVA Injection, 3 PU Injection units for unit sole, 6 Lines for cement lasted injection and one machine for the latest TPU Injection. Above production facilities are maintained with focus on environment cleanliness under ISES 2000 norms, provides a complete range of family footwear of all seasons and occasions, covers the entire domain of Industrial safety and Health Footwear requirements.

Liberty is a technology company Humantech Libertys patented technology is a combination of human craftsmanship and technological excellence.

PROMOTERS OF THE COMPANY

The company has been promoted by three business minded persons named as:-

Late Sh.D.P.GuptaHe has been associated with the shoe industry for the last 50 years. He initiated the shoes business under the trading cycle Pal boot house in 1944.

Late Sh.P.D.GuptaHe was the Chairman and the Managing Director of the Company. He has been associated with the shoe industry since the age of 16 years. He was also the chairman of joint venture setup in Russia by the Company. He had been the president of all India chambers of footwear exports.

Late Sh.R.K.BansalHe was the promoter Director of the Company. He had been associated with shoe industry and with the trade for the last 45 years. He had the knowledge of international market and with his abilities he was able to introduce Liberty products in most advanced countries like Italy and America.

GROUP COMPANIESLIBERTY AUTOMOTIVELiberty Automotive is a joint venture company promoted by Azin Khodro Group of Iran and Liberty Group of India manufactures Automotive Trim Parts.

It came up with its green field at Bawal Industrial Growth Centre on Delhi-Jaipur national highway for manufacturing automotive trim parts.

Drawing upon the considerable manufacturing experience of Azin Khodro group and business acumen of Liberty group it is all set to deliver high quality finished product. Armed with the unique R & D source Liberty Automotive is able to offer ideas to create solutions an d resources to meet the challenges of performance optimization.LIBERTY ORGANOSYSLiberty Organises Limited is promoted by Liberty Group Lfor manufacturing acetic acid in India promotes. Liberty proposes to use carbonylation route for manufacturing the chemical.60% of the worlds production is based on this technology .Liberty plans to build this project on large scale, meeting the entire demand of the nation.

LIBERTY REVOLUTIONSIn the elite shopping avenues of fashion capitals Revolutions has begun its walk. The fashion accessory and footwear stores have begun operation in Chennai, Banglore, Mumbai, Calcutta, Hyderabad and pune. These are company managed and owned outlets where the emphasis is to deliver high fashion to the customers backed by quality service making it a delightful shopping experience. Liberty showrooms enter the international market as company has plans of opening more revolution showrooms nationally and internationally.

CORPORATE VALUES

1. We value and trust out people.

2. We recruit and select quality people through a secular approach.

3. Continuous investment in development of people pays.

4. We appreciate and regard integrity, loyalty and commitment.5. Objectivity and fairness are the criteria for performance and action evaluation.

6. Means are as important as the result achieved.

7. Performers thrive.

8. Our style of operation is participative.

9. Creative and high aesthetic sense is encouraged and changes welcomed

10. We keep the organization systematic yet simple.

11. Courtesy and freedom of expression across the organization from the basis of our communication.

12. Our profitability is based on customer satisfaction through high quality products and service.

13. Consistent growth based on new technology is necessary for the continued health of the organization.

14. A positive corporate image helps us in all our tasks.

CORE STRENGHT OF LIBERTY.

Corporate Image.

Consistent Growth.

Organizational Transparency.

Visionary & Dynamic Leadership.

Fair Employment Practices.

Multi-technology Manufacturing Capabilities.

Manufacturing Flexibility.

Multi-disciplinary R & D.

OBJECTIVE OF THE COMPANYThe main objective to be pursued by the company on its incorporation as set on memorandum of association as under: To work as buying selling agent with or without trademark for finished product.

To import the technical know how of footwear and PVC technology.

To deal in raw hides and skins.

To carry on business of manufacturing and repairing, and wholesale dealers in all types of footwear and accessories of footwear (such as heels, soles, puckers and hand grouse and other product of leather), PCC, leather manufactures and dealers in all kinds of water proof articles.

To prepare, process, cost, transport, refine, recover, retain, utilize, extract, finish import, buy and sell market install summary and carry on business as manufacture dealer in all kinds of footwear, component and accessories.Corporate Goals of the CompanyAny company if it wants to grow in the long run; it should have clear cut and well-defined goals. The goals of the Liberty Shoes Company are as follows: Liberty Company wants to develop a sprit of co-operation between individual and group with in the company.

It wants to maintain good relationship among the management and the union of the company.

It well endeavors to keep highly qualified employee by appropriate training and thus raise their morale and competence.

Liberty will try to make the management for facing the competition of highest level.

It will try to remain as technically fir as the market leader of the footwear industry and leather product industry.

Liberty wants to be known for the quality of its products and services.

