Beruflich Dokumente
Kultur Dokumente
ABSTRACT
The key function of the financial management is the selection of the most
profitable assortment of capital investment and it is the most important area of decision
making of the financial manger because any action taken by the manger in this area
affects the working and the profitability of the firm for many years to come.
Further, it caters information about cash inflows and outflows of various years.
Thus the comparison provides clear idea about investments and return on the same which
can be helpful for the years to come.
The analyses have been done by the data collected from income and expenditure
statements and separate investment report. Capital budgeting techniques like Net Present
Value method, Rate of Return method and Payback Period method are used to analyze the
collected data. Some other forecasting tools like standard deviation, Correlation analysis
and Trend analysis are used in this study
1
TABLE OF CONTENTS
NO.
I INTRODUCTION
II COMPANY PROFILE
IV RESEARCH METHODOLOGY
VI FINDINGS
VII SUGGESTIONS
VIII CONCLUSION
IX ANNEXURE
BIBLIOGRAPHY
BALANCESHEET
2
TABLE CONTENTS
3
NET PRESENT VALUE
4 PROFITABILITY INDEX
3
CHART CONTENTS
4
CHAPTER I
In today's rapidly evolving markets, the need for companies to react swiftly to the
changing environment is essential. Reporting financial numbers alone is no longer
acceptable. Reports should also include analyses and forecasts. Optimally, they should
lead the way forward to achieve pre-defined goals.
Purpose for reporting is to communicate messages to specific audiences, but more
importantly, the performance reports need to induce change and mark the start of
corrective actions to ensure targets are achieved. Business analysis and predictive
modelling solutions help companies to foresee the future, and thus support today's
business decisions, closing the performance management cycle.
Making the right decision in such an atmosphere is easier when there is a clear view on
what the future will bring. The future, however, may be predicted only from the moment
when a good understanding of the past has been achieved; fast-changing business
conditions call for agile planning, budgeting and forecasting.
5
Forecasts must integrate both the external and internal drivers of the business as
well as the financial results.
Absolute forecast accuracy is less important than insight about how current
decisions and future events will interact to shape performance.
The number is less important than the assumptions and variables that support it -
those are the things that should be tracked to provide advance warning of opportunities or
threats.
Detail does not equal accuracy with respect to forecasts -desire for detail should
match predictive capability.
Best practice demonstrates that annual budgets may serve as a basis for estimating the
required resources to deliver income and cost estimates within manageable ranges. These
budgets are updated every quarter for the quarter ahead to reflect the best current
information. The quarterly budgets are then further supported by 12-month rolling
forecasts, which allow adapting resource allocations to volatility in the market.
Capital Budgeting
Facing with limited sources of capital, management of any firm should carefully
decide whether a particular project is economically acceptable. In the case of more than
one project, management must identify a project that will contribute more profits and
more value to the firm. The project work entitled “A study on capital budgeting with
special reference to Bimetal Bearing Limited”, Coimbatore, aims to analyze the capital
budgeting process to be adopted by the company in order to take better investment
decisions for various business projects.
6
Capital Budgeting Process
b) Preliminary Screening
The list of the promising investment opportunities identified from various sources
is first subjected to an analysis within the governmental regulatory framework to obtain a
set of feasible investment opportunities that merit further considerations. Since it will be a
tedious task to undertake a detailed appraisal of each of these opportunities the list has to
be further narrowed down by evaluating the investments against certain specific criteria
and selecting only those investments that are prima facie desirable.
The criteria that are typically applied for the preliminary evaluation are
7
Reasonableness of cost.
Risk inherent in the project.
c) Feasibility study
Once a project opportunity is conceived and it is considered acceptable after
preliminary screening, a detailed feasibility study has to be undertaken covering all
marketing, technical financial, and economic aspects of the project. A suitable capital
budgeting technique should be followed. The study should also concentrate on Estimating
market size and demand, Product and manufacturing process, Risk and return, Evaluating
from the view point of society.
The study in the form of detailed project report will contain fairly specific
estimates of project costs, means of financial schedules of implementation, estimates of
profitability based on projected sales and production costs, estimates of cost and benefit
streams in terms of cash flows, debt servicing capability of the project and social
profitability. The ultimate decision whether to go in for the project or not and how to
finance it is undertaken after this study which discloses whether the project is technically
feasible, economically viable and financially sound.
d) Implementation
The implementation of a project that is translating the investment proposal into a
concrete project is a highly complicated, time consuming, tension fraught and risky affair.
The various stages of implementation are:
Preparation of blue prints and designs for project and plant engineering,
selection of machines and equipment.
Negotiating for project finance with various financial institutions, entering into
technical knowhow agreements and if necessary, entering into contracts for
construction of buildings, supply of machinery, marketing of the company’s
products etc.
Actual construction of buildings and other civil works, erection and
installation of machinery and equipment.
Training of engineers, technicians, workers
Commissioning of plant and trial run.
8
e) Performance Review
Once the project has been implemented, the trial run is successful, and
commercial production started, a review of the actual performance with the performance
projected in the feasibility study is required. This is an integral and vital part of project
management because, it throws light on how realistic were the assumptions underlying
the project and it is a valuable tool for decision-making in future.
Capital Budgeting
• Capital budgeting uses the concept of present value to select the projects.
• Capital budgeting uses tools such as payback period, net present value, internal rate
of return, profitability index to select projects.
• Payback Period
• Profitability Index
9
CHAPTER II
INDUSTRY PROFILE
Welding is a precise, reliable, cost-effective, and high-tech method for joining materials
in manufacturing industries. In fact, no other technique is so widely used by
manufacturers, in India, to join metals and alloys efficiently to add value to their
products. Most of the familiar objects in modern society, right from buildings and
bridges, to vehicles and medical devices, could not be made without the use of welding.
Welding today is applied to a wide variety of materials and products, using such
advanced technologies as lasers and plasma arcs. The future of welding holds even
greater promise as methods are devised for joining dissimilar and non-metallic materials,
and for creating products of innovative shapes and designs. Welding operation is most
critical operation of any manufacturing process, and quality of welding has direct impact
on quality of final product. Joining technology is an integral part of the manufacturing
process and effort has been spent to develop and demonstrate the suitability of various
processes for application into both design and structural fabrication. Welding is the core
of modern technology and it has gone through a complete evolution today, following the
utmost precedence that machines have garnered in our lives. There is a rapid development
in this industry and new methods are being discovered and added day by day. Welding is
an ever growing discipline which presents challenges and work opportunities for new
generations of engineers. In India, welding contributes significantly to the GDP in several
ways, such as welding intensive industries, auxiliary products, complementary goods,
employment, and user industries.
