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Working Capital may be regarded as the most important factor of a business. Its effective
provision and utilization can do much to ensure the success of a business.
While the efficient management may not only lead to loss of projects but also to the ultimate
shown fall of what otherwise would be considered as promising concern. A study on working
capital is of major importance, because of its close relationship with current day-today operations
of a business.
The team working capital stands for that form of capital which is required for the financially of
working or current need of the company. It is usually invested in raw material work in progress
finished goods accounts receivable and saleable securities.
Management of working capital usually involves planning and controlling current assets, namely
cash and marketable securities, assets receivable and inventories and also administration of
current liabilities.
Working Capital or current assets management is one of the most important aspect of the over all
financial management. It is concerned with the problem that arises in attempting to manage the
current assets.
The current liabilities and the inter relationships that exists between them. Current assets are the
assets, which can be converted into cash with in an Accounting year and includes cash short-term
securities, debtors, bill receivable and inventories.
Current liabilities are that claim of outside, which are expected to mature for payment with in an
Accounting year and includes creditors bill payable and outstanding expenses.
The goal of working capital management is to manage the firms current assets and current
liabilities in such a way enough to cover its current liabilities in order to ensure that they are
obtained and used in the best possible way.
INDEX
S.No:
1.
CONTENTS
PAGE NO.
INTRODUCTION
5-9
REVIEW OF LITERATURE
INDUSTRY PROFILE
3.
COMPANY PROFILE
4.
10-32
33-37
38-55
56-83
INTERPRETATION
5.
CONCLUSION
84-86
SUGGESTION
6.
BIBLIOGRAPHY
87-88
1
CHAPTER-I
INTRODUCTION
INTRODUCTION
WORKING CAPITAL:
Cash is the lifeline of a company. If this lifeline deteriorates, the company's ability to fund
operations, reinvest and meet capital requirements and payments also deteriorate. Understanding
a company's cash flow health is essential for making investment decisions. A good way to judge
a company's cash flow prospects is to look at its working capital management (WCM).
Working capital of a company reveals more about the financial condition of a business than
almost any other calculation. It tells you what would be left if a company raised all of its short
term resources, and used them to pay off its short term liabilities. The more working capital, the
less financial strain a company experiences.
Working capital also gives investors an idea of the company's underlying operational efficiency.
Money that is tied up in inventory or money that customers still owe to the company can't be
used to pay off any of its obligations. So, if a company is not operating in the most efficient
manner (slow collection) it will show up in the working capital. This can be seen by comparing
the working capital from one period of time to another; slow collection may signal an underlying
problem in the company's operations.
DEFINITION
The definition of working capital is that it is the difference between an organizations current
assets and its current liabilities. Of more importance is its function which is primarily to support
the day-to-day financial operations of an organization, including the purchase of stock, the
payment of salaries, wages and other business expenses, and the financing of credit sales. Its a
measure of both a company's efficiency and its short-term financial health.
The better a company manages its working capital, the less the company needs to borrow. Even
companies with cash surpluses need to manage working capital to ensure that those surpluses are
invested in ways that will generate suitable returns for investors.
The most common definition of net working capital is the difference between the current
assets and the current liabilities.
The alternate definition of NWC is that portion of current assets which is financed with
long term funds. Since the current liabilities represent the sources of short term funds, as
long as current assets exceed current liabilities, the excess must be financed with long
term funds.
The net working capital, as a measure of liquidity is quite useful for internal control. The net
working capital helps in comparing the liquidity of the same firm over time.
Therefore:
Current Assets - Current Liabilities = Working Capital
A positive working capital means that the company is able to pay off its short-term liabilities. A
negative working capital means that a company currently is unable to meet its short-term
liabilities with its current assets (cash, accounts receivable, inventory).
Management must ensure that a business has sufficient working capital. Too little of the working
capital will result in cash flow problems highlighted by an organization exceeding its agreed
overdraft limit, failing to pay suppliers on time, and being unable to claim discounts for prompt
payment. In the long run, a business with insufficient working capital will be unable to meet its
current obligations and will be forced to cease trading even if it remains profitable on paper.
4
On the other hand, if an organization ties up too much of its resources in working capital it will
earn a lower than expected rate of return on capital employed. Again this is not a desirable
situation.
As it is said that working capital is the difference between the current assets and the current
liabilities, the management of the company has to manage their current assets and current
liabilities.
METHODOLOGY
The secondary data was collected from companys annual reports, various books and
Internet.
LIMITATIONS
Due to the busy schedule of the executives in the company, all the required primary data
could not be collected, which might affect the results of the study.
Recommendations of the study are only personal opinions. Hence the judgments may be
biased and could not be considered as ultimate and standard solutions.
Short period of time is one of the limitations, due to which a detailed study could not be
conducted on the topic
CHAPTER-II
REVIEW OF LITERATURE
If working capital dips too low, a business risks running out of cash. Even very profitable
businesses can run into trouble if they lose the ability to meet their short-term obligations.
Working capital financing can be used as a fast cash option to cushion the periods when the flow
is not ideal or readily available. Even when owners are meticulous in managing working capital,
finding the right levels to remain comfortable and competitive can be difficult.
Ratio analysis can be used to monitor overall trends in working capital and to identify
areas requiring closer management
When considering these techniques and strategies, departments need to recognize that each
department has a unique mix of working capital components. The emphasis that needs to be
placed on each component varies according to department.
Furthermore, working capital management is not an end in itself. It is an integral part of the
department's overall management. The needs of efficient working capital management must be
considered in relation to other aspects of the department's financial and non-financial
performance.
Working Capital Ratio
Current assets:
The term current assets refer to those assets which in the ordinary course of business can be, or
will be, converted into cash within one year without under going any diminution in the value and
without disrupting the operations of the firm. The major current assets are cash, cash equivalent,
marketable securities, accounts receivable, inventory, prepaid expenses and other short term
investments.
Debtors
Debtors are people or other firms who owe money to the firm. This will usually happen where
the firm has sold goods with a period of credit. The firm sells the good or service but allows the
purchaser a period of credit to pay - usually a month. During this month the purchaser owes the
firm the money and is therefore a debtor.
If the firm has debts these are considered an asset, because when the debtors pay the firm will
have converted the debt into cash in the bank. Because most debts are relatively short-term they
are considered current assets the amount of debtors a firm has depends on the line of business
they are in.
CASH
In a business the term cash may have a broader meaning. Cash is an asset to the business and is
usually considered to be one of the current assets. Under the heading cash on the balance sheet
may be included a number of items of varying liquidity. A small amount may actually be cash (or
readies) held in tills or as petty cash, but the majority is likely to be held in various bank
accounts. However, since money in current accounts rarely earns interest, if a business has a
surplus of cash it may invest it in various ways. Some will have to be in very liquid accounts so
that if necessary they can get at it very quickly, but some may be tied up for longer periods of
time.
