SRM UNIVERSITY

KATTANKULATHUR CAMPUS FACULTY OF ENGINEERING AND TECHNOLOGY

INTERNSHIP REPORT DONE IN THE KERALA MINERALS AND METALS LIMITED (A GOVERNMENT OF KERALA UNDERTAKING) SANKARAMANGALAM, CHAVARA, KOLLAM KERALA, INDIA - 691 583,

ORKING CAPITAL MANAGEMENT

F!" #$% &'"#(') *+)*(),%-# !* #$% "%.+("%,%-#/ *!" #$% 0%1"%% !* MASTER OF 2USINESS ADMINISTRATION 2Y RAHUL RA3 R 3511415141 U-0%" #$% GUIDENCE !* M"6 V SURESH

ACKNO

LEDGMENT

First of all I thank Almighty God who has been with me throughout this endeavour and helped me in completing this project successfully. I have great pleasure in e pressing my sincere and grateful thanks to my internal guide professor !.suresh for continuous guidance throughout this project. I owe my sincere and grateful thanks to the e ternal guide of "##$% &havara% #rs '.!. prasanna (Accounts officer) for guiding me through this project work. $ast but not the least I thank all my faculty members% all employees and managers of "##$% my parents and my friends who have been a source of inspiration and also helped me throughout this project.

CHAPTER 17 INTRODUCTION

STATEMENT OF THE PRO2LEM A business is an economic activity so it needs to flourish% means e pand. For e panding the business it needs money% means sufficient amount of fund. A business needs funds not only for flourishing but also for meeting its day to day e penses. Funds are invested in the current asset for meeting the day to day needs is called 8!"9(-1 :'&(#') !" /$!"# #%", :'&(#') . *orking capital+ current asset, current liabilities. 'he need for working capital arises because of the time gap between the production and realisation of cash from sales. #anagement of working capital is concerned with the problem that arises in attempting to manage current assets% current liabilities and their relationship. *orking capital management has a vital important in every business towards the profitability% li-uidity% structural strength% smooth working of the business enterprise% etc. if a business need to run smoothly it need sufficient amount of working capital. .o business can run without sufficient amount of working capital. 'hus this study concentrate on the e amining of the working capital position of "erala #inerals / #etals $td% &havara% "ollam% "erala% in order to satisfy its short term objectives and also to study how efficiently firm manages its working capital

O23ECTIVES OF THE STUDY 'o study about the current position of working capital of "##$ 'o analyse the li-uidity position of the firm 'o study about the payment and collection period of "##$ 'o get the knowledge about the functional and managerial aspects of "##$. 'o get the practical knowledge of "##$. 'o brief study of "##$

SCOPE OF THE STUDY 'he study is only conducted in "erala #inerals / #etals% &havara% "ollam% "erala regarding the working capital management. 'he in formation is e tract from the financial year from 0112,13 to 0144,40. 5o the project is only related to finance department . 'he scope of the study is use financials tools like ratios % balance sheet to analyse the working capital position of the company based on that% analysis the finding and suggestions are given.

RESEARCH METHODOLOGY In simple words research refers to a search for knowledge. In other words research is scientific and systematic search for information on a specific topic. And research methodology is the way which we conduct research to gather knowledge. In other words research methodology is a way to systematically solve the research problem. In this study of working capital management of "erala #inerals and #etals $td I have used the 6istorical research design% because all my study on the past data of "##$% that is the secondary data% that includes the financial reports (balance sheet profit / loss account) for the past 7 years.

LIMITATIONS OF THE STUDY 'he study is mainly based upon secondary data provided in the financial statements 'he main limitation of the study is the limited time. 'he time of the study is limited to 3 weeks to do the project are not sufficient to do the study. 'he annual report and A8& of the company were giving limited information regarding the performance of the study. 'he study has been restricted to span of the 7 years only. 'he workers were busy with their work and had little time available for an interview or conversation. 'his study is based on the historical data and information provided in the annual reports therefore it may not be a future indicator.

INDUSTRY PROFILE

'he world is rapidly shrinking with the advent of communication% transportation and financial flows product development in one Industry are finding enthusiastic acceptance in other industry. As the Industry% which is manufacturing Industry% product definitely depends on the end user Industries. Industry plays a significant sole in every firm. Industrial development has been given on greater importance in Indian planning on account of Industrial development. Industry is necessary in productivity% employment% national Income and rate of capital formation in India witnessed large scale diversification India. .ow India occupies tenth place among the industrially developed countries in the world.

TITANIUM DIO;IDE INDUSTRY IN INDIA 'he Indian reserves of illmenite and rutile is e pected to the around 91 million tones. 'he most important sources of illmenite in India are beach sands of south. #aharashtra% :rissa% 'amilnadu and in "erala is around ;7 million tones. 'here are about 01 million tonnes reserves in :rissa. 'his information threw light in to the possibilities of new manufactures and competitions in 'itanium <io ide pigment Industry in the Indian #arket with the increasing demand for the paints% rubber% plastic and printing inks etc. 'he arrival of new manufactures will be more in the near future. 'his will ultimately results in tight competition.

CERTIFICATIONS OF KMML 1) ISO 955174555 C%"#(*(:'#% *"!, 2+"%'+ V%"(#'/ <+')(#= I-#%"-'#(!-') (2V<I) and holes certification of U-(#%0 K(-10!, A::"%0(#'#(!-/ S%">(:% (UKAS). 'he =nited "ingdom Accreditation 5ervice is the sole national accreditation body recogni>ed by government to assess% against internationally agreed standards of an organi>ations that provide certification for testing% inspection and calibration services. and accredits certification from ANSI-AS< N'#(!-') A::"%0(#'#(!- 2!'"0 (ANA2) is the =.5. accreditation body for management systems% A.A? is a member of the International Accreditation Forum and a signatory of the IAF #ultilateral &ooperative Arrangements (#&A) % A.A? ensuring accredited certificates which are recogni>ed nationally and internationally for good -uality management system. 4) ISO 1?5517455? C%"#(*(:'#% *"!, 2+"%'+ VERITAS <+')(#= I-#%"-'#(!-') (2V<I) and accredits certification of N'#(!-') A::"%0(#'#(!- 2!'"0 *!" C%"#(*(:'#(!2!0(%/ (NA2C2)6 .A?&? is a member of International Accreditation Forum

(IAF) having #ultilateral @ecognition Arrangement (#$A) to certify I5: 4;114 , Anvironmental #anagement 5ystem. and holes certification of U-(#%0 K(-10!, A::"%0(#'#(!-/ S%">(:% (UKAS). 'he =nited "ingdom Accreditation 5ervice is the sole national accreditation body recogni>ed by government to assess% against internationally agreed standards of an organi>ations that provide certification for testing% inspection and calibration services. 3)OHSAS 1855171999 C%"#(*(:'#% *"!, 2+"%'+ VERITAS <+')(#= I-#%"-'#(!-') (2V<I) 'he O::+&'#(!-') H%')#$ '-0 S'*%#= A//%//,%-# S%"(%/ (OHSAS) specification gives re-uirements for an occupational health and safety (:6/5) management system% to enable an organi>ation to control its :6/5 risks and improve its performance.

N'#(!-') '-0 I-#%"-'#(!-') '8'"0/ :!-*%""%0 !- KMML .ational award for @ / < efforts industry for the best research and

development efforts by department of 5cience and 'echnology(4BB0) FA&' #"" .AI@ #emorial productivity Award 4BBC,B;%B;,B7 for the best productivity performance by "erala 5tate Droductivity &ouncil Anergy &onservation Award 4BBBin appreciation for outstanding

achievements towards energy conservation and management in the category of large scale industries FA&' #"" .AI@ #emorial productivity Award 0114,10 for second in productivity performance by "erala 5tate Droductivity &ouncil 0114 FA&' #"" .AI@ memorial productivity Award 4BBB,0111%0111,14 for first in productivity performance($arge :rgani>ation) by Droductivity &ouncil Anergy &onservation Award 0114 for conservation and management in the category of large scale industries by Anergy management centre "erala 0114 "erala 5tate

 Award for @evenue performance 011C for the best performance by central e cise% customs "ollam <ivision 011C #arketing campaign Award 011C for best marketing campaign by Asia pacific coating 011C

International gold medal for the Euality of the product and efficiency of the company by Forum "erala $umpur Global @ating =" 011C 5pecial A port Award for e port performance by chemicals and Allied A port Dromotion &ouncil (&ADAFI$) sponsored by ministry of &ommerce Government of India 0110,1C

EMPLOYEE STRENGTH 'here are about 041 officers and 4400 workmen in "##$. 'he total strength is 4CC0. FUTURE PLAN 'he company is studying the possibility of the productivity of more economic titanium metal sheets. @ecently% researchers established that the Aeronautic Industry could use 'itanium metal instead of Aluminium alloy or <uraluminium coverings. 'he company is in the process of e pansion and the target e pected is appro imately as shown be4owG 4. A new #ineral 5eparation Dlant of capacity 0 lakhs tones per year illmenite 0. C. ;. A new 5ynthetic @utile Dlant of capacity 4.C lakhs tones per year A new 411 tones per day : ygen Dlant &apacity enhancement of 'i:0 pigment plant 4 lakh tones per year

POLLUTION CONTROL "##$ has elaborate Dollution &ontrol system with respect to both water and air pollution. 'he waste (acid) from illmenite ?eneficiation Dlant is sent to Affluent .eutrali>ation Dlant (A.D). A.D consist of a Drimary .eutrali>ation 'ank (D.')

and 5econdary .eutrali>ation 'ank (5.') where it is treated with caustic soda solution. 'he totally neutrali>ed slurry from the 5.' is pumped to 71111mC capacity setting pond provided with impervious clay% polythene lining at bottom side where the solids are settled. 'he dye solution from setting pond of 07111mC capacity where the balance solids are allowed to settle. 'hen clean water from the polishing pond meeting all specification stipulated by Dollution &ontrol ?oard authorities is pumped in to the Arabian 5ea. All gases from &hlorination% : idation% Illmenite ?eneficiation Dlant and Acid @egeneration Dlant are passed through scrubbed water or caustic solution to absorb the to ic gases diluted with enough fresh air and only let out to the atmosphere through tall slacks.