National and International awardsThe liberty group has won several prestigious national and international awards, which are as under:

Arch of Europe international gold star, 1994.

International awards for good quality, Brussels, Belgium 1988.

Europe award for pair in 1987.

International Asian award, Jakarta in 1982.

National award from government in 1981 1982.udyog rattan by government of India.

Certificate of merit as national export award from government of India in 1989.

Leather export promotion council merit award for outstanding performance for 1976 to 1982.

National award for best export performance in leather garments in 1987 1988.

Haryana government exports award in 1978 1979.

National productivity award in 1995 1996.

Research MethodologyResearch, which is done for this particular project, is with the help of data collection.

Data, which is collected, is mainly secondary data, which is collected from the account books of the Liberty Shoes Limited.Here the research process, which is used, is as follows:Research problem: here the problem is to analyze the ratio of the company for which we have to conduct the research.

Extensive literature survey: now we have to see that from where the data is being collected on which we have to perform the research.

Preparing the research design: here the research is descriptive research as we to give various descriptions so design are formulated accordingly.

Sample size: here the sample is taken from the companies past records of various accounts. Here sampling is done step by step or we can say multistage sampling.

Collecting of data: data, which is collected for the research is secondary data as I had collected it from the account books of the company.

Execution of project: when data is being collected then that data is used for the execution of the project.

Analysis of data: in this stage of research process the data is made in the tabulated whether data is adequate or not.

Preparation of report: finally the report is prepared on the basis of various conclusions drawn.Sources of data collection1. Primary data: -Primary data comprises of information obtain from employees of this organization.

2. Secondary data: -Secondary data comprises of annual reports, questioning, ledger and past records.

Company has provided me annual reports from 2000 2001 to 2006 2007 by the help of which prepared my report.

Questioning: -Actually no particulars questionnaire was prepared. Questions related to problems and data tallied with FM, CA, & accountants of the company.

Special record searching: -Special records are maintains by accountants have been studied thoroughly while making this report.

Analysis: -Analysis of various types of data, statements are also made during the study by using standard formulas.

Sample size: -

Interview from 10 employees.

Limitation of study The study was conducted in limited areas.

Employees felt unnecessary burden.

Any biases by the respondents may lead to wrong infer.

The time of study was less.

Scope of study was very wide.

Respondent cannot be force give true response.

Balance SheetAmount in crores.

Year Mar.11Mar.10Mar.09Mar.08Mar.07Share capital17.0417.04 5.07 5.07 5.07

Reserve & surplus81.8164.6357.1250.9045.91Total shareholder funds98.8581.6762.1955.9750.98Secured loans104.0348.8222.123.1723.67

Unsecured loans23.9223.0432.9148.71 4.30Total debt127.9571.8655.0271.8827.97

Total Liability226.80153.53117.211278578.95

Gross block110.5579.7066.5060.6551.43Less: accum. Depreciation 35.5431.2127.3923.7420.11Net block 75.0148.4939.1136.9131.32Capital work in progress 8.14 0.92 0.25 0.12 1.32

Investment 18.49 6.42 4.02 1.53 0.00

Inventories 76.1753.6441.0144.3744.31

Sundry debtors 72.0848.3347.2648.5521.49

Cash and bank balances 4.62 2.94 2.45 4.25 1.47

Loan and advances 28.3130.0123.2025.6423.45

Current liabilities 43.5322.2631.8225.2437.40

Provisions 5.20 7.36 8.27 8.28 7.16

Net current assets127.2697.7073.8389.2946.16

Misc. expenses not w/o 0.00 0.00 0.00 0.00 0.15

Total Assets226.80153.53117.21127.8578.95Contingent liabilities 15.1616.14 18.11 17.83 6.34Profit & Loss account

YearsMar 11Mar 10Mar 9Mar 08Mar 07

Sales turnover237.54221.11194.84199.2070.57

Other income1.671.111.250.421.14

Stock adjustment20.126.490.131.9414.62

Total Income259.33228.71196.22201.5686.33

Raw materials121.2296.6781.7983.2741.78

Excise duty15.6416.3517.3222.0511.53

Power & fuel coast 4.655.004.093.991.92

Other manufacturing exp.16.2614.9513.106.755.94

Employee cost21.2319.9116.4115.234.86

Selling & administration 45.8642.0337.9546.837.13

Miscellaneous Expenses1.511.211.061.591.12

Less: Preoperative expenditure capitalised0.000.000.000.000.00

Profit before depreciation32.9532.5924.2421.8512.05

Interest & financial charges8.814.746.995.600.71

Profit before depreciation & tax24.1427.8517.2516.2511.34

Depreciation4.633.993.713.643.15

Profit before tax19.5123.8513.5412.618.19

Tax2.505.363.754.211.72

Profit after tax17.0118.499.798.406.47

Adjustment below net profit0.150.430.100.260.11

P & l Balance brought forward11.721.691.471.482.98

Appropriation6.008.899.478.157.86

P& l Bal. Carried down22.9011.721.691.471.48

Introduction to the ProjectFinancial Analysis

Every company mainly prepares two statements, which are:a) The income statement

b) The balance sheet

The data, which are shown by the Co. in both the statements, do not show better insight to various users, unless these data reanalyzed. So it is very crucial aspect to analyze the information and shown in statements so they can provide the knowledge of strength & weakness of the firm. In firm many parties are always interested to know firm financial position & they came to know all this by analyzing the data & information.