Inventory
Inventory is also a current asset which can be either raw materials, finished items available for
sale, or goods in the process of being manufactured. Inventory is recorded as an asset on a
company's balance sheet.
10
Raw material
An item used to produce something else is called a "raw material." Some raw materials are easy
to spot, but many require detective work. Raw material of a company may be imported or
indigenous. Raw material should be managed in such a way that flow of production is not
interrupted. Reordering quantity and time should be estimated in a proper manner.
Work in process
An operation is composed of processes designed to add value by transforming inputs into useful
outputs. Inputs may be materials, labor, energy, and capital equipment. Outputs may be a
physical product (possibly used as an input to another process) or a service. Processes can have a
significant impact on the performance of a business, and process improvement can improve a
firm's competitiveness.
Finished Goods
Definition: Commodities that will not undergo further processing and are ready for sale to the
final demand user, either an individual consumer or business firm. This includes unprocessed
foods such as eggs and fresh vegetables, as well as processed foods such as bakery products and
meats.
This also includes durable goods such as automobiles, household furniture and appliances, and
Nondurable goods such as apparel and home heating oil.
Prepaid Expenses:
In the course of every day operations, businesses will have to pay for goods or services before
they actually receive the product Sometimes companies decide to prepay taxes, salaries, utility
bills, rent, or the interest on their debt. These would all be pooled together and put on the
balance sheet under the heading prepaid expenses. By their very nature, Prepaid Expenses are a
small part of the balance she
11
Current liabilities
The term current liabilities are those liabilities which are intended at the time of their inception,
to be paid in the ordinary course of business, within a year, out of the current assets or earnings
of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft
and outstanding expenses and other short term debts.
Creditors:
Creditors (Accounts Payable) are suppliers whose invoices for goods or services have been
processed but who have not yet been paid.
In other words, creditors are people to whom the company owes the money.
The term creditor is frequently used in the financial world, especially in reference to short term
loans, long term bonds, and mortgages.
The term creditor derives from the notion of credit. In modern America, credit refers to a rating
which indicates the ability of a borrower and likelihood to pay back his or her loan. In earlier
times, credit also referred to reputation or trustworthiness.
of services, the accumulated expenditures are converted into receivables and ultimately into cash
again. The average period of time intervening between the cash-to-cash conversion is the
operating cycle of the business. When the business has no clear operating cycle, or when the
operating cycle is shorter than 12 months, a 12-month period should be used to segregate current
assets.
This concept of the nature of current assets would exclude from that classification such resources
as 1) cash and claims to cash that are restricted as to withdrawal or other use for current
operations; 2) investments in securities (whether marketable or not) or advances that have been
made for the purpose of control, affiliation, or other business advantage; 3) cash surrender value
of life insurance; 4) depreciable assets; 5) long-term receivables; and 6) land.
For analytical purposes, specific recommendations of the FFSC are:
1. Principal debt due within 12 months, even on notes with monthly payments, should be
included as a current liability.
2. Capital leases should be accounted for on the balance sheet, with the current portion of
the principal due and the accrued interest shown as a current liability.
3. Cash value of life insurance should be a non-current asset.
4. Loans to family members should be treated based on the characteristics of the notes. (The
amount of these loans should be separately disclosed, if material.)
5. PIK certificates should be treated as current assets.
6. Retirement accounts should be shown as non-current assets.
The current portion of both deferred tax assets and deferred tax liabilities are to be recorded as
current assets or current liabilities.
13
A department also needs a system of internal controls to efficiently manage stocks and to ensure
that stock records provide reliable information.
Departmental financial reports show only the total inventory balance. Analysts from outside the
department can examine this balance by using ratio analysis or other techniques. However, this
gives only a limited assessment of inventory management and is not adequate for internal
management. Good financial management necessitates the careful analysis of individual
inventory lines.
Inventory Management involves the control of assets being produced for the purposes of sale in
the normal course of the company's operations. The goal of effective inventory management is to
minimize the total costs - direct and indirect - that are associated with holding inventories.
However, the importance of inventory management to the company depends upon the extent of
investment in inventory.
The task of inventory planning can be highly complex in manufacturing environments. At the
same time, it rests on fundamental principles. The system used for inventory must tie into the
operations of the firm. Inventory planning and management must be responsive to the needs of
14
the firm. The firm should design systems, including reports that allow it to make proper business
decisions
Inventory management is an important aspect of working capital management because
inventories themselves do not earn any revenue. Holding either too little or too much inventory
incurs costs.
Costs of carrying too much inventory are:
Warehousing costs;
Obsolescence;
Insurance.
Ordering costs:
- Freight;
- order administration;
- loss of quantity discounts.
Making frequent small orders can minimize carrying costs but this increases ordering costs and
the risk of stock-outs. Risk of stock-outs can be reduced by carrying "safety stocks" (at a cost)
and re-ordering ahead of time.
The best ordering strategy requires balancing the various cost factors to ensure the department
incurs minimum inventory costs. The optimum inventory position is known as the Economic
Reorder Quantity (ERQ). There are a number of mathematical models (of varying complexity)
for calculating ERQ.
15
Analytical review of inventories can help to identify areas where inventory management can be
improved. Slow moving items, continual stock outs, obsolescence, stock reconciliation problems
and excess spoilage are signals that stock lines need closer analysis and control.
However, it is important to keep an overall perspective. It is not cost-effective to closely manage
a large number of low value inventory lines, nor is it necessary. A usual feature of inventories is
that a small number of high value lines account for a large proportion of inventory value. The
"80/20" rule (PARETO) predicts that 80% of the total value of inventory is represented by only
20% of the number of inventory items. Those high value lines need reasonably close
management. The remaining 80% of inventory lines can be managed using "broad-brush"
strategies.
The overall management philosophy of an organization can affect the way in which inventory is
managed. For example, "Just in Time" (JIT) production management organizes production so
that finished goods are not produced until the customer needs them (minimizing finished goods
carrying costs), and raw materials are not accepted from suppliers until they are needed. (Large
organizations have the power to insist that suppliers hold stocks of raw materials and thereby
pass the carrying cost back to the supplier). Thus, JIT inventory strategies reduce bottlenecks and
stock holding costs.
In summary:
There is a trade-off to be made between carrying costs, ordering costs, and stock out
costs. This is represented in the Economic Reorder Quantity (ERQ) model.
2. Ordering Costs:
Any manufacturing organization has to purchase materials. In that event, the ordering costs refer
to the costs associated with the preparation of purchase requisition by the user department,
preparation of purchase order and follow-up measures taken by the purchase department,
transportation of materials ordered for, inspection and handling at the warehouse for storing. At
times even demurrage charges for not lifting the goods in time are included as part of ordering
costs. Read more about ordering costs
3. Carrying Costs:
These are the expenses of storing goods. Once the goods have been accepted, they become part
of the firm's inventories. These costs include insurance, rent/depreciation of warehouse, salaries
17
of storekeeper, his assistants and security personnel, financing cost of money locked-up in
inventories, obsolescence, spoilage and taxes.