MA3OR COMPETITORS 'he company has a monopolistic nature in 'i:0 pigment industry in India. 'he company has some competitors in the world market. 'he main competitors in the world market areG <upont (=5A) Ishihara (Hapan) 6oite (=5A) #illennium (Germany) 6enduk (5eoul% "orea) Flectha 'itanium Droducts (.ew Iealand) 'ofins (.etherlands)

COMPANY PROFILE

"erala is blessed with rich and e tensive mineral deposits. 'his deposits stretch along the sea cost between .eendakara and "ayamkulam% a track generally known as &havara coast. 'his deposits stretch up to a distance of 43 "m along the coastal strip and having a depth of 3m. 'he dark sands of 'ravancore coast are rich in mineral deposits as #ona>ite% I4lmenite% @utile% Iircon etc. 'he company is located at 5ankaramangalam near &havara% "ollam a coastal town 37 km north of 'hiruvananthapuram. "##$ is situated on the side of .6,;2 to about 037 acres in area. "##$ has a worldwide reputation% a socially responsible company with an eco,friendly image. 'he company derived strength from its dedicated manpower and customer organi>ation. "##$ is fully owned "erala Government Anterprise. 'here are about 0111 employees in the company at present that helps "##$ to grow.

H(/#!"= !* KMML In the earliest periods of 4Bth century% precisely in 4B1B a German scientist named #r. 5chaumberg happened to discover traces of I4lmanite and mona>ite in the black beach sands of &havara coast in the "erala state of India. 5chaumberg who was then working for an Anglish firm got the sand e ported to Angland. At that time there was great demand for mona>ite because of its wide application in the mantle making of gas lights. &ontinued efforts of German led to the discovery of other minerals such as @utile% Iircon% 5ilmanite etc in large volume in the sand of &havara coast between .eendakara and "ayamkulam.. 'he discovery of mona>ite was -uite accidental. Aventhough the German laid foundation for a mineral

separation plant at &havara its activities were curtained by *orld *ar 0.

'he first full fledged mineral separation plant in &havara was established by a private entrepreneur in 4BC0 as F. F. Dereira and 5ons ('ravancore) Dvt. $td. 'hey were involved in mining and separating mineral sands into various constituents like Illmanite% #ona>ite% @utile% Iircon% $euco ene etc. <uring 4B79 this concern was taken over by the state government and was placed under the control of its industries department. 'he unit was converted as a limited company with effect from 4.;.4B20 in the name of J'he "erala #inerals and #etals $tdJ. Initially the company had only one unit known as K#ineral 5eparation DlantK. In 4B2; the company received intent for the production of 'itanium dio ide ('i10) pigment using &hloride process. In 4B29 "##$ registered its 0nd unit known as 'itanium dio ide Digment Dlant. Its construction started only in 4B2B and total capital cost was @s.4;; &rores. 'he plant was commissioned in <ecember 4B3;. "##$ became the first and only Integrated 'itanium dio ide plant in the world. Aven though "##$ was commissioned in 4B3; it was not able to operate efficiently due to technical problems. <ue to these problems the company has to suffer an accumulated loss of more than the capital investment over a period of 3 years. In the above circumstances it was in 4BB4 that the entire personnel of "##$ from top management to down to the lowest workers started to think individually and collectively about the re-uirement of a K'urn AroundK. A strategy was planed and implemented with the wholehearted support of the workforce during the period 4BB4,4BBC.4t started to yield results and the &ompany attained the break even level by 4BBC.From 4BBC,4BB; onwards% the company started to make profits and wiped out the entire accumulated loss within a few years and repaid the long term loans. 'hereafter% it is the story of success and growth. INCORPORATION OF KERALA MINERALS AND METALS LIMITED "erala is a land enriched with heavy mineral deposit. 'his richness evolved the formation of the company "erala #inerals and #etals $imited ("##$). It was all way back in 4B1B% when a German &hemist namely

<r. 5chaumberg noticed some brown sand particles sticking with coir e ported from India. 6e reali>ed that the particles present were #ona>ite leading to the discovery of vast deposits of #ona>ite in the black beach sands of #anavalakuriclll in the east 'ravancore state. $ate the Geological 5urvey of India established the occurrence of #ona>ite and other earth minerals like limonite% @utile% $euco ene% 5illimanite and Iircon.

#iss. F F Dereira / 5ons ('ravancore) Drivate $imited were the pioneers who established the first full fledged #ineral 5eparation industry in &havara area way back in 4BC0 using the dry separation process. Gradually the company found itself in financial crisis and in Hanuary 4B79% the "erala 5tate Government took over the company and continued under name F .F.D #inerals in 4B20 the Government renamed the name of the company as. 'he "erala #inerals and #etals $imited ("##$). At present "##$ consists of two units% the #ineral 5eparation Dlant and the 'itanium <io ide Digment Dlant.

TECHNICAL COLLA2ORATION 'he "##$ entered in to technical collaboration with three multinational corporations #8s. "ers #& Gee &hemical &orporation of =5A. #8s. ?enedict &orporation of America. #8s. *oodall <ukham of =" respectively for the above. 'he #etallurgical of Angineering &onsultants India $imited (#A&:.) a Government of India =ndertaking did the detailed engineering

REVIE

OF LITERATURE

ORKING CAPITAL MANAGEMANT THEORY MEANING AND DEFINATION7

A part from investment in fi ed assets% every enterprise has to arrange for ade-uate funds for meeting day (operations) e penses to kept it a concern. 5o originally speaking working capital refers to the flow funds % necessary for working of enterprise however these is no agreement among the financial e perts regarding the meaning of working capital. 'hey define working capital in the following ways.

ACCORDING TO MEAD MALLOT7 *orking capital means current assets.

ACCORDING TO

ESTON AND 2RIGHAM7

*orking capital refers to a firm investment in short term assets% cash% short term securities% accounts receivable and inventories.

CONCEPT OF

ORKING CAPITAL7-

'here are 0 concepts of working capital G gross and net. 'he term gross working capital also referred to as a working capital% means the total current assets. 'he term net working capital can be defined in 0 ways. 'he most common definition of net working capital is the different between current assets and current liabilities Alternate definition of net working capital is that portion of current assets which is financed with long term funds.

'he task of the financial manager in managing working capital efficiency is to ensure sufficient li-uidity in the operation of the enterprise. 'he li-uidity of a business firm is measured by its ability to satisfy short term obligations as they become due. 'he three basics measures of a firmLs overall li-uidity are 'he acid test ratio 'he net working capital 'he current ratio

In brief % they are useful in inter firm comparison of li-uidity . net working capital as a measure of li-uidity% is not very useful for comparing the performance of different firms% but it is -uite useful for internal control. 'he net working capital helps in comparing the same firm over time. NEED FOR ORKING CAPITAL7-

In order earn sufficient profits% a firm has to depend on its sales activities apart from others. *e know that sales are not analysis converted into cash immediately. i.e.% there is a time lack between the sale of a product and the reali>ation of cash so% an ade-uate amount of working capital is re-uired by a firm in the form of different current assets for its activities to continue un interrupted and to tackle the problem that may arise because of the time lay. Dractically this happens simply owing to the operating cycle(or) cash cycle% involves the following steps. &onversion of cash into inventory. &onversion of inventory into receivables. &onversion of receivables into cash.

NATURE OF

ORKING CAPITAL7-

'he term working capital refers to current assets which may be defined as

'hose which are convertible in to cash or e-uivalents with in a period of one year and

'hose which are re-uired to meet day operations.

'his fi ed assets as well as current assets% both re-uired investment of funds. 5o% the management of working capital and of fi ed assets% apparently seen to involve same type of consideration but it is not so. 'he management of capital involves different concepts and methodology than the techni-ues used in fi ed assets management. 'he reason for this different is obvious. 'he very basics of fi ed assets decision process (i.e the capital budgeting ) and the working capital decision process are different. 'he fi ed assets involve long period perspective and therefore% the concept of time value of money is applied where as in working capital the time hori>on is limited% in general% to one year only and the time value of money concept is not considered. 'he fi ed assets the long term profitability of the while the current assets affect the short term li-uidity position. #anaging current assets may re-uire more attention than managing fi ed assets. 'he financial manager must. 'herefore continuously monitor the assets to ensure that the desire levels are being maintained. 5ince the amount of money invested in current assets can change rapidly. 5o does the financing re-uired. #ismanagement of current assets can be costly. 'oo large an investment in current means tying up funds that can be productively used else where (or it means added interest cost if the firm has borrowed funds to finance the investment in current assets). A cess investment may also e pose the firm to undue risk e.g. In case% the inventory cannot be sold or the receivable cannot be collected. :n the other hand% too little investment also can be e pensive for e G, insufficient inventory may mean that sales are lost as the goods which a customer wants are not available. 'he results is that financial managers spend a large chunk of their time managing the current assets because level of these assets changes -uickly and a lack of attention paid to them may result in appreciably lower profits for firm. 5o% in the working capital management% a financial manager is faced with decisions involving some consideration as followsG

*hat should be the total investment in working capital of the firmM

*hat should be the level of individual current assetsM

*hat should be the relative proportion of different sources to financial the working capital re-uirementsM

'hus the working capital management may be defined as the management of firmLs sources and uses of working capital in order to ma imi>e the wealth of the share holders. 'he proper working capital management re-uires both the medium term planning (say up to C years) and the immediate to changes arising due to fluctuation in operating levels of the firm. THE OPERTING CYCLE AND THE ORKING CAPITAL NEEDS7-

'he working capital re-uirement of a firm depends% to a great e tent up on the operating cycle of the firm. 'he operating cycle may defined as the duration from the procurement of goods or raw materials and ending with sales reali>ation. 'he length and nature of the operating cycle may differ from one firm to another depending up or the si>e and nature of the firm. In a treading concern there is a serious of activities starting from procurement of goods ending with reali>ation of sales revenue. 5imilarly in case manufacturing concern . 'his serious start form procurement of raw material and ending with the sales reali>ation of finished foods. In both the cases however there is a time gap between the happening of the first event and the happening of last event . this time gap is called operating cycle. 'hus the operating cycle of a firm consists of time re-uired for the completion of chronological se-uence of some or all of the following. Drocurement of raw material and services

&onversion of raw material in the work in progress.

&onversion of work in progress in to finished goods.

5ales of finished goods. (cash or credit).

&onversion of receivable into cash.

'he firm is after re-uired to e tend credit facilities to customers. 'he finished goods must be kept in store to take care of the orders and minimum cash balance must be maintained. It must also have minimum of raw material to have smooth and uninterrupted production process. 5o in order to have a proper and smooth running of the business activities% the firm must make investment in all these current assets. 'his re-uirement of funds depend up on the operating cycle period of the firm and also denoted as the working capital needs of the firm.