The term analysis is methodical classification of data given in the financial statements. Financial analysis is the process of identifying the financial strength and weakness of tiles Finn by properly establishing relationship between the item of balance sheet & profit & loss account.

Financial analysis can be undertaken by the firm or by outside parties, firms owner, creditors, investors and other. Actually the nature of analysis depends upon the parties.

Following statements are include in the list of financial statements:1. Profit and loss account.

2. Balance sheet

3. P & L Appropriation account.

4. Fund flow statement

5. Various schedules

6. Explanatory notes given at the end of financial statement.Feature Of Financial Analysis To present a complex data contained in the financial statement in simple and understandable form.

To classify the item contained in the financial statements in convenient and rational groups.

To make comparison between various groups to draw various conclusions.

Objective of study of financial statements To determine the change in financial condition of business.

To determine the source from where the working capital was obtained & for which purpose it will be used.

To spot out strength & weakness of business.

To determine the absolute figure for last three years and the absolute changes from one year to another two years and the absolute change in term of percentage.

To compare assets & liabilities and find out the any increase or decrease in above on three different dates.

To depict change in cash position from one years to another two years.

Purpose of analysis of financial analysisThe purpose of analysis of financial statements. Depends upon the need of a person who analysis these statements. These needs may be:

To know the earning capacity or profitability.

To know the solvency.

To know the financial strength.

To make comparative study with other firms.

To know the capability of payment of interest & dividend.

To know the trend of business.Procedure of financial statement analysisThe following procedure is adept for the analysis and interpretation of financial statements:

The analyst should acquaint himself with principals and postulates of accounting. He should know the plans and policies of the management so that he may be able to find out whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided. If the aim is to find out the earning capacity of the enterprises then analysis of the income statement will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary.

The financial data be given in the statement should be recognized and rearranged. It will involve the grouping of similar data under same heads. Breaking down of individual components of statement according to nature. The data is reduced to a standard form.

A relation is established among financial statements with the help of tool & technique of analysis such as ratio, trends, common size, fund flow etc.

The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for help in decision making.

The conclusion drawn from interpretation is presented to the management in the forms of reports.

Types of financial analysis Classification on the basis of material used.

Classification on the basis of modus operandi.On the basis of material used: -

1. External analysis: -

Outsiders, who dont have access to the detailed internal accounting record of business firm, do this analysis. These outside parties are potential investors, creditors, government agencies & general public.

2. Internal analysis: -The analysis conducted by person who has access to the internal accounting records of a business firm is known as internal analysis.

On the basis of modus operandi: -

1. Horizontal analysis: -Horizontal analysis refers to the comparison, of financial data of a company for several years. The figures of this type of analysis are presented horizontally over a number of columns. This type of analysis is also called dynamic analysis.

2. Vertical analysis: -This analysis refers to the study of relationship of the various items in the financial statements, of one accounting period. It is also known as Static analysis.

Analysis and interpretationRatio analysis:

A ratio is simple arithmetic expression of relationship of one number to another. A financial ratio is the relationship between two accounting figures expressed mathematically. It can be expressed as percentage by multiplying the ratio by 100. Ratio is the indicator of financial strength, soundness, position or weakness of enterprises. We can draw conclusion about the extract financial position of a concern with the help of ratios.Definition:

According to accountants handbook by WIXON, K.ELL & BEDFORD A ratio is an expression of the quantitative relationship between two numbers.

According to KOTLER a ratio is the relation of the amount, a to another b, expressed as the ratio of a to b, a b (a is to b); or as a simple fraction, integer, decimal, fraction or percentage.Signification of ratio analysis: Helps in decision making of investor, creditors.

Helpful for employees, government & shareholders.

Helpful in coordination and control.

Limitation of ratio analysis: Limited use of single ratio.

Lack of adequate standards.

Inherent limitation of accounting.

Change of accounting procedure.

Window dressing.

Incomparable.

Classification of ratio analysisLiquidity ratio: - Current ratio.

Quick ratio.Solvency ratio: - Debt equity ratio.

Funded debt to total capitalization ratio.

Preparatory ratio.

Fixed interest coverage ratio.

Debt to total fund ratio.

Fixed asset to net worth ratio.Activity ratio: - Debtors turnover ratio.

