The document provides an overview of the Indian textile sector and a case study on Anandam Manufacturing Company. It discusses key details about the Indian textile market size, growth drivers, challenges. It then presents the case of Anandam, a garment manufacturer established in 2012. By 2015, the company was facing financial problems due to working capital requirements and sought additional bank funding of Rs. 50 million. Ratio analyses are presented comparing Anandam's ratios to industry averages for current ratio, debt-to-equity, inventory turnover, and others, showing some areas where the company lags industry standards.

1. GROUP A
Presented by
Section D
Ayesha Anjum Khan-2021PGP198
Himanshu Parashar-2021PGP206
Himanshu Bulchandani-2021PGP205
Ruchika Suthar-2021PGP230
Tarun Kant-2021PGP245
Naval Mittal-2021PGP219
R Rajsekar-2021PGP226
Indian Institute of Management, Shillong
Financial Reporting and Analysis
Group Project
PGP21 Term I

2. India is the second-largest producer of garments in the world.
INDIAN TEXTILE SECTOR
US$223 billion
Expected Market Growth
24%
World’s spindle capacity
45 Million People
Directly/ Indirectly employed in
the sector
4%
Contribution to GDP of India
Key Growth Drivers:
• Increase in per capita income & demographic distribution
• Superior quality products
• Increased production and exports
Textile market has shown growth of ~14.58% in past 3 years. The
industry has attracted FDI worth $11 million and anticipates $60
million growth.
Key Challenges:
• Dearth of trained employees
• Increasing energy & transportation costs
• Industries reluctant to adopt new technologies
Exports anticipated to reach $60 billion in next 3
years, US being the primary market.
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
CONCLUSION

3. Agarwal could easily procure raw
material & other resources
required for manufacturing, the
only problem he faced was getting
a stylish designer for new &
modern designs to cater market
needs.
He hired Ragini, Iyer, a young
fashion designer, under whom the
business flourished exponentially.
Anandam Manufacturing Company:
Established in April 2012
Business Growth
Financial Problems: 2015
In July 2015, Agarwal
approached a local bank
for additional funding of
₹50 million to continue
with the smooth
operations and to expand
his business.
CASE OVERVIEW
Anand Agarwal, a
qualified textile
engineer realized the
dearth of good-quality
dresses in the market.
He opened garment
manufacturing company
specializing in formal
dresses for girls upto 12
years of age, investing
₹1.2 million.
Anandam Manufacturing Company
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
CONCLUSION

4. Key Funding Problems:
FINANCIAL SITUATION: ANANDAM
Working capital required for regular purchases of raw
material
Excessive credit periods granted to customers
Shortage of funds for new manufacturing machines
Insufficient factory space
In 2012, Anand Agarwal and his
wife were the only shareholders
and had shares of ₹ 1.2 million.
He borrowed ₹0.736 million as
mortgage of his assets, which
had a value of ₹1.9 million.
As the business expanded, he continued to borrow money from the
bank and the loan was ₹ 1.236 million in the second year and ₹ 2.5
million in the third year.
A part-time accountant maintained the financial records including
vouching, cash maintenance, receipts and payments of Anandam. These
statements were audited by a professional accountant.
The business was generating profits for all the expenses and interest
payments. The revenue increased from ₹2 million to ₹8 million in 3
years and PAT increased from ₹0.364 million to ₹0.84 million.
In July 2015, Anand Agarwal approached a local bank for additional
funding of ₹50 million to meet the growing requirements of the
company.
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
CONCLUSION

5. Current ratio
Acid test ratio (quick ratio)
01
02
Sector Average 2.30:1
Sector Average 1.20:1
The current ratio, otherwise known as the working capital ratio, measures the ability of a business to meet its short-term obligations that
are due within a year. The ratio compares total current assets to total current liabilities. The current ratio looks at how a company can
maximize the liquidity of its current assets to settle its debt obligations.
The quick ratio, also known as the acid-test ratio, measures the ability of a business to pay its short-term liabilities by having assets that
are readily convertible into cash. These assets are cash, marketable securities, and accounts receivable. These assets are considered
“quick” assets because they can be quickly and easily converted into cash.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐶𝑎𝑠ℎ + 𝑚𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠 + 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
2.54 1.79 1.60
Company Ratio
2012-13 2013-14 2014-15
1.31 0.93 0.79
The current ratio, otherwise known as the working capital ratio, measures the ability of a business to meet its short-term obligations that
are due within a year. The ratio compares total current assets to total current liabilities. The current ratio looks at how a company can
maximize the liquidity of its current assets to settle its debt obligations.
ANALYSIS: Our current ratio for the year 2013-14 and 2014-15 is less than the sector average which indicate
a possibility of high risk of distress or default
ANALYSIS: Company Acid test ratio is less than the industry
ration which suggest that company is taking high amount of risk
by not maintaining a proper shield of liquid resources
CONCLUSION