CASH MANAGEMENT
Good cash management can have a major impact on overall working capital management.
The key elements of cash management are:
Cash forecasting;
Balance management;
Administration;
Internal control.
Cash Forecasting. Good cash management requires regular forecasts. In order for these to
be materially accurate, they must be based on information provided by those managers
responsible for the amounts and timing of expenditure. Capital expenditure and operating
18
expenditure must be taken into account. It is also necessary to collect information about
impending cash transactions from other financial systems, such as creditors and payroll.
Balance Management: Those responsible for balance management must make decisions
about how much cash should at any time be on call in the Departmental Bank Account and how
much should be on term deposit at the various terms available.
There are various types of mathematical model that can be used. One type is analogous to the
ERQ inventory model. Linear programming models have been developed for cash management,
subject to certain constraints. There are also more sophisticated techniques.
They cannot earn interest or reduce overdraft until they are banked;
Information about the existence and amounts of cash receipts is usually not available
until they are processed.
Where possible, cash floats (mainly petty cash and advances) should be avoided. If, on review,
the only reason that can be put forward for their existence is that "we've always had them", they
should be discontinued. There may be situations where they are useful, however. For example, it
may be desirable for peripheral parts of departments to meet urgent local needs from cash floats
rather than local bank accounts.
Internal Control. Cash and cash management is part of a department's overall internal
control system. The main internal cash control is invariably the bank reconciliation. This
provides assurance that the cash balances recorded in the accounting systems are consistent with
the actual bank balances. It requires regular clearing of reconciling items.
The key to successful cash management is milestones:
o
Cost control often depletes value (e.g. by using people as accounting chips)
CREDITORS MANAGEMENT
Creditors are the businesses or people who provide goods and services in credit terms. That is,
they allow us time to pay rather than paying in cash.
There are good reasons why we allow people to pay on credit even though literally it doesn't
make sense! If we allow people time to pay their bills, they are more likely to buy from your
business than from another business that doesn't give credit. The length of credit period allowed
is also a factor that can help a potential customer deciding whether to buy from a company or
not: the longer the better.
Creditors will need to optimize their credit control policies in exactly the same way as the
debtors' turnover ratio.
Average Creditors
(Cost of Sales/365)
As with the stock turnover ratio, creditor values relate to the costs of raw materials, goods and
services
DEBTORS MANAGEMENT
20
The objective of debtor management is to minimize the time-lapse between completion of sales
and receipt of payment. The costs of having debtors are:
Bad debts.
Offering cash discounts for early payment and/or imposing penalties for late payment;
Placing the responsibility for collecting the debt upon the center that made the sale;
Identifying long overdue balances and doubtful debts by regular analytical reviews;
- a reminder;
- a letter;
- cancellation of further credit;
- telephone calls;
- use of a collection agency;
- legal action.
To control the cost of credit allowed & to keep it at the minimum possible level.
365_____________
(in days)
The figure measures (in number of days) how long on average it has taken the firm to collect its
debts. The higher the figure the longer it has taken. However, the normal period for collecting
22
debts will differ between industries. For example, a figure of 10 days may sound very
impressive, but if this was the figure for a chain of supermarkets it would be high. Therefore no
debt is incurred and retail firms will tend to have very few debtors and a low debt collection
period. Firms who do a lot of business on credit though will have much higher debt collection
periods.
Debtors' Turnover
Debtors control is a vital aspect of working capital management. Many businesses need to sell
their goods on credit, otherwise they might find it difficult to survive if their competitors provide
such credit facilities; this could mean losing customers to the opposition.
The formula for debtors' turnover is:
Debtors' Turnover
Debtors management
credit who become the debtors of the company. At the end of the credit period the company gets
the cash from the debtors whom they pay to the creditors and the cycle goes on.
It is must for any company to have an ideal working capital cycle. It should neither be too long
nor too short. If the cycle is too long the funds get stuck up with the debtors and prompt payment
to the creditors cannot be made.
A simple working capital cycle may look something like:
24
Payment
CASH
CREDITORS
Collection
Supply
RAW MATERIALS
DEBTORS
Sales
Production
FINISHED GOODS
W.I.P
Value added conversion
A firm can draw funds from its banks within the maximum credit limit sanctioned. It can draw
funds in the following forms.
Overdrafts
Cash credit
Bills purchasing or discounting
Working capital loan
Letter of credit
TANDON COMMITTEE
Like many other activities of the banks, method and quantum of short-term finance
that can be granted to a corporate was mandated by the Reserve Bank of India till
1994. This control was exercised on the lines suggested by the recommendations of
a study group headed by Shri Prakash Tandon.
The study group headed by Shri Prakash Tandon, the then Chairman of Punjab
National Bank, was constituted by the RBI in July 1974 with eminent personalities
drawn from leading banks, financial institutions and a wide cross-section of the
Industry with a view to study the entire gamut of Bank's finance for working capital
and suggest ways for optimum utilization of Bank credit. This was the first
elaborate attempt by the central bank to organize the Bank credit. The report of this
group is widely known as Tandon Committee report.Most banks in India even
today continue to look at the needs of the corporates in the light of methodology
recommended by the Group.
As per the recommendations of Tandon Committee, the corporates should be
discouraged from accumulating too much of stocks of current assets and should
move towards very lean inventories and receivable levels. The committee even
suggested the maximum levels of Raw Material, Stock-in-process and Finished
26
As per Formula 1: PMM = 25% of [CA CL] and thereby PBF = 75% of [CA CL]
As per Formula 2: PMM = 25% of CA and thereby PBF = 75%[CA] CL
As is apparent Formula 2 requires a higher level of PMM as compared to Formula 1. Formula 2
is generally adopted in case of bank financing. In cases of sick units where the promoter is
unable to bring in PMM to the extent required under Formula 2, the difference in PMM between
Formulae 1 and 2 may be provided as a Working Capital Term Loan repayable in installments
over a period of time.
METHODS FOR DETERMINING PERMISSIBLE BANK BORROWINGS
1st method
2nd method
(a)
Current
assets(CA)
100
100
(b)
Current
liabilities(CL)
20
20
(c)
Working capital
gap (CA-CL)(ab)
80
80
(d)
Borrowers
contribution
20(25% of c)
25(25% 0f a)
(e)
Permissible bank
finance,(c-d)
60
55
28
Factors such as seasonality of raw materials or of demand may require a high level of
inventory being maintained by the company. Similarly, industry norms of credit allowed
to buyers determine the level of debtors of the company in the normal course of business.
