Vels Financial Management

Gandhigram Rural University, Gandhigram.
A STUDY ON THE FINANCIAL PERFORMANCEOF

HANDLOOM WEAVERS COOPERATIVES IN
CHINNALAPATTY
Project Report
Submitted in partial fulfillment of the requirements for the

award of Degree in Bachelor of Commerce (Cooperation)
Submitted by
P.VELANKANNI (Reg. No. 06203033)
B.VIJAYAKUMAR (Reg. No. 06203034)
G.VIGNESH (Reg. No. 06203035)
Department of cooperation
Faculty of Rural Social Sciences
Gandhigram Rural University
(Accredited With Five Star Status by NAAC)
Gandhigram – 624 302.
Dindigul District, Tamil Nadu
March 2009
acerP.Velankanni, B.Com 2006-09 1

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Dr.B.Tamilmani M.A., M.Com, M.Phil, PhD

Reader, Department of Cooperation
Gandhigram Rural University
Gandhigram – 624 302
CERTIFICATE
This is to certify that this project report entitled ‘A Study on the Personnel
Management Practices in Handloom Weavers Cooperative and Government Schemes
for Development of Weavers’ is a bonafide work done by P.Velankanni,
B.Vijayakumar, and G.Vignesh under my supervision and guidance and that this
report is genuine.
Place: Gandhigram
Date:
(Dr.B.Tamilmani)

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DECLARATION
We hereby declare that the project work entitled ‘A Study on the Financial
Performance of Handloom Weavers Cooperatives in Chinnalapatty’ submitted by me
in partial fulfillment of the requirement for the award of degree of bachelor of
commerce (cooperation) is our original work and that it has not previously formed the
basis for the award of any other Degree, Diploma, Fellowship or other similar titles.
Place: Gandhigram
Date:
Signature of the
Candidates
P.Velankanni
B.Vijayakumar
G.Vignesh

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ACKNOWLEDGEMENT
We are very much pleased to extend out sincere thanks to out beloved guide
Dr.B.Tamilmani, Reader, Department of Cooperation, Gandhigram Rural University,
Gandhigram for his delegated valuable guidance for the completion of the study.
We extend our sincere thanks to Dr.B.Subburaj, Professor and Head,
Department of Cooperation, Gandhigram Rural University, Gandhigram for his moral
support during our study.
Our sincere thanks are further extended to our faculty members
Dr.P.Sivaprakasam, Professor, Dr.K.Ravichandran, Reader, Dr.S.Manivel, Reader,
Sri.B.Baskar, Lecturer, Dr.C.Mangaleswari, Lecturer, Department of Cooperation,
Gandhigram Rural University, and Gandhigram for their valuable support during our
study.
We express our profound thanks to the secretary and other staffs of Anjugam,
Anna, Gandhiji, Kamala Nehru, Namnadu, Sanjay Gandhi, Silambu, weavers’
cooperative society, Chinnalapatty, for having provided the relevant data for
completion of our project report.
We express our sincere thanks to our parents and friends for their timely help
and cooperation.
P.Velankanni
B.Vijayakumar
G.Vignesh

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CONTENTS
CHAPTER PAGE NO
TITLE
NO.
I INTRODUCTION 6-9
II DESIGN OF THE STUDY 10– 11
III 12 – 35
ANALYSIS AND DISCUSSION
IV FINDINGS, CONCLUSIONS AND SUGGESTIONS 36 – 40
BIBLIOGRAPHY

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Chapter 1
Introduction
Handloom Cooperatives in India
The growth of these cooperative institutions in the last two decades is indeed
phenomenal and today the weaver’s cooperatives form the largest group of industrial
cooperatives in India. Employing on the handloom more number of people than the
mass of workers employed in the organized industries in our country.
In India the cooperatives have come to play a significant role in the handloom
industry. The primary societies take the role of master weavers. But the profits are
shared by the members of the society. The coopertivisation of handlooms has been
one of the major. Through of the government in
The last few decades so that the handloom weaving could be brought into an
organized form of production. To encourage more private to be brought under the
cooperative fold. The government have been extending credit facilities to the weaver’
cooperatives societies for enlisting more members.
These weavers’ cooperative societies exist in rural and semi – urban areas
where there is heavy concentration of handloom weavers. All the developmental and
welfare schemes of the state government indented for the handloom weavers are being
channelised through these primary weavers’ cooperative societies alone.
The Handloom sector plays a very important role in the country’s economy. It
is one of the largest economic activity providing direct employment to over 65 lakhs
persons engaged in weaving and allied activities. Due to effective Government
intervention through financial assistance and implementation of various
developmental and welfare schemes, this sector has been able to withstand
competition from the power loom and mill sectors. As a result of these measures,
the production of handloom fabrics registered more than ten fold increase from a
level of 500 million sq. meters in the early fifties to 7352 million sq. meters in
1999-2000. This sector constitutes nearly 19 per cent of the total cloth produced in
the country and also contributes substantially to the export earnings. Handloom
forms a part of the heritage of India and exemplifies the richness and diversity of
our country and the artistry of the weavers.

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The Office of the Development Commissioner for Handlooms has been

implementing since its inception in the year 1976, various schemes for the
promotion and development of the handloom sector and providing assistance to the
handloom weavers in a variety of ways.
Some of the major programmes formulated by this office relate to:

a) Employment Generation Programme
b) Modernization and Up gradation of Technology
c) Input Support
d) Marketing Support
e) Publicity
f) Infrastructural Support
g) Welfare Measures
h) Composite Growth Oriented Package
i) Development of Exportable Products
j) Research & Development
All these measures aim at meeting the objectives enshrined in the Directives
Principles of State Policy for the growth of decentralized handloom sector. All the
schemes are weaver oriented. Concerted efforts are being made through the schemes
and programmed to enhance productivity, income and socio-economic status of
weavers by upgrading their skills and providing essential inputs.44 handloom
showrooms are selling products.
Over the centuries handlooms have come to be associated with excellence in

India's artistry in fabrics. Right from the ancient times, the high quality of Indian
handloom products like muslin of Chanderi, silk brocades of Varanasi, the tie and dye
products of Rajasthan and Orissa, the Chintas of Machhlipatnam, the himroos of
Hyderabad, the Khes of Punjab, the prints of Farrukhabad, the Phenek and Tongam
and bottle designs of Assam and Manipur, the Maheshwari sarees of Madhya Pradesh
and the Patola sarees of Baroda have been famous all over.