6. Receivable turnover ratio
Receivable days
03
04
Sector Average 52 days
Sector Average 7 times
The accounts receivable turnover ratio, sometimes known as the debtor’s turnover ratio, measures the number of times over a specific period
that a company collects its average accounts receivable.
The accounts receivable turnover ratio can also be manipulated to obtain the average number of days it takes to collect credit sales from
customers, known as accounts receivable days.
𝑁𝑒𝑡 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒
365
𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
54.75 114.0625 95.8125
Company Ratio
2012-13 2013-14 2014-15
6.666667 3.2 3.809524
ANALYSIS: Since the company receivable turnover ratio is less than the industry average, suggests that
company collection process is poor
ANALYSIS: Company receivable days is more than the sector average implies that time taken by company
to recover the amount is more when company to other companies which may lead to cash flow problems in
long run
CONCLUSION

7. Inventory turnover ratio
Inventory days
05
06
Sector Average 4.85 times
Sector Average 75 days
The days sales of inventory (DSI) is a financial ratio that indicates the average time in days that a company takes to turn its inventory, including
goods that are a work in progress, into sales.
The inventory turnover ratio measures how many times a business sells and replaces its stock of goods in a given period of time. This ratio looks
at cost of goods sold relative to average inventory in the period.
This ratio indicates how efficient a business is at clearing its inventories.
𝐶𝑂𝐺𝑆
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑎𝑡 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
365
𝐼𝑛𝑣𝑒𝑛𝑡𝑟𝑜𝑦 𝑡𝑢𝑟𝑛 𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
94.19355 193.3263 171.0938
Company Ratio
2012-13 2013-14 2014-15
3.875 1.888 2.133333
ANALYSIS: Low inventory ratio indicate that company is carrying too much inventory, which could suggest
poor inventory management or low sales
ANALYSIS: A high days inventory outstanding indicates that a company is not able to quickly turn its
inventory into sales.
CONCLUSION

8. Long-term debt to total debt
Debt-to-equity ratio
07
08
Sector Average 24%
Sector Average 35%
Ratio between Long-Term Debt and Total Debt. This ratio indicates how much money the company owes in long-term debt for each
unit of money it owes in overall debt.
The debt-to-equity ratio is a leverage ratio that calculates the proportion of total debt and liabilities versus total shareholders’ equity. The ratio
compares whether a company’s capital structure utilizes more debt or equity financing.
The ratio looks at total debt which consists of short-term debt, long-term debt, and other fixed payment obligations (such as capital leases).
𝑆ℎ𝑜𝑟𝑡 𝑡𝑒𝑟𝑚 𝑑𝑒𝑏𝑡 + 𝑙𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝑑𝑒𝑏𝑡 + 𝑜𝑡ℎ𝑒𝑟 𝑓𝑖𝑥𝑒𝑑 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
𝑆ℎ𝑎𝑟𝑒 ℎ𝑜𝑙𝑑𝑒𝑟′𝑠 𝑒𝑞𝑢𝑖𝑡𝑦
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
63.68% 112.44% 136.22%
Company Ratio
2012-13 2013-14 2014-15
73.90% 41.70% 47.35%
ANALYSIS: A high long term debt ratio indicate that company will have huge interest obligation in future
which will affect the cash flow and profit of the company
ANALYSIS: A higher than sector average implies that there is high risk of loan default and company may also have difficulty in
securing additional fund
CONCLUSION
𝐿𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝑑𝑒𝑏𝑡
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡

9. Gross profit ratio
Net profit ratio
09
10
Sector Average 40%
Sector Average 18%
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining profit after all costs of production, administration,
and financing have been deducted from sales, and income taxes recognized.
The gross margin ratio, also known as the gross profit margin ratio, is a profitability ratio that compares the gross margin of a company to its
revenue. It shows how much profit a company makes after paying off its cost of goods sold (COGS). The ratio indicates the percentage of each dollar
of revenue that the company retains as gross profit, so naturally a high gross margin ratio is desired.
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐶𝑂𝐺𝑆
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
18.20% 14.00% 10.50%
Company Ratio
2012-13 2013-14 2014-15
38.00% 41.00% 40.00%
ANALYSIS: Company GP ratio is at par with sector which indicate that company is doing well on the part of
maintaining revenue and expenses
ANALYSIS: A lower net profit ratio indicates that company is not doing well on part of converting sales into
actual profit and expenses other than operation expenses are on the higher side
CONCLUSION