The Indian welding industry was dominated by low technology and very rare
technological innovation. However, in recent years, the demand of automatic and semi
automatic welding production systems are rising. Simultaneously, low budgets and
recession have marked the ongoing popularity of manual, economical techniques.
Increased FDI equity inflow in India has contributed to the rise in projects in automotive,
offshore activities, oil and gas sector, ship building and heavy machinery industries.
Many foreign automobile companies have set up their manufacturing units in India. This
has positively affected the rise of consumables and welding equipment. However,
economic crisis has impacted the flow of FDI in India which may result in decline in
demand of welding equipment over the short period. There has been an overall growth of
10
about 10% in steel industry in India. The rising demand of steel has promoted the use of
modern, unique, uses of steel, increasing the demand of welding equipment.
In India, welding contributes significantly to the GDP in several ways, such as welding
intensive industries, auxiliary products, complementary goods, employment, and user
industries. The Indian welding industry was dominated by low technology and very rare
technological innovation. However, in recent years, the demand of automatic and semi
automatic welding production systems are rising. Simultaneously, low budgets and
recession have marked the ongoing popularity of manual, economical techniques.
Increased FDI equity inflow in India has contributed to the rise in projects in automotive,
offshore activities, oil and gas sector, ship building and heavy machinery industries.
Many foreign automobile companies have set up their manufacturing units in India. This
has positively affected the rise of consumables and welding equipment. However,
economic crisis has impacted the flow of FDI in India which may result in decline in
demand of welding equipment over the short period.
One of the big challenges faced by the local manufacturers of equipment in India is the
considerable import of welding equipment. The increased imports has negatively
impacted the market share of local participant in various industries such as shipbuilding,
automotive and transportation and white appliances. Another challenge faced by welding
electrode plant is the unorganized sector that presently occupies nearly 50-55% of the
market. Lack of standard specification and tedious approval process is resulting in the
growth of unorganised sector. Indian welding consumables and equipment manufacturers
need to produce high quality and unique goods in order to stay competitive in Indian and
international markets. With increasing competition and lower profit margins,
manufacturers need to improve their service, performance and delivery.
Due to lack of knowledge of its application and cost economies, to a large extent, higher
productivity welding consumables like CO2 continuous welding wires and flux cored
wires fail to find higher demand. In view of this it is pertinent to start vigorous marketing
efforts by existing leading manufacturers of consumables and equipment to educate the
users.
11
No technologies for low installed capacities
Majority of organised sector units have quite low installed capacities to enable them to
use modern machinery set up like computerised batching plant, X-ray florescent tester,
etc. The welding consumable manufacturers should arrange these technologies and try to
adopt it for lower capacity plants if possible
Testing facilities and quality assurance systems are inadequate in India. Approval of
inspection agencies, Indian and foreign, is for limited specific types of consumables.
Quality and reliability of other varieties are dependent on Quality Assurance Systems of
the manufacturer. The manufacturers need to be exposed to international practices in
Quality Assurance Systems like ISO 9000, which are desirable, in order to face
international competition. Third party labs
Lack of R&D
R & D effort in India for welding electrodes is fragmented among few leading
manufacturers and WRI, Tiruchy. Very frequently research effort is being spent on
already developed products. Majority of the manufacturers cannot offer to carry out
research on their own.
India’s working-age population will rise by 12.5 crore over the coming decade, and by a
further 10.3 crore over the following decade. It is almost a cliché to say India is sitting on
a demographic dividend. That is, with its growing young workforce, it can look forward
to decades of high productivity, economic growth and upward social mobility. By 2022, it
is estimated that unless action is taken, there will be a gap of 10.3 crore skilled labourers
in the infrastructure sector, 3.5 crore in auto and 1.3 crore in healthcare, to name a few.
Indian government has given a major impetus to skilling over the last few years.
Organised market is mainly controlled by established players like ESAB India Ltd.,
Ador Welding Ltd., D&H Welding Electrodes India Ltd., EWAC Alloys Ltd., etc.
12
Robust outlook of the infrastructure sector , welding consumables market is expected
to grow at a CAGR 10-11% over next five years.
Organised Market accounts for 40 - 45% while Unorganised accounts balance Market
Companies such as ESAB India Ltd., Ador Welding Ltd., Linclon Electric Company
India Pvt. Ltd., Kemppi India Pvt. Ltd., Miraj Electrical & Mechanical Co. Pvt. Ltd &
ITW India Pvt Ltd. (Miller) are the major established organised players
The welding equipment industry is expected to grow at a CAGR of 6-7% over the next
five years.
MARKET SEGMENTATION
Heavy Engineering
Witnessed a remarkable growth over the last few years driven by increased investments
in infrastructure and industrial production
The capital goods & engineering turnover in India is expected to reach US$ 125.4 Bn
by FY17
The FDI inflows in the sector during April 2000 to March 2016 stood at around US$
3,068.1 million
Automotive
6th largest producer in the world with average annual production 24 Million vehicles
By 2026, India is expected to be the third largest automotive market by volume in the
world
13
Railways
4th largest rail freight carrier in the world and network spans more than 66030 kms.
making it the world’s 3rd largest rail network
Indian railways envisages a prospective investment of USD 130.76 billion in the next 5
years
Construction
USD 650 Billion investments in urban infrastructure estimated over next 20 years
Government investment to develop 100 Smart Cities and 500 AMRUT Cities
Shipbuilding
With over 40% of India’s fleet of ships in the 20 plus age group, which holds
tremendous opportunity for India’s shipbuilding and ship-repair industry
14
COMPANY PROFILE
Chowel was established in 1976 by manufacturing welding equipments and built a unique
position in Korea. Chowel understood the necessity of welding equipments and started
production as this equipment was an important factor to develop the necessary
infrastructures like Shipyards, Heavy Industries like Defence, Construction, and Aviation
etc. Chowel’s mission is to develop products which have the most advanced technology
base, proper quality management system and to produce highly efficient machines in
different kinds of welding viz-a-viz ARC / TIG / MIG / MAG / CO2. Chowel is not only
developing the equipment but also the service provider of total welding solution and it is
producing various kinds of Resistance Welding Machines, controllers which have the
worldwide quality and have the greatest market share in the Automobile Industry and so
on. Also, CHOWEL is a global player accomplishing specialization of manufacturer of
Special Purpose Machine and Automatic Welding Machine line with advanced
technology by contributing realization of factory automation. Chowel is committed to
customer delight by achieving the customer needs like Quality, Cost, Delivery and better
service provider up to the customer satisfaction level. Chowel is leading the way in the
Welding Industry. Chowel is a focused supplier of Resistance Welding Products, an Jig &
Fixture lines to the Automotive companies. We excel in providing customized Resistance
Welding products based on RWMA Standards and Jig & Fixture lines. We have one of
the largest manufacturing and technological centers in the world. Thru the years we have
rapidly acquired a reputation as an innovator for precision engineered products sold to the
automotive markets in Asia, Europe and the United States. Our commitment does not stop
with technology. We believe that providing service and support with our product is
essential in giving our customers the total confidence and peace of mind that should
accompany a custom - engineered product.