Total asset turnover ratio.

Net asset turnover ratio.

Fixed asset turnover ratio.

Stock turnover ratio.

Working capital turnover ratio.

Capital turnover ratio.Profitability ratio: - Net profit ratio.

Interest & financial charge ratio.

Operating ratio.

Return on capital employed.

Return on equity.

Earning per share.

Gross profit ratio.

Liquidity ratiosThese are the ratio, which measures the short-term solvency or financial position of a firm. These are calculated to comment upon the short term paying capacity of a concern or the firms ability to meet its current obligations. The short-term obligation is met by realization amounts from current, floating or circulations assets. The current assets should either be liquid or near liquidity. These should be convertible into cash for paying obligation of short-term nature. Comparing them whit short-term (current) liabilities should assess the sufficiency of current assets.Current Ratio: current assets / current liability.Years2006 20072007 20082008 20092009 2010 2010 2011

Current assets

(In Crores)90.70122.81113.92134.94181.20

Current Liabilities

(In Crores)56.2689.8977.2875.6760.67

Current Ratio1.611.371.471.782.99

In a business, current ratio is considered to be satisfactory when it is 14% less in the years 2006 2007 & 2007 2008. It is more than standard i.e. 1.61 & 1.37 means co. is not using its resources fully in the years 2006 2007, 2007 2008 it is just less than satisfactory i.e. 1.61, 1.37, means co. does not have sufficient assets in these years.Quick ratio: quick assets / current liabilities.

Quick assets: current assets stock prepaid expensesYears2006 20072007 20082008 20092009 20102010 2011

Quick assets

( In Croces)46.4078.4072.9181.2985.29

Current Liabilities

( In Crores)56.2689.8977.2875.6760.67

Quick ratio0.820.870.941.071.41

Interpretation: -Usually a high quick ratio is an indication that the firm is liquid and has the ability to meet its current liquid liabilities in time and on the other hand a low quick ratio represent that the firms liquidity position is not good. As a rule of thumb or as a conversion quick ratio 1:1 is considered satisfactory. The quick ratio of the company is in years 2006 2007 and 2010 2011 i.e. 0.82 and 1.41 while in the year 2006 2007, 2007 2008, 2008 2009, it grows.

Solvency ratiosThe term solvency refers to the ability of a concern to meet its long-term obligations. The long-term indebtedness of a firm includes debenture holder, financial institutions providing medium and long-term loans and other creditors selling goods on installment basis. Long-term creditors of a firm are primarily interested in knowing the firms ability to pay regularly interest on a long term borrowing, repayment of the principal amount at the maturity and the security of their loans. Accordingly, long term solvency ration indicates associated with its long-term borrowing.

Debt equity ratio: -Long term loan / shareholder funds

Years200620072007-2008200820092009201020102011

Loan funds

( In crores )9.658.5010.3071.84127.95

Share holder fund

( In crores )50.9855.9762.1981.6798.85

Debt equity ratio0.190.150.160.871.29

Interpretation: -A debt equity ratio 1:1 may be considered to be satisfactory ratio. Although there cannot be any role of thumb. The debt equity ratio of the firm is 0.16 in the years 2009-2010 and 0.87 in the years 2010-2011 which shows the financing by the outsiders which can be consider a good sign for the firm as they may lead to much more flexibility in the operation of the firm. Debt equity ration of the firm is 1.29 in the years 2010-2011. Which shows a large share of financing by the creditors of the firm.

Funded debt to total capitalization ratio: -Funded debt / total capitalization

Funded debt = secured loans + unsecured loans

Total capitalization shareholder fund + funded debt misc.expenditureYears2006-20072007-20082008-20092009-20102010-2011

Loan funds (In crore)27.9771.8755.0271.84127.95

Total capitalization78.85127.84117.21153.51226.80

Funded debt to total capitalization ratio0.350.560460.470.56

Interpretation: -This ratio establishes a link between the long-term funds raised from outsider and total long-term funds available in the business. Through there is no role of thumb but still the reliance on outsiders the better it will be. If this ratio is smaller, better it will be upon 50% or 55%. If ratio is smaller better than we can say that this ratio was better position in the year 2006-2007as compared to the years 2006-2007 to 2010-2011.