10. Return on equity
Return on total assets
11
12
Sector Average 22%
Sector Average 10%
Return on equity is a measure of a company’s annual return (net income) divided by the value of its total shareholders’ equity, expressed as a
percentage (e.g. 10%). Alternatively, ROE can also be derived by dividing the firm’s dividend growth rate by its earnings retention rate (1-dividend
payout ratio). There are several ROE drivers, and we will further breakdown the ratio.
The return on total assets ratio indicates how well a company’s investments generate
value, making it an important measure of productivity for a business.
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟′𝑠 𝑒𝑞𝑢𝑖𝑡𝑦
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑠𝑡𝑠
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
14.22% 12.00% 9.17%
Company Ratio
2012-13 2013-14 2014-15
23.27% 25.49% 21.67%
ANALYSIS: A good rule of thumb is to target an ROE that is equal to or just above the average for the
company's sector—those in the same business and it is the good sign of anandam that its ROE is equal to
sector average
ANALYSIS: ROA of company is at par with industry average which indicate that company is efficiently
using it assets
CONCLUSION

11. Total asset turnover ratio
Fixed asset turnover ratio
13
14
Sector Average 1.1
Sector Average 2
The fixed asset turnover ratio reveals how efficient a company is at generating sales from its existing fixed assets. A higher ratio implies that
management is using its fixed assets more effectively.
The total asset turnover ratio compares the sales of a company to its asset base. The ratio measures the ability of an organization to efficiently
produce sales, and is typically used by third parties to evaluate the operations of a business. Ideally, a company with a high total asset
turnover ratio can operate with fewer assets than a less efficient competitor, and so requires less debt and equity to operate. The result should
be a comparatively greater return to its shareholders.
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
1.1 1.9 1.7
Company Ratio
2012-13 2013-14 2014-15
0.8 0.9 0.9
ANALYSIS: Lower ratio indicate that company isn’t using its assets efficiently and most likely have
management or production problems
ANALYSIS: Company lower fixed turnover ration than sector average indicate that company is most likely
not using its fixed assets efficiently
CONCLUSION

12. Current Asset Turn Over Ratio
Interest Coverage Ratio (Times Interest Earned)
15
16
Sector Average 3
Sector Average 10
Current Assets Turnover Ratio indicates that the current assets are turned over in the form of sales more number of times. A high current assets
turnover ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in current assets. Higher the
current ratio better will be the situation.
The times interest earned (TIE) ratio is a measure of a company's ability to meet its debt obligations based on its current income. The formula for
a company's TIE number is earnings before interest and taxes (EBIT) divided by the total interest payable on bonds and other debt.
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝐵𝐼𝐷𝑇𝐴
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
9.666667 7.075949 4.529412
Company Ratio
2012-13 2013-14 2014-15
3.0 1.5 1.8
ANALYSIS: Low current asset turnover ratio indicate that company is not efficiently using its current ratio
to generate sales
ANALYSIS: Low Interest coverage ratio indicate that company doesn’t have enough funds to service its
debts and it can be a problem for a company in near future. In worst case it can even land in liquidation of
company
CONCLUSION

13. Working capital turnover ratio
Return on fixed assets
17
18
Sector Average 8
Sector Average 24%
Working capital turnover is a ratio that measures how efficiently a company is using its working capital to support sales and growth. Working
capital turnover measures how effective a business is at generating sales for every dollar of working capital put to use. A higher working capital
turnover ratio is better, and indicates that a company is able to generate a larger amount of sales.
how much money the company makes in return for its assets. To calculate RoFA, divide current operational income by investment cost.
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒
𝐼𝑛𝑣𝑒𝑡𝑠𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
Company Ratio
2012-13 2013-14 2014-15
19.16% 26.88% 17.87%
Company Ratio
2012-13 2013-14 2014-15
5.0 3.5 4.8
ANALYSIS: Company lower working capital turnover ratio indicates that business is investing in too many
account receivable and inventory to support its sales which could lead to to an excessive amount of bad debt
or obsolete inventory
ANALYSIS:
CONCLUSION

14. CONCLUSION
As a loan officer, I cannot grant the loan. As per the given data,
the ratio of the company fall down in financial 2015. The key ratio
of the company is also below the industry average ratio which
implies that the company may not be able to pay its interest in
due time and finally may lead to insolvency due to high collection
period and low current ratio than industry average
INDIAN TEXTILE SECTOR
CASE OVERVIEW
FINANCIAL SITUATION: ANANDAM
RATIO ANALYSIS
PRESENTATION INDEX :
CONCLUSION

15. THANK YOU

16. OPEN TO QUESTIONS