CHAPTER 1

INTRODUCTION

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 INTRODUCTION

This chapter explains about the background and states the objectives of the project. The

purpose of the study is to determine the cash management to be done in asmoli sugar mill.

Cash management is comprehensive terms, and covers the entire process to be done for

managing cash in which all the activities are involved in it. Cash management is a part of

finance where it is restricted to direct inducement on a long term basis services. The same

cash management strategies are applied by Asmoli sugar mill to promote their business &

boost up its profits. The Asmoli sugar mill is perform several tasks to have full utilization

of cash in which they want to invest in their business according to their budget they have

set i.e.(sugar ,co-generation &baggas).

 Sugar we all know & also the uses of the sugar.

 Co-generation is to produce electricity with the help of turbine & providing that

electricity to the nearby area and even to the government because of their tie-up

with the government.

 Baggas, it is used by the paper mill in the production of boards etc.

In the present competitive world if any business organization has to survive it needs to

keep an eye on various forces operating in the market. More over competitors constantly

try to win over others. In this scenario, every business organization needs to monitor the

changes taking place in the market &how to increase our profits by using strategies and

compete our competitor by any any how.

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CASH MANAGEMENT

The term cash management refers to the management of cash and 'near cash assets' while

cash includes coins, currency notes, cheques, bank drafts, and the demand deposits, the

near cash assets include marketable securities and time deposits with banks. Such

securities and deposits are easily convertible into cash.

‘CASH MANAGEMENT ‘refers to the management of cash and the whole accounts

department works very hard on it. Their main objective is to maintain cash outflow in

proportion to the cash inflow of the company and to avoid over drafting. Cash section

maintain cash outflow as per the payment requirement and in accordance with the

allocation of funds from corporate finance.

Cash Management

Business analysts report that poor management is the main reason for business failure.

Poor cash management is probably the most frequent stumbling block for entrepreneurs.

Understanding the basic concepts of cash flow will help you plan for the unforeseen

eventualities that nearly every business faces.

 Good cash management is simple. It involves:

 Knowing when, where, and how your cash needs will occur

 Knowing the best sources for meeting additional cash needs

 Being prepared to meet these needs when they occur, by keeping good

relationships with bankers and other creditors

The starting point for good cash flow management is developing a cash flow projection.

Smart business owners know how to develop both short-term (weekly, monthly) cash

flow projections to help them manage daily cash, and long-term (annual, 3-5 year) cash

flow projections to help them develop the necessary capital strategy to meet their

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business needs. They also prepare and use historical cash flow statements to understand

how they used money in the past.

OBJECTIVES OF CASH MANAGEMENT:

Inspite of the fact that cash does not earn any substantial return for the business, it is held

by the concern with the following motives.

1). Transaction Motive - A company enters into a variety of business transactions

resulting both inflow and outflow of cash, at times the cash outflow exceeds the cash

inflow. In order to meet the business obligations in such situation, it is necessary to

maintain adequate cash balance. Thus, a firm with the motive of making routine business

payments maintains cash balance.

2). Precautionary Motive - A firm holds cash balance to meet sudden cash needs arising

out of unexpected contingencies such as floods, strikes, obsolesces sharp increase in

prices of raw materials, presentation of bills for payment earlier than expected date more

amount of cash will be kept by the firm if 1there will be more possibility of such

contingencies

3). Speculative Motive -SOCIAL SECURITY DISABILITY also keeps cash balance to

take advantage of unexpected business opportunities. Such motive is there of speculative

nature.

4). Compensation Motive - Banks provide certain services to their customers free of

charge. So they usually require the customers to keep minimum cash balance with them

which unable them to earn interest and compensate for the free services render.

INTRODUCTION OF CASH

Cash is that form of money which the person can use any time. It may be in the form of

any currency. It is also called liquid money .it is the most desirable form of money

because this money can use without any obstacle or regulation.

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IT IS LIQUID MONEY

The most important nature of cash is its liquid form. Cash is that form of money which is

available to use any time. So the liquidity is the main feature of cash.

 LIFE BLOOD OF BUSINESS

Cash is the most important sector of business without cash business cannot run

that is why it is indispensable part of business.