PRODUCTS
15
RESISTANCE WELDING MACHINES
16
Cableless Co2/Mag Arc Welding Machine
Inverter DC Pulse Tig Arc Welding Machine
Inverter Air Plasma Cutting Machine
Thyristor Control DC Arc Welding Machine
Submerged Arc Auto Welding Machine
Inverter DC Arc Welding Machine
Inverter DC Pulse Tig Arc Welding Machine
ASPC - 75/100
ASPH - 30/50
SERVICES
This line assembles Arc welding machine (CO2, TIG, MIG, MAG and etc.) which is used
widely in industry. A bundle of assembly process with high efficiency and strict quality
test can satisfy all requirement of customer.
This line produce all kind of resistance welding transformer including a portable spot
welding machine which are mainly used in automobile industries.The products from this
line has excellent durability, weldibility and top class quality. These assembly line consist
of mass production system to meet customer's demand.
17
VACUUM DRIVE OVEN
The accuracy is the most important factor in automatic welding fixture of automobil
industries. chowel's welding fixture inspection by precision equipment (allowable error:
5/1000mm) can keep welding machine in best quality and are contributed to customer's
reliance and productivity.
This line consists of efficient assembly system to prevent troubles through the strict
inspection by each process from design, manuacture to assembly.
18
CHAPTER III
REVIEW OF LITERATURE
CONCEPTUAL REVIEW
The foremost importance is that the capital is a limited resource which is true of
any form of capital, whether it is raised through debt or equity. The firms always face the
constraint of capital rationing. This may result in the selection of less profitable
investment proposals if the budget allocation and utilization is the primary consideration.
So the management should make a careful decision whether a particular project is
economically acceptable and within the specified limits of the investments to be made
during a specified period of time. In the case of more than one project, management must
identify the combination of investment projects that will contribute to the value of the
firm and profitability. This, in essence, is the basis of capital budgeting.
In the form of either debt or equity, capital is a very limited resource. There is a
limit to the volume of credit that the banking system can create in the economy.
Commercial banks and other lending institutions have limited deposits from which they
can lend money to individuals, corporations, and governments. In addition, the Federal
Reserve System requires each bank to maintain part of its deposits as reserves. Having
limited resources to lend, lending institutions are selective in extending loans to their
customers. But even if a bank were to extend unlimited loans to a company, the
management of that company would need to consider the impact that increasing loans
would have on the overall cost of financing.
In reality, any firm has limited borrowing resources that should be allocated
among the best investment alternatives. One might argue that a company can issue an
almost unlimited amount of common stock to raise capital. Increasing the number of
share of company stock, however, will serve only to distribute the same amount of equity
among a greater number of shareholders. In other words, as the number of shares of a
company increases, the company ownership of the individual stockholder may
proportionally decrease.
19
The argument that capital is a limited resource is true of any form of capital,
whether debt or equity or retained earnings, accounts payable or notes payable, and so on.
Even the best known firm in an industry or a community can increase its borrowing up to
a certain limit. Once this point has been reached, the firm will either be denied more
credit or be charged a higher interest rate, making borrowing a less desirable way to raise
capital.
In capital budgeting, there are a number of different approaches that can be used to
evaluate any given project, and each approach has its own distinct advantages and
disadvantages.
All other things being equal, using internal rate of return (IRR) and net present value
(NPV) measurements to evaluate projects often results in the same findings. However,
there are a number of projects for which using IRR is not as effective as using NPV to
discount cash flows. IRR's major limitation is also its greatest strength: it uses one single
discount rate to evaluate every investment.
Although using one discount rate simplifies matters, there are a number of situations that
cause problems for IRR. If an analyst is evaluating two projects, both of which share a
common discount rate, predictable cash flows, equal risk, and a shorter time horizon, IRR
will probably work. The catch is that discount rates usually change substantially over
time. For example, think about using the rate of return on a T-bill in the last 20 years as a
discount rate. One-year T-bills returned between 1% and 12% in the last 20 years, so
clearly the discount rate is changing.
In reality, any firm has limited borrowing resources that should be allocated among the
best investment alternatives. One might argue that a company can issue an almost
unlimited amount of common stock to raise capital. Increasing the number of share of
company stock, however, will serve only to distribute the same amount of equity among a
greater number of shareholders. In other words, as the number of shares of a company
increases, the company ownership of the individual stockholder may proportionally
decrease.
20
The argument that capital is a limited resource is true of any form of capital,
whether debt or equity or retained earnings, accounts payable or notes payable, and so on.
Even the best known firm in an industry or a community can increase its borrowing up to
a certain limit. Once this point has been reached, the firm will either be denied more
credit or be charged a higher interest rate, making borrowing a less desirable way to raise
capital.
Payback Period
Payback period is the time duration required to recoup the investment committed
to a project. Business enterprises following payback period use "stipulated payback
period", which acts as a standard for screening the project.
• Here payback period is the time when cumulative cash inflows are equal to the
outflows.
Payback Reciprocal Rate
The payback period is stated in terms of years. This can be stated in terms of percentage
also. This is the payback reciprocal rate.
21
Decision Rules
A. Capital Rationing Situation
• Select the projects which have payback periods lower than or equivalent to the
stipulated payback period.
• Arrange these selected projects in increasing order of their respective payback
periods.
• Select those projects from the top of the list till the capital Budget are exhausted.
Decision Rules
C. Mutually Exclusive Projects
In the case of two mutually exclusive projects, the one with a lower payback period is
accepted, when the respective payback periods are less than or equivalent to the stipulated
payback period.
Determination of Stipulated Payback Period
22
obsolescence and product obsolescence - as in electronics/computer industry -
prefer payback period method.
• The time value of money is ignored. For example, in the case of project
• A Rs.500 received at the end of 2nd and 3rd years is given same weightage.
Broadly a rupee received in the first year and during any other year within the
payback period is given same weight. But it is common knowledge that a rupee
received today has higher value than a rupee to be received in future.