Based on the level of activity decided and the unit cost and sales price projections, the
banks calculate at the annual sales and cost of production.
The quantum of current assets (CA) in the form of Raw Materials, Work-in-progress,
Finished goods and Receivables is estimated as a multiple of the average daily turnover.
The multiple for each of the current assets is determined generally based on the industry
norms.
The current liabilities (CL) in the form of credit availed by the business from its creditors
or on its manufacturing expenses are deducted from the current assets (CA) to arrive at
the Working Capital Requirement (WCR).
The issue of computation of working capital requirement has aroused considerable debate
and attention in this country over the past few decades. A directed credit approach was
adopted by the Reserve Bank of ensuring the flow of credit to the priority sectors for
fulfillment of the growth objectives laid down by the planners. Consequently, the
29
quantum of bank credit required for achieving the requisite growth in Industry was to be
assessed. Various committees such as the Tandon Committee and the Chore Committee
were constituted and studied the problem at length.
Norms were fixed regarding the quantum of various current assets for different industries
(as multiples of the average daily output) and the Maximum Permissible Bank Financing
(MPBF) was capped at a certain percentage of the working capital requirement thus
arrived at.
Some companies can generate cash so quickly they actually have a negative working capital.
This is generally true of companies in the restaurant business (McDonalds had a negative
working capital of $698.5 million between 1999 and 2000). Amazon.com is another example.
This happens because customers pay upfront and so rapidly, the business has no problems raising
cash. In these companies, products are delivered and sold to the customer before the company
ever pays for them.
A negative working capital is a sign of managerial efficiency in a business with low inventory
and accounts receivable (which means they operate on an almost strictly cash basis). In any
other situation, it is a sign a company may be facing bankruptcy or serious financial trouble
30
INDUSTRIAL PROFILE
31
The term "financial services" became more prevalent in the United States partly as a
result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of
companies operating in the U.S. financial services industry at that time to merge. [2]
Companies usually have two distinct approaches to this new type of business. One
approach would be a bank which simply buys an insurance company or aninvestment
bank, keeps the original brands of the acquired firm, and adds the acquisition to its
holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), nonfinancial services companies are permitted within the holding company. In this scenario,
each company still looks independent, and has its own customers, etc. In the other
style, a bank would simply create its own brokerage division or insurance division and
attempt to sell those products to its own existing customers, with incentives for
combining all things with one company.
India has a diversified financial sector undergoing rapid expansion, both in terms of
strong growth of existing financial services firms and new entities entering the market.
The sector comprises commercial banks, insurance companies, non-banking financial
companies, co-operatives, pension funds, mutual funds and other smaller financial
entities. The banking regulator has allowed new entities such as payments banks to be
created recently thereby adding to the types of entities operating in the sector. However,
the financial sector in India is predominantly a banking sector with commercial banks
accounting for more than 64 per cent of the total assets held by the financial system.
The Government of India has introduced several reforms to liberalise, regulate and
enhance this industry. The Government and Reserve Bank of India (RBI) have taken
various measures to facilitate easy access to finance for Micro, Small and Medium
32
Investment corpus in Indias pension sector is expected to cross US$ 1 trillion by 2025,
following the passage of the Pension Fund Regulatory and Development Authority
(PFRDA) Act 2013.
Investments/Developments
Thomas Cook India, an integrated travel and travel related financial services
company, has entered into a partnership with Western Union Business Solutions,
with a view to assist Small and Medium-sized Enterprises (SMEs) in India with
their trade payments across borders.
33
Kotak Mahindra Bank Limited has bought 19.9 per cent stake in Airtel M
Commerce Services Limited (AMSL) for Rs 98.38 crore (US$ 14.43 million) to set
up a payments bank. AMSL provides semi-closed prepaid instrument and offers
services under the Airtel Money brand name.
Tata Capital, the financial services arm of Tata Group, plans to raise Rs 2,000
crore (US$ 293.4 million) for its real estate fund, from State General Reserve
Fund (SGRF), the sovereign wealth fund of OmaN
Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA Life
Insurance Co Ltd, a joint venture owned by Tata Sons Ltd and AIA Group from 26
per cent to 49 per cent.
Canada-based Sun Life Financial Inc plans to increase its stake from 26 per cent
to 49 per cent in Birla Sun Life Insurance Co Ltd, a joint venture with Aditya Birla
Nuvo Ltd, through buying of shares worth Rs 1,664 crore (US$ 244.14 million).
Nippon Life Insurance, Japans second largest life insurance company, has
signed definitive agreements to invest Rs 2,265 crore (US$ 332.32 million) in
34
order to increase its stake in Reliance Life Insurance from 26 per cent to 49 per
cent.
The Securities and Exchange Board of India (SEBI) plans to gradually introduce
more commodity products and allow more participants in the commodity
derivatives market in India.
The Reserve Bank of India (RBI) has also given in-principle approval to 11
entities to open payment banks which are expected to result in widening the
reach of banking services and thereby improve the extent of financial inclusion as
envisaged by the government. The setting up of 11 new payments banks can
potentially free up Rs 1,400,000 crore (US$ 205.4 billion) per annum to fund the
infrastructure sector, as per a study by the State Bank of India.
Indias largest microfinance company Bandhan has set up Bandhan Bank Ltd,
banking and financial services company, post the receipt of license from RBI.
Government Initiatives
Several measures have been outlined in the Union Budget 2016-17 that aim at reviving
and accelerating investment which, inter alia, include fiscal consolidation with emphasis
on expenditure reforms and continuation of fiscal reforms with rationalization of tax
structure.
35
The Union Budget 2016-17 has allowed foreign investment in the insurance and
pension sectors in the automatic route up to 49 per cent subject to the extant guidelines
on Indian management and control to be verified by the regulators.
Service tax on service of life insurance business provided by way of annuity under the
National Pension System regulated by Pension Fund Regulatory and Development
Authority (PFRDA) being exempted, with effect from April 01, 2016.
Capital gains tax exemptions have been extended to merger of different plans within a
mutual fund scheme, which is expected to benefit investors in case of merger of mutual
fund schemes.
The Government of India plans to revise and improve few of its flagship schemes such
as the Atal Pension Yojana (APY), aimed at providing pension coverage, and Pradhan
Mantri Mudra Yojana, which funds small entrepreneurs, in Union Budget 2016-17 in
order to increase the number of beneficiaries covered by these schemes and overcome
shortcomings in implementation.
The Government has also announced several schemes to improve the extent of
financial inclusion. The Prime Minister of India has launched the Micro Unit
Development and Refinance Agency (MUDRA) to fund and promote Microfinance
Institutions (MFIs), which would in turn provide loans to small and vulnerable sections of
the business community. Financial Services Secretary Mr Hasmukh Adhia has
announced that the ministry will launch a campaign for loans under Pradhan Mantri
Mudra Yojana (PMMY) in order to double loan disbursement to the small business
sector to over Rs 100,000 crore (US$ 14.67 billion).