 ONE OF THE MODE OF PAYMENT

Cash is one of the most acceptable form of receipts because if the payment is

made in the form of cash then it will give more security to the receiver. That is

why it is more desirable.

 IT IS THE PART OF CURRENT ASSETS

Cash is the part of current asset and is shown on the assets side of the balance

sheet. Cash at bank and cash in hand are two major parts of cash.

Now I am going to discuss all the things, tools and procedure, which the SOCIAL

SECURITY DISABILITY is using for, cash management (A centralized system)

 REASONS OF CASH MANAGEMENT

Cash management involves the following four basic problems

1). Controlling Level Of Cash - One of the basic objectives of cash management is to

minimize the level of cash balance with the firm. This objective is sought to be achieved

by means of the following:

2)Preparing Cash Budget - Cash budget is the most important device for planning and

controlling the use of cash. It involves the future receipts and payments of the firm. On

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the basis of this information the finance manager can determine the future cash needs of

the firm.

 Providing For Unpredictable Discrepancies - Cash budget shows discrepancies

between cash receipts and payments on the basis of normal business activities.

 Availability Of Alternative Source Of Funds - A firm may not need to keep

large cash balance. If it has arrangements with banks for borrowing money in

times of emergencies.

 Controlling Of Cash Inflow - In order to prevent fraudulent diversion of cash

receipt and speeding up collections of cash, an adequate control on cash inflow is

necessary. A properly installed internal check system can, to a great extent, to

minimize the possibility of fraudulent diversion of cash. Speedier collection of

cash can be made possible by adoption of the following two techniques:

 Concentration Banking System: It is a system of decentralizing collection of

account receivables. According to this system branch offices are authorized to

collect the payment from the customers, and deposit in the local bank accounts

this system facilities fast movement of funds. This system is good in case of the

firms having there spread over a large area.

 Lock Box System: This system is more popular in the U.S.A. and is further step

in speeding up collection of cash. This system has been devised to element delay

arising in cash of the concentration banking system on account of a time gap

between actual receipt of checks by the regional collection centers and its deposits

in the local bank account. Under this system SOCIAL SECURITY DISABILITY

higher a post office box and instructs its customers for their remits to the box. It

also reduces the chances of fraud in the cash collection process and controls the

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 cash inflows better. In order to avoid the unnecessary pockets of idle funds, the

company should maintain minimum number of bank accounts

 Controlling Outflows Of Cash - an efficient control over cash outflows is

equally important for conserving cash and reducing financial requirements.

Control over cash outflow signifies slow disbursement. In order to control the

outflows of cash efficiently, a firm should keep in view the following

consideration.

 Centralized System For Cash Payments - should be followed as compared to

decentralized system in cash of collections. All payments should be made from a

single control account, i.e., from the central office of the company. However, the

local office of the company may pay local expenses.

 Payment Should Be Made On The Due Dates, neither before nor after. The

company should neither loss cash discount nor its prestige on account of delayed

payments. The company should, therefore, made payments within the terms

offered by the suppliers.

 Playing Float:- Technique should be used by the company for maximizing the

availability of funds. The term 'float' means the account tide up in checks, which

have been issued by SOCIAL SECURITY DISABILITY but not have yet been

presented, for payment by the creditors. As a result of time lag between issue of a

cheque and its actual presentation, The actual bank balance of a firm may be more

than the balance shown in the books. The difference is called 'payment of float'.

The longer the 'float period the greater would be the benefit of the firm

EVOLUTION OF CASH MANAGEMENT

All Business transaction involves give & take. Earlier this give & take was settled

through commodities. One commodity was exchanged with another.

This system of ‘Barter’ had three difficulties;

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 • Presence of two persons who could satisfy each other’s need.

• Determination of the rate of exchange

• Problems of exchanges of large with smaller commodities.

The Origin of cash can be easily understand by with the below three stages

 Early Cash:- It was to overcome the disadvantages of Barter that a need for a

medium of exchange was felt & commodity as medium as entered the business

arena. The commodity money didn’t serve the purpose well because was devoid

of basic features of good money, i.e., durability, divisibility & portability. Metals

became the medium of exchange. First it was silver then gold. These metals were

weighted every time a transaction was settled. Later on, to overcome the

difficulties of weight age every time, the metals were cut down in to pieces of

definite weight age & coinage into circulations.