• But this drawback can be set right by using the discounted payback period
method. The discounted payback period method looks at recovery of initial
investment after considering the time value of inflows.
Accounting Rate of Return
Accounting rate of return is the rate arrived at by expressing the average annual
net profit (after tax) as given in the income statement as a percentage of the total
investment or average investment. The accounting rate of return is based on accounting
profits. Accounting profits are different from the cash flows from a project and hence, in
many instances, accounting rate of return might not be used as a project evaluation
decision. Accounting rate of return does find a place in business decision making when
the returns expected are accounting profits and not merely the cash flows.
• The accounting rate of return using total investment. Or Sometimes average rate
of return is calculated by using the following
23
Formula:
Where average investment = total investment divided by 2
Decision Rules
A. Capital Rationing Situation
• Select the projects whose rates of return are higher than the cut-off rate
• Arrange them in the declining order of their rate of return and
• Select projects starting from the top of the list till the capital available is
exhausted.
• It Is Easy To Calculate.
• The Percentage Return Is More Familiar To The Executives.
• The definition of cash inflows is erroneous; it takes into account profit after tax
only. It, therefore, fails to present the true return.
24
Computation Of Net Present Value (NPV)
• When the cash outflow is required for only one year i.e., in the present year, then
the Net present value is calculated as follows:
Decision Rules
Davina F. Jacobs (2010) is a senior economist in the Fiscal Affairs Department has done
a research on capital budgeting practices. His study argues that the key challenge in
government budgeting is to define an appropriate balance between current and capital
expenditures. Budgeting for government capital investment also remains not well
integrated into the formal budget preparation process in many countries. Hence, the
research has been prepared with an aim to provide an overview of past and current
budgeting practices for public investment. The study will also provide a comparison
between the budget practices between low-income countries and developed countries and
make a series of recommendations for how to ensure efficient integration of capital
planning and budget management in low-income countries.
Niels Hermes, Peter Smid and Lu Yao (2006) Faculty of Management and
Organization, University of Groningen and Faculty of Economics, University of
Groningen, The Netherlands, have made a study on “Capital budgeting practices: A
comparative study of the Netherlands and China”. The paper compares the use of capital
budgeting techniques of Dutch and Chinese firms, using data obtained from a survey
26
among 250 Dutch and 300 Chinese companies. It aims to analyze the use of capital
budgeting techniques by companies in both countries from a comparative perspective to
see whether economic development matters. The empirical analysis provides evidence
that Dutch Chief Financial Officers on average use more sophisticated capital budgeting
techniques than Chinese CFOs do. At the same, however, the result suggests that the
difference between Dutch and Chinese firms is smaller than expected based upon the
differences in the level of economic development between both countries, at least with
respect to the use of methods of estimating the cost of capital and the use of CAPM as the
method of estimating the cost of equity.
Those making environmental decisions must not only characterize the present, they must
also forecast the future. They must do so for at least two reasons. First, if a no-action
alternative is pursued, they must consider whether current trends will be favorable
or unfavorable in the future. Second, if an intervention is pursued instead, they must
evaluate both its probable success given future trends and its impacts on the human and
natural environment. Forecasting, by which I mean explicit processes
for determining what is likely to happen in the future, can help address each of these
areas. Certain characteristics affect the selection and use of forecasting methods. First, the
concerns of environmental forecasting are often long term, which means that large
changes are likely. Second, environmental trends sometimes interact with one another and
lead to new concerns. And third. Interventions can also lead to unintended changes. This
chapter discusses forecasting methods that are relevant to environmental decision making,
suggests when they are useful, describes evidence on the efficacy of each method, and
provides references so readers can get details about the methods. A key consideration is
whether or not the forecasting methods are designed to assess the outcomes of
interventions. The chapter then examines issues related to presenting forecasts effectively.
Finally, it describes an audit procedure for determining whether the most appropriate
forecasting tools are being used.
A Framework for Forecasting
Figure 1 shows possible forecasting methods and how they relate to one another. The
figure is designed to represent all approaches to forecasting. The methods are organized
according to the types of knowledge. As one moves down the chart, the integration of
27
statistical and judgmental methods increases. Judgmental methods are split into those
involving one’s own behavior in given situations (intentions or role-playing) and expert
opinions. The intentions method asks people how they would act in a given situation.
Role-playing examines how people act in a situation where their actions arc influenced by
a role. Experts can be asked to make predictions about how others will act in given
situations. They can also identify analogous situations, and forecasts can be based on
extrapolations from those situations. Intentions and expert opinions can be quantified by
relating their “predictions” to various causal factors with, for example, regression
analysis. Expectations about one’s own behavior are referred to as conjoint analysis (e.g.,
given alternatives having a bundle of features that have been varied according to
an experimental plan). Expert opinions about the behavior of others (which can also be
based on an experimental design, but are often based on actual data) are referred to as
judgmental bootstrapping
JOURNALS
Abstract
This chapter provides a historical appraisal of the development of current capital
budgeting practices and reviews capital budgeting academic research. In the late
eighteenth and early nineteenth centuries, the industrial revolution was instrumental in
creating demand for capital budgeting processes and techniques. Academic research,
beginning in the late 1940s and early 1950s, is categorized by its focus on appraisal
techniques, individual decision-maker effects, organizational issues, and environmental
factors. Experimental, analytical, agency-based, survey-based, and case-based research is
reviewed. The chapter concludes with a compilation of issues identified by academic
research and a set of questions that have not yet been addressed.
2. Capital Budgeting Theory and Practice: A Review and Agenda for Future
Research
28
Lingesiya Kengatharan1 1Department of Financial Management, University of
Jaffna, Sri Lanka
The main purpose of this research was to delineate unearth lacunae in the extant capital
budgeting theory and practice during the last two decades and ipso facto become
springboard for future scholarships. Web of science search and iCat search were used to
locate research papers published during the last twenty years. Four criteria have been
applied in selection of research papers: be an empirical study, published in English
language, appeared in peer reviewed journal and full text research papers. These papers
were collected from multiple databases including OneFile (GALE), SciVerse
ScienceDirect (Elsevier), Informa - Taylor & Francis (CrossRef), Wiley (CrossRef),
Business (JSTOR), Arts & Sciences (JSTOR), Proquest ,MEDLINE (NLM), and Wiley
Online Library. Search parameters covered capital budgeting, capital budgeting decision,
capital budgeting theory, capital budgeting practices, capital budgeting methods, capital
budgeting models, capital budgeting tools, capital budgeting techniques, capital budgeting
process and investment decision. Thematic text analyses have been explored to analyses
them. Recent studies lent credence on the use of more sophisticated capital budgeting
techniques along with many capital budgeting tools for incorporating risk.