Government of Indias Jan Dhan initiative for financial inclusion is gaining momentum.
Under Pradhan Mantri Jan DhanYojna (PMJDY), 210 million accounts# have been
opened and 174.6 million RuPay debit cards have been issued. Government of India
aims to extend insurance, pension and credit facilities to those excluded from these
benefits under the Pradhan Mantri Jan Dhan Yojana (PMJDY). The Union Cabinet
Minister has also approved the Pradhan Mantri Suraksha Bima Yojana which will
provide affordable personal accident and life cover to a vast population.
36
The Union Cabinet has approved 100 per cent Foreign Direct Investment (FDI) under
the automatic route for non-bank entities that operate White Label Automated Teller
Machine (WLA), subject to certain conditions.
Minister of Finance Mr Arun Jaitley has formally declared the merger of Forward
Markets Commission (FMC) with Securities and Exchange Board of India (SEBI), which
help convergence of regulations in the commodities and equity derivatives markets.
The Insurance Regulatory and Development Authority of India (IRDA), as part of its
endeavour to increase insurance sector growth, has allowed a new distribution avenue
called the point of sale person, who will be allowed to sell simple standardized
insurance products in the non-life and health insurance segments, which are largely
pre-underwritten.
Road Ahead
India is today one of the most vibrant global economies, on the back of robust banking
and insurance sectors. The country is projected to become the fifth largest banking
sector globally by 2020, as per a joint report by KPMG-Confederation of Indian Industry
(CII). The report also expects bank credit to grow at a Compound Annual Growth Rate
(CAGR) of 17 per cent in the medium term leading to better credit penetration. Life
Insurance Council, the industry body of life insurers in the country also projects a CAGR
of 1215 per cent over the next few years for the financial services segment.
Also, the relaxation of foreign investment rules has received a positive response from
the insurance sector, with many companies announcing plans to increase their stakes in
joint ventures with Indian companies. Over the coming quarters there could be a series
of joint venture deals between global insurance giants and local players. The relaxation
in the foreign direct investment (FDI) limit to 49 per cent can result in additional
investments up to Rs 60,000 crore (US$8.81 billion).
37
CHAPTER-III
38
COMPANY PROFILE
CORPORATE PROFILE
Universal Financials, LLC, through its Tax wing 'MytaxFilings' is specialized in offering
Tax Planning, Preparation and Filing of US Individual Income Tax Return services for
US Citizens, Green card Holders, Expatriates from other countries who have come to
the US on various reasons such as Employment and/or Study purposes including the
Non-Resident Aliens who have a requirement of filing the Tax Returns within the United
States of America.
Our Tax Filing Service include Preparation & Filing of Federal Returns such as
Form 1040/1040NR along with all applicable Schedules and Supporting.
All Taxable State Returns.
Amendment Returns (Form 1040X).
One of the unique features of our Taxation Service includes our thorough knowledge on
different Tax Laws and the identification of various Tax Planning tools for the benefit of
39
our clients. Most of our Indian clients who have been to the United States on
Employment and Student Visas such as H1, H1B, L1 & F1 Visas have benefitted much
from our Tax Planning Service. We have also gained adequate expertise in offering
customized long term tax planning solutions including Retirement Planning and Estate
Planning
to
US
Citizens
and
Green
Card
holders.
Our expertise, dedication and commitment towards offering unique, flawless and
incessant Tax Planning and Filing Services is clearly demonstrated from our initiative of
setting up a separate Tax wing by name 'MytaxFilings'. We have a dedicated team of
Tax Researchers who are always involved in conducting a detailed research on various
Tax Laws and interpreting the same for applicability to our clients' scenario. Our
constant knowledge upgradation through incessant research makes the tax filing
process simple and quick. Our tailor-made process with continuous improvement is
facilitating us to provide the Quality services to our esteemed client like you. In addition
to this, our exceptional customer service and competitive price makes us unique.
Our Tax Filing Service include Preparation & Filing of Federal Returns such as
One of the unique features of our Taxation Service includes our thorough knowledge on
different Tax Laws and the identification of various Tax Planning tools for the benefit of
our clients. Most of our Indian clients who have been to the United States on
Employment and Student Visas such as H1, H1B, L1 & F1 Visas have benefitted much
40
from our Tax Planning Service. We have also gained adequate expertise in offering
customized long term tax planning solutions including Retirement Planning and Estate
Planning to US Citizens and Green Card holders.
41
CHAPTER-IV
DATA ANALYSIS
& INTERPRETATION
42
Curren
t Assets
Growth
Rate (%)
Current
Liabilities
Net W.C
Growth of
W.C (%)
2010-11
150097
7
100
862668
100
638301
100
2011-12
168873
3
112.5
1029208
119
659525
103
2012-13
230760
4
153.74
1155154
134
1152450
180
2013-14
2150110
143.24
1359165
157
790945
123
43
2014-15
2011272
133.99
1470284
170
540988
84
1
0.9
0.8
0.7
0.6
#REF!
0.5
#REF!
0.4
#REF!
0.3
0.2
0.1
0
2010-11
2011-12
2012-13
2013-14
2014-15
44
Networking Capital
Ratio
2010-11
2648791
638309
4.15
2011-12
3423153
659525
5.19
2012-13
4225506
1152450
3.69
2013-14
3901375
790945
4.93
2014-15
4748354
540988
8.77
Ratio
9
8
7
6
5
4
3
2
1
0
2010-11
2011-12
2012-13
2013-14
2014-15
Turnover Ratio:
45
Debtors Turnover Ratio expresses the relationship between debtors and sales. A high Debtors
Turnover Ratio or low Debt collection period is indicative of sound credit management policy.
Table
shows
Debtors
Turnover
Ratio
of
UNIVERSAL
Avg. Debt
Ratio
2010-11
2648791
567931
4.67
2011-12
3043448
682289
4.46
2012-13
3925325
612590
6.24
2013-14
3614471
442498
8.17
2014-15
4417677
47842
9.34
46
Ratio
5
4
3
2
1
0
From the above table, it is observed that the UNIVERSAL FINANCIALSs debtors turnover
ratio shows a good sigh. The company noted a maximum ratio of 9.34 in the year 2014-15 and
the maximum ratio of 4.46 in the year of 2010-11
If we observed the above table the ratio is increasing from 4.46 in the year 2010-11to 9.34 in the
year 2013-14in the year but it is decreased to 4.46 in the year 2010-11. It shows a good sign for
the company.