Proprietary ratio: -Shareholder fund / shareholders + long term loansYears2006-20072007-20082008-20092009-20102010-2011

Shareholder fund50.9855.9762.1981.6798.85

Shareholder fund + long term fund60.6364.4783.78128.39188.40

Proprietary ratio0.840.870.740.640.52

Interpretation:As proprietary ratio represents the relationship of owners fund to total assets, higher the ratio or the share of the shareholder in the total capital of the company, better the long-term solvency position of the company. This ratio indicates the extent to which the assets solvency position of the company can be lost without affecting the interest of creditors of the company. It changes fraction from the years 2006-2007 to 2010-2011 i.e. 0.84 to 0.52.Fixed interest coverage ration: - EBIT / InterestYear2006-20072007-20082008-20092009-20102010-2011

EBIT (in crore)8.9018.2020.5228.5927.11

Interest ( in crore)0.715.596.984.748.81

Fixed interest coverage ratio12.523.252.056.033.08

Interpretation: -The interest coverage ratio indicates how much interest charges operating profit available to pay the interest charge covers. It is desirable in the years 2006-2007 & 2010-2011 i.e. 12.52 & 3.08 respectively. But in the years 2008-2009 & 2007-2008 it shows 3.25 & 2.05 indicates excessive use of debt. However in the years 2006-2007 it is too high i.e.12.52 shows that firm is very conservative.

Debt to total funds ratioLong term / shareholders funds + long term loansYears2006-20072007-20082008-20092009-20102010-2011

Long term loans9.658.5021.5946.7289.55

Shareholder fund + long term fund60.6364.4783.78128.39188.40

Fixed assets to net worth ratio0.160.130.250.360.48

Interpretation: -In the years 2006-2007 , 2007-2008 & 2008-2009 debt to total funds ratio is not satisfactory as if only 0.16,0.13 & 0.25 respectively. Which is less than ideal. However in the years 2006-2007 & 2010-2011. It is more than desirable i.e. 0.16 & 0.48 respectively. Means in last five years three is no improvement in this context.

Fixed assets to net worth ratio: -Fixed assets / net worth

Years2006-20072007-20082008-20092009-20102010-2011

Fixed assets32.6437.0339.3549.4083.14

Net worth50.9855.9762.1981.67116.86

Fixed assets to net worth ratio 0.640.660.630.600.71

Interpretation: -1. The ratio of fixed assets to net worth indicates the extent to which shareholders fund sunk in to the need assets. There is rule of thumb to interpret this ratio but 60% to 65% is considered to be satisfactory ratio in case of industrial undertaking. As this ratio less than 100% in the years 2006-2007, 2007-2008, 2008-2009, 2009-2010 & 2010-2011 it implies that owners funds are not sufficient to finance fixed assets and the firm has depended upon outsiders to finance the fixed assets.

Activity ratiosActivity ratios are also called Turnover ratio it indicates efficiency with which firms manage its capital employed is rotated in the business. We know that the funds of the creditors and owner are invested in various assets to generate sale profit, which depends upon the better management of assets. So better management can be said that it is better efficiency of managers. So in these ratio efficiency is evaluated.

In these ratio we come to know the speed which assets are being converted into sales. Thats why these are called turnover ratio. Activity ratio can be calculated to judge effectiveness of assets utilization.Debtors turnover ratio: -Sales / average debtorsYears2006-20072007-20082008-20092009-20102010-2011

Sales ( in crore )70.57199.20194.82221.11237.54

Average debtors19.6535.0147.8947.7971.08

Debtors turnover ratio3.595.684.064.623.34

Average collection periodNo of days / debtors turnover ratio:Years2006-20072007-20082008-20092009-20102010-2011

No. of days365365365365365

Debtors turnover ratio3.595.684.064.623.34

Average collection period ( days )102649079110

Interpretation: -

By interpreting above ratio, we come to know how many debtors are liquid or good. In the years 2003-2004 it is good i.e. 5.68. it is also good in the year 2005-2006 i.e.4.62 but in the years 2006-2007, 2007-2008 , 2008- 2009 & 2010-11 it is bit lesser i.e. 4.06, 4.62, 3.34. It quite low.

Total asset turnover ratio: - Sales / total assets.Years2006-20072007-20082008-20092009-20102010-2011

Sales ( in crore)70.57199.20194.83221.11237.54

Total assets ( in crore)78.95127.85117.21153.53226.80

Total assets turnover ratio0.891.551.661.441.04

Interpretation: -The ratio means how much sales is generated by one rupee invested in total assets, it is high in year 2006-2007 & 2007-2008 i.e. 1.55, 1.66 in both years which higher than one rupee, so these are favorable to co. & indicates efficient use of resources by the company but it was low in 2006-2007, 2007-2008, 2008-2009, 2009-2010 & 2010-2011 i.e. 0.89, 1.55, 1.66, 1.44 & 1.04 respectively.

Net assets turnover ratio: -Sales / net assets

Net assets = net fixed assets + net current assets + investmentsYears2006-20072007-20082008-20092009-20102010-2011

Sales ( in crore)70.57199.20194.83221.11237.54

Net assets (in crore)85.39134.80124.70161.15234.15

Net assets turnover ratio0.831.481.561.371.01

Interpretation: -Net assets turnover ratio of the company is good in the year 2006-2007 & 2006-2007 i.e. 1.48 & 1.56 respectfully. Which indicates efficiency utilization of resources. It also show good response in the year 2006-2007 & 2007-2008 but it was low in the year 2006-2007 i.e. 0.83 shows inefficiency of resources.