Notwithstanding, it drew a distinction between developed and developing countries.
Moreover, factors impinging on choice of capital budgeting practice were identified, and
bereft of behavioral finance and event study methodological approach were highlighted.
More extensive studies are imperative to build robust knowledge of capital budgeting
theory and practice in the chaotic environment. This research was well thought out in its
design and contributed by stating the known and unknown arena of capital budgeting
during the last two decades. This scholarship facilitates to academics, practitioners, policy
makers, and stakeholders of the company.
Recommendation
Many research scholars criticized that many researches on capital budgeting were opt-
testing the methods of capital budgeting and its practices. They were purely finding that
actual what methods were in practice. However, in practice, there are enormous factors
affecting the capital budgeting practice and it has ―country effect‖ too. In line up with
this argument, this research was well thought out in its design and become springboard
for future research. This study contributed by stating the known and unknown arena of
29
capital budgeting during the last two decades. In the cutting edge technology world, the
way of doing things have been changed and challenging. For example, decision support
system become more prevent in making decision and more advanced technological sphere
penetrates into assessing capital budgeting practices than ever before. Thus, this rese
THEORIES
Stewardship Theory Psaros (2009) states that similar to stakeholder theory, the views of
stewardship theory differ from agency theory. For example, stewardship theory does not
support the view that individuals are utility maximisers and also does not support the
assertion that all business decisions are based on economic considerations only. It asserts
that some business decisions are based on non-economic returns such as those related to
social status in the community. Donaldson and Davis (1991) add that some individuals
are motivated in their decisions by an intrinsic satisfaction in undertaking a task that
challenges them or/and achieving trust from peers and supervisors. The core of
stewardship theory is about how individuals rank their social needs in a community, such
as being accepted and valued by their peers and supervisors. Similar to executive
remuneration or compensation, ‘these needs help align the individual’s interests with their
organisation’s goals’. If the organisation maintains a good relationship with the
stakeholders, including the local community, individuals would want to make decisions
that identify them with the organisation because that would help promote their social
status in the community. If the individuals rank social status high on their list of needs,
then it would help them perform harder to achieve the organisation’s goal. Psaros (2009)
asserts that stewardship theory states that managers do not start out with the intention of
maximising their own utility at the expense of the interests of other stakeholders. In
support of stewardship theory, Kiel and Nicholson (2003, p. 190) state that ‘underlying
this rationale is the assertion that since managers are naturally trustworthy there will be
no major agency costs’. The acceptance of stewardship theory has adverse implications
on one theory that has become widely accepted, that having the chair of the board
independent of the CEO gives the organisation legitimacy for claiming to have an
efficient or sound financial management in place and hence improving the return on
equity (ROE) to the shareholders. However, Kiel and Nicholson (2003) state that their
findings support Boyd’s (1995) conclusion that the issue of CEO duality is explained
better if the size and complexity of the organisations are considered. In highly
30
entrepreneurial firms, for example in the humble beginnings of Microsoft and internet
companies the chairman-CEO duality may send a positive message to the market 30 2
Literature Review because it supports stewardship theory and enhances social status by
minimizing the agency cost. It can also lead to the organisation being seen as having a
clear leadership which may lead to better corporate performance.
In addition to the studies investigating the relationship between board composition and
firm performance, sociologists have focussed on the relationship between the firm’s
social network and the firm’s performance. These studies formed the resource
dependency theory. The resource dependency theory explains how the firm’s success is
linked to its ability to control its external resources (Psaros 2009). The board of a
company plays several vital roles, such as providing advice to management on
operational and strategic issues and monitoring management. Besides these, it is also an
important link between the organisation and the external resources which an organisation
needs to maximise its performance (Hillman et al. 2000; Pfeffer and Salancik 2003). The
more control an organization has on external resources, the lower the costs of resources
and the higher the chances that the firm will minimise agency costs. The firm may then
maximise the use of resources to maximise the value of the firm. It will also help in
making strategic plans more workable and mitigate agency costs. If the success of the
organization depends on external resources, then having its members on the board of
directors of the resources company who can help to establish a relationship between the
organisation and the external resources improves the financial efficiency and management
of the organisation, reduces agency costs and hence maximises the value of the firm. It
also reduces uncertainty of accessing the resources, and external dependencies (Psaros
2009). Kiel and Nicholson (2003) argue that agency theory, stewardship theory and
resource dependence theory all play a vital role in determining what should be
appropriate corporate governance policies and structures.
31
CHAPTER IV
RESEARCH METHODOLOGY
OBJECTIVES
Primary Objective
To study the performance of capital budgeting and to evaluate the data of capital
budgeting techniques in Chowel India (P) Ltd.
Secondary Objective
32
Need for the study
33
Scope of the Study
The study has been undertaken to understand the significance of capital budgeting
through which to analyze the performance of the capital budgeting.
The study can help the organization to take investment decision in forthcoming
years
34
Limitations of the Study
The whole study focuses on different kind of capital budgeting techniques. Though
these methods have sound advantages there are some computational problems and
disadvantages in adapting these techniques. Though NPV method is easy to use if
forecasted cash flows are known, in practice, it is quite difficult to obtain the estimates of
cash flows due to uncertainty. Discount rate is also difficult in practice to precisely
measure the discount rate. Further, caution needs to be applied in using the NPV method
when alternative projects with unequal lives, or under funds constraint are evaluated.
Ranking of investment projects as per the NPV rule is not independent of the discount
rates.
35
Research design
Descriptive Research
Source of Data
Primary data
Secondary data
Primary data are those which are collected afresh and for the first time and thus
happen to the original in character.
Secondary data, the data that are already available, it refers to the data which have
already been collected and analyzed by someone else. The secondary data re collected
from company profile and website. Mostly the data used for the project are secondary
data.
36
Method for Analysis
The payback period is also called as pay off or payout period method. That
represents the period in which the total investment in permanent assets payback itself.
The method is based on the principle that every capital expenditure pays itself back
within a certain period out of the additional earnings generated from the capital assets.
Thus, it measures the period of time for the original cost of the project to be recovered
from the additional earnings of the project itself. Under this method, various investments
are ranked according to the length of their payback period in such a manner that the
investment with a shorter payback period is preferred to the one which has longer
payback period. It is exact amount of time required for a firm to recover its initial
investment in a project as calculated from cash flows.
The payback measures the length of time it takes a company to recover in cash its initial
investment. This concept can also be explained as the length of time it takes the project to
generate cash equal to the investment and pay the company back. It is calculated by
dividing the capital investment by the net annual cash flow. If the net annual cash flow is
not expected to be the same, the average of the net annual cash flows may be used.