 Present Day Cash:- With the increase of business & trade it became increasingly

difficult to use commodity money as a medium of exchange due to the problem

explained above. Thus started the era of paper money the initial use of paper

money was in the form of receipts given by London goldsmiths for deposits of

coin. In the first phase of paper money, these receipts were accepted as medium

of exchange only if these were convertible into same value.

 Future Cash:-Computer has entered every segment of commercial world. The

advent of internet has further intensified its penetration. Cash too, has remained

aloof from its impact. In fact, mass experiments are going on which could

transform the way we could think about money. A new breed of cash, which is

basically a software is being developed for circulation in future it sis a kind of a

electronic money known as “ E cash”

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 Under the system one may have E-cash in the form of a credit card size piece of

plastic with an embedded microchip that one can load with E-money purchased

With traditional currency or one can have E- cash in his personal computer or

electronic wallet downloaded over phone lines from the issuer of e money.

E cash can be issued both by banks and non banks. As on date non-banking corporations

are more aggressive in this process of cash replacement. Commercial banks are entrusted

with the creation of money by central banks of concerned countries by keeping a fraction

of deposit as reserve.

E-cash represents the biggest revolution in the currency since bold replaced co-wrie

shells some experts look at it’s as a revolution similar to industrial revolution. Some of

the benefits of e cash are given below:

E-cash is more convenient and feasible than traditional money.

Banks that issue e-cash could find it much cheaper than handling checks and papers that

accompany traditional money. Unlike credit card which provides no privacy to its users

e-cash offers virtually complete anonymity.

Cash flow statement should report Cash flow (inflow and outflow) during particular

period classified by operating, investing and financing activities in such a manner as most

suitable and appropriate to its business. Classification of cash flows by activities on the

financial position information which may help the users to assess the impact of those

activities on the enterprise and the amount of its cash and cash equivalents .this

information may also be used to evaluate the relation ships among those activities.A

single transaction may include cash flow which may be classified differently.

Cash flow statement is a statement of cash flow and cash flow signifies the movements of

cash in and out if a business concern. Inflow of cash I known as source or cash and

outflow of cash is called use. This statement also depicts factor for such inflow &outflow

of cash .thus ,cash flow statement is a statement designed to highlight upon the causes

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which bring change in case position between two balance sheets dates. It virtually takes

the nature and character of cash receipts and cash payments ,though the basic information

used in the preparation of this statement differs form that which is used in recording cash

receipts and cash payment.

Activities relating to current operation:

 Cash sale of goods and service.

 Cash sale of waste , by product spoilage.

 Collection from customer – receipts from debtors and bills receivable.

 Rent received from asset let out on rent.

 Cash dividends and interest received on investments.

 Refund of tax.

 Cash sale of fixed assets and current investment.

Financial activities :

(1)Discounting of bills Receivables.

(2) Issue of debentures for cash

(3) Raising loans for cash

(4) Item of cash outflow (uses) the activities of which cash is put to use in a business

concern may be:-

 operation activities ,

 activities relating to the purchase of fixed assets,

 financial activities ,a number of sub-activities may be grouped into these three

distinct activities as summarized below:

(A)Operation activities :

 Cash payment of wages ,production expenses and other operation expenses.

 Cash purchase of raw materials

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  Cash payment to creditors and of bills payable

 Cash payment of interest.

 Cash payment of income –tax

 Cash dividends

 Cash payment of any sum payable under some legal decisions.

(B)Activities relating to the purchase of fixed assets:

 Cash purchase of fixed assets

 Cash expenses on the extraordinary repair of plant and other equipments

 Cash purchase of temporary investments.

(c) Financial Activities:

(1) Repayment of long –term loan and redemption of debentures in cash

(2) Redemption of preference shares for cash.

In United States banking, cash management, or treasury management, is a marketing term

for certain services offered primarily to larger business customers. It may be used to

describe all bank accounts (such as checking accounts) provided to businesses of a

certain size, but it is more often used to describe specific services such as cash

concentration, zero balance accounting, and automated clearing house facilities.