OPERATING CYCLE PERIOD7'he length or time duration of the operating cycle of any firm can be defined as the sum of itLs inventory conversion period and the receivable conversion period. (4)INVENTORY CONVERSION PERIOD7It is the time re-uired for the conversion of raw material in to finished goods sales. In a manufacturing concern the I&D is consisting of raw materials conversion period(@#&D)% work in progress conversion period (*D&D)% and the finished goods conversion period (FG&D). 'he @#&D refers to the period for which the raw material is generally kept in store before is issued to the production department. 'he *D&D refers to the period for which the raw material remains in the production process before it is taken out as a finished unit. 'he FG&D refers to the period for which finished units remain in stores before being sold to the customers. RECEIVA2LES CONVERSION PERIOD7 (RCP)

It is the time re-uired to convert the credit sales in to cash reali>ation. It refers to the period between the occurrence of credit sales and collection of debtors.

'he total of I&D and @&D is also known as total operating cycle period (':&D). 'he firm might be getting some credit facilities from the supplier of raw material wag earners etc. this period for which the payment it these parties are deferred or delayed is known as deferral period. 'he net operating cycle of a firm is arrived at by deducting the deferral period from total operating cycle period. 'hus .:& + ':&D,< + I&DN@&D, <D.

OPERATING CYCLE 'he duration of time re-uired for completing the following se-uences of events in case of manufacturing firm s called the operating cycle. &onversion of cash into raw material. &onversion of raw material into work in progress. &onversion of work in progress into finished goods. &onversion of finished goods into debtors / bills receivable through sale. &onversion of debtors / bills receivable into cash.

&A56

A&&:=.'5 @A&IA!A?$A

@A* #A'A@IA$

FI.I56A< G::<5

*:@" D@:G@A55

I.

'he duration of the operating cycle for the purpose of estimating working capital re-uirement is e-uivalent to the sum of duration of each of these tables less the credit period allowed by the suppliers of the firm.

TYPES OF NET

ORKING CAPITAL ORKING CAPITAL7

'he net working capital is the different between current assets and current liabilities. 'he concept of net working capital enables a firm to determine how much amount is left for operational re-uirements. GROSS ORKING CAPITAL7

Gross working capital is the amount of funds invested in the various components of current assets. PERMANENT ORKING CAPITAL7

Dermanent working capital is the minimum amount of current assets which is needed to conduct a business even during the dullest season of the year. 'he amount varies from year to year depending up on the growth of the company and stage of business cycle in which it operates. It is the amount of funds re-uired to produce goods and services which are necessary to satisfy demand at a particular point. TEMPORARY OR VARIA2LE ORKING CAPITAL7

It is represents the additional assets which are re-uired at different times during the operating year additional inventory% e tra cash etc.% seasonal working capital is the additional amount of current assets particularly cash% receivables and inventory which is re-uired during the more active business seasons of the year.

2ALANCE SHEET

ORKING CAPITAL7

'he balance sheet working capital is one which calculated from the items appearing in the balance sheet. Gross working capital which is represented by the e cess of current assets% and net working capital which is represented by the e cess of current assets over current liabilities are e amples of balance sheet working capital.

CASH

ORKING CAPITAL7

&ash working capital is one which is calculated from the appearing in the profit and loss account. It shows the real flow of money or value at a particular time and is considered to be the most realistic approach in working capital management.

It is the basis of the operating cycle concept which has assumed a great importance in financial management in recent years. 'he reason is the working capital indicates the ade-uacy of the cash flow. *hich is an essential pre,re-uisite of a business. NEGATIVE ORKING CAPITAL7

.umbers working capital emerges when current liabilities e ceed current assets. 5uch a situation is not absolutely theoretical% and occurs when a firm is nearing a crisis of some magnitude. DETERMINANTS OF ORKING CAPITAL7-

.umbers of rules are formulated to determine the working capital re-uirement of the firm. a large number of factors influence the working capital needs of the firm. All these factors have different importance% also the importance of the factor change for a firm over time. 'herefore analysis of the relevant factor should be made in order to determine the total investment in working capital re-uirements of the firm.

.ature and si>e of business

5easonality of operation

Droduction policy

#arketing conditions

?usiness cycle fluctuation

&redit policy

&onditions of supply

*orking capital policy

&urrent assets in relation to sales

NATURE OF 2USINESS7'he working capital re-uirement of a firm is closing related to the nature of its business. A service firm like an electricity undertaking or a transport corporation% which has short operating cycle and sells on cash basis% has modest working capital re-uirement. :n the other hand manufacturing concern like machine tools units which has long operating cycle and which sells largely on credit had varied substantial working capital management.

SEASONALITY OF OPERATION7Firms which have market seasonally in their operation usually have highly function working capital re-uirement. For a sugar industry the raw material i.e.% sugar cane is available in particular season only. 5o sugar industry mainly depends upon seasonality of operations. PRODUCTION POLICY A firm marked by pronounced seasonal fluctuations in its sales many pursue a production policy which many reduce the shape variation is working capital re-uirement.

MARKETING CONDITIONS7 In view of competitive conditions prevailing in the firm may have to offer liberal credit terms% to customs resulting in higher debtors% even large inventories

many be maintain to serve an order as and when received. 'hus the working capital tends to be high as a result of investors in inventions / receivable. 2USINESS CYCLE FLUCTUATIONS7<ifferent phases of business cycle i.e boom% recession% recovery etc% also effect working capital re-uirement. In case of born conditions inflationary pressure appear and business activities e pand. As a result the overall need for cash % inventories etc.% increase resulting more and more funds blocked in these current assets. In case of recession period. 6ow ever% there is usually dullness in business activities and there will be opposite effect on the level of working capital. CREDIT POLICY7'he credit policy means the totality of terms and conditions on which goods are sold and purchased. At firm has interact with 0 types of credit policies at a time one% the credit policy of the supplier of raw material% goods etc% and two the credit policy relating to credit which it e tends to its customer. In both the cases% however%the firm while deciding its credit policy has to take care of credit policy of the market for e ample affirm might be purchasing goods and services on credit but selling foods only for cash the working capital re-uirement of this firm will be lower than that of a firm which is purchasing cash% but has to sell on credit basis.

CONDITIONS OF SUPPLY7If the supply is prompt and ade-uate the firm can manage with small inventory% if the supply is unpredicted and service then the firm has to ensure continuity of production. ORKING CAPITAL POLICY7'wo important issue in formulation the working capital policy areG *hat should be the ratio of current assets to sales.

*hat should be the ratio of short term financing to long,term financing.

CURRENT ASSETS IN RELATION TO SALES7 It usually does the investment in current assets cannot be specified une-ually. In sales of uncertainty the outlook on current assets would consist of base component meant to meet normal re-uirement and safety component mean to copy with unusual demands and re-uirements. 'he safety assets policy of the firm . If the firm pursues a very conservation current assets policy is should carry a high level of current assets in relation to sales. If the adopts a moderate current assets policy it would carry a moderate level of current assets in relation to assets. If the term follows highly aggressive current assets policy. It would carry a low level of current assets in relation of sales. A conservative current assets policy trends to reduce risk. 'he surplus current assets under the policy enable firm to copy rather easily with variations in sales. 7;/77 An aggressive current assets policy seeking to minimi>e the investment in current assets e poses the firm to greater risk.

RATIO OF SHORT TERM FINANCING TO LONG TERM FINANCING7*hat would be the relative proportions of short,term bank financing on one hand and long,term sources of finance and the other hand. 'he board policy alternatives in the respect areG A conservative current assets financing policy. An aggressive current assets financing policy. A conservative current assets financing policy refills less on short,term bank financing and more long on

term sources like debentures. An aggressive current financing policy relies heavily on short,term bank finance and seek to reduce dependants on long O term financing. CHOOSING THE ORKING CAPITAL POLICY7-

'he overall working capital policy adopted by the firm may broadlyG, &onservative #oderate Aggressive

CONSERVATIVE7 A conservative overall working capital policy means that the firm chooses conservative current assets policy along with conservative current assets financing policy. MODERATE7 A moderate overall working capital policy reflects a combination of a conservative current assets policy and aggressive current assets financing policy or a combination of an aggressive current assets policy and conservative current assets financing policy.

AGGRESSIVE7 An aggressive overall working capital consists of an aggressive current assets policy and aggressive current assets financing policy. FINANCING OF ORKING CAPITAL7-

.ormally% financing arrangements are planned for a combination of needs including capital e penditure and working capital investment the assessment of

sources of funds from a package and rarely will be possible to concept upto a particular shows to a specific application or use at the same time financing manager does make an assessment of the investment needs as well as current assets and decider an a proper mi of long and short term funds. 'aking note of the internal generation of funds for 79 /72 the period in -uestion be decisions on the e tent to which the firm would resort to issue of share or long short,term borrowing to mobile the re-uired sources. 'ypically the current assets of a firm are supported by the combination of long term and short term sources of financing long term sources of finance are e-uity% preference term loans and debentures which primarily are fi ed assets and secondarily provide working capital margin.

*here the commitments are certain but cash flows are not clearly predictable% it would wise to cut down drastically the number and e tent of short term debts to manageable levels and prefer longer maturity schedules for debts. 5hort term debts can take care of the seasonal needs of the organi>ation even here to take care of vagaries in cash flow% a past of the funds re-uired may be obtained from sources with longer maturity schedules of the debts. 'hus usually permanent and long,term finance is used to finance the permanent re-uirements or fi ed assets and the net permanent current assets and a apart of the reasonable short term needs. 'he important sources of finance which more or less e clusively support current assets areG 'rade credit *orking capital advances by commercial bank. Dublic corporate deposits Inter corporate deposits 5hort term loans from financial institutions .

@ights debentures for working capital. Amerging sources commercial paper and factoring.

:f all the above the most significant sources of working capital finance are trade credit and bank borrowings% after trade credit bank borrowing are the ne t important sources of financing working capital re-uirements of firms in India. 'anton committee has suggested guidelines for the ratio allocation and optimum use of the bank credit for the working capital re-uirement. CHANGES IN ORKING CAPITAL7-

'he working capital of a concern is subject to changes due to several reasons. As we know that the gross working capital is e-ual to current assets. ?ut net working capital we mean the e cess of current assets over current liabilities. 'he net working capital is therefore% affected by the following transactions. *hich increase the current but not the current liabilitiesM *hich decrease the current assets and current liabilities both increase in the same direction by a transaction it does not bring any change in the net working capital of the concern. :nly the total of current assets and current liabilities increase and decrease. REASONS FOR CHANGES IN ORKING CAPITAL7-

&hanges in the level of sales andP or operating e penses. Dolicy changes. &hanges in the technology.