The payback method is a one-sidedly derived number which tells a small amount about a
project's beginning phase, but it tells one close to nothing about the full lifetime of the
project. The effortlessness of calculating payback can possibly promote carelessness,
especially in the failure to incorporate all the costs linked with investing in a project, such
as training and maintenance. The payback method does not account for the time value of
money either, and is therefore considered an unsophisticated capital budgeting technique.
Even though the payback method has these cons associated with it, the simplicity of the
method can allow it to be used as a filter for those projects which should go on to a more
37
in-depth method, such as those explained below. If a project is not recommended based
on the payback method, then chances are pretty high the project should not even be
considered for the other methods.
The method takes into account the earnings expected from the investment over
their whole life. It is known as accounting rate of return method for the reason that under
this method, the accounting concept of profit is used rather than cash inflows.
According to this method, various projects are ranked in order of the rate of
earnings or rate or returns. The project with the higher rate of return is selected as
compared to the one with lower rate of returns. This method can also be used to make
decision as to accepting or rejecting the proposal.
The IRR method is another sophisticated capital budgeting technique and is the
most widely used. It is, however, more complicated to calculate by hand, and a scientific
calculator or spreadsheet application may need to be used. Businesspeople typically
would rather see calculation results in the form of annual rates of return instead of actual
dollar returns. This allows them to really compare two or more projects for ranking
purposes to see which project is going to provide more bang for the buck. The IRR
method gives the rate of return result. This is especially important in our current
economic climate, where businesses are trying to cut costs and only invest in those
projects which will yield a higher rate of return.
38
Net Present Value measures the difference between present value of future cash inflows
generated by a project and cash outflows during a specific period of time. With a help of
net present value we can figure out an investment that is expected to generate positive
cash flows.
The NPV method does take into consideration the time value of money, so it is referred to
as a sophisticated capital budgeting technique. Therefore, everything is calculated based
of today's dollars. For example, if $300,000 is expected to be earned in year 5, then its
worth is $155,811 in today's dollars. This method is easier to calculate by hand than the
IRR method. In addition, the NPV method gives a more realistic solution due to the fact
that it takes into consideration that the firm reinvests intermediate cash flows at the
company's cost of capital rate, rather than the high rate specified by the IRR method. The
NPV method is the theoretically preferred method of capital budgeting techniques. (p.
429-430)
The NPV is considered less insightful because it does not measure the interest rates,
profitability, and other benefits relative to the amount invested. This means that NPV
gives one a measure of the expected dollar amount of money made from the proposed
project. Most often, financial managers want to see results measured in annual rate of
return, such as with the IRR method.
In order to calculate net present value (NPV), we first estimate the expected future cash
flows from a project under consideration. The next step is to calculate the present value of
these cash flows by applying the discounted cash flow (DCF) valuation procedures. Once
we have the estimated figures then we will estimate NPV as the difference between
present value of cash inflows and the cost of investment
Net Present Value measures the difference between present value of future cash inflows
generated by a project and cash outflows during a specific period of time. With a help of
net present value we can figure out an investment that is expected to generate positive
cash flows.
In order to calculate net present value (NPV), we first estimate the expected future cash
flows from a project under consideration. The next step is to calculate the present value of
these cash flows by applying the discounted cash flow (DCF) valuation procedures. Once
39
we have the estimated figures then we will estimate NPV as the difference between
present value of cash inflows and the cost of investment
The question arises why capital budgeting decisions are critical? The foremost
importance is that the capital is a limited resource which is true of any form of capital,
whether it is raised through debt or equity. The firms always face the constraint of capital
rationing
40
4.7 ADVANTAGES AND DISADVANTAGES OF CAPITAL BUDGETING
TECHNIQUES
Advantages
The payback method is popular with business analysts for several reasons. The first is its
simplicity. Most companies will use a team of employees with varied backgrounds to
evaluate capital projects. Using the payback method and reducing the evaluation to a
simple number of years is an easily understood concept. Identifying projects that provide
the fastest return on investment is particularly important for companies with limited cash
that need to recover their money as quickly as possible. Managers use the payback
method to make quick evaluations of projects with small investment. These small projects
do not necessarily involve a group of employees, and it is not necessary to conduct a
rigorous economic analysis.
Disadvantages
The payback method ignores the time value of money. The cash inflows from a project
may be irregular, with most of the return not occurring until well into the future. A project
could have an acceptable rate of return but still not meet the company's required
minimum payback period. The payback model does not consider cash inflows from a
project that may occur after the initial investment has been recovered. Most major capital
expenditures have a long life span and continue to provide income long after the payback
period. Since the payback method focuses on short-term profitability, an attractive project
could be overlooked if the payback period is the only consideration.
41
The most-used method of capital budgeting is determining the payback period. The
company establishes an acceptable amount of time in which a successful investment can
repay the cost of capital to make it. Investment alternatives with too long a payback
period are rejected. Investment alternatives inside the payback period are evaluated on the
basis of the fastest payback. Payback method disadvantages include that it does not
account for the time value of money.
In net present value capital budgeting, each of the competing alternatives for a firm’s
capital is assigned a discount rate to help determine the value today of expected future
returns. Stated another way, by determining the weighted average cost of capital over
time, also called the discount rate, a company can estimate the value today of the
expected cash flow from an investment of capital today. By comparing this net present
value of two or more possible uses of capital, the opportunity with the highest net present
value is the better alternative.
A disadvantage of the net present value method is the method's dependence on correctly
determining the discount rate. That calculation is subject to many variables that must be
estimated.
An advantage of capital budgeting with the internal rate of return method is that the initial
calculations are easier to perform and understand for company executives who may not
have a financial background. Excel has an IRR calculation function.
The disadvantage of the IRR method is that it can yield abnormally high rates of return by
overestimating the value of reinvesting cash flow over time.
42
6. Standard Deviation
7. Mean
8. Trend Analysis
The payback measures the length of time it takes a company to recover in cash its initial
investment. This concept can also be explained as the length of time it takes the project to
generate cash equal to the investment and pay the company back. It is calculated by
dividing the capital investment by the net annual cash flow. If the net annual cash flow is
not expected to be the same, the average of the net annual cash flows may be used.
Initial Investment
Payback Period =
Cash Inflow per Period
43
items
INTERPRETATION
The shorter the payback period, the sooner the company recovers its cash investment.
Whether a cash payback period is good or poor depends on the company's criteria for
evaluating projects. From the above it is inferred that the company have its highest pay
back on 2014 with 4.97 or 5 years.