Sometimes, private banking customers are given cash management services.

The following is a list of services generally offered by banks and utilised by larger

businesses and corporations:

 Account Reconcilement Services: Balancing a checkbook can be a difficult

process for a very large business, since it issues so many checks it can take a lot

of human monitoring to understand which checks have not cleared and therefore

what the company's true balance is. To address this, banks have developed a

system which allows companies to upload a list of all the checks that they issue

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 on a daily basis, so that at the end of the month the bank statement will show not

only which checks have cleared, but also which have not. More recently, banks

have used this system to prevent checks from being fraudulently cashed if they

are not on the list, a process known as positive pay.

 Armored Car Services: Large retailers who collect a great deal of cash may have

the bank pick this cash Most banks have an Internet-based system which is more

advanced than the one available to consumers. This enables managers to create

and authorize special internal logon credentials, allowing employees to send wires

and access other cash management features normally not found on the consumer

web site. up via an armored car company, instead of asking its employees to

deposit the cash.

 Automated Clearing House: services are usually offered by the cash

management division of a bank. The Automated Clearing House is an electronic

system used to transfer funds between banks. Companies use this to pay others,

especially employees (this is how direct deposit works). Certain companies also

use it to collect funds from customers (this is generally how automatic payment

plans work). This system is criticized by some consumer advocacy groups,

because under this system banks assume that the company initiating the debit is

correct until proven otherwise.

 Balance Reporting Services: Corporate clients who actively manage their cash

balances usually subscribe to secure web-based reporting of their account and

transaction information at their lead bank. These sophisticated compilations of

banking activity may include balances in foreign currencies, as well as those at

other banks. They include information on cash positions as well as 'float' (e.g.,

checks in the process of collection). Finally, they offer transaction-specific details

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 on all forms of payment activity, including deposits, checks, wire transfers in and

out, ACH (automated clearinghouse debits and credits), investments, etc.

 Cash Concentration Services: Large or national chain retailers often are in areas

where their primary bank does not have branches. Therefore, they open bank

accounts at various local banks in the area. To prevent funds in these accounts

from being idle and not earning sufficient interest, many of these companies have

an agreement set with their primary bank, whereby their primary bank uses the

Automated Clearing House to electronically "pull" the money from these banks

into a single interest-bearing bank account.

 Lockbox services: Often companies (such as utilities) which receive a large

number of payments via checks in the mail have the bank set up a post office box

for them, open their mail, and deposit any checks found. This is referred to as a

"lockbox" service.

 Positive Pay: Positive pay is a service whereby the company electronically shares

its check register of all written checks with the bank. The bank therefore will only

pay checks listed in that register, with exactly the same specifications as listed in

the register (amount, payee, serial number, etc.). This system dramatically reduces

check fraud.

 Sweep Accounts: are typically offered by the cash management division of a

bank. Under this system, excess funds from a company's bank accounts are

automatically moved into a money market mutual fund overnight, and then

moved back the next morning. This allows them to earn interest overnight. This is

the primary use of money market mutual funds.

 Zero Balance Accounting: can be thought of as somewhat of a hack. Companies

with large numbers of stores or locations can very often be confused if all those

stores are depositing into a single bank account. Traditionally, it would be

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 impossible to know which deposits were from which stores without seeking to

view images of those deposits. To help correct this problem, banks developed a

system where each store is given their own bank account, but all the money

deposited into the individual store accounts are automatically moved or swept into

the company's main bank account. This allows the company to look at individual

statements for each store. U.S. banks are almost all converting their systems so

that companies can tell which store made a particular deposit, even if these

deposits are all deposited into a single account. Therefore, zero balance

accounting is being used less frequently.

 Wire Transfer: A wire transfer is an electronic transfer of funds. Wire transfers

can be done by a simple bank account transfer, or by a transfer of cash at a cash

office. Bank wire transfers are often the most expedient method for transferring

funds between bank accounts. A bank wire transfer is a message to the receiving

bank requesting them to effect payment in accordance with the instructions given.

The message also includes settlement instructions. The actual wire transfer itself

is virtually instantaneous, requiring no longer for transmission than a telephone

call.