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The art and craft traditions since almost the dawn of civilization has been kept
alive despite sweeping changes due to continuous efforts of generations of artists and
craftsmen who weaved their dreams and visions into exquisite handloom products.
The handloom industry now provides livelihood to over 90 million people in

the country. It continues to be craft-oriented, even though it was circumscribed by a
limited choice of processing and technology. During the first half of the present
century there was very little effort to develop the handloom sector and the handloom
weavers were pitted against modern textile mills. They struggled to survive not only
against the unfair competition but also against the unscrupulous middlemen who did
everything to ensure that the weavers remained in perpetual debt trap. It is a tribute to
their ingenuity and skill that they succeeded in preserving the long tradition of
excellence in hand-weaving, dyeing, in-printing and craftsmanship.
Advantages
The Deemed Exporter ‘supplies the yarn’ in the quality the buyer wants it.
This saves the weavers from investing in purchasing of yarn or for the cooperative to
get cash credit from DCCB to purchase yarn. This is an ideal business proposition for
PWCS that have lost CC facility with the DCCBs. The society does not require
working capital for
Purchasing yarn.
The Deemed Exporter ‘decides which items are to be produced’. The
weaverneednotworry about what the market demands. He can be contended if he
could weave and supply the items demanded by the Deemed Exporter. There is no
incidence of Deemed Exporters delaying payment to the weavers. They seem to be
sending Demand Draft within a fortnight’s time. There is no problem of marketing
because the Deemed Exporter procures the entire lot he placed order for. The wages
paid are also comparatively better, although it is on a declining trend over the Years.
Handloom forms a part of the heritage of Tamil Nadu and exemplifies the
richness and diversity of the State. Taking into account the present status of handloom
industry in Tamil Nadu, an attempt is made to analyze the problems and prospects of
this traditional industry by using SWOT Analysis.

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Strengths
Its rural base, low capital investment and employment intensive nature of
production not only help in providing livelihood to large number of people in the rural
non-farm sector but also strengthen its survival in the age of computerized weaving
technology.
It is eco-friendly in nature and inflicts no harm to health. It prevents distress
migration of rural artisans to the cities by providing work in the village itself. It
provides productive employment to the women, old and destitute in their households
(in the preparatory work) and thus serves an important social purpose, at virtually no
cost to the government.
Problems
• The inherent weakness of handloom industry is low productivity.

• The sector is weak and need protection from the government by giving
• Rebate/concessions periodically during the festive seasons.
• It is relatively higher wage component of handloom products as compared to
the
• Power loom products which affects their commercial viability.
• It grapples with problems like non-availability of good quality yarn, low
technology, lack of market intelligence and poor marketing facilities.
• Another important weakness of the handloom industry is related to poor
capacity of the weavers to switch over to new products and designs according
to consumers’ tastes and Preferences on the short notice in comparison with
power loom products.
Chapter 2
Designing of the Study
Statement of the problem

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Hand loom cooperatives are gross root level cooperatives involved in

production and marketing of handloom cloths. Naturally this organization have to
financial management in good level once the financial management is good in
financial performance it also good in financial is associated in purchase of materials
and introduction activities on marketing activities. If the weaver’s cooperatives are
financially good and performance wise some they will objectives properly. Financial
performance therefore is an indicates of the health sites of the organization. Financial
performance can be assessed through ratios. The ratios like liquidity, solvency,
activity and profitability are very, much useful to measure the performance of the
weavers cooperatives. The researchers being the students of the cooperatives
including of financial performance of weavers cooperatives in Chinnala patty. Hence
the piece of study.
Scope of the study
The scope of the study covers the practices of the areas of working capital,
assets, inventory turnover, gross profit, net profit and expenses the study unit. The
study aims at analyzing the practice of the above areas and so assessing their
performance. To have holistic view of financial performance, the researchers have
attempted to analyze the business performance through ratio of weaver’s
cooperatives.
Objectives of the study
The study has the following objectives;
To analyze the financial performance of the weavers cooperatives through
relevant financial ratios.
To summarize findings and suggestion measures for strengthening the
societies
Methodology
The study aims at analyzing the financial performance of the weaver’s
cooperative societies in a detailed manner. The chinnalapatty weaver’s cooperative
societies were selected for the study. There were seven weavers’ cooperatives, the
seven societies were selected. In this way, it is census study.
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The study will rely mainly on secondary data collected form the source of
audit reports, annual reports, with the officials responsible for financial and business
activities will be held to get further information and clarifications.
Handloom:
Handloom means any cloth woven and handloom from cotton, silk, woolen
yarn or a mixing of mill yarns. A handloom uses human power for undertaking all the
motion in weaving operating.
Chapter scheme
First chapter deals with Introduction of weavers Cooperatives.
Second chapter deals with Design of the Study.
Third chapter deals with Analysis and discussion
Fourth chapter deals with Findings conclusions and Suggestions.

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Chapter 3
Analysis and Discussion
This chapter makes on attempt in analyzing the financial performance of the

study units. The financial performance of each weavers society was analyzed through
major ratios namely (i) liquidity ratio, (ii) solvency, (iii) activity, (iv) profitability.
1) LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as
and when these become due. The short-term obligations are met by realizing amounts
from current, floating or circulating assets. The current assets either be liquid or near
liquidity. These should be convertible into cash for paying obligation of short-term
nature.
a) CURRENT RATIO
Current ratio may be defined as the relationship between current assets and
current liabilities. This ratio, also known as working capital ratio, is a measure of
general liquidity and is most widely used to make the analysis of a short-term
financial position or liquidity of a firm.
Current Assets
Current Ratio =
Current Liabilities
The two basic components of this ratio are: Current assets and current
liabilities. Current assets include cash and those assets which can be easily converted
into cash within a short period of time generally, one year. Current liabilities are
those obligation which are payable within a short period of generally one year.