47
Current Ratio:
It is the ratio of the current assets current liabilities this ratio is used to know the companys
ability to meet its current obligations. The standard norm for the current ratio is 2:1
Current Assets
Current Liabilities
Ratio
2010-11
1500977
862668
1.74
2011-12
1688733
1029208
1.64
2012-13
2307604
1155154
1.99
2013-14
2150110
1359165
1.54
2014-15
2013547
1427828
1.40
48
7
6
5
4
3
2
1
0
1
49
Quick Ratio:
Quick ratio is relation between quick assets and current liabilities. The term quick assets, which
can be converted into cash with a short notice. This category also includes cash bank balances
short term investments and receivables.
Current Assets
Current Liabilities
Ratio
2010-11
870459
862668
1.01
2011-12
923353
1029208
0.89
2012-13
1056852
1155154
0.91
2013-14
1005863
1359165
0.74
2014-15
1082902
1427828
0.76
50
quick Ratio
1.2
1
0.8
ratio 0.6
Ratio
0.4
0.2
0
years
It is observed from the table that the UNIVERSAL FINANCIALSs Quick Ratio is satisfactory.
The company has noted a maximum ratio of 1.01 in the year of 2012-13 2013-14.
Except the 2010-11 year, the remaining is below the standard of the norm 1:1. But we observed
the ratio of the company, it is decreasing gradually. so it is a bad sign for the company.
51
Particulars
20010 11
2011-12
2012-13
2013-14
2014-15
Avg.
630518
765380
1250752
1144247
926645
48.16
Inventory
(42%)
(45.32%)
(54.2%)
(53.41%)
(46.07%)
Sundry
708107
656472
568707
316288
523360
(47.17%)
(38.87%)
(24.64%)
(14.71%)
(23.02%)
56675
35502
25034
58827
17636
(3.77%)
(2.1%)
(1.08%)
(2.74%)
(2.74%)
105677
29032
93380
192467
204545
(7.04%)
(1.71%)
(4.04%)
(8.95%)
(10.62%)
--
202347
369731
438281
339086
1500977
1688744
2307604
2150110
2011272
(100%)
(100%)
(100%)
(100%)
(100%)
30.17
Debtors
Loans &
4.11
6.38
Advances
Other current
12.94
Assets
Total
52
4000000
3500000
3000000
2500000
100 Rs
2000000 Total
Inventory
1500000
1000000
500000
-500000
years
53
54
Statements of profit & loss for the year ended Dec 31, 2010-11
(All amount in Cr of rupees)
Schedul
e
PARTICULARS
2009-10
2010-11
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
Add: service Incomes
1,983,391
286,365
1,697,026
224,878
1,921,904
13
125,693
2,047,597
3,015,714
366,923
2,648,791
173,847
2,822,638
114,172
2,936,810
Material costs
decrease/increase in stock
excise duty on stocks, scrap sales
etc.,
employee costs
manufacturing and other expenses
Depreciation
Interest
miscellaneous expenditure written off
14 1,232,971
15
(93,224)
1,737,661
(28,949)
29,236
426,585
314,637
157,225
24,758
5,300
32,655
482,580
382,604
143,832
25,793
2,759
TOTAL(B)
2,097,488
2,778,935
(49,891)
--------
157,875
----(46,315)
other incomes
TOTAL(A)
EXPENDITURES
16
17
18
55
(49,891)
(420,294)
111,560
(470,185)
(470,185)
(358,625)
5.60
Statements of profit & loss for the year ended Dec 31, 2011-12
(All amounts in Cr of rupees)
Schedul
e
PARTICULARS
2010-11
2011-12
3,015,71
4
366,923
2,648,79
1
173,847
2,822,63
8
114,172
2,936,81
0
3,423,15
3
379,705
3,043,44
8
102,182
3,145,63
0
258,985
3,404,61
5
1,737,66
1
(28,949)
2,219,60
1
(59,818)
32,655
482,580
382,604
143,832
25,793
2,759
1,933
588,770
378,026
174,202
44,428
----
2,778,93
3,347,14
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
Add: service Incomes
other incomes
13
TOTAL(A)
EXPENDITURES
Material costs
decrease/increase in stock
excise duty on stocks, scrap sales
etc.,
employee costs
manufacturing and other expenses
Depreciation
Interest
miscellaneous expenditure written off
TOTAL(B)
14
15
16
17
18
56
157,875
57,473
----(46,315)
(86)
(40,971)
111,560
(470,185
)
16,588
(358,625
)
(358,625
)
5.60
(342,037
)
0.80
Statements of profit & loss for the year ended Dec 31, 2012-13
(All amounts in Cr of rupees)
Schedul
e
PARTICULARS
2011-12
2012-13
3,423,15
3
379,705
3,043,44
8
102,182
3,145,63
0
258,985
3,404,61
5
4,255,50
6
330,181
3,925,32
5
66,668
3,991,99
3
426,626
4,418,61
9
2,219,60
3,387,64
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
Add: service Incomes
other incomes
13
TOTAL(A)
EXPENDITURES
Material costs
14
57
1
-59,818
5
-315,934
1,933
588,770
378,026
174,202
44,428
-----
17,657
668,065
446,527
208,101
36,532
------
3,347,14
2
4,448,59
3
57,473
(29,974)
(86)
(40,971)
-----(3,779)
16,588
(358,625
)
(33,753)
(342,037
)
(342,037
)
0.80
(375,790
)
1.55
decrease/increase in stock
excise duty on stocks, scrap sales
etc.,
employee costs
manufacturing and other expenses
Depreciation
Interest
miscellaneous expenditure written off
15
16
17
18
TOTAL(B)
Profit before tax(A-B)
TAXATION
current(Net of excess provisions of
earlier year written back
rs.5086(2006 nil)
Deferred
Statements of profit & loss for the year ended Dec 31, 2013-14
(All amounts in Cr of rupees)
PARTICULARS
Schedul
e
2012-13
2013-14
4,255,50
6
330,181
3,925,32
5
66,668
3,903,00
5
288,534
3,614,47
1
67,362
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
Add: service Incomes
58
13
3,991,99
3
426,626
4,418,61
9
3,681,83
3
493,559
4,175,39
2
Material costs
decrease/increase in stock
excise duty on stocks, scrap sales etc.,
14
15
3,387,64
5
-315,934
17,657
employee costs
manufacturing and other expenses
Depreciation
Interest
miscellaneous expenditure written off
16
17
668,065
446,527
208,101
36,532
2,828,10
4
186,135
10,414
612,4
67
508,751
240,224
69,032
4,448,59
3
4,455,12
7
(29,974)
(279,735
)
------(3,779)
(4000)
(8056)
----
(33,753)
(342,037
)
(291,791
)
(375,790
)
(375,790
)
1.55
(667,581
)
13.25
other incomes
TOTAL(A)
EXPENDITURES
18
TOTAL(B)
Statements of profit & loss for the year ended Dec 31, 2014-15
(All amounts in Cr of rupees)
PARTICULARS
Schedul
e
2013-14
2014-15
59
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
Add: service Incomes
other incomes
13
TOTAL(A)
3,903,00
5
288,534
3,614,47
1
67,362
3,681,83
3
493,559
4,175,39
2
4,748,354
330,678
4,417,676
37,428
4,455,104
386,261
4,841,365
EXPENDITURES
Material costs
decrease/increase in stock
excise duty on stocks, scrap sales etc.,
employee costs
manufacturing and other expenses
Depreciation
Interest
miscellaneous expenditure written off
TOTAL(B)
Profit before tax(A-B)
Provision for taxation
current taxation
fringe benefit tax
14
15
16
17
18
2,828,10
4
186,135
10,414
612,467
508,751
240,224
69,032
3,722,053
88,800
25,085
685,159
466,859
292,689
133,955
4,455,12
7
5,414,600
(279,735
)
(573,235
)
(4000)
(8056)
---(7,355)
(291,791
)
(375,790
)
(667,581
)
13.25
(580,590)
(667,581)
(1,248,171
)
26.37
60
Balance sheet
Balance sheet is a statement of financial position of a business at a specified moment of
time. It represents all assets own by the business at a particular moment of time and the claim of
the owners and outsiders against those assets at that time. It in a way of the financial condition of
the business at that time.