 Controlled Disbursement: This is another product offered by banks under Cash

Management Services. The bank provides a daily report, typically early in the

day, that provides the amount of disbursements that will be charged to the

customer's account. This early knowledge of daily funds requirement allows the

customer to invest any surplus in intraday investment opportunities, typically

money market investments. This is different from delayed disbursements, where

payments are issued through a remote branch of a bank and customer is able to

delay the payment due to increased float time.

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In the past, other services have been offered the usefulness of which has diminished with

the rise of the Internet. For example, companies could have daily faxes of their most

recent transactions.

Cash management services can be costly but usually the cost to a company is outweighed

by the benefits: cost savings, accuracy, efficiencies, etc.

 Internal Factors

Internal Factors are products of management policies followed either consciously &

positively, or unconsciously by default, or combination of both.

Following are some of the avenues from where these factors emanate & affect the cash in

a business:

• Operating policies: These refer to all types of decisions which make the

business operative. Operating policies are basically aims for the business

BECAUSE EVERY BUSINESS DESIRES TO OPERATE AT ITS OPTIMUM

LEVEL. For this it has to gear up its entire department like production, marketing

sales etc.

• Fixed Assets: Fixed assets are the long lived properties of the business which it

owns & uses as an aid to generate the profits. So far as cash is concerned

investment in fixed assets embodied two important features.

It requires cash outlay of high order.

The cash is ‘sunk’ for a longer period whenever these are purchased.

• Management of Receivables: In the modern competitive business environment

there is no escape from selling goods on credit The credit policy followed by the

business has a direct bearing on the cash in the business. The cash remains
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 ‘blocked’ to the extent and period of credit allowed. Also credit term like cash

discount will affect the flow of cash from debtors.

• Inventory: Inventory refers to the stock held by the business. Funds are normally

tied up in three kinds of inventory:

• Raw –Material

• Work in process

• Finished goods

• Payment Policies: It refers to the policies concerning the payment to be released

to creditors & suppliers. Extracting maximum credit from suppliers, utilizing cash

discount offered by them are some of the ingredients of prudent purchase

management policies resulting in decelerating of cash outflow.

• Miscellaneous: Other factors which affect the cash flow may arise due to

commercial & statutory requirements. Some of the examples are periodic deposit

of advance tax installment.

 External Factors

External factors are covered by all determinants relevant to the overall economy &/or a

particular industry

• Monetary & fiscal factors: These factors relate to the money supply in the

economy. During period of inflation, the economy is flushed with money, Price

rise has a cascading effect on the output and the business has cash in abundance.

On the other hand, during recessionary period demand for goods contracts &

economy faces cash drought.

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The fiscal factors too, have a direct bearing on the cash availability in a business Tax is

an important fiscal factors which determines the size of disposable cash in the hands of

business.

• Special factors relevant to an industry: In addition to monetary & fiscal factors,

there may be some special factors unique to a particular industry as well. These

also influence the cash flow of a business.

Cash Flow Cycle:

Cash

Purchas
Sales e

Stock Labour
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 WIP
DIAGRAM OF CASH FLOW CYCLE

Figure-1

TOOLS OF CASH CONTROL:

 Cash Budget: - It is the most significant tool of controlling the use of cash. It

provides a comparison between actual and budgeted cash receipts and

disbursements locating the points of deviations, if any. The financial manager,

after ascertaining the reasons for deviations between the actual and budgeted

figures, can take the necessary action to remove.

 Inflows And Outflows Of Cash :- In order to check the change in cash position

of the firm from one period to another a cash flow statement is cash.

 Ratio Analysis - Ratio analysis is also an important tool of cash control.

Different ratio, liquidity ratio, receivables turnover ratio, and inventory turnover

ratio and cash position ratios.

ANALYSIS OF CASH MANAGEMENT WITH THE HELP OF CASH

BUDGET:

 Investments Of Surplus Funds

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As we knew that cash is a non earning asset. Cash not required for the temporary period

can be invested in near cash asset i.e., marketable securities, which are readily

convertible into cash, short term securities are considered “near cash” because they are

income bearing and near cash items, excess cash should be invested in marketable

securities, which can be promptly converted into cash for two reasons -:

The working capital requirements fluctuate due to reasonability and different business

aid. Excess cash in slack season is idle temporarily and it should be used for investment

in short term securities.