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Components of Current Ratio
Current Assets Current Liabilities
1. Cash in hand 1. Outstanding expenses /

2. Cash at bank Accrued expenses
3. Marketable Securities 2. Bills payable
(Short-term) 3. Sundry creditors
4. Short-term investments 4. Short-term advances
5. Bills receivable 5. Income-tax payable
6. Sundry Debtors 6. Dividends payable
7. Inventories (Stocks) 7. Bank overdraft
8. Work-in-process
9. Prepaid Expenses

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Table 1
Current Ratio
Year Anna Gandhiji Namnadu Silambu Kamala Sanjay Anjugam
97-98 0.36 - 3.50 2.47 0.85 0.60 0.12
98-99 0.10 - 3.37 1.66 0.86 0.63 0.56
99-00 0.04 - 3.04 2.10 0.81 0.46 0.29
00-01 4.29 - 3.62 1.10 0.79 0.89 1.31
01-02 0.46 0.96 8.56 3.19 0.81 0.83 0.86
02-03 0.62 0.93 3.76 2.52 0.85 0.67 0.64
03-04 0.35 0.93 3.02 1.49 0.89 0.52 0.27
04-05 0.38 0.96 2.64 3.47 0.93 0.69 0.83
05-06 0.46 1.00 2.54 3.52 1.03 0.82 0.57
06-07 0.29 1.03 2.38 1.69 0.99 1.08 0.28
Avg 0.73 0.96 4.00 2.32 0.79 0.71 0.57
Table 1 explains particulars of current ratio of study units. It was found that
the societies current ratio was very high at 4.29 in Anna society (2000-01) and 8.5 in
Namnadu society (2001-02). Four societies namely Anna, Gandhiji, Sanjay and
Kamala maintained current ratio less than one in most of the study period. The
Namnadu society maintained current ratio at 4 followed by Silambu Salver with 2.32
and Anjugam with 0.57. The reasons for maintaining of high current ratio were
attributed by (i) Maintained high stock, ii) Maintenance of high current assets rather
then fixed assets.

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b) QUICK or LIQUID RATIO

Quick Ratio, known as Liquid Ratio, is a more rigorous test of liquidity than
the current ratio. The term ‘liquidity’ refers to ability of a firm to pay its short-term
obligations as and when they become due. It is also called as acid test ratio.
Quick Assets
Quick Ratio=
Current Liability
Components of Quick Ratio
Quick/Liquid Assets Current Liabilities
Cash in hand Outstanding Expenses

Cash at Bank Bills payable
Bills Receivables Sundry creditors
Sundry Debtors Short-term advances
Marketable Security Income-tax payable
Temporary Investments Dividends payable
Bank overdraft

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Table 2
Quick Ratio
97-98 0.20 - 1.43 0.93 0.61 0.46 1.51
98-99 0.08 - 2.69 0.39 0.86 0.35 1.23
99-00 0.02 - 2.01 1.63 0.70 0.37 1.07
00-01 4.43 - 2.31 0.82 0.83 0.40 1.17
01-02 0.34 0.69 5.90 2.21 0.78 0.49 0.93
02-03 0.56 0.72 3.01 1.94 0.55 0.40 1.25
03-04 0.03 0.76 2.98 2.50 0.51 0.53 2.14
04-05 0.05 0.80 1.95 2.32 0.53 0.69 0.84
05-06 0.33 0.82 1.97 1.00 0.49 0.81 1.68
06-07 0.20 0.82 6.38 2.21 0.57 1.02 1.77
Avg 0.62 0.76 3.06 1.59 0.64 0.85 1.35
It is clear from the table that the Namnadu society goes in first place with 3.06
followed by silambu (1.59). The societies namely Anna, Kamala maintained quick
ratio at below one. It means that the quick assets are less than the current liabilities.
The quick ratio was very high at 6.38 with Namnadu society in (2006-07) and the low
ratio was witnessed in case of Anna society at 0.02 in (1999-00).
The reason for high quick ratio incase of Namnadu was because of the
maintenance of high current assets, wherein case of Anna society the low level was
attributed because of low quick assets.

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2. a) Solvency Ratio
This ratio a small variant of equity ratio and can be simply calculated as
100 equity ratio, i.e., continuing the example taken for the equity ratio, solvency ratio
= 100.-66.67 or say 33.33%. The ratio indicates the relationship between the total
liabilities to outsiders to total assets of a firm and can be calculated as follows:
Total liabilities
Solvency ratio=
Total assets
Generally, lower the ratio of total liabilities to total assets, more
satisfactory or stable is the long-term solvency position of a firm.
Table 3
Solvency Ratio
97-98 0.89 - 0.75 0.56 0.58 0.87 0.94
98-99 0.35 - 0.95 0.82 0.39 0.89 0.94
99-00 1.00 - 0.94 0.51 0.24 0.92 0.94
00-01 1.00 - 0.94 0.67 0.13 0.90 0.96
01-02 0.87 0.82 0.95 0.95 0.22 0.93 0.90
02-03 0.09 1.03 0.95 0.25 0.29 0.91 0.91
03-04 0.10 0.58 0.95 0.95 0.30 0.96 0.90
04-05 0.07 0.68 0.95 0.84 0.22 0.96 0.90
05-06 0.74 0.25 0.96 0.25 0.15 0.96 0.87
06-07 0.65 0.54 1.05 0.85 0.14 0.98 0.90
Avg 0.47 0.65 0.84 0.66 0.26 0.89 0.88
It is clear from the table 7 that almost all the weavers’ cooperatives societies
were in solvent position. That is they are capable of settling their liabilities with the
help of assets.