The current year (2017) PBP is found to be 1 year. This shows that the company recovers
its investment in 1 year
44
Payback Period Analysis
4.97
5
4.5
4
3.5
3
2.5 2.17
2
1.5 1.46
1
0.5 1
0.58
0
2013
2014
2015
2016
2017
45
ACCOUNTING RATE OF RETURN (ARR)
PAT
Original Investment
Inference:
The chart shows that, in the year 2014 the company had lower expected rate of return
than the minimum rate so the investment on the particular project can be reduced. In the
46
year 2016 the project has a higher rate of return than the minimum rate. Higher rate of
return indicates that investment made in the particular year has higher cash inflow in the
future. The Average rate of return for the year 2017 is reduced to 1 year.
1.8
1.72
1.6
1.4
1.2
1
1
0.8
0.68
0.6 0.46
0.4
0.2
0.2
0
2013
2014
2015
2016
2017
47
NET PRESENT VALUE
Considering the time value of money is important when evaluating projects with different
costs, different cash flows, and different service lives. Discounted cash flow techniques,
such as the net present value method, consider the timing and amount of cash flows. To
use the net present value method, you will need to know the cash inflows, the cash
outflows, and the company's required rate of return on its investments. The required rate
of return becomes the discount rate used in the net present value calculation.
Formula
Present value = Cash flows * Present value of Re. 1 @ 10% discount using present value
table
Net present value = Present value of all cash inflows – present value of initial
investment.
Decision Rule:
48
Net Present Value Analysis
Calculation:
Interpretation
Above table clearly indicates that the Net Present Value for the five years from
2013 to 2017 is (17, 08, 88,234.5)
49
A negative NPV indicates that the project will probably be unprofitable and
therefore should be adjusted, if not abandoned altogether. NPV enables a management to
consider the time value of money it will invest. This concept holds that the value of
money increases with time because it can always earn interest in a savings account.
Therefore, any other investment of that money must be weighed against how the funds
would perform if simply deposited and saved.
PROFITABILITY INDEX
Profitability index (PI), also known as profit investment ratio (PIR) and value investment
ratio (VIR), is the ratio of payoff to investment of a proposed project. It is a useful tool
for ranking projects because it allows you to quantify the amount of value created per unit
of investment.
Assuming that the cash flow calculated does not include the investment made in the
project, a profitability index of 1 indicates breakeven. Any value lower than one would
indicate that the project's PV is less than the initial investment. As the value of the
profitability index increases, so does the financial attractiveness of the proposed project.
50
PAT Discounting present Present Value Present value
Year (Rs. In Crore) value of Net Cash of Initial
Table Flows investment
(Present value of Re.1
@ 10 %)
PI = 235173271.3 ÷ 406061505.8
PI = 0.579
DECISION RULE:
Accept: PI >1
Reject: PI<1
INFERENCE:
51
PI is lesser than 1 so Reject the proposal
It indicates that for every one rupee investment there will be 0.579 loss
STANDARD DEVIATION
(In Crores)
∑ X 3.1781 ∑ X2 0.586764008
∑ X2 / n-1 0.146691002
S.D = 0.3830026
52
0.4
0.359616102
0.35
0.3
0.25
0.2
0.15
0.1
INFERENCE:
53
STANDARD DEVIATION CALCULATION OF INVESTMENT
(In Crores)
∑ X 52.019 ∑ X2 185.355
∑ X2 / n-1 46.33875
S.D = 6.0872
54
60 58.0674
50 50.47
40
33.3945
33.3945
30
20
10
10.029
0
2017
2016
2015
2014
2013
INFERENCE:
The Investments of the company has been in the increasing rate till 2015. The company
has the same investment for the last 2 years 2016 and 2017. The investment of the
company has been decreased. In the year 2017 the Investment has been decreased to
4.625.
55
Standard deviation is applied to an investment to measure the investment's volatility.
Standard deviation is also known as historical volatility and is used by investors as a
gauge for the amount of expected volatility.
(In Crores)
∑ X 101.895 ∑ X2 1016.261545
∑ X2 / N 254.0654
S.D = 15.93943
56
REVENUE (X)
25 23.716
21.965
20.625
19.526
20
16.063
15
10
0
2017 2016 2015 2014 2013
REVENUE (X)
INFERENCE:
The greater the S.D, the greater will be the magnitude of the deviations of the values from
the mean. The S.D measures the variability of values. Revenue is in a increasing
position. Revenue is high in 2017 with 23.716 when compared to the previous year 2016
with 21.965.
57
CORRELATION ANALYSIS
CORRELATION 0.449147
58
.
25
23.716
21.965
20 20.625
19.526
16.063
15
10
INFERENCE:
There is a high degree of correlation between Revenue and EBIT as the correlation value
0.449147 is more than 0.05. It measures the closeness of relationship between Revenue
and EBIT and they both have a positive correlation
59
CORRELATION CALCULATION OF SALES AND PAT
CORRELATION 0.377508531
60
CORRELATION CALCULATION OF SALES AND PAT- CHART
25
23.5
21.8
20 20.5
18.3
15.7
15
10
0.795 1.2353
0 0.4622 0.3524 0.3332
2017 2016 2015 2014 2013
INFERENCE:
There is a high degree of correlation between Sales and Profit after Tax because the
correlation value (0.377508531) is more than 0.05. It measures the closeness of
relationship between Sales and Profit after Tax and they both have a positive correlation.
61
CORRELATION CALCULATION OF EXPENSES AND PAT
CORRELATION 0.297873
62
CHART- CORRELATION CALCULATION OF EXPENSES AND PAT
25
22.9
20.7
20 19.6
18.1
15 15.5
10
0.795 1.2353
0 0.4622 0.3524 0.3332
2017 2016 2015 2014 2013
INFERENCE:
There is a high degree of correlation between Expenses and PAT, the correlation value is
0.297873 above than 0.05. It measures the closeness of relationship between Expenses
and PAT and they both have a positive correlation.
63
MEAN
The Mean of a data set illustrates an average. To find the mean, add all of the numbers in
a data set and then divide by how many numbers given in the data set. The mean would
be significantly affected if one of the numbers in a data set is an outlier. The mean is a
good measure of central tendency to use when a data set doesn’t have any outliers
YEAR EXPENSES( x)
2013 1555885007
2014 1815614877
2015 1961324252
2016 2068196415
2017 2286017710
∑ x= 9687038261
64
9687038261
= ---------------------------- = 1937407652
∑ x= 9.687038261 0.299599686
0.299599686
= ----------------------------------------
5-1
65
CHART- EXPENSES
Expenses
2.28601771
2.068196415
1.961324252
1.815614877
1.555885007
Expenses
Inference:
66
TREND ANALYSIS
Trend analysis is based on the idea that what has happened in the past gives traders an
idea of what will happen in the future. Trend analysis has a great advantage that it can
also be used to predict the future events. This is possible by forecasting the future cash
flow based on the data available of the past. With the help of trend analysis, you can
predict the future and track the variances to add performance.