STATEMENT OF CHANGES IN

ORKING CAPITAL7-

=ntil now any increase decrease in any individual item of current assets and current liabilities was shown in the funds flow statement. ?ut now a statement is

prepared to deficit the changes in working capital. 'he net increase or decrease is then carried forward to the funds flow statement. 'he statement of working capital is prepared with the help of current assets and current liabilities of the two periods the figures of 0 periods are compared. If there is an increase in the amount of any current liabilities in the current year in comparison to that in that in the previous year% it will result to an increase in the working capital. 5imilarly% a decrease in the amount of any current assets or an increase in amount of current liabilities in the current year in comparison to that in the previous year and total decrease in the end is compared and the different of total increase and total decrease shows net increase or decrease in the working capital. .et increase in working capital is an application of funds and net decrease in working capital in the source of funds. A form of statement is shown below.

RATIO ANALYSIS

5everal ratios calculated from the accounting date% can be grouped into various classes according to financial activity or function to be evaluated. As stated earlier% the parties interested in financial analysis are short and short and long,term creditors% owners and management. 5hort,term creditors main interest is in li-uidity position or the short, term solvency of the firm. $ong,term creditors% on the other hand% and more interested in the long,term solvency and profitability of the firm. 5imilarly% owners concentrate on the firmLs profitability and financial conditions. #anagement is interested on in evaluating every aspect of the firmLs performance. 'hey have to protect the interests of all parties and see that the firm grows profitably. In view of the re-uirements of the various users of ratio% we may classify them into the following four important categories. TYPES OF RATIO7 $i-uidity ratios $everage ratios Activity ratios Drofitability ratios

L(.+(0(#= "'#(!7-

'he li-uidity refers to the maintenance of cash% bank balance and those assets% which are easily convertible into cash in order to meet the liabilities as and when arising. 5o% the ratios study the firmLs short,term solvency and its ability to pay off the liabilities. C+""%-# "'#(!7&urrent ratio is the ratio of current and current liabilities. &urrent assets are assets which can be converted into cash within one year and include cash in hand and at bank% bills receivable% net sundry debtors% stock of raw materials% finished goods and work in progress% prepaid e penses% outstanding and occurred incomes% and short term or temporary investments. &urrent liabilities are liabilities% which are to be repaid with in a period of 4 year and include bills payable% sundry creditors% bank over drafts% and outstanding e penses% Income received in advanced% proposed dividend% provision for ta ation% unclaimed dividends and short term loans and advances repayable within 4 year Current assets Current Ratio= ----------------------------------------------Current liabilities A current ratio 0G4 is considered as idealG if a business has an undertaking with its bankers to meet its working capital re-uirements short notices% a current ratio of is ade-uate. .+(:9 R'#(!7<+(:9 '//%#/ Quick ratio = -------------------------------------------------Quick liabilities A -uick ratio of 4 is considered as ideal. A -uick ratio of less than 4 is indicated of inade-uate li-uidity of the business. A very high ratio is also not available as funds can be profitability employed.

A@/!)+#% )(.+(0 "'#(!7It is ratio of absolute li-uid ratio assets to -uick liabilities. 6owever% for calculation purposes% it is taken as ratio of li-uid assets of current liabilities. 'rade investment or marketable securities are e-uivalent of cash therefore% they may be included in the computation of absolute li-uid ratio. Absolute liquid ratio

Absolute quick ratio =

------------------------------------------------Current liabilities

Leverage ratios:

leverage ratio indicate the relative interest of owners and creditors in a business. It shows the proportions of debt and e-uity in financing the firmLs assets the long, term solvency of a firm can be e amined by using leverage ratio. 'he long,term creditors like debenture holders% financial institutions etc%. are more concerned with firms long Oterm financial strength. 'here are two aspects of the long,term solvency of a firm Ability to repay the principal when due% and @egular payment of the interest they leverage ratio are calculated to measure the financial rest and firms abilities of using debt.

TOTAL DE2T RATIO7'otal debt will include short and long,term borrowing from financial institution debentures bonds. &apital employed will include total debt and net worth. 'he firm may be interested in knowing the proportion of the interest bearing debt in the capital structure by calculating total debt ratio. A highly debt burdened firm difficulty in raising funds from creditors and owners in future. &reditors treat the ownerLs e-uities as a margin of safety. Total Debt Total Ratio = ---------------------------------------------C'&(#') E,&)!=%0

DE2T -E<UITY RATIO7-

It reflects the relative claims of creditors and shareholders against the assets of the business. <ebt% usually% refers to long,term liabilities. A-uity include preference share capital and reserves. 'he relationship describing the lenders contribution for each refers of the ownerLs contribution is called debt e-uity ratio.

A high ratio shows a large share of financing by the creditors relative to the ownerLs and therefore% large claim against the assets of the firm. A low ratio implies a smaller claim of creditors. 'he e-uity indicates the margin of satisfy to the creditors so% there is no doubt the ?eth high and low debt e-uity ratios are not desirable. *hat is needed is a ratio% which strikes a proper balance between debt and e-uity.

Total Debt Debt-Equity = ------------------------------------N%# 8!"#$ 5ome financial e perts opine that debt should indicate current liabilities also. 6owever% this is not a popular practice. In case of preference share capital% it is treated as a part of shareholders funds% but if the preference shares are redeemable% they are taken as a part of long,term debt shareholder funds are also known as proprietor funds and it indicates items e-uity share capital% reserve% and surplus. A debt e-uity ratio of CG4 is considered ideal.

PROPRIETORY RATIO7-

It e presses the relation between net worth and total assets. Net ort! "ro#erty ratio= ---------------------------------------Total assets .et worth+ e-uity share capital N preference share capital N reserves O fictitious assets. 'otal assets+ fi ed assets N current assets (e cluding fictitious assets) @eserve earmarked specifically for a particular purpose should not be included in calculation of net worth. A high proprietorLs ratio is indicative of strong financial position of the business. 'he higher the ratio% the better it is.

FI;ED ASSETS RATIO7$i%ed assets $i%ed Assets = -----------------------------------------Ca#ital e&#loyed &apital employed O e-uity share capital N preference share capital N reserves N long term liabilities O fictitious assets. 'his ratio indicates the mode of financing the fi ed assets. A financially well, managed company will have its fi ed assets financed by long term funds. 'herefore% the fi ed assets ratio should never be more than A ratio of 1.92 is considered ideal

INTEREST COVERAGE RATIOG 'his interest coverage ratio is computed by dividing earnings before interests and ta ed by interest charges. Debt 'nterest coverage ratio = --------------------'nterest 'his interest coverage ratio shows the number of times the interest charges are covered by funds that are or demurely available for their payment. A high ratio is desirable but too high ratio indicates that the firm is very conservative in using debt and that is not using credit to the debt advantage of shareholder. A lower ratio indicates e cessive use of debt or inefficiency operations. 'he firm should make efforts to improve the operating efficiency or to retire debt to have a comfortable coverage ratio. iii) ACTIVITY RATIOS7Activity assets turnover ratio% measures the efficiency of a firm in managing and utili>ing its assets. 'he higher the turnover ratio% the more efficiency the management and utili>ation of the assets while low turnover ratio is indicate of under, utili>ation of available resources and presence idle capacity. 'he total assets turnover ratio is computed by dividing sales by total assets. (ales Total assets turnover ratio = ------------------------------------Total assets

ORKING CAPITAL TURNOVER RATIOS7-

C!/# !* 1!!0/ /!)0 )orking ca#ital turnover ratio = ------------------------------------)orking ca#ital *here if cost of goods sold is known. .et sales can be taken in the numerator. *orking capital + current assets O current liabilities. A high working capital turnover ratio indicates efficiency utili>ation of the firmLs funds. 6owever% it should not result in over trading. DE2TORS TURNOVER RATIO 7<ebtorLs turnover ratio e presses the relationship between debtors and sales. It is calculated. Net credit sales Debtors turnover ratio = ------------------------------------Average debtors .et credit sales inspire credit sales after adjusting for sales returns. In case information no credit sale is not available. sales can be taken in the numerator. <ebtors include bills receivable. <ebtors should be taken at gross value% without adjusting provisions for bad debts. In case% average debtors be foundQ closing balance of debtors should be taken in the denominator. A high debtors turn over ratio or a low debt collection period is indicative of a sound credit management policy. A debtors turnover collection period of C1,C9 days is considered ideal.

DE2T COLLECTION PERIOD7'he debt collection period measures the -uality of debtors since it indicates the speed of the collection. 'he shortest the average collection period implies the prompt payment by debtors. No* o+ days year Debt collection #eriod = ----------------------------------------Debt collection #eriod An e cessively long collection period implies a very liberal and inefficient credit and collection performance. 'his certain delays the collection delays the collection of each and impairs the firmLs li-uidity. 'he average no. of days for which debtors remain outstanding is called debt collection period or average collection period. CREDITORS TURNOVER RATIO7&reditorLs turnover ratio e presses the relationship between creditorLs and purchases. Net credit #urc!ase Creditors turnover ratio = --------------------------------------------Average creditors .et credit purchase implies credit purchase after adjusting for purchases returns. In case information on credit purchase is not available purchase may be taken in the numerator. &reditors include bills payable. In case avenue creditors canLt be found% closing balance of creditors should be taken in the denominator. 'he creditorLs turnover ratio is 40 or more. 6owever% very less creditors turnover ratio% or a high debt payment period% may indicate the firmLs inability in meeting its obligation in time.

PAYMENT PERIOD RATIO7&reditors turnover rate can also be e pressed in terms of number of days by the business to pay off its debts. It is termed as debt payment period which is calculated asG, Nu&ber o+ days in a year "ay&ent #eriod ratio = -------------------------------------------Creditors turnover ratio

FI;ED ASSETS TURNOVER RATIO7It is defined as Net sales $i%ed assets turnover ratio = --------------------------------$i%ed assets Fi ed assets imply net fi ed assets i.e. after depreciation. A high fi ed assets turnover ratio indicates better utili>ation of the firmLs fi ed assets. A ratio around 7 is considered ideal. INVENTORY TURNOVER RATIO75tock turnover ratio indicates the number of times the stock has turned over into sale sin the year. It is calculated. Cost o+ goods sold 'nventory turnover ratio = ------------------------------------------Average inventory &ost of goods sold + sales gross profit Average stock + (opening stock and closing stock 4P0) In case% information regarding cost goods sold is not known. 5ales may be taken in the numerator. 5imilarly% if average stock canLt be calculated% closing stock should be taken in the denominator.

A stock turnover ratio of R3L is considered ideal. A high stock turnover ratio indicates that the stocks are fast moving and get converted into sales -uickly. 6owever% it may also be on account of holding low amount of stocks and replenishing stocks in larger number of installments.