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DEBT – EQUITY RATIO

Debt-Equity Ratio, also known as External – Internal Equity Ratio is
calculated to measure the relative claims of outsiders and the owners (i.e.,
shareholders) against the firm’s assets. This ratio indicates the relationship between
the external equities or the outsider’s funds and the internal equities or the
shareholders’ funds, thus:
Outsider’s funds
Debt Equity ratio =
Shareholders fund
Table 4
Debt Equity Ratio
97-98 10.28 - 0.36 1.89 0.33 0.66 0.57
98-99 2.16 - 0.45 0.07 0.07 2.84 0.46
99-00 0.13 - 2.18 0.24 0.24 2.09 0.84
00-01 9.93 - 1.69 0.84 0.22 2.06 0.65
01-02 1.68 1.93 1.05 0.26 0.25 2.00 1.63
02-03 0.95 2.36 0.46 0.33 4.00 0.32 1.89
03-04 0.27 4.61 0.56 0.29 4.60 2.09 2.09
04-05 0.93 2.09 0.79 0.20 6.57 2.65 1.72
05-06 0.20 2.49 0.93 0.21 0.50 0.42 1.86
06-07 0.81 2.36 0.62 0.32 6.80 0.56 2.11
Avg 1.83 2.64 0.90 0.46 2.33 1.56 1.80

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The relationship between debt and equity is measured. Here debt includes loan
from outside agencies, including DCCB, creditors include suppliers of yarn, NHDC
and Cooptex. Equity denotes the members share capital and reserve fund. It signifies
the debt borrowed by the weavers cooperatives based on the equity. It is found that
Sanjay society and Gandhiji maintained the ratio of 4.5 times and 2.64 times
respectively, representing 4.5 times of debt than equity. The societies like Anna,
Kamala Nehru and Sanjay maintained this ratio at negative level indicating lower debt
than equity. The weaver’s cooperatives’ borrowing pattern is different from other
credit agencies resulting in very low borrowing.
Capital Gearing Ratio

The term capital gearing is used to describe the relationship between equity
share capital including reserves and surpluses to preference share capital and other
fixed interests-bearing loans. It equity share capita and other fixed interest on loans
exceed the equity share capital including reserves, the firm is said to be highly geared.
Equity share capital + Reserves and surplus

Capital gearing ratio=
Long term debt

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Table 5
Capital Gearing Ratio

97-98 0.14 0.09 0.20 1.26 0.23 1.20 0.13
98-99 0.19 0.20 0.19 1.33 0.53 1.40 0.53
99-00 0.24 0.46 0.18 1.30 0.10 4.12 0.76
00-01 0.28 0.59 0.14 1.87 0.12 3.38 0.89
01-02 0.22 0.18 0.13 1.34 0.09 3.99 1.11
02-03 5.89 0.20 1.76 1.27 0.05 0.02 1.07
03-04 0.13 0.13 2.46 1.28 0.05 0.07 1.62
04-05 -0.15 1.07 1.07 1.29 0.04 0.07 1.06
05-06 89.39 0.89 1.27 1.99 0.61 0.07 1.34
06-07 30.15 1.22 1.84 2.39 0.05 0.07 1.52
Avg 1.89 0.50 0.92 1.53 0.19 1.44 1.00
Capital gearing ratio is indicated in the table 16. The ratio was high incasing
of Anna society with 1.84 and Silambu Salver the high ratio indicates that the equity
capital and Reserve fund to be over and above the long term debt. Sanjay Gandhi
maintained very low level with 0.19 times which indicates that the owned capital is
very low. High owned capital is also preferred and it is a signed of strength.
3. Activity Ratios
a) Inventory Turnover Ratio
Inventory turnover ratio also known as stock velocity is normally
calculated as sales/average inventory.
Cost of Goods Sold

Inventory Turnover Ratio =
Average Inventory at Cost

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Table 6
Inventory Turnover Ratio
97-98 1.16 - 0.88 2.84 0.36 2.88 1.34
98-99 3.58 - 3.44 0.23 1.66 5.35 1.47
99-00 3.53 - 4.02 3.87 4.51 4.01 1.20
00-01 2.33 - 2.62 2.04 5.76 3.86 1.72
01-02 2.69 0.33 3.02 2.04 4.04 3.80 1.12
02-03 3.43 2.71 4.10 1.13 4.02 4.41 1.75
03-04 3.70 0.52 2.98 2.68 4.80 4.70 2.01
04-05 4.13 9.69 7.33 - 5.69 4.64 2.41
05-06 4.74 12.86 5.72 - 3.17 4.30 2.22
06-07 1.36 8.93 5.32 - 10.75 4.19 2.38
Avg 3.06 5.84 3.94 1.48 4.47 4.21 1.71
It is understood from the table that the societies namely Gandhiji, Sanjay and
Kamala Nehru maintained Inventory Turnover Ratio at high level with 5.84, 4.21 and
4.4 respectively. It means cost of goods sold is less than the average inventory cost.
Other societies maintained below 4 times. It is felt that high turn over will lead
efficiency in production. That is it facilitates high production. Inventory Turnover
Ratio was maintained high at 12.86 time in case of Gandhiji society in (2005-06) and
Sanjay Gandhi society with 10.75 times in (2006-07). The low level inventory
turnover ratio at 0.33 in Gandhiji society (2001-02). High fluctuation is witnessed in
Gandhiji Society.