Y=a+b(x)
Y=a+b(x)
Year
PAT(y) x X2 xy
Y=a +b (x)
a = Σy /n
67
b= Σxy / Σ x2
a= 0.63562
b= 0.07006
For: 2018
Y=a + b(x)
Y= 6.3562 +0.0368737 *3
Y= 0.7462411
PAT
1.4
1.2 1.2353
0.2
0
2013 2014 2015 2016 2017 2018
PAT(y) Y=a+b(x)
INTERPRETATION
The PAT is increasing at an increasing rate for the all the five years. The company
has the highest PAT on 2015 with 1.2535
68
The PAT trend is found to be increasing rate this is due to the gradual decrease of
expenses for the first 3 years. In the year 2017 the PAT is tend to decrease this is
due to the increase in the interest and expenses of the company.
The PAT trend is decreasing so the company should take necessary steps to
increase the profit of the company by decreasing the expenses and debtors
EBIT
Y=a+b(x)
Year EBIT(y)
x X2 xy
Y=a +b (x)
a = Σy /n
b= Σxy / Σ x2
a=1.003
b=0.0627
For: 2018
69
Y=a + b(x)
Y= 1.003 +0.033*3
Y= 1.102
EBIT
1.6
1.4
1.36
1.283
1.2
1.1284 1.102
1.0657
1 1.012
1.003
0.9403
0.8776 0.856
0.8
0.6
0.504
0.4
0.2
0 EBIT(y) Y=a+b(x)
2013 2014 2015 2016 2017 2018
INTERPRETATION
The EBIT is fluctuating for the all the five years. The company has the highest
EBIT on 2014 with 13.60
The EBIT trend is found to be increasing rate this is due to the gradual Increase of
Sales
70
The EBIT trend is decreasing in 2017 this may due to increase in the expenses and
high interest.
FINDINGS
1. The current year (2017) PBP is found to be 1 year. This shows that
the company recovers its investment in 1 year
2. The Average rate of return for the year 2017 is reduced to 1 year
the Net Present Value for the five years from 2013 to 2017 is (17, 08, 88,234.5).
A negative NPV indicates that the project will probably be unprofitable and
therefore should be adjusted, if not abandoned altogether.
71
10. There is a high degree of correlation between Revenue and EBIT
as the correlation value 0.449147 is more than 0.05. It measures the closeness of
relationship between Revenue and EBIT and they both have a positive correlation.
11. There is a high degree of correlation between Sales and Profit after
Tax because the correlation value (0.377508531) is more than 0.05. It measures
the closeness of relationship between Sales and Profit after Tax and they both
have a positive correlation.
16. The PAT is increasing at an increasing rate for the all the five
years. The company has the highest PAT on 2015 with 1.2535
17. The PAT trend is found to be increasing rate this is due to the
gradual decrease of expenses for the first 3 years.
18. In the year 2017 the PAT is tend to decrease this is due to the
increase in the interest and expenses of the company.
19. The EBIT is fluctuating for the all the five years. The company has
the highest EBIT on 2014 with 1.360
20. The EBIT trend is found to be increasing rate this is due to the
gradual Increase of Sales
72
SUGGESTIONS
1. The shorter the payback period, the sooner the company recovers its cash
investment. Whether a cash payback period is good or poor depends on the
company's criteria for evaluating projects. Higher rate of return indicates that
investment made in the particular year has higher cash inflow in the future.
2. A negative NPV indicates that the project will probably be unprofitable and
therefore should be adjusted, if not abandoned altogether.
3. NPV enables a management to consider the time value of money it will invest.
This concept holds that the value of money increases with time because it can
always earn interest in a savings account. Therefore, any other investment of
that money must be weighed against how the funds would perform if simply
deposited and saved.
4. The PAT trend is decreasing so the company should take necessary steps to
increase the profit of the company by decreasing the expenses and debtors
5. The EBIT trend is decreasing in 2017 this may due to increase in the expenses
and high interest. So the company should take necessary actions to decrease
the expenses.
73
CONCLUSION
Through this study it is very clear that capital budgeting essentially involves evaluation of
the worth of capital investment proposals based on estimates of cash inflows and
outflows. The study emphases that efficient allocation of capital is the most important
finance function in the modern times. Thus, capital budgeting or investment decisions are
of considerable importance to the firm, since they tend to determine its value by
influencing its growth, profitability and risk. The analysis of payback period and Average
Rate of Returns conclude that management should take efforts to perform the capital
budget in efficient manner.
74
Consolidated five years Balance Sheet of Chowel India (P) Ltd
75
Lease rent & other rent 0.011 0.011 0.011 0.015 0.016
Repairs & maintenance 0.234 0.218 0.242 0.265 0.305
Insurance premium paid 0.031 0.027 0.02 0.014 0.029
Outsourced mfg. jobs (incl. job 0.224 0.346 0.489 0.351 0.308
works, etc.)
Outsourced professional jobs 0.005 0.008 0.007 0.01 0.01
Directors' fees 0.002 0.002 0.002 0.002 0.002
Selling & distribution expenses 0.576 0.56 0.674 0.727 0.896
Travel expenses 0.153 0.177 0.187 0.208 0.186
Communication expenses 0.042 0.039 0.039 0.045 0.041
Printing & stationery expenses 0 0 0 0 0
Miscellaneous expenses 0.314 0.306 0.335 0.444 0.404
76
7.2 Investments Report
77
Report Showing Appreciation of Profit
78
Prior period & extra- 0.011 0.017 0.01 0.013 0.02
ordinary income
Prior period & extra- 0 0.005 0.011 0 0.003
ordinary expenses
Net prior period & -0.011 -0.012 0.001 -0.013 -0.017
extraordinary transactions
Non—provisions 0 0 0 0 0
Diminution in 0 0 0 0 0
investement
Sundry debtors 0 0 0 0 0
Loans & advances 0 0 0 0 0
including NPAs
Loans & advances to 0 0 0 0 0
group cos.
Interest expenses 0 0 0 0 0
Power expenses 0 0 0 0 0
Gratuity 0 0 0 0 0
Others 0 0 0 0 0
79