The important distinct an income statement and balance sheet is that the income statement is for
a period while balance which is for a particular date. Income statement is therefore a flow report,
as contrasted with the balance sheet which is a static report
61
201011
Amou
nt
Inc/De
c
Amou
nt
19905
34
21864
7
19905
34
0
36239 14374
4
7
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Reserves and Surplus
Advance share Application Amount
2209
181
(A)
Loan Funds
16653
9
Secured Loans
Unsecured Loans
(B)
(A +B) = ( C )
APPLICATION OF FUNDS
Fixed Assets
0
1665
39
2375
720
1437
47
20130
9 34370 25
18000 18000
0
0
0
38090 2143 12
9
70
9
27338 3581
37
17 15
3693
19786
28
58883
6
13897
92
24863
9
856
1485
579
0
16384
31
-856
1568
52 10
1040
1040
97432
0
0
9743 10
2
0
Gross block
LESS: Accumulated Depreciation
Net Block
(D)
Investments
(E)
Deferred Tax Asset-Net
(F)
18946
4
44631
3
14483
30
23529
28
0
6
6
7
83985
14252
3
58538
21224
6
4
32
4
58
3
10
10
0
62
56163
0
38777
1
63051
8 68888
70810 32033
7
6
24837
10314
0
56675 31838
10567
7
2537
1077
378
61449
8
46723
6612
21
4170
53
2759
4701
85
2375
720
15009
77
12
83
12
8
2
4235
99 39
80914 19464
5
7 32
53523
6800 15
86266 2014
8
47 30
63830 2212
9
56 53
10
0 -2759
0
35862 1115
5
60 24
27338 3581
15
37
17
Interpretation (2010-11):
1. The comparative balance sheet of the company during the year 2010-11 records that the
current assets have increased by 423599 Cr i.e.,39%
63
2. Because of increase in current assets we can say that the short term solvency of the
company is good.
3. The current liabilities have increased by 201447 Cr i.e.,30.4%
4. Fixed assets have decreased by 153708 Cr i.e.,10%
5. The shareholders funds of the company have increased when compared to previous year.
So we can say that long-term solvency of the company is satisfactory.
6. There is increase in working capital of 222152 Cr when compared to the previous year.
So we can say that the financial position of the company is good.
201112
Amou
nt
Inc/De
c
Amou
nt
19905
34
36239
4
21019
95
36239
4
11146
1
2352
928
2464
389
1114
61
20130
9
18000
13617
9
29310
64730
11310
32
63
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Reserves and Surplus
Advance share Application
Amount
(A)
Loan Funds
Secured Loans
Unsecured Loans
64
(B)
(A +B) =
(C)
0
38090
9
27338
37
1
4292
80
2893
669
19786
28
58883
6
13897
92
24863
9
16384
31
24018
84
76365
2
16382
32
19737
4
18356
06
0
1835
606
1
4837
1 13
1598
32
6
APPLICATION OF FUNDS
Fixed Assets
Gross block
LESS: Accumulated Depreciation
Net Block
ADD: Capital Work in progress
(including Capital Advances), Net
Fixed Assets held for disposal
(D)
Investments
(E)
Deferred Tax Asset-Net
(F)
Current Assets, Loans and
Advances
16384
31
1040
97432
42325
6 21
17481
6 30
24844
0 18
51265 21
19715
5 12
0
0
1971
75 12
40 -1000 96
5646 4097
1
1 42
63051
8
70810
7
76538
0
65647
2
50675
10567
7
0
15009
77
35502
23137
9
0
1688
733
Current Liabilities
80914
5
Provisions
53523
90402
5
12518
3
Inventories
Sundry Debtors
Cash and bank balances
Loan and Advances
other current Assets
(G)
Less: Current Liabilities and
Provisions
13486
2 21
51635 -7
15173 31
12570 11
2
8
0
0
1877
56 13
94880
71660
12
13
4
65
(H)
Net Current Assets
(G - H) = (I)
Miscellaneous Expenditure
(written off)
Profit and Loss Account
(J)
Total
(D+E+F+I+J)
86266
8
63830
9
1029
208
6595
25
1665
40 19
2121
6
3
35862
5
27338
37
3420
37
2893
669
1658
8
1598
32
-5
6
Interpretation (2011-12)
1. The comparative balance sheet of the company during the years 2011-12 records that the
current assets have increased by 187756 Cr i.e.,13%
2. Because of increase in current assets we can say that the short term solvency of the
company is good.
3. The current liabilities have increased by 166540 Cr i.e.,19%
4. Fixed assets have decreased by 197175 Cr i.e.,12%
5. The shareholders funds of the company have increased when compared to previous year.
So we can say that long-term solvency of the company is satisfactory.
6. There is an increase in working capital of 212216 Cr when compared to the previous
year. So we can say that the financial position of the company is good.