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b) Debtors turnover Ratio

A concern may sell goods on cash well as on credit. Credit is one
of the important elements of sales promotion. The volume of sales can be increased
by following a liberal credit policy.
Debtors
Debtors turn over ratio=
Net Sales
Table 7
Debtors Turnover Ratio

97-98 1.35 - 6.93 0.46 1.17 2.73 1.14
98-99 2.40 - 9.70 6.96 1.84 4.22 3.39
99-00 2.54 - 3.97 9.40 2.56 3.43 2.81
00-01 1.94 - 2.86 8.54 0.31 4.22 2.37
01-02 1.96 1.10 2.78 1.89 3.82 3.31 2.78
02-03 1.95 1.41 2.12 2.20 2.46 2.97 2.16
03-04 0.03 1.98 3.25 3.24 3.21 2.52 4.01
04-05 3.86 2.17 4.96 - 4.29 3.30 4.52
05-06 3.70 5.36 4.16 - 1.18 4.11 5.34
06-07 6.11 4.26 7.14 - 0.52 7.24 4.54
Avg 2.58 2.71 4.78 3.26 2.13 3.04 3.30

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The ratio of debtor’s turnover of the sample units has been discussed in the
table 4. It was found that the Namnadu society and Anjugam society had maintained
the ratio at high level with 4.78 and 4.26 times respectively. The reason for such high
turnover was because of high showroom sales, participatory in emporium to push up
sales. The high turnover ratio indicates capably of making higher sales which
facilitates for profitability. On the other hand the lower ratio indicates the high
dependency on the debtors, and in number of debtors do not settle for the society.
The high debtor turnover was found maintaining in Namnadu society with 9.7 times
in (1998-99) and Silambu with 9.4 (1999-00) times. The lowest level was maintained
by the Anna society at 0.03 times in (2003-04).
c) Fixed Assets to Proprietary Fund Ratio

The ratio establishes the relationship between fixed assets and shareholder’s
funds, i.e., share capital plus reserves, surplus and retained earnings. The ratio can be
calculated as follows:
Fixed Assets (After depreciation)

Fixed Assets to Net worth Ratio =______________________________
Shareholder’s Funds

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Table 8
Fixed Assets to Proprietary Funds Ratio
97-98 0.12 - 0.15 2.67 0.47 0.01 0.11
98-99 0.03 - 0.18 0.55 0.25 0.03 0.23
99-00 0.01 - -0.61 0.51 -0.15 0.21 0.27
00-01 -0.15 - -0.84 1.39 -0.56 -0.08 0.63
01-02 0.02 1.63 -0.34 0.99 0.21 0.58 1.04
02-03 1.10 3.29 0.05 1.12 -0.57 -0.07 1.19
03-04 0.07 7.68 0.54 1.08 0.24 -0.06 1.37
04-05 1.63 8.11 0.47 1.17 0.26 1.22 1.79
05-06 1.08 5.69 0.38 1.06 0.54 1.73 1.46
06-07 -0.45 6.00 0.29 3.64 0.68 0.12 1.51

Avg 0.34 5.40 0.02 1.41 0.13 0.39 0.96
It is clear from the table that excepting Gandhiji society and Silambu Salver
society all other societies maintained the ratio at below one. Gandhiji society was
capable enough in maintaining this ratio at more than 5 times, as the society is a
bigger society in the study area and possessing enough showrooms, own office
building, etc., All other societies did not own office building and other fixed assets.

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d) Current Assets to Proprietary Fund Ratio

The ratio calculated by dividing the total of current assets by the amount of
shareholders’
Current Assets
Current Assets to Proprietary Fund Ratio = × 100
Shareholders Funds
Table 9
Current Assets to Proprietary Funds Ratio
97-98 1.10 - 14.02 11.91 2.14 8.37 0.65
98-99 8.07 - 19.09 1.46 2.01 7.39 1.52
99-00 4.97 - 11.05 7.96 2.32 9.50 2.38
00-01 2.13 - 14.35 9.21 3.38 7.40 2.50
01-02 4.72 5.56 17.06 6.79 4.28 13.60 0.87
02-03 6.02 6.97 18.97 4.43 7.95 14.22 1.11
03-04 3.34 6.84 15.53 6.06 8.56 15.29 1.76
04-05 2.92 6.93 18.06 6.08 10.13 18.20 1.44
05-06 3.84 5.26 16.33 6.92 12.23 13.47 1.66

06-07 11.07 4.21 17.97 6.14 13.81 12.10 1.16
Avg 4.81 5.96 16.24 6.70 6.68 11.95 1.53
It is clear from the table10 that the Namnadu society maintained a high level
of current assets to proprietary ratio. The reason for such high in case of Namnadu
was it maintained of high current assets and low level of proprietary funds. Sanjay
Gandhi society comes in the 2nd place with annual average of 11.95 times. The low
level was noticed in the case of Anjugam society with 1.53 times as because the low
level of current assets.

Roll NO: 06203033
e) Working Capital Turnover Ratio

Working capital of a concern is directly related to sales, the current assets like
debtors, bills receivables, cash, stock etc., and change with the increase or decrease in
sales. The working capital is taken as:
Working Capital = Current Assets – Current Liabilities
Working Capital turnover ratio indicates the velocity of the utilization of net
working capital. This ratio indicates the number of times the working capital is
turned over in the course of a year.
Cost of sales
Working capital turn over ratio=
Average working Capital
Opening Working Capital + Closing Working Capital

Average Working capital =________________________________________
2

Roll NO: 06203033
Table 10
Working Capital Turnover Ratio
97-98 1.98 - 1.87 3.90 2.10 1.07 1.22
98-99 2.10 - 2.01 3.35 2.04 1.70 1.09
99-00 2.66 - 2.12 3.60 2.50 1.67 1.43
00-01 1.18 - 1.69 2.40 4.20 1.93 1.18
01-02 1.93 1.57 1.34 0.65 5.26 2.01 1.09
02-03 2.03 1.63 0.88 0.39 3.01 2.16 1.76
03-04 3.01 1.47 1.62 0.56 2.79 2.04 2.09
04-05 3.73 1.79 2.51 0.59 7.91 3.19 2.32
05-06 3.14 1.52 2.00 0.35 9.71 2.09 2.98
06-07 2.89 1.03 2.49 0.92 6.19 4.12 2.65
Avg 2.46 1.50 1.85 1.60 4.47 2.19 1.77
The working capital turnover ratio indicates that the number of times the
working capital turned during the year. A reasonable turnover of the ratio will lead to
better business performance. It is found that the societies namely Anna and Sanjay
maintaining a reasonably acceptable ratio respectively of 2.46 times and 2.19 times. It
means that they utilize the net working capital properly in the business. The Kamala
Nehru society was found maintaining a negative working capital ratio, because of the
low working capital than cost of sales.