Excess cash may be held as a buffer to meet unpredictable financial need the decision to

invest in short term securities must take into account following points :

 Safety: there are two types of risk associated with dealing in securities i.e. price

risk and default risk. Price risk refers to adverse price movements. Default risk is

the risk that an issuing organization may not be able to its obligations safe

securities earn low return. A company is normally interested in receiving as high

return as possible, but a proper balance should be maintained between

profitability and risk.

 Maturity: The long maturity of securities is associated with danger of price

fluctuations. So SOCIAL SECURITY DISABILITY should prefer to invest in

securities; whose remaining life is longer then six to nine months.

Company in the following short term investments may invest the temporary cash

surplus:-

 Deposit Accounts: - This is a very flexible investment with low risk but interest

rates are relatively low.

 Term Deposits:- Interest rates are higher and depend on length of deposit, but

amount invested cannot be drawn except on maturing.

GOVERNMENT AND LOCAL AUTHORITIES SECURITIES:-

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They provide a guaranteed fixed income, if held until maturity.

 Analysis Through Ratio Analysis:

• Current Ratio:- It is the best ratio to find relationship between the current assets

and current liabilities. We can easily calculate the current ratio with the help of

the following formula:

Current ratio = current assets/current liabilities

Example:

As we all know that the current ratio of any company may be 2:1, but according to the

USA accounting standard any company should maintain a ratio of 1.33:1. Moreover we

can see from the above calculations that the current ratio of SOCIAL SECURITY

DISABILITY in 2003-04 was 1.22:1 which is quite unfavorable and bad from the

companies point of view, the current assets and current liabilities were in inappropriate

proportion. It means that the company was not quite able to meet out its liabilities. The

current ratio of the company is continuously rising i.e. in 2004-05 it was 1.14:1, in 2006-

07 it was 1.12:1. In 2007-08 the current ratio has gone down to 0.96:1 which was the

lowest in the last five years due to the increase in current liabilities and decrease in the

current assets as compared to previous year.

The current assets decreased due to decrease in inventory which was65365 in 2007-08

as compared to67627 in 2006-07 the current ratio further Detroit in 2007-08 to 0.96:1

which is not favorable from companies point of view. Decrease in current assets is again

due to stock, or inventory and sundry debtors. It indicates that the ideal stock is less,

which is not favorable for the company.

• Liquidity Ratio:- This ratio establishes a relationship between quick assets and

current liabilities.

The major objective to compute this ratio is to measure the ability of the firm to meet its

short-term obligations as and when due without relying upon the realization stock.

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We can easily calculate this ratio with the help of the following formula:

Liquidity ratio= liquid assets/current liabilities

Example:

Liquid ratio indicates that what amounts of liquid assets are available for each rupee of

current liability. We know that the liquid ratio of any company may be 1:1, is considered

to be satisfactory. Now comparing the company's position according to the liquid ratio. In

2005-6 the liquid ratio of the company was 0.75:1 which was less than the standard ratio

that indicates liquid position of the company was not good. The liquid ratio started

decreasing in 2006-07 was 0.54:1 which was 0.63:1 in 2007-08 .It followed the same

trend 0.54:1 which were the worst liquidity position years for the company. But again it

followed a upward trend in 2008-09 & 2009-10, the ratios were 0.67:1 & 0.64:1

respectively. It means that the liquidity position of the company is constantly decreasing

it is due to large amount of current liabilities as compared to liquid assets. Also the

number of debtors of the company is increasing. This is not better from management's

point of view. As more of amount is blocked in the debts and chances of bad debt will

increase. Analysis Of Cash Management Statement With The Help Of Cash Flow

Statement: -

Cash flow statement shows inflows & outflows of cash or sources and application of cash

during a periodic period. This statement explains the various transactions, which have

affected the cash balance and cumulative impact of these transactions in cash balances

between two balance sheet dates. This statement is extremely helpful in planning for

immediate future to avoid serious cash shortages. A proper planning of cash transactions

helps management to have cash available when needed.