Fixed assets turnover ration: - sales / fixed assetsYears2006-20072007-20082008-20092009-20102010-2011

Sales ( in crore)70.57199.20194.83221.11237.54

Fixed assets (in crore)32.6437.0339.3549.4083.14

Fixed assets turnover ratio2.165.374.954.482.85

Interpretation: - As calculated above, this ratio 2.16 in the year 2006-2007 which is low indicates inefficiency of assets but it is good in the next four years and in the year 2006-2007 it has gained its maximum in last five years i.e. 5.37 shows higher efficiency. This indicates the progress of the company.

Stock turnover ratio:- sales / stockYears2006-20072007-20082008-20092009-20102010-2010

Sales ( in crore)70.57199.20194.83221.11237.54

Stock (in crore)44.3044.3741.0153.6476.17

stock turnover ratio1.594.494.754.123.11

Interpretation: -The stock turnover ratio shows how long goods are kept in store before being sold. In the year 2006-2007, 2007-2008, 2008-2009, 2009-2010, 2010-2011 the ratio is good which indicates efficient sales performance. However in the year 2002-2003 it is very low i.e. 1.59 shows that stock does not sell quickly and remains in godown for a long time.

Working capital turnover ratio: - sales / capital employedYears2006-20072007-20082008-20092009-20102010-2011

Sales ( in crore)70.57199.20194.83221.11237.54

Capital employed (in crore)67.1071.4780.01107.47125.35

Capital turnover ratio0.821.492.442.051.89

Interpretation: - this ratio measures the effectiveness with which a firm uses financial resources at its disposal. In the years 2008-2009 this ratio is high, which shows efficient utilization either capital is lying idle or the sale shave been suppressed or any constituents of capital employed has been inflated.

Profitability ratioWhat is profitability?Profitability is the indication of the efficiency with which the operations of business are carried on. Every business is established for profit. Profit is the main aim of any business concern. Profit depends upon the sales and operational performance. But sale alone are not the factor. Sometimes sale may be high but company is earning low profit and vice versa. Other factor also affects the profitability. Although we know profit is the difference the revenue and expenditure. But if expenditure is such like financial expenses, administration expenses are highs it will reduce the profit instead of increase the profit.

A Company should earn profit to survive and grow over a long period of time. But it does not mean that every action of management should be aim at maximizing of the profit. Sometimes companies considered social consequences. But some firm always to increase their profit at the cost of employees, customers and society. But it is not possible for the long time. But Company should earn at least sufficient profit to sustain the operation of business to be able to obtain funds from investors for execution and growth the contribution toward social overheads for the welfare of the society. We can say that if company is not earning sufficient profit, company has no future.

Various groups are interested in knowing the profit due their associated interest with company profit so to satisfy all the groups, financial managers should continuously evaluate and efficiency of its company in the terms of profit so that they can provide relevant information to various groups.

Profitability ratio is calculated to measure operating efficiency of the company. Following are the ratios, which have been calculated in regards of the Liberty Shoes Limited to measure operating efficiency of the firm.Net profit ratio: - Pat / sales * 100Years2006-20072007-20082008-20092009-20102010-2011

Net profit ( in crore)6.468.399.8018.4917.01

Sales ( in crore)70.57199.20194.83221.11237.54

Net profit ratio %10.944.735.528.367.16

Interpretation: -Net profit ratio is slightly fluctuating it was 10.94% in 2006-2007 & 8.36% in 2009-2010. This ratio expresses the cost price effectiveness of the operation. A high net profit margin would ensure adequate return to the owners as well as enable to with stand adverse economic condition when selling price is decline. Cost of production is rising and demand for product is falling.Interest & financial coverage ratio: -Interest & financial coverage / total sale * 100Years2006-20072007-20082008-20092009-20102010-2011

Interest & financial coverage ( in crore)0.575.306.704.748.81

Sales ( in crore)70.57199.20194.83221.11237.54

Interest & financial ration %0.812.673.442.143.71

Interpretation: -In the year 2006-2007 this ratio is 0.81% which is favorable for the company but there is constant increase after as in 2006-2007 it has increased to 0.81% in 2010-2011 it is 3.71% & in 2010-2011 it has increased maximum up to 3.71 which is very unfavorable for the company. This ratio also should be as far as low for company profitability.Operating ratio: -Cost of goods sold + operating expenses / net sales * 100Years2006-20072007-20082008-20092009-20102010-2011