PROFITA2ILITY RATIO7It measure the overall performance and effective of the firm. Door operational performance may indicate poor sales and hence poor profits. A lower profitability may arise due to the lack of control over the e penses. ?ankers% financial institutions and other creditors look at the profitabilityLs. ratio as an indicator whether or not the firm earns substantially more than it pays interest for the use of borrowed funds and weather the ultimate repayment of their debt appear reasonably certain owner are interest to know the profitability as it indicates the return which they can get on this instruments. Drofitability ratioLs measure the profitability of a concern generally. 'hey are calculated either in relation to sales or in relation to investment. NET PROFIT RATIO It indicates the result of the overall operation of the firm. 'he higher the ratio% per profitable is the business. 'he net profit ratio is reassured by dividing net profit ratio indicates management efficiency in manufacturing administration and selling the products. 'his ratio is the overall firms ability to turn each rupee of sale into net profit. If the profit margin is inade-uate% the firm fails to achieve satisfactory return on share holderLs funds. "ro+it a+ter ta% Net #ro+it ratio = ---------------------------------Net sales A firm with high net profit margin can make better use of favorable conditions. 5uch as rising selling prices% falling cost of products or increasing demand for the product. 5uch a firm will be able to accelerate its profits at a faster rate than a firm with a low net profit margin. 'his ratio also indicates the firm capacity to withstand adverse economic conditions.

RETURN ON NET

ORTH RATIO G,

It indicates the return% which the shareholders are earning on their resources invested in the business. "ro+it a+ter ta% Return on net ort! ratio = -----------------------------------------Net ort! .et worth + share holders funds + e-uity share capital N preference share capital N @eserves O factious assets. 'he higher the ratio% the better it is for the share holders. 6owever% inter firm comparisons should be made to ascertain if the returns from the company are ade-uate. A trend analysis of the ratio over the past few years much is done to find out the growth or deterioration in the profitability of the business.

RETURN ON ASSETS RATIO 7"ro+it a+ter ta% Return on assets ratio = -----------------------------------------Total assets 'otal assets do not include fictitious assets. 'he higher the ratio% the better it is.

EARNINGS PER SHARE RATIO7Aarnings per share are the net profit after ta and preferences dividend% which is earned on the capital representative of one e-uity share. It calculated as G, "ro+it a+ter ta% available to equity !olders Earnings #er s!are ratio = ----------------------------------------------------------------Nu&ber o+ ordinary s!are

ADVANTAGE OF RATIOS

=seful of evaluation performance in terms of profitability and financial stability. =seful for intra / inter firm comparison. =seful forecasting and budgeting. It is just in tabular form over a period of years indicated the trend of business. 5mile to understand rather than the reading but the figures of financial statement. "ey tool in the hand of modern financial management. Anable outside parties to assess the strength and weakness of the firm. @atio analysis is very useful for ranking management decisions and also highlights the performance in the area of profitability financial stability and operational efficiency.

LIMITATIONS OF FINANCIAL RATIOS

'he ratio analysis is widely used of techni-ue to evaluate the financial position and performance of business. ?ut there are certain problems in using ratios. 'he analyst should be aware of these problems the following are some of the limitations of ratio analysis.

It is difficult to decide on the proper basis of comparison.

'he comparison is rendered difficult because of differences in situations of two companies or of one company over years. 'he price level changes make the interpretation of ratios invalid. the differences in the definitions of items in the balance sheet and the profit / loss statement make the interpretation of ratios difficult. 'he ratios calculated at a point of time or less informative and defective as they suffer from short term changes. <ifference in accounting policies and accounting period make the accounting data of firms non comparable as also the accounting ratios. It is very difficult to generali>e weather a particular ratio is good or bad. For e G a low current ratio may be said bad from the point of view of low li-uidity. ?ut a high current ratio may not be good. As this may results from in efficient working capital management.

CHAPTER

47

INTERGRATED

PERSPECTIVE

OF

ALL

FUNCTONAL AREAS OF THE ORGANIAATION

ORGANIAATION STRUCTURE

MANAGING DIRECTOR

GM PRODUCTION

DGM PBA

GM MARKETING

GM FINANCE

MAINTENANCE MANAGER

MANAGER
MANAGER

AGM

AGM

ELFARE

MANAGER

ASST PERSONNEL OFFICER

DEPUTY MANAGER

DEPUTY MANAGER

PROCESS

EMPLOYEES

SENIOR ACCOUNTANT

EMPLOYEES

EMPLOYEES

ASST TO SENIOR ACCOUNTANT PURCHASIN G OF FIRM

EMPLOYEES

MARKETING OF FIRM (DOMESTIC)

ACCOUNTANT GRADE 1

ASST GRADE

TYPIST

PEON

ACCOUNTANT GRADE 4

EMPLOYEES

EMPLOYEES

DEPARTMENTAL STUDY $ike any other public sector undertaking "##$ has separate departments and separate e ecutive heads for each department <epartments are based on the functional basis. Aach department speciali>es in its own area of operation. 'he various departments in the "##$ areG, 4) Dersonnel / Administration 0) #arketing C) Finance ;) Droduction 7) #aintenance 9) #aterials 2) <ata processing 3) Fire / 5afety B) 'echnical 41) @esearch and development <epartment 44) Droject

1) PERSONAL AND ADMINISTRATIVE DEPARTMENT :f all the factors of productions% man is by for the most important. It is a matter of common knowledge that every business organi>ation depends for its effective functioning not so much on its material or financial @esources as on its pool of able and willing 6uman @esources. # H Hueius defines personnel management as the field of management which has to do with planning% organi>ing% controlling various operative activities of procuring% developing% maintaining and utili>ing a labour force in order that the objectives and interest for which the company is established are attained as effectively and economically as possible and the objectives and interest of all levels of personnel and community are served to the highest degree. 4) MARKETING DEPARTMENT

J#arketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and e changing products and value with othersJ,,,,,,,,,,,,Dhilip "otler.

A2OUT KMML MARKETING "##$ have monopolistic in 'itanium <io ide ('i:0) pigment industry. "##$ is a public limited company that stands as a leader in production of 'i:0. 'he company has a large number of customers from all over the world and out side. 'he marketing department is engaged in selling of the companyKs product. 'here is no separate department for sales and marketing management also perform these functions. 'he marketing section keeps detailed report about customersK product% product group control% dispatch and payment. Droducts of "##$ always maintain very high standard perfection%

achieving technical e cellence in every phase of production to offer a wide range of products for -uality conscious customers. At "##$% one factor comes before everything else is customers and "##$ go out of their way to ensure customers satisfaction. A team of motivated marketing e perts% who make it their business to find out the firmKs views% highlights customerKs consciousness. #aintaining close contacts% they are perfectly aware of customerKs needs and are instrumental in development of new products at price and offering.

3) FINANCE DEPARTMENT Finance is the lifeblood of every business. 'his is one of the most important departments. In "##$ a well organi>ed finance department is functioning. 'he finance position of the company can be understood by ?alance 5heet and Drofit and $oss Account% prepared budget report according to the companyKs goal is also an important function of the finance department. A::!+-#(-1 P!)(:= !* KMML 4) &onvention 'he final statements are prepared under the historical cost convention in accordance with applicable accounting standard that was relevant to presentational re-uirement of the &ompanies Act 4B79. 0) Fi ed Assets Fi ed assets are stated at cost of ac-uisition and additional if any% less accumulated depreciation% is provided at rates and methods prescribed in the schedule FI! of the &ompanies Act on straight line method in respect of plant and machinery and railway sliding belonging to 'i:0 pigment unit. And written down value method in respect of all the asset of the company. 'he depreciation is calculated on the basis of &ompanies Act and for income ta audit it is added to the profit and recalculated as per the audit rules. C) A cise duty A cise duty on manufactured is accounted for as and when goods. Are

dispatched is accordingly no provisions is made in respect of duty due on goods manufactured% but not dispatched nor included in valuation of stock. .

;) Gratuity Gratuity liability and leave is accounted on the basis of actuarial valuation.

7) Inventory 5ystem *ork,in,progress is valued at the cost and stock of raw materials% chemicals% fuel and stores are valued at weighted average cost on monthly basis ?) PRODUCTION DEPARTMENT "##$ always maintain high standard of perfection by achieving technical e cellence in every phase of production. &atering to strict guideline% "##$ offers a wide range of products for -uality conscious customers. 'heir products go in to the manufacture of variety of products used in every day life. Daint material% facial creams% tablets% newsprint% rubber products% cosmetics and printing inks all contain 'i:0. 'his department undertakes activities and decision regarding the production work. <eputy General #anager (production and maintenance) controls the activities of the department. Droduction of 'i:0 is carried out in lot wise with specific lot number. Aach lot contain 47 #' of 'i:0 samples are collected from production at specific intervals and e amined thoroughly in the laboratory or the company. If any defect is identified% then the lot is considered as inferior -uality. . #ineral separation plant (#5 unit) and 'i:0 pigment plant ('D unit) is two independent production units in "##$. 'he 'D unit is divided in to three plants. Illmenite ?eneficiation Dlant Acid @egeneration Dlant Digment

5) MAINTENANCE DEPARTMENT 'he maintenance department of "##$ can be grouped in to Alectrical% #echanical and Instrumentation section. 'he Hoint General #anager (maintenance) is the top authority. 16 E)%:#"(:') /%:#(!-7 'his department is under the control of assistant general manager (Alectrical). It is the function of the department to ensure the flow of electricity through out the company. 46 M%:$'-(:') /%:#(!-7 'his department is under the control of assistant general manager (#echanical). Function of the department is to ensure the easy working of machines. 'he company is doing periodical shutdown. to carryout necessary maintenance and servicing of the plant. 36 I-/#"+,%-#'#(!-7 Assistant General #anager (Instrumentation) is the ape authority of this section. 'he section inspects safety of valves% mechanics etc. and working of instruments. A statutory body occasionally visits the company to check the safety of the plant. ?6 C(>()7 #anager (civil) controls the activities of this section. 'hey undertake the functions relating to implanting new machinery etc. 6) MATERIALS DEPARTMENT All functions relating to purchase and storage of materials for the company is carried out by this department. 'his department is headed by the <eputy General #anager (materials). 'here is around 02111 items of raw materials in "##$. 'he

functions of material department can be grouped in to threeG Durchase 5torage Inventory control C) MANAGEMENT INFORMATION SYSTEM #anagement Information 5ystem (#I5) is under the supervision of the data processing department. Assistant General #anager (A<D) is the top authority of the department. 'here are 21 personal computers in the company. 7C personal computers in the company are in local area network. &ompany is having 41 #ega ?ytes personal computers back borne copper cabling. It has four signalsG 4. 5tores 0. Dlant technical service C. Illmenite ?eneficiation plantS Acid regeneration plant ;. Digment processing unit8laboratory 'here is a direct connection from I?# server to Durchase% Finance% #arketing and Dersonnel department. 'he entire Information 'echnology activities are monitored by Alectronic <ata Drocessing (A<D) section. "##$ is using :racle @elated <atabase management system at backend and Dower ?uilder as front,end. An integrated online application module developed in power builder is being used among finance% purchase% stores% marketing% personnel and production departments. 'he database is fed to the system by each department% which is re-uired to generate various #anagement Information 5ystems to the management. A strict security control is incorporated in the operations of various modules.