66
201213
Amou
nt
Inc/De
c
Amou
nt
21019
95
36239
4
22018
61
36239
4
99866
2464
389
2564
255
13617
9
29310
1
4292
80
2893
669
32440
7
54987
4
8742
81
3438
536
18822 13
8
8
25677
3 88
4450 10
01
4
5448
67 19
24018
84
76365
2
16382
32
27337
11
96481
9
17688
92
33182
7
20116
7
13066
0
10977
3
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Reserves and Surplus
Advance share Application
Amount
(A)
Loan Funds
Secured Loans
Unsecured Loans
(B)
(A +B) =
(C)
0
9986
6
APPLICATION OF FUNDS
Fixed Assets
Gross block
LESS: Accumulated
Depreciation
Net Block
ADD: Capital Work in progress
(including Capital Advances),
Net
Fixed Assets held for disposal
(D)
Investments
(E)
Deferred Tax Asset-Net
19737
4
18356
06
0
1835
606
40
5646
87601
18564
93
1081
1857
574
14
26
8
56
20887
1081
2196
8
1
1
40
0
5268 -3779
0
7
67
(F)
Current Assets, Loans and
Advances
Inventories
Sundry Debtors
Cash and bank balances
Loan and Advances
other current Assets
(G)
Less: Current Liabilities and
Provisions
Current Liabilities
Provisions
(H)
Net Current Assets
(G
- H) = (I)
Miscellaneous Expenditure
(written off)
Profit and Loss Account
(J)
Total
(D+E+F+I+J)
76538
0
65647
2
12507
52
56870
7
35502
20234
7
25034
36973
1
48537
2
87765
10468
16738
4
29032
1688
733
93380
2307
604
64348
6188
71 37
90402
5
12518
3
1029
208
6595
25
10010
83
15407
1
1155
154
1152
450
3420
37
2893
669
3757
90
3438
536
97058
63
13
29
83
22
2
11
28888 23
1259
46 12
4929
25 75
3375
3 10
5448
19
67
Interpretation (2012-13)
1. The comparative balance sheet of the company during the years 2012-13 records that the
current assets have increased by 618871 Cr i.e.,37%
2. Because of increase in current assets we can say that the short term solvency of the
company is good.
3. The current liabilities have increased by 125946 Cr i.e.,12%
4. Fixed assets have increased by 21968 Cr.
68
5. The shareholders funds of the company have increased when compared to previous year.
So we can say that long-term solvency of the company is satisfactory.
6. There is increase in working capital of 492925 Cr when compared to the previous year.
So we can say that the financial position of the company is good.
69
Advances
10650
5
25241
9
Inventories
12507
52
11442
47
Sundry Debtors
56870
7
31628
8
25034
93380
36973
1
58827 33793
19246
7 99087
43828
1 68550
2150 1574
110
94
(D+E+F+I+J)
2307
604
10010
83
15407
1
1155
154
1152
450
3757
90
3438
536
-9
44
13
5
10
6
19
-7
11920 19092
12
9 19
16715
3 13082
8
1359 2040
165
11 18
7909 3615
45
05 31
6675
81
3952
358
2917
91 78
5138
15
22
Interpretation (2013-14):
1. The comparative balance sheet of the company during the years 2013-14 records that the
current assets have decreased by 157494 Cr i.e.,7%
2. Because of decrease in current assets we can say that the short term solvency of the
company is not good.
71
201415
Amou
nt
2201
861
3623
94
22018
61
36239
4
Inc/D
ec
Amo
unt
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Reserves and Surplus
Advance share Application Amount
(A)
2564 25642
255
55
72
Loan Funds
3845 31862
09
1
1003 12026
594
81
1388 15013
103
02
3952 41455
358
56
Secured Loans
Unsecured Loans
(B)
(A +B) = ( C )
APPLICATION OF FUNDS
Fixed Assets
3441
023
1187
425
36680
21
14772
90
Net Block
2253
598
21907
32
1875
12
70620
Gross block
(E)
2441 22613
110
52
40
40
5268
2 52682
Sundry Debtors
1144
247
3162
88
92664
5
62939
6
5882
7
17637
Inventories
4382 23132
81
5
1924 20454
67
4
2150 20135
6588
8
2590
87
1931
99
1931
98
1
7
2
6
1
4
5
2269
98 7
2898 2
65 4
6286
6 -3
1168 6
92 2
0
1797
58
0
7
0
2176
02
3131
08
4119
0
2069
56
1207
7
-
1
9
9
9
7
0
4
7
73
6
-
110
47
1405
63
Current Liabilities
Provisions
(H)
Net Current Assets
(G - H) = (I)
Miscellaneous Expenditure (written off)
Profit and Loss Account
Total
(D+E+F+I+J)
(J)
7909 58172
45
0
3350
3
3516
0
6866
3
2092
25
6675 12497
81
02
3952 41455
358
56
5821
81
1931
98
3
2
1
5
2
6
8
7
5
Interpretation (2014-15)
1. The comparative balance sheet of the company during the years 2014-15 records that the
current assets have decreased by -157497 Cr i.e.,7%
2. Because of decrease in current assets we can say that the short term solvency of the
3.
4.
5.
6.
7.
74
CHAPTER-V
FINDINGS, SUGGESTIONS
& CONCLUSION
75
FINDINGS
1. The UNIVERSAL FINANCIALSs net working capital is satisfactory between the years
2012-13 since it shows increasing trend ; but after that it is in declining position
2. The current ratio of UNIVERSAL FINANCIALS is satisfactory during the period of
study 2010-11 to 2012-13. It is increased from 1.74 to 1.99 but after that it is declining.
3. The average quick ratio of UNIVERSAL FINANCIALS is not good though the quick
ratio is showing maximum value of 0.91 in the year 2011-12 and then it is declining to be
deal
4. Fixed assets turnover ratio of UNIVERSAL FINANCIALS increased from .84 times to
1.95. The company has to maintain this.
5. Inventory turnover ratio of UNIVERSAL FINANCIALS is also increased gradually,
without any fit falls up to 2011-12. But in the year 2011-12 it is declined to 3.02, and
again it has increased to 4.02 in the year 2014-15. Good inventory management is good
sign for efficient management
6. Total Assets turnover ratio of UNIVERSAL FINANCIALS is not satisfactory because it
is always below one, except in the year 2014-15 having a value of 1.03
7. Return on investment is not satisfactory. This indicates that the companys funds are not
being utilized in a better way.
8. Return on Net worth is not satisfactory since it is decreased from 4.95 to 0.69 in the year
2011-12, -1.34 in the year 2012-13, -11.61 in the year 2012-13 and -23.1 in the year
2014-15
9. The UNIVERSAL FINANCIALSS Net Profit Ratio is showing negative profit in the
year 2012-13. These event is an expected one because since from the previous two years
it is showing the decline stage in Net Profit Ratio
76
SUGGESTIONS
77
CONCLUSION
1
The company had taken secured loans in the assessment year 2010-2014.
The company has repayment total unsecured loans in the assessment year 2012-2014.
Equipment required for profits under constructions but not installed by end of year is
shown under capital work in progress.
Depreciation is calculated from year to year. That is already given in the balance sheet.
BIBLIOGRAPY
78
BOOKS
Financial Management Written By M.Y. Khan & P.K. Jain
Financial Management Written By Prasanna Chandra
Financial Management Written By I. M. Pandey
Financial Management Written By S. N. Maheswari
WEBSITES
www.UNIVERSAL FINANCIALS.com
www.investopedia.com
www.valuebasedmanagement.net
79