Cogs + operating exp. ( in crore)43.27140.48138.1014.8716.88

Net Sales ( in crore)59.04177.15177.51204.88222.14

Operating ratio73.2879.3077.797.257.60

Interpretation: -In the year 2006-2007 this ratio is desirable but in 2006-2007 & 2007-2008 but in year 2009-2010 a very low ratio i.e. 7.25% it is not satisfactory as in these years this ratio is quite high, high means it leaves a small portion of income to meet other non-operating expenses. A low ratio is better because it reflects the efficiency of management. The lower ratio higher would be profitability. Return on capital employed: -Profit before interest, tax and dividend / capital employed * 100Years2006-20072007-20082008-20092009-20102010-2011

Profit before int.tax & dividend ( in crore)8.9018.2028.5920.5218.10

Capital employed (in crore)67.1071.4780.01107.47125.35

Return on capital employed13.2525.4628.4419.0914.44

Interpretation: -Return shareholder investment is the basic profitability ratio. In 2006-2007 & 2007-2008 there is adequate return on investment i.e. 25.46% & 25.65% which shows good sign of companys progress. However in proceeding years i.e. 2006-2007, 2007-2008, 2008-2009 & 2009-2010 the return percentage is quite low but the company tends to improve this context.Return on equity: -Pat / shareholders fund * 100Years2006-20072007-20082008-20092009-20102010-2011

Pat ( in crore)6.468.399.8018.4917.01

Share holder fund ( in crore) 50.9855.9762.1981.6798.85

Return on equity %12.6715.0015.7422.6317.21

Interpretation: -This ratio measures the profitability o the capital committed to the business by equity shareholders. This ratio tends to increase at increasing rate as in 2006-2007 it was 12.67% in 2007-2008 it was 15% & in 2010-2011 it was 17.21% which shows good return & indicates that firm has earned a satisfactory return for its shareholders. It enables that firm has earned a satisfactory return for its shareholders. It enables the earning capacity of the enterprises to be contrasted with the earning capacity of other investments.

Earning per share: - pat / no. Of equity shareYears2006-20072007-20082008-20092009-20102010-2011

Pat ( in crore)6.468.399.8018.4917.01

No of equity shares (in crore)507507507170.40170.40

Earning per share12.7416.5519.3210.889.98

Interpretation: -This ratio is low in 2006-2007 i.e. 12.74 but it show good response in upcoming year as in 2006-2007 it was 16.55 & in 2007-2008 it was maximum 19.32which shows its earning capacity, profitability and its bright future.

Gross profit ratio: -Gross profit / net sales * 100Years2006-20072007-20082008-20092009-20102010-2011

Gross profit (in crore)27.3577.72118.59141.90154.20

Net Sales ( in crore)59.04177.15177.51204.88222.14

Operating ratio46.3243.8767.1769.2669.42

Interpretation: -This ratio measures the relationship between gross profit in relation to net sales. This ratio tends to increase year by with increase in gross profit. It was 46.32% in 2006-2007 and increase to 67.42 up to 2010-2011. This year to year change may be the result of decrease in cost of goods sold without increase in sales revenue or change in the method of valuation of closing stock.Fund flow statementTill now we have analyzed ratio analysis. The second technique of financial statement is fund flow statement. It is prepared for the analyzing the past situation of the company not the future.fund flow statement we come to know the changing in fund between in two years balance sheet.

The fund flow statement is a statement which shows the movement of fund and is a report of the financial operation or the business undertaking. It indicates various means were obtained during the particular period and the ways in which these funds were employed. In simple words, is a statement of sources and application of funds.

Meaning of funds: -In a narrow sense it means only cash and a fund flow statement prepared on these basis is called a cash flow statement. Such a statement enumerates net effect of the various business transaction on cash and takes into accounts receipts and disbursement or cash.

In a broader sense the term funds refer to money values in whatever from. It may exist, here funds means all financial resources used in business weather in the form of men, material, money, machinery and others.

Significance of fund flow statement: - It helps in analysis of financial statements.

It throws light on many perplexing questions of general interest.

Such as:-

Were the current assets lesser in-spite of higher profits?

Why more dividends could not be declared in spite of profits?

It helps in the proper allocation of resources.

It acts as a future guide.

It helps in apprising the user of working capital.

It helps in knowing the overall credit worthiness of a firm.Limitation of fund flow statement It should remember that a fund flow statement is not a substitute of an income statement or balance sheet. It provides only some additional information as regard changes in working capital.

It cant reveal continuous changes.

It is not original statement but simply arrangement of data given in financial statements.

It is essentially historic in nature and project fund flow statement cannot be prepared with much accuracy.

Change in cash is more important and relevant for financial management than the working capital.

Fund flow statement has three parts: - Schedule of change in working capital.

Fund from operation.

Fund flow statement.