8) FIRE AND SAFETY DEPARTMENT Fire and safety is a main department of "##$. It manages the process of giving security to the employees by giving successful training and giving license to employees and machines. 'he sections under fire and safety areG

16

E,&)!=%% 0%#'()/ ,'-'1(-1G , In this section the details of the employees

are identified by separate employee codes. 6ere in employee code% employee name% designation% date of birth% date of joining and -ualifications are recorded. 'hese section supplies the details of employee to another section.

46

E,&)!=%% #"'(-(-17 - All the employees are trained for the successful

running up of "##$. 'he details of training is recorded when they gives each training. Amployee code% serial number% date of training% course and remark are recorded. *hen an accident occurs the details of the training given to the employee is produced. 36 E,&)!=%% '::(0%-#7 - 'his section handles the details of accident occurs to

the employee. Amployee code% serial number% accident data% description of accident% the body part which was injured% unsafe condition or unsafe act% whether lost time accident or not lost time accident% the days lost are recorded. ?6 ED&!- P%#" !-L(:%-/%7 - 'his section stores the details of the license

provided to each machines. A different agency provides this license. It must have to be renewed after the validity is lost. 'his section stores the serial number% item name% license number% tag number% last test% test type etc. 56 L(*#(-1 ,':$(-%/ '-0 #':9)%/7 - 'here are different lifting machines in

different location. 'hese machines have to be tested and if any defect it is stored. 'he machines are given a hoist no.% location% last test% tested by% defect% ne t test and remarks are stored. 66 P"%//+"% >%//%)7 - 'his section handles different machines% which handle the

substance of high pressure such as $DG% &6$:@I.A etc. It is very difficult to handle these types of machines. It needs high security and to confirm whether the e-uipment is running smoothly. It contains serial no.% section% pressure vessel% last test etc.

C6

M!:9-0"())7 - It is a section contains trained person to maintain the security.

If any accident occurs% the help of this person is supplied and reduces the comple ity of accident. An accident controller is the head of this section 9) TECHNICAL DEPARTMENT Assistant General #anager (technical) is the head of this wing. 'his wing functions as a third agency to the production and maintenance department. 'he technical wing takes charge to research and development% Euality control% $aboratory and technical services. 15) RESEARCH AND DEVELOPMENT "##$ maintain a fully e-uipped research and <evelopment facility in the area of Digment and paint technology with a view to establish world, class products and competitiveness. 'his e cellent facility undertakes research% development and product improvement. 5cientists and Angineers continuously pursue innovative technologies in the area of 'i:0 pigment% -uality improvement and other allied products. 'he technical and sales service wing e tends all helps to customer in the field of applications and users. "##$Ks @esearch and development has achieved following tasks in recent timesG 4. <eveloped new grade @&,310 with e cellent balancing properties of glass and weather ability. 0. 5uccessfully developed an improved process of o idation plant. C. <eveloped know how to convert iron o ide waste to bricks used for construction. ;. <eveloped grade @&, 313% special grade for automotive coating.

11) PRO3ECT DEPARTMENT Hoint General #anager (Droject) is the head of the wing. 'his wing is engaged in the e pansion program of the company. 'hey are engaged in the

building up of new products etc. they also decide up on the future plans of the company. 5ome major projects on which they are working upon includeG 4. A new #5 plant of 0 lacks tones illmenite capacity per year 0. A new synthetic rutile plant of capacity 4.C lacks C. A new 411 tone per day : ygen plant ;. &apacity enhancement of 'i10 plant in to one lacks tones per year

CHAPTER3- ANALYSIS AND INTERPRETATION TA2LE 1 'able showing &=@@A.' @A'I: of "##$ &urrent ratio+ current assets8current liabilities A current ratio 0G4 is considered as idealG if a business has an undertaking with its bankers to meet its working capital re-uirements short notices% a current ratio of is ade-uate. CURRENT YEAR 2007-08 2008-09 2009-10 2010-11 CURRENT ASSET 42959.03 32429.76 33035.54 36862.77 LIABILITY 22728.01 12864.53 14066.5 27265.53 CURRENT RATIO 1.88 2.57 2.35 1.35

2011-12 INTERPRETATION

36270.02

26404.87

1.37

'he table evaluates the current ratio of "##$ from 0112,13. 'he ideal current ratio should be 0G4. it means that every 4 rupee of current liability should be covered by 0 rupees of current asset. 'he table shows that in 0112,13 the ratio is less than re-uired and in 0113,1B and 011B,41 it is above the ideal rate% but in 0141,44 and 0144,40 it is again less than re-uired

CURRENTRATIO
3 2.5 2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12 CURRE NT RATIO

TA2LE 4 'able showing E=I&" @A'I: of "##$ Euick ratio+Euick assets8current liabilities A -uick ratio of 4 is considered as ideal. A -uick ratio of less than 4 is indicated of inade-uate li-uidity of the business. A very high ratio is also not available as funds can be profitability employed

YEAR

QUICK ASSET

CURRENT LIABILITY

QUICK RATIO

2007-08 2008-09 2009-10 2010-11 2011-12 INTERPRETATION

19049.41 24574.25 26096.84 30052.32 21065.68

22728.01 12864.53 14066.5 27265.53 26404.87

0.838146851 1.910233021 1.855247574 1.102209273 0.797795255

'he table evaluates the -uick ratio of "##$ from 0112,13. 'he ideal -uick ratio should be 4G4. It means that every 4 rupee of current liability should be covered by 4 rupees of -uick asset. 'he ratio shows an increasing trend in 0112,13 and 0113,1B. then onwards it shows decreasing trend. 5o the company is finding it difficult to maintain the ratio at ideal level as year passes.

QUICKRATIO
2 1.5 1 0.5 0 2007-08 2008-09 2009-10 2010-11 2011-12 QUICK RATIO

TA2LE 3 'able showing &A56 A.< ?A." ': &=@@A.' A55A' @A'I:of "##$ cash and bank to current asset ratio +cash and bank8current assets CASH & BANK YEAR 2007-08 2008-09 BALANCE 8827.1 14076.2 CURRENT ASSET 42959.03 32429.76 CASH &BANK TO CURRENT RATIO 0.205477172 0.434051933

2009-10 2010-11 2011-12

13808.32 12144.93 7740.61

33035.54 36862.77 36270.02

0.417983784 0.329463304 0.213416204

INTERPRETATION In the year 0112,13 and 0113,1B ratio is showing increasing trend. ?ut gradually it is falling. 'his is because of investing in securities

CAS H &BANKTO CURRENTRATIO

0.5 0.4 0.3 0.2 0.1 0 2007-08 2008-09 2009-10 2010-11 2011-12 CAS H &BANK TO CURRE NT RATIO

TA2LE ? 'able showing I.!A.':@T '=@.:!A@ @A'I: of "##$ Inventory turnover ratio +sales8inventory 5tock turnover ratio indicates the number of times the stock has turned over into sales in the year.

INVENTORIE INVENTORY TURNOVER YEAR 200708 200809 200910 201011 201112 SALES 30748.69 41908.91 48398.2 53938.54 57302.87 S 6338.5 8341.2 6735.46 6810.45 15204.34 RATIO 4.85109884 5.024326236 7.18558198 7.919967109 3.768849552

INTERPRETATION 'he inventory turnover ratio shows an increasing trend from 0112,13 to 0141,44 and decreases in 01144,40% due to increase in inventories.

INVENTORYTURNOVERRATIO
9 8 7 6 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12 INVE NTORY TURNOVE R RATIO

TA2LE 5 'able showing <A?':@5 '=@.:!A@ @A'I: of "##$ <ebtors turnover ratio +sales8debtors

<ebtors turnover ratio e presses the relationship between debtors and sales. It is calculated.

YEAR 2007-08 2008-09 2009-10 2010-11 2011-12

SALES 30748.69 41908.91 48398.2 53938.54 57302.87

EBTORS 2606.48 3203.56 4709.92 6421.85 6594.03

EBTORS TURNOVER RATIO 11.79701743 13.08198067 10.27580086 8.399221408 8.690113633

INTERPRETATION 'he debtors turnover ratio increases in 0112,13 and 0113,1B and then onwards shows deceasing trend. 'his is due to increase in sales.

DEB TORSTURNOVERRATIO
2011-12 2010-11 2009-10 2008-09 2007-08 0 5 10 15 E BTORS TURNOVE R RATIO

TA2LE 6

'able showing A!A@AGA &:$$A&'I:. DA@I:< of "##$ Average collection period +C978debtors turnover ratio . 'he debt collection period measures the -uality of debtors since it indicates the speed of the collection. 'he shortest the average collection period implies the prompt payment by debtors NU!BER O" YEAR 200708 200809 200910 201011 201112 INTERPRETATION 'he table shows average collection period which decreased in 0113,1B% it shows that the company has tighten its collection period for reducing the rate of delay in payment by debtors% and it increased during the years 011B,41 and 0141,44% it shows the company has liberali>ed the collection period for getting more sales and company has tighten its collection period during the year 0144,40 for reducing the rate of delay in payment by debtors. IN YEAR 365 365 365 365 365 AYS EBTORS TURNOVER RATIO 11.797 13.082 10.276 8.399 8.69 AVERA#E COLLECTION $ERIO 30.94006951 27.90093258 35.51965745 43.45755447 42.0023015

AVERAGECOLLECTION PERIOD
2011-12 2010-11 2009-10 2008-09 2007-08 0 10 20 30 40 50 AVE RA#E COLLE CTION $E RIO

TA2LE C 'able showing &@A<I':@5 '=@.:!A@ @A'I: of "##$

creditors turnover ratio +net purchases8creditors &reditorLs turnover ratio e presses the relationship between creditorLs and purchases

YEAR 2007-08 2008-09 2009-10 2010-11 2011-12

NET $URCHASE 7303.35 7979.3 10717.37 11758.46 10170.08

CRE ITOR S 1559.63 1540.7 1468.77 3672.55 3376.43

CRE ITORS TURNOVER RATIO 4.682745267 5.179009541 7.296833405 3.201715429 3.012080807

INTERPRETATION 'he table shows the creditors turnover ratio is increasing from 0112,13 to 011B,41% it shows that the company get more payment period for its creditors. And the ratio decreases in 0141,44 and 0144,40 %the company is finding it difficult to pay in time

CREDITORSTURNOVERRATIO
8 7 6 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12

CRE ITORS TURNOVE R RATIO

TA2LE 8

'able showing A!A@AGA DAT#A.' DA@I:< of "##$ Average payment period +C978creditors turnover ratio &reditors turnover rate can also be e pressed in terms of number of days by the business to pay off its debts. It is termed as debt payment period

YEAR 200708 200809 200910 201011 201112

NO% O" AYS IN YEAR 365 365 365 365 365

CRE ITORS TURNOVER RATIO 4.68 5.18 7.297 3.2 3.012

AVERA#E $AY!ENT $ERIO 77.99145299 70.46332046 50.02055639 114.0625 121.1819389

INTERPRETATION 'he ratio shows fluctuations in the years. In the year 011B,41 it was 71.10 which is good and in 0144,40 it is 404.430. it shows that the company is taking more time in paying its creditors.