Roll NO: 06203033
f) Proprietary Funds Ratio

A variant to the debt-equity ratio is the proprietary ratio which is also known
as Equity Ratio or Shareholders’ to Total Equities Ratio or Net worth to Total Assets
Ratio.
Shareholders funds
Proprietary funds ratio=
Total Assets
Table 11
Proprietary Fund Ratio
97-98 0.07 - 0.09 0.08 0.07 1.06 0.30
98-99 0.10 - 0.06 0.68 0.10 0.47 0.57
99-00 0.90 - 0.02 0.12 0.23 2.06 0.79
00-01 0.87 - 0.01 0.10 0.22 1.71 0.48
01-02 0.90 0.03 0.03 0.16 0.37 1.03 0.56
02-03 0.60 0.09 0.05 0.14 0.46 0.26 0.76
03-04 0.65 0.10 0.05 0.22 0.30 0.73 0.46
04-05 0.70 0.08 0.05 0.16 0.54 0.82 0.70
05-06 0.60 0.12 0.04 0.16 0.49 0.52 0.43
06-07 0.63 0.20 0.05 0.05 0.57 0.41 0.62
Avg 0.06 0.10 0.04 0.18 0.33 0.90 0.56

Roll NO: 06203033
Proprietary fund ratio is calculated to find out the proprietary fund ratio which
was much lower than one (in fraction). So it indicates that the members share capital
was very low. The reason is that the weaver members are already financially very
poor. They cannot be expected to contribute much to the share capital.
4. Profitability Ratios
a) Gross Profit Ratio
Gross profit ratio measures the relationship of gross profit to net sales and is
usually represented as a percentage. Thus, it is calculated by dividing the gross profit
by sales:
Gross Profit
Gross Profit Ratio= ×100
Net Sales

Roll NO: 06203033
Table 12
Gross Profit Ratio
97-98 13.25 14.68 7.52 9.01 6.99 11.36 23.30
98-99 6.20 9.70 8.01 9.29 10.73 8.49 10.30
99-00 3.94 7.42 6.03 10.51 11.11 14.01 11.02
00-01 14.21 9.75 11.23 9.97 11.98 8.57 10.04
01-02 11.42 8.17 9.58 14.23 0.84 13.14 11.80
02-03 12.12 10.04 8.99 6.69 15.26 11.58 7.40
03-04 12.30 10.70 12.48 8.88 25.36 14.20 11.10
04-05 10.90 10.04 10.67 11.10 0.58 10.07 5042
05-06 0.10 7.44 13.79 10.24 15.36 12.13 6.27
06-07 10.94 9.90 14.47 10.46 16.03 11.23 11.20
Avg 9.53 9.78 10.47 10.03 8.88 11.47 10.78
The Gross profit ratio of study units is described in the table 11. It is found
that the Sanjay Gandhi society maintained a high level of Gross profit ratio (11.47)
than all the other study units. The 2nd place was occupied by Anjugam society with
10.78%. It is therefore clear from the table that the Gross profit margin maintained
high incase of Sanjay Gandhi and Anjugam society. The Kamala Nehru society
which found to be low among all the study units with 8.8%.

Roll NO: 06203033
b) Operating Profit Ratio

This ratio is calculated by dividing operating profit by sales. Operating profit
is calculated as:
Operating Profit = Net Sales-Operating Cost (Or)

= Net Sales (Cost of goods sold + Administrative and
Office Expenses + Selling and distributive Expenses)
Operating Profit
Operating Profit Ratio = ×100
Net Sale

Roll NO: 06203033
Table 13
Operating Profit Ratio
97-98 21.52 - 70.15 84.53 59.60 84.38 80.92
98-99 80.86 - 91.70 88.21 69.10 91.46 88.85
99-00 99.58 - 85.90 98.27 83.20 55.11 91.60
00-01 99.80 - 88.10 90.14 91.60 83.95 87.80
01-02 30.83 17.80 87.60 61.16 87.20 64.03 86.31
02-03 83.38 29.70 17.55 86.95 87.96 83.79 83.22
03-04 99.90 25.30 12.56 84.96 87.84 67.84 86.82
04-05 89.32 20.90 10.96 85.09 88.72 79.42 79.60
05-06 11.05 37.40 14.19 85.54 87.91 87.43 87.61
06-07 99.96 41.80 13.50 87.52 88.99 87.90 87.77
Avg 71.62 28.81 49.22 85.23 83.21 78.53 86.05
Operating profit ratio indicates that high ratio was witnessed incase of
Anjugam society with 86.31% and Silambu Salver 85.23% respectively. The lowest
was indicated incase of Gandhiji society with 29%. It is therefore inferred the
operating expenses were less incase of Anjugam and Silambu Salver whereas high
incase of Gandhiji society.
c) Net Profit Ratio
Net Profit ratio establishes a relationship between net profit (after taxes) and
sales, and indicates the efficiency of the management in manufacturing, selling,
administrative and other activities of the firm. This ratio is the overall measure of
firm’s profitability and it calculated as:
Net Profit
Net profit Ratio= ×100
Net Sales

Roll NO: 06203033
Table 14
Net Profit Ratio
97-98 0.14 0.09 0.20 1.26 1.20 0.23 0.13
98-99 0.19 0.20 0.19 1.33 1.40 0.53 0.53
99-00 0.24 0.46 0.18 1.30 4.12 0.10 0.76
00-01 0.28 0.59 0.14 1.87 3.38 0.12 0.89
01-02 0.22 0.18 0.13 1.34 3.99 0.09 1.11
02-03 5.89 0.20 1.76 1.27 0.02 0.05 1.07
03-04 0.13 0.13 2.46 1.28 0.07 0.05 1.62
04-05 -0.15 1.07 1.07 1.29 0.07 0.04 1.06
05-06 89.39 0.89 1.27 1.99 0.07 0.61 1.34
06-07 30.15 1.22 1.84 2.39 0.07 0.05 1.52
Avg 1.89 0.50 0.92 1.53 1.44 0.19 1.00
Net profit ratio is indicated in the table. It is found the Anjugam society
maintained high ratio of 3.31% followed by Anna society with 2.19 %. These two
societies maintained Net profit in most of the years. Gandhiji society also maintained
Net profit ratio but the quantum of Net profit is at reduced level. The Net profit was
negative incase of Kamala Nehru with (-4.7) and Sanjay Gandhi (-3.6).