Schedule of change in working capital: -ParticularCurrent year ( 2010)Previous year ( 2010 )Effect on working ( increase)Capital (decrease)

Current assets

Inventories73,17,38,31553,64,96,03519,52,42,280

Sundry debtors72,08,97,47448,33,85,81723,75,11,657

Cash & bank balances4,62,40,4832,94,45,5611,67,94,922

Loan & advances28,31,64,88030,01,48,434-1,69,83,554

Total (A) 1,78,20,41,1521,34,94,75,847

Current Liabilities

Sundry Creditors35,55,87,15512,02,22,97423,53,64,181

Advances from Customers1,29,14,7552,82,47,541-1,53,32,786

Expenses payable6,54,71,1624,86,07,6271,68,63,535

Other liabilities3,13,80,1402,55,42,57958,37,561

Provisions5,20,13,5007,36,57,3172,16,43,817

Total ( B)51,73,66,71229,62,78,03827,38,71,533-94,95,225

( A B )1,26,46,74,4401,05,31,97,809

Net increase in working capital28,33,66,758

Cash flow statement for the period ended 31st march 2011

Cash flow from operating activities:31.03.200731.03.2007

Net profit before tax, interest and extra ordinary items27,8166,04728,27,06,838

Adjustment for:

Unrealized foreign exchange difference58,78,2466,27,720

Depreciation4,63,34,6083,99,98,538

Loss on sale of assets7,10,7585,65,596

Bank & other interest18,62,1425,86,356

Dividend on investments2,9181,69,866

Operating profit before working capital32,78,03,08332,18,87,030

Adjustment for:

Trade & other receivable23,75,08,6571,08,11,770

Inventories22,52,42,28012,63,54,123

Loan & advances54,48,87,39561,44,440

Trade & other payables57,93,85,23918,20,56,916

Cash generated from operations49,89,24,78036,06,33,613

Direct taxes paid3,66,06,6985,78,06,406

Cash flow before extra ordinary items46,23,18,08230,28,27,207

Extra ordinary items7,40,68354,964

Net cash flow from operation activities46,30,58,76530,28,82,171

Cash flow from investing activities:

Purchase of fixed assets38,99,54,76414,16,89,324

Sale of fixed assets68,96,6056,58,778

Bank & other interest18,62,1425,86,356

Dividend on investments2,9181,69,866

Increase in investments12,07,37,3952,40,40,581

Net cash used in investing50,19,30,49716,43,14,905

Cash flow from financing activities:

Proceed from long tem borrowing14,01,69,870.

Repayment of long term borrowing1,99,58,9042,66,74,830

Interest paid5,86,66,0664,40,14,944

Dividend paid & corporate dividend tax..6,35,91,743

Net cash use in financial activities6,15,44,90013,42,81,517

Net increase in cash2,26,73,16843,85,749

Cash & cash equivalents ( opening Balance)2,94,45,5612,45,32,092

Unrealized foreign exchange difference58,78,2466,27,720

Cash & cash equivalent ( closing balance )4,62,40,4832,94,45,561

Comparative profit & loss statement for the year 2010 and 2011ParticularsYear 2010Year 2011Change% change

Net sales2,05,03,42,2362,22,39,72,520+17,36,30,284+8.47%

Less: - cost of goods sales1,23,12,13,7581,81,74,29,658+38,62,15,900+31.37%

Gross profit (A)81,91,28,47850,65,42,862+31,25,85,616+38.16%

Operating expenses: -

Payment to employees administration expenses19,91,55,747

43,20,32,91821,23,26,510

47,36,32,514+1,31,70,763

+4,15,99,596+6.61%

+9.63%

Total (B)63,11,88,66268,59,59,024+5,47,70,359+8.68%

Operating profit ( A- B )18,79,39,81317,94,16,162-85,23,651-4.54%

Less: - Operating exp.3,99,98,538

1,11,11,2024,63,34,608

1,67,28,098+63,36,070

+56,16,896+15.84%

+50.55%

Add: - Operating income4,74,18,093

23,85,56,7348,81,68,867

19,51,16,285+4,07,50,774

-4,34,40,449+85.94%

-18.21%

Less: - Interest

Profit before tax4,88,26,320

12,96,9002,46,36,260

32,48,830-2,41,90,060

-19,51,930-49.51%

-150.51%

Less:- provision for deferred tax liability

Net profit18,49,28,51417,01,94,555-1,47,33,959-7.97%

Suggestions & recommendations Company must increase its investment on advertisement, as it has become now more effective and catchy.

Company should make their prices more competitive because they are cost effective.

Company should have proper inventory management for high quality of production.

Company should stress on domestic market as well as on export, which are key areas of profit earning areas of the company.

As company is planning its business to diversity in consumer good, image, sales, profits of the company can enhance its established brand name in market.

Quick disposal of rejected and defected goods should be done at reasonable price to increase sales and profit.

Companys ACP is still under control but company should be careful because of it increase it may face difficulties in future.

Company should try to keep more current assets as in recent years its current ratio is less than ideal.