Example of Cash Flow Statement

It helps us to plan of optimum utilization of funds and avoid the situations leading to idle

cash \ surplus.

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It ensures timely payment of dividend and other major cash transactions.

It exhibit in right peers perceive the company's ability to meet demand of trade creditors

and bank loan.

It discloses the reasons that lead to movement of cash balance.

OUTFLOW/ INFLOW OF CASH

 Disbursement Of Salary/ Wages:

 Notification Of Dates Of Payment

In accordance with the provision of the payment of wages act and rules made

there under, Accounts officer notify the dates of payment of wages of various

categories of employees in office and the shop floor.

 Mode Of Payment

Payment should be made either by cheque or by transfer through bank according

to the instructions contained in the pass order on the debit advice cum payment

voucher.

 Payment System

Wherever payment is made in cash, disbursement of salary/ wages is made by pay

packet system. The pay packet contain the exact amount payable to the employees

along with the net amount is noted on the pay packet system. This is not

necessary if pay slips containing details of the gross amount of salary and

deduction are securely attached to the pay packets.

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 Payment through pay packet or in loose cash is made by the pay disbursement

officials selected for the purpose, who should be permanent employees of the

company and covered under fidelity insurance.

 Time For Payment

Accounts officer notices the time for payment at each counter or shop floor to the

concerned officers in charge well in time. The disburser is available at the counter

floor only during these specific hours and the officers in charge are expected to

see that all the employees working with are available to receive the payment

during these specific hours.

The employees who do not receive the salary during these hours will be paid on

days specifically notified for payment of unpaid wages. Salary remaining unpaid

for 10 days or more is remitted back to the bank and the amount is credited to

unpaid wages account.

 Identification

The correct identification of individual employees is the responsibility of the

identifying officials. He should identify the individual employees coming forward

to receive the payment on the pay bills by initiating against the individuals name

in the pay bill. He should also sign on the pay bill, certify that he has identified &

witnessed the payment to the employees mentioned in the pay bill.

 Payment Procedure: At the time of payment, employees stand in queue to

receive their payment. Each employee presents himself before the pay disburser

& sign against his name in the pay bill. In case of illiterate person, the identifying

official insures that the left hand thumb impression is given by the individual

concerned in his presence.

No claim for support will be entertained if the employee concerned has left the

counter after singing the pay bill.

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 Payment Through Bank:On the receipt of the pay bill, bank wing separate out

the cases requiring payment through banks & send cheques to the concerned bank

one day in advance of the due date of disbursement.If for nay reason

cheques/letters of the authority are made out more than one day in advance, they

will bear an endorsement, “payable on or after ………” & the due date of

payment shell be specified therein.

 Responsibility For Cash

The pay disburser shell be responsible for cash received by them from the time of

obtaining payment from chief cashier till pay has been disbursed & unpaid

amount handed over to the chief cashier.

 Payment To An Employee On Behalf Of Another

Payment of salary/wages & allowance etc. should normally be made to the

individual concerned only & under no circumstances to outsider on behalf of the

company employees. When payment is made to accompany employee on behalf

of another, the following procedure should be followed.

Payment of dues one employee should not be made to another accept on the

written authority of the person to whom the payment is due which shell be

attached to the pay bill in support of payment.

Signature of the employee to whom the payment is due shall be attested by the

officer under whom the employee is working.

The employee to whom the payment is made o9n the basis of authority letter

should be properly identified before payment.

TECHNIQUE OF CASH FORECASTING AND CASH

BUDGETING:

24
 • Cash forecasting means of cash near future. It is very important task because it

avoids the problem of over cash and under cash. Cash forecasting is based on two

major factors:

• Forecasting of payment

• Forecasting of receipts

• Forecasting Of Payment:

Forecasting of payment means is to forecast the payment of near future that is

requirement of cash for payment purpose. There are a lot of many payments, which the

company pays. Some of them are as follows:

 Day today basic funds requirements

 Medical reimbursement

 Traveling allowances

 Pending of bills

 Argent bills

 Statuary bills - sales tax, excise duty, reasonable provident fund (RPF), income

tax.

 Priority payments.

 Employee related payments

 Salary payments

 Overtime payment

 Incentives

 Festival advances etc.