Roll NO: 06203033
d) Trade Charges Ratios

Trade charges ratio indicates the relationship of trade charges to net sales.
Trade Charges
Trade Charges Ratio= ×100
Net Sales
Table 15
Trading Charges Ratio
97-98 0.56 3.20 0.52 6.40 0.06 2.20 4.11
98-99 0.32 4.11 0.26 0.42 0.09 3.95 1.48
99-00 0.96 3.20 0.21 0.07 0.93 3.47 1.87
00-01 1.15 2.22 0.27 0.03 0.11 3.00 1.39
01-02 0.39 2.01 0.35 0.03 0.49 4.10 0.71
02-03 0.81 1.37 0.41 0.04 0.75 3.80 1.62
03-04 0.51 1.40 0.49 0.04 0.99 0.68 1.46
04-05 0.28 1.52 0.43 - 0.70 0.19 0.55
05-06 0.72 1.61 0.51 - 0.85 0.27 1.68
06-07 1.15 1.86 0.49 - 0.52 0.42 1.68
Avg 0.68 2.03 0.39 1.00 0.54 2.20 1.65
The table gives the particulars of trading charges ratio. It is found that the
study units maintained the ratio from 0.39% to 2.20% (average). It is advisable that
the ratio must be as low as possible; that indicates the low trade charges incurred by
the cooperatives. Namnadu society maintained low ratio 0.39% and the Sanjay
Gandhi society maintained high ratio. The reasons for the high trade charges were,
low purchase high trade charges, high purchase but low sales.

Roll NO: 06203033
e) Establishment Expenses
Establishment expenses ratio indicates the relationship of establishment
expenses to net sales.
Establishment Expenses
Establishment Expenses Ratio= ×100
Net Sales
Table 16
Establishment Expenses Ratio
97-98 13.90 - 17.90 16.76 8.06 3.87 3.60
98-99 5.45 - 4.10 7.69 7.57 4.03 4.25
99-00 8.46 - 6.30 2.97 1.46 4.17 5.29
00-01 8.70 - 7.00 3.92 1.09 4.29 4.95
01-02 1.05 7.92 6.20 4.33 0.47 5.19 7.62
02-03 6.10 12.28 8.67 5.20 5.03 5.30 6.02
03-04 5.70 6.33 7.12 5.22 5.24 5.60 6.79
04-05 4.80 4.80 6.26 - 4.99 5.43 3.02
05-06 5.35 3.65 6.62 - 5.64 5.16 7.12
06-07 4.48 5.59 9.26 - 5.22 3.53 6.86
Avg 6.39 6.76 7.94 4.61 4.47 4.66 5.55
Establishment expenses ratio is crucial ratio which correlates establishment

expenses to net sales. Being expenses, it must be maintain at low level as possible.
High ratio indicates the livelihood expenses an establishment cost and it will be a
burden to the handloom weaver’s cooperatives. The table describes that the Namnadu
society maintained 7.94% followed by Gandhiji society with 6.76%respectively. The
kamala Nehru society maintains at the lowest level, among the study units (4.47%).
The year wise performance of the study units indicates that high percent of expenses
was maintained in the first year of the study.

Roll NO: 06203033
Chapter 4
Summary of Findings, Conclusions and Suggestions
The chapter is designed to present key findings and the conclusions drawn on
financial performance through ratio analysis in the selected weaver’s cooperatives.
The study was conducted with the following objectives.
To analyze the financial performance through established ratio.

To compare the actual accounting ratios with available standard norms
wherever possible and draw meaningful interpretations.
The findings of the study are presented in two sections. In the first part,
findings are pertaining to the general profile of the weaver’s cooperatives. In the
second section, the findings are relating to the financial and functional aspects
through ratio analysis.
i) Findings on General Working profile
Except Kamala Nehru society all the societies registered on 7.12.1973

and commenced on the same date.
The area of operation of the societies was with in Chinnala patty.
The liability of the societies was limited to share capital.
The share capital of the societies showed in a fluctuating trend during
the study period.
The reserve funds (both statutory and non-statutory funds) showed a
fluctuating trend.
The borrowing position of the societies shows ups and downs over a
study period. This was classified into four sections like, Government
loans, cash credit I, II and ST loan.

Roll NO: 06203033
ii) Findings on financial performance
Current Ratio: The Namnadu society has maintained high current ratio compared
with other societies (4.00). The Sanjay society maintained low current ratio (0.71).
Quick ratio: The Namnadu society maintains a high level of quick ratio (3.06). The
Anna society maintained low quick ratio (0.64).
Inventory turnover ratio: The Gandhiji society maintained high inventory ratio and
the Silambu Salver society maintained lower ratio (1.48).
Debtor’s turnover ratio: In case of debtors turnover ratio the Namnadu society had
high with 4.78 times compared with other societies and the Anna society maintained a
low ratio.
Working capital turnover ratio: The Kamala Nehru society had adequate working
capital with 4.47 times and the Gandhiji society maintained low ratio at a 1.50 times.
Debtor’s equity ratio: The Gandhiji society maintained high level outsider’s funds
(2.64). And the Silambu Salver society maintained low level outsiders fund (0.46).
Proprietary fund ratio: The Sanjay society maintained 0.90 time’s proprietary funds
and the Anna society maintained low level proprietary funds.
Solvency ratio: The Sanjay society maintained 0.89 times liabilities to capital.
Kamala society maintained low level funds at 0.26 times.
Fixed assets to proprietary funds ratio: The Gandhiji society maintained high fixed
assets and the Namnadu maintained low level fixed assets 0.02.