AVERAGEP AYMENTPERIOD
2011-12 2010-11 2009-10 2008-09 2007-08 0 50 100 150 AVE RA#E $AY !E NT $E RIO

TA2LE 9

'able showing &=@@A.' A55A' '=@.:!A@ @A'I: of "##$ &urrent asset turnover ratio +net sales8current assets 'his ratio indicates the e tent to which the company invest in current assets with regard to its sales. 6igher ratio shows that the firm is in good position. NET YEAR 2007-08 2008-09 2009-10 2010-11 2011-12 SALES 30748.69 41908.91 48398.2 53938.54 57302.87 CURRENT ASSETS 23688.82 33079.7 33035.54 36862.77 36270.02 CURRENT ASSET TURNOVER RATIO 1.298025398 1.266907197 1.465034324 1.463225363 1.579896289

INTERPRETATION 'he table shows that the ratio shows fle ible trend. 'he company is trying to attain good current asset turnover position.

CURRENTAS S ET TURNOVERRATIO
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 2011-12

CURRE NT AS S ET TURNOVE R RATIO

TA2LE 15

'able showing FIFA< A55A' ': &=@@A.' A55A' @A'I: of "##$ Fi ed asset to current asset ratio +net sales8current assets 'he ratio shows relationship between fi ed asset and current asset.

"I&E YEAR 200708 200809 200910 201011 201112 ASSET 12862.52 17942.43 17803.97 21883.4 22967.57

CURRENT ASSETS 23688.82 33079.7 33035.54 36862.77 36270.02

"I&E ASSET TO CURRENT ASSET RATIO 0.542978502 0.542400022 0.538933827 0.593645025 0.633238416

INTERPRETATION 'he table shows fi ed asset to current asset ratio in 0112,13 and 0113,1B. 'he ratio shows constant trend in the first two years and from 011B,41 and 0144,40 it shows increasing trend.

FIXED AS S ET TO CURRENTAS S ET RATIO

0.64 0.62 0.6 0.58 0.56 0.54 0.52 0.5 0.48

"I&E AS S E T TO CURRE NT AS S E T RATIO

TA2LE 11

'able showing *:@"I.G &ADI'A$ '=@.:!A@ @A'I: of "##$ *orking capital turnover ratio +net sales8net working capital 'his ratio indicates the e tent to which the company invest in current assets with regard to its sales. 6igher ratio shows that the firm is in good position. A high working capital turnover ratio indicates efficiency utili>ation of the firmLs funds. 6owever% it should not result in over trading. 'his ratio indicates whether a company has enough short term assets to cover its short term debt. Anything below 4 indicates negative working capital. *hile any thing between 4.0 to 0 is considered sufficient NET YEAR 200708 200809 200910 201011 201112 SALES 30748.69 41908.91 48398.2 53938.54 57302.87 NET 'ORKIN# CA$ITAL 20231.02 20215.17 18969.04 9597.24 9865.15 'ORKIN# CA$ITAL TURNOVER RATIO 1.519878385 2.073141606 2.551431174 5.620213728 5.808616189

INTERPRETATION 'he working capital turnover ratio shows an increasing trend. 'his is because sales is more than the net working capital. 'he working capital turnover ratio is increasing every year due to increase in sales and gradual reduction in working capital% since in the working capital ratio of the firmLs performance was at increasing level the working capital performance is satisfactory.

WORKINGCAPITALTURNOVER RATIO
2011-12 2010-11 2009-10 2008-09 2007-08 0 2 4 6 'ORKIN# CA$ITAL TURNOVER RATIO

TA2LE 14

'able showing .A' D@:FI' @A'I: of "##$ .et profit ratio + profit after ta 8net sales

It indicates the result of the overall operation of the firm. 'he higher the ratio% per profitable is the business. 'he net profit ratio is reassured by dividing net profit ratio indicates management efficiency in manufacturing administration and selling the products. 'his ratio is the overall firms ability to turn each rupee of sale into net profit. If the profit margin is inade-uate% the firm fails to achieve satisfactory return on share holderLs funds.

YEAR 2007-08 2008-09 2009-10 2010-11 2011-12

NET $RO"IT A"TER TA& AVAILABLE 612.74 449.76 6063.23 2811.92 11545

SALES 30748.69 41908.91 483898.2 53938.54 57302.87

()* +,-./* ,0*/0.019927353 0.010731847 0.01252997 0.052131926 0.201473329

INTERPRETATION 'he net profit ratio is is showing decreasing trend in the years 0112,13%0113,1B and 011B,41. but it is showing an increasing trend in 0141,44 and 0144,40% it means the managerial efficiency is increased.

net pr !"t r#t"

2011-12 2010-11 2009-10 2008-09 2007-08 0 0.05 0.1 0.15 0.2 0.25 ()* +,-./* ,0*/-

TA2LE 13 'able showing AA@.I.G5 DA@ 56A@A @A'I: of "##$ Aarnings per share ratio + profit available to e-uity share holders8number of shares Aarnings per share are the net profit after ta and preferences dividend% which is earned on the capital representative of one e-uity share
NET $RO"IT A"TER TA& AVAILABLE 612.74 449.76 6063.23 2811.92 11545 NO% O" SHARES 30.93 30.93 30.93 30.93 30.93

YEAR 2007-08 2008-09 2009-10 2010-11 2011-12

E$S RATIO 19.81053993 14.54122211 196.0307145 90.9123828 373.262205

INTERPRETATION 'he eps ratio although is less in the first 0 years(0112,13 / 0113,1B) compared to the following years. 'he eps ratio for the ne t years 011B,41%0141,44%0144,40 are comparatively high. 5o the company is earning a good earning for its shareholders lately.

EPSRATIO
400 350 300 250 200 150 100 50 0 2007-08 2008-09 2009-10 2010-11 2011-12

E $S RATIO

ANNE;URE ?A$A.&A 56AA' A5 A' C4 #A@ 0113

DA@'I&=$A@5 5:=@&A5 :F F=.<5 5hare holderLs funds 5hare capital @eserves and surplus <effered ta liability 'otal ADD$I&A'I:. :F F=.<5 Fi ed assets &apital work in progress Investments &urrent assets $oans and advances $essG current liabilities Drovisions .et current assets #isc e p ( to the e tent not written off or adjusted)

A5 DA@ C48C844(I. $A"65) 5&6A<=$A

A ? &

C1BC.02 ;1309.79 00;.2C ;;4;;.79

@ F G 6 I

40390.70 441CC.;0 42.91 0C933.30 4B021.04

< A H

41134.99 409;9.C7 010C4.10 1.11

5ignificant accounting policy .otes forming part of account

5 '

'otal ;;4;;.79

5'A'A#A.' :F D@:FI' / $:55 F:@ '6A TAA@ A.<A< C48C80113 DA@'I&=$A@5 INCOME @evenue from operations Gross sales $essG e cise duty
A5 DA@ 5&6A<=$A

0112,13

C;C00.71 C72C.34

.et sales other income stock differential 'otal revenue E;PENDITURE #anufacturing e penses Dayment / benefits to employees Admn% selling% / other e penses Interest / finance charges <epreciation 'otal e penses profit before ta lessG prior period items lessG provision for bad / doubtful adv profit after prior period adjustment lessG provision for current ta ation add8(less)G provision for deferred ta lessG provision F?' profit for the year D/$ account balance brought forward Amount available for appropriations Droposed dividend 'a on dividend 'ransfer to reserve 5urplus transferred to balance sheet Aarnings per share( ?asic and <iluted) @efer note09 of schedule 2 5ignificant accounting policy .otes forming part of account ?A$A.&A 56AA' A5 :. C48C81B 5 ' E " $ # . @ : D

C12;3.9B 41;C.;9 (99;.72) C4402.73

000B2.01 9C73.BC 704.2C 9B.;1 3C9.93 C1113C.B7 41;C.9C 03.B4 1.11 414;.20 C07.11 (;4.B3) C7.11 940.2; 0;;;7.40 07172.39 C1B.CC 70.72 ;7.B7 0;971.11 4B.34

DA@'I&=$A@5 5:=@&A5 :F F=.<5 5hare holderLs funds 5hare capital @eserves and surplus <effered ta liability 'otal ADD$I&A'I:. :F F=.<5 Fi ed assets Gross block $essG <epreciation .et block &apital work in progress Investments C+""%-# '//%#, )!'-/ '-0 '0>'-:%/ &urrent assetsG Inventories 5undry debtors &ash and bank balance :ther current assets $oans and advances

A5 DA@ C48C81B(I. $A"65) 5&6A<=$A

A ? &

C1BC.02 ;1B4;.;4 293.12 ;;227.27

. F

C07BC.24 4;974.03 42B;0.;C 2071.;B 074B0.B0 42.91

6 29B4.09 C01C.79 4;129.01 ;0C.71 21C7.0; C0;0B.29

$essG :+""%-# )('@()(#(%/ '-0 &"!>(/(!-/ current liabilities Drovisions .et current assets 5ignificant accounting policy .otes forming part of account 5 ' < A 401C2.94 309.B0 4039;.7C 4B797.0C

'otal

;;227.27

D@:FI' A.< $:55 A&&:=.' F:@ '6A TAA@ C48C81B DA@'I&=$A@5 A5 DA@ 0113,1B(I. $A"65) 5&6A<=$A

INCOME Gross sales $essG e cise duty .et sales :ther income 5tock differential 'otal E;PENDITURE #anufacturing e penses Dayments and benefits to employees Admn%selling and other e penses Interest /finance chrgs <epreciation 'otal Drofit Drior period income8(e penses),(net) E;CEPTIONAL ITEMS Drov for e penditure on abandoned projects Drov for diminution in the value of land Drofit before ta Drov for ta ation ,current ta ation ,fringe benefit ta ,deferred ta (net) ,e cess provision for ta ation in earlier year Drofit after ta D/$ account balance brought forward Amount available for appropriations AppropriationsG ,proposed dividend ,ta on dividend ,transfer to reserve 5urplus transferred to balance sheet AD5(basic and diluted) 5ignificant accounting policy .otes forming part of accounts ?A$A.&A 56AA' A5 :. C48C841

;9C7B.C7 ;;71.;; ;4B13.B4

D E

42;3.10 (0B22.92) ;192B.09 0;;;0.4C B2C7.B3 B40.C; C1.41 33;.;7 C9117.11

H " $ # .