25
• Forecasting Of Receipts

Forecasting of receipts means to forecast the cash that the company receives. There are

several types of receipts. Some of them are as follows:

 Vocational trainees fees

 Rent of residential house

 Medical card fees

 Tender document

 Earnest money

 Security deposit

 Payment by customer

 After forecasting the receipts and the payments companies makes a comparison

between them and estimate the net difference and on the basis of the difference

company estimates the cash requirements.

26
CHAPTER 2

SCOPE

AND

IMPORTANCE

27
 SCOPE AND IMPORTANCE

Scope of the study:

 It will help to understand the cash inflow and outflow of the organization

 It will help in comparing the cash inflow and outflow of the organization with the

help of two years.

 It will also help to compare the actual and budgeted cash inflow and outflow of

the organization.

 I am able to learn from this report that how the cash is being managed or how it

will be applicable in any organization.

Importance of the Study:

Cash management is ultimately about cash flow -- and very few small businesses are

awash in cash. Even successful, growing companies are vulnerable to cash flow problems

because they tend to add employees and inventory rapidly. This may quickly deplete the

company coffers and lead to cash shortages.

Because having cash at the right time is so important, entrepreneurs must pay close

attention to cash management.

Here are some tips for saving money and managing cash flow:

 Make financial projections. Forecast both expenses and anticipated revenues for

at least the coming year. This will help you predict when you're likely to have

cash and when you're likely to need it. You should also maintain a cash reserve if

possible.

 Create contingency plans. Have several budget projections, including best case

and worst case scenarios, and think about how you might respond. In the event

sales don't take off as expected or there's some unforeseen problem, you'll be

better prepared.

28
 Keep a lid on spending. One of the most common problems with new businesses

is the owners' tendency to spend freely. There's no need to have lavish offices or

expensive furniture. Remember, you're in this for the long haul: You should try to

get as much value as possible out of every transaction, whether you're leasing

office space or stocking the company kitchen.

 Keep inventory low. Don't stock inventory based on your fantasy of what you

think you'll be selling in six months. Instead, stock only what you know you can

sell in the short term.

 Lease, don't buy. Another good way to conserve cash is to lease equipment

instead of buying it. Although leasing can be more expensive in the long run, it

helps you avoid laying out a lot of capital all at once for things like office

furniture, computers and copiers.

 Delay hiring employees. Try to improve the productivity of current employees

(without burning them out), use independent contractors and consider outsourcing

certain nonessential functions. Employees are expensive, so you should put off

adding permanent hires as long as you can -- or at least until you're earning the

revenue to support them.

 Go without a salary. Some experts recommend stockpiling a year's worth of

living expenses before going into business. Admittedly, this may be difficult, but

you should at least avoid paying yourself an excessive salary. Too many

entrepreneurs waste cash by paying themselves big salaries without the revenues

to justify them.

 Speed up customer payments. Try to get customers to pay on time or early, if

possible. Offer incentives like discounts or late fees, and adopt more effective

collection techniques for deadbeat customers.

29
 Don't be wasteful. Recycle and reuse what you can -- for example, boxes, and

computer discs and file folders. The savings may not be large on any given item,

but they can add up over time.

Objectives of the study

 Recognize key concepts, terminology, goals and tools used in the

management of corporate cash.

 Examine the cash conversion and operating cycles of a company and methods

used to forecast cash flows.

 Recognize fundamental financial ratio analysis used to measure liquidity.

 Identify objectives and methods used to collect receipts quickly and control

disbursements.

 Identify basic borrowing and investment techniques used to ensure adequate

liquidity.

30
 CHAPTER 3

LITERATURE REVIEW

31
LITERATURE REVIEW

Czyzewski and Hicks pointed in their paper that companies strive for the maximum

return for the certain amount and the given structure of the assets. From microeconomics

point of view, adding another penny on the optimal mix of input results in the decrease of

the return on the given input. In other words, when the marginal cost is equal to marginal

return the company stays in the optimal capital structure. Their research revealed that the

companies with the higher ROA ratio also have higher cash to total assets ratio. However,

they didn’t explore deeply the factors that affect the asset structure of the firms. Therefore

a large amount of research emerges concerning the determinants