Roll NO: 06203033
Current assets to proprietary fund ratio: The Namnadu society maintained high
level current assets at 16.24 and the Anjugam society maintained very low level
current assets.
Gross profit ratio: The Anjugam society earned high level gross profit as it earned
profit in many of period. And the Kamala Nehru society had low level gross profit.
Operating profit ratio: The Anjugam society earns high level operating profit (78.5
percent) and the Gandhiji society has low level operating profit (28.81 percent).
Trade charges ratio: The Sanjay society maintained a high ratio with (2.03) and the
Anna society maintained low ratio (0.39)
Establishment expenses: he Namnadu maintained high level establishment expenses

(7.94) and the Silambu Salver society maintained low level establishment expenses
ratio (4.47).
Net profit ratio: The Anna society maintained a high net profit ratio (1.89) and the
Sanjay had low level net profit ratio (0.19).
Capital gearing ratio: The Anna society maintained high capital gearing ratio at 1.89
and the Sanjay maintained a low 0.19.
Conclusion
After having analyzed the financial performance of the sample societies
through relevant financial ratios, it is concluded that which society has been good in
the areas like Sales, purchase, current assets and borrowings aspects. The societies
operational analysis indicted certain areas need to be concentrated well, namely
capital, trade charges, establishment expenses and working capital. Nevertheless of
the many passive features, which society has been successful in any of the financial
and functional areas?

Roll NO: 06203033
Suggestions
The society should undertake promotional activities like advertisement,
incentives to sales personnel and so on to enhance sales.
The present purchase policy of the society should be revised.
Steps must be taken to reduce operating expenses by minimizing wastages.
The society should organize seminars, conferences among the employees as
well as weavers members.
The present management system of the society should be revised.
Membership derive must be encouraged so as to have large membership.
Profitable new showrooms should be opened to increase sales and get profit.
The Government introduces new schemes for development of members
economic.

Roll NO: 06203033

Vels Financial Management

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Gandhigram Rural University, Gandhigram.

A STUDY ON THE FINANCIAL PERFORMANCEOF

Submitted in partial fulfillment of the requirements for the

P.VELANKANNI (Reg. No. 06203033)

B.VIJAYAKUMAR (Reg. No. 06203034)

G.VIGNESH (Reg. No. 06203035)

acerP.Velankanni, B.Com 2006-09 1

Dr.B.Tamilmani M.A., M.Com, M.Phil, PhD

acerP.Velankanni, B.Com 2006-09 2

acerP.Velankanni, B.Com 2006-09 3

acerP.Velankanni, B.Com 2006-09 4

II DESIGN OF THE STUDY 10– 11

IV FINDINGS, CONCLUSIONS AND SUGGESTIONS 36 – 40

acerP.Velankanni, B.Com 2006-09 5

acerP.Velankanni, B.Com 2006-09 6

The Office of the Development Commissioner for Handlooms has been

Some of the major programmes formulated by this office relate to:

Over the centuries handlooms have come to be associated with excellence in

acerP.Velankanni, B.Com 2006-09 7

The handloom industry now provides livelihood to over 90 million people in

acerP.Velankanni, B.Com 2006-09 8

• The inherent weakness of handloom industry is low productivity.

Statement of the problem

acerP.Velankanni, B.Com 2006-09 9

Hand loom cooperatives are gross root level cooperatives involved in

Second chapter deals with Design of the Study.

Third chapter deals with Analysis and discussion

Fourth chapter deals with Findings conclusions and Suggestions.

acerP.Velankanni, B.Com 2006-09 11

This chapter makes on attempt in analyzing the financial performance of the

acerP.Velankanni, B.Com 2006-09 12

Components of Current Ratio

Current Assets Current Liabilities

1. Cash in hand 1. Outstanding expenses /

acerP.Velankanni, B.Com 2006-09 13

Year Anna Gandhiji Namnadu Silambu Kamala Sanjay Anjugam

97-98 0.36 - 3.50 2.47 0.85 0.60 0.12

98-99 0.10 - 3.37 1.66 0.86 0.63 0.56

99-00 0.04 - 3.04 2.10 0.81 0.46 0.29

00-01 4.29 - 3.62 1.10 0.79 0.89 1.31

01-02 0.46 0.96 8.56 3.19 0.81 0.83 0.86

02-03 0.62 0.93 3.76 2.52 0.85 0.67 0.64

03-04 0.35 0.93 3.02 1.49 0.89 0.52 0.27

04-05 0.38 0.96 2.64 3.47 0.93 0.69 0.83

05-06 0.46 1.00 2.54 3.52 1.03 0.82 0.57

06-07 0.29 1.03 2.38 1.69 0.99 1.08 0.28

Avg 0.73 0.96 4.00 2.32 0.79 0.71 0.57

acerP.Velankanni, B.Com 2006-09 14

b) QUICK or LIQUID RATIO

Components of Quick Ratio

Quick/Liquid Assets Current Liabilities

Cash in hand Outstanding Expenses

acerP.Velankanni, B.Com 2006-09 15

Year Anna Gandhiji Namnadu Silambu Kamala Sanjay Anjugam

97-98 0.20 - 1.43 0.93 0.61 0.46 1.51

98-99 0.08 - 2.69 0.39 0.86 0.35 1.23

99-00 0.02 - 2.01 1.63 0.70 0.37 1.07

00-01 4.43 - 2.31 0.82 0.83 0.40 1.17

01-02 0.34 0.69 5.90 2.21 0.78 0.49 0.93

02-03 0.56 0.72 3.01 1.94 0.55 0.40 1.25

03-04 0.03 0.76 2.98 2.50 0.51 0.53 2.14

04-05 0.05 0.80 1.95 2.32 0.53 0.69 0.84

05-06 0.33 0.82 1.97 1.00 0.49 0.81 1.68