;92;.09 ;92;.09 49C3.C; 1.11 C1;0.B1 0111.11 ;C.11 7;C.C; 9.31 ;;B.29 0;971.14 071BB.22 C1B.CC 70.72 CC.2C 0;21;.4; 4;.7;

5 '

DA@'I&=$A@5 5:=@&A5 :F F=.<5 5hare holderLs funds 5hare capital @eserves and surplus <effered ta liability 'otal ADD$I&A'I:. :F F=.<5 Fi ed assets Gross block $essG <epreciation .et block &apital work in progress Investments C+""%-# '//%#, )!'-/ '-0 '0>'-:%/ &urrent assetsG Inventories 5undry debtors &ash and bank balance :ther current assets $oans and advances

A5 DA@ C48C841(I. $A"65) 5&6A<=$A

A ? &

C1BC.02 ;742;.40 443;.;2 ;B;74.39

. F

CC212.11 47B1C.1C 4231C.B2 40994.07 C1;97.00 42.91

6 92C7.;9 ;21B.B0 4C313.C0 212.B4 212C.BC CC1C7.7C

$essG :+""%-# )('@()(#(%/ '-0 &"!>(/(!-/ current liabilities Drovisions .et current assets 5ignificant accounting policy .otes forming part of account 5 ' < A 44992.BC 0CB3.72 4;199.71

43B9B.1;

'otal

;B;74.39

D@:FI' A.< $:55 A&&:=.' F:@ '6A TAA@ C48C841 DA@'I&=$A@5 INCOME Gross sales $essG e cise duty .et sales :ther income 5tock differential A5 DA@ 011B,41(I. $A"65) 5&6A<=$A : 74B1C.BB C717.2B ;3CB3.01 D E 497;.C7 (4C1;.41)

'otal E;PENDITURE #anufacturing e penses Dayments and benefits to employees Admn%selling and other e penses Interest /finance chrgs <epreciation 'otal Drofit Drior period income8(e penses),(net) E;CEPTIONAL ITEMS Drov for e penditure on abandoned projects Drov for diminution in the value of land Drofit before ta Drov for ta ation ,current ta ation ,fringe benefit ta ,deferred ta (net) ,e cess provision for ta ation in earlier year Drofit after ta D/$ account balance brought forward Amount available for appropriations AppropriationsG ,proposed dividend ,ta on dividend ,transfer to reserve 5urplus transferred to balance sheet AD5(basic and diluted) 5ignificant accounting policy .otes forming part of accounts 5 ' H " $ # .

;32;3.;7 07;39.;1 3BC2.40 C34;.C2 4B.91 40;7.B; CB71C.;C

B0;7.10 B0;7.10 42B.09 931.21 3C24.71 4B11.11 1.11 ;49.;1 (3.4C) 919C.0C 0;21;.4; C1292.C2 47;9.9; 079.33 919.C0 03C72.7C 4B9.14

?A$A.&A 56AA' A5 :. C48C844

DA@'I&=$A@5 5:=@&A5 :F F=.<5 5hare holderLs funds 5hare capital @eserves and surplus <effered ta liability 'otal ADD$I&A'I:. :F F=.<5 Fi ed assets Gross block $essG <epreciation .et block &apital work in progress Investments C+""%-# '//%#, )!'-/ '-0 '0>'-:%/ &urrent assetsG Inventories 5undry debtors &ash and bank balance :ther current assets $oans and advances

A5 DA@ C48C844(I. $A"65) 5&6A<=$A

A ? &

C1BC.02 ;9433.71 40C0.37 71747.90

. F

CB041.0; 42C09.3; 0433C.;1 47749.C3 C2CBB.23 C742.91

6 9341.;7 90;4.37 404;;.BC 77B.3C 41B07.24 C9390.22

$essG :+""%-# )('@()(#(%/ '-0 &"!>(/(!-/ current liabilities Drovisions .et current assets 5ignificant accounting policy .otes forming part of account 5 ' < A 0;3B2.C1 0C93.0C 02097.7C B7B2.0;

'otal

7174;.90

D@:FI' A.< $:55 A&&:=.' F:@ '6A TAA@ C48C844 DA@'I&=$A@5 INCOME Gross sales $essG e cise duty .et sales :ther income 5tock differential A5 DA@ 0141,44(I. $A"65) 5&6A<=$A : 73;93.70 ;70B.B3 7CBC3.7; D E 4317.CC 0C3.77

'otal E;PENDITURE #anufacturing e penses Dayments and benefits to employees Admn%selling and other e penses Interest /finance chrgs <epreciation 'otal Drofit Drior period income8(e penses),(net) E;CEPTIONAL ITEMS Drov for e penditure on abandoned projects Drov for diminution in the value of land Drofit before ta Drov for ta ation ,current ta ation ,fringe benefit ta ,deferred ta (net) ,e cess provision for ta ation in earlier year Drofit after ta D/$ account balance brought forward Amount available for appropriations AppropriationsG ,proposed dividend ,ta on dividend ,transfer to reserve 5urplus transferred to balance sheet AD5(basic and diluted) 5ignificant accounting policy .otes forming part of accounts 5 ' H " $ # .

77B30.;0 C1942.C1 4;910.2C C1;;.;B 09.24 4;4B.39 ;B244.1B

9024.CC (40.49) 1.11 1.11 907B.42 CC71.11 1.11 ;3.C3 (;3.32) 0344.B0 03C72.7C C449B.;7 47;9.9; 071.B1 034.4B 0B1B1.20 B1.B1

?A$A.&A 56AA' A5 :. C48C840 DA@'I&=$A@5 E.+(#= '-0 )('@()(#(%/ 5hare holderLs fund 5hare capital @eserves and surplus
.:'A .:5

A5 A' C48C840

0 C

C1BC.02 771C2.01

734C1.;2 .on current liabilities <eferred ta liability(net) $ong term provisions ; 7 41;2.3B 3B9.BB

C+""%-# )('@()(#(%/ 'rade payables :ther current liabilities 5hort term provisions A//%#/ .on current assets Fi ed assets 'angible assets &apital work in progress .on,current investments $ong term loans and advances C+""%-# '//%#/ Inventories 'rade receivables &ash and bank balance 5hort term loans and advances :ther current assets 9 2 3 C;CB.C3 4B7C1.9C C;C;.39

09;1;.32 39;31.00

B.41 B.44 41 44

00B92.74 4CB9B.;9 C742.91 B277.9C

71041.01

40 4C 4; 47 49

4701;.C; 97B;.1C 24;1.94 7BB7.9B 2C7.C7

C9021.10 39;31.00

5'A'A#A.' :F D@:FI' / $:55 F:@ '6A TAA@ A.<A< C48C840 DA@'I&=$A@5 INCOME I @evenue from operations Gross sales $essG e cise duty .:'A .: 0144,40

42

94211.71 ;CB2.9C

.et sales II other income 43

72C10.32 013C.70 7BC39.CB 4B 01 04 00 B.4 0C BB;3.17 (9BBB.22) 4C01C.20 ;019 0104.27 07920.40 ;CB22.BC 47;1C.;9

III 'otal revenue( INII) E;PENSES &ost of materials consumed &hanges in inventories of finished goods and *ID Amployee benefits e penses Finance cost <epreciation / amorti>ation e pense :ther e penses IV 'otal e penses V profit before e ceptional and e traordinary items and / ta ( III,I!)

VI A ceptional items VII Drofit before e tra ordinary items and ta (!,!I) VIII A traordinary items I; ; profit before ta (!II,!III) 'a e penses (4) current ta (0) deferred ta (net) 47;13.;9

47;13.;9 ;1;3.;0 (43;.B9) 447;7.11 C2C.0C

;I .et profit for the year(IF,F) ;II Aarning per share(basic / diluted in rupees) of face value of 411 5ignificant accounting policies 0;

CHAPTER?- FINDINGS AND SUGGESTIONS

FINDINGS

&ompany has no debt capital in its capital structure

*orking capital turnover is increasing year by year Firms current ratio is not desirable currently &ash / bank balance of the company is decreasing year by year due to investment is securities

5ales of the company is increasing year by year 'he firm keeps on liberali>ing the collection period from debtors 'he company is taking more time to pay its creditors currently 'he company is currently giving good earnings to its shareholders 'he company is showing signs of increased managerial efficiency

SUGGESTIONS 4. &ompany must try to include debt capital in its structure this will benefit the company in getting ta advantage 0. &ompany should try to maintain sufficient amount of cash and bank balance C. &ompany should maintain a good current asset position ;. &ompany should try to control its liberali>ation policy as to much liberali>ation in collection period may lead to bad,debts

CHAPTER 5

C!-:)+/(!-

'his study in "##$ has been a uni-ue learning e perience. All the staff members and employees are disciplined% punctual / helpful. A good support is e tended to me by my guide and 5he was always there to share his views% ideas% knowledge. 'he study is conducted in "##$ :. the topic *:@"I.G &ADI'A$ #A.AGA#.'. I emphasi>ed on the study of the financial analysis of the company with the help of various ratios. It could be understood that "##$ is one the most profitable companies in "erala under the state government. It has been earning good returns for its share holders.

?I?I$:G@AD6T

2!!9/ 4. Financial #anagement 0. @atio analysis %@/(#% www.kmml.com www.wikipedia.com www.google.com

A--+') R%&!"#/ "##$ annual reports for the years 0112,13 0113,1B 011B,41 0141,44 0144,40

APPENDI; <+%/#(!--'("%

4. *hat is the primary activity of "##$M 0. *hat are the missions and visions of "##$M C. *hat are the strengths% weaknesses% opportunities% and threats of "##$M ;. *hat is the value of current assetM 7. *hat is the value of current liabilityM 9. *hat is the value of -uick assetsM 2. *hat is the value of cash and bank balancesM 3. *hat is the value of salesM B. *hat is the value of inventoriesM 41. *hat is the value of debtorsM 44. *hat is the value of net purchasesM 40. *hat is the value of creditorsM 4C. *hat is the value of net salesM 4;. *hat is the value of net working capitalM