Impact of financial performance indicators (fpis) on profitability

Most of the organizations use financial data to allocate resources to their various departments. Hence to assess the financial health of an organization, analyzing the financial data and financial performance indicators become crucial. This paper deals with the impact of financial performance indicators on profitability of a textile industry. Indian textile industry is the second largest employment generating sector, next to agricultural sector. Financial analysts often assess firm’s production and productivity performance, profitability performance, liquidity performance, working capital performance, fixed assets performance, fund flow performance and social performance. The financial performance analysis identifies the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and profit and loss account. Thus the present paper is of crucial importance to measure the firm’s liquidity, profitability and other indicators that ensures the business is conducted in a rational and normal way and enough returns to the shareholders to maintain at least its market value. In this context researcher has undertaken an analysis of financial performance of garments companies to understand how management of finance plays a crucial role in the growth. The present study covers two garments sectors. The study has been undertaken for the period of 3 months from Jan2014 to March2014. In order to analyze financial performance in terms of liquidity, solvency, profitability and financial efficiency, various accounting ratios have been used. Statistical measures linear multiple regression analysis and test of hypothesis-t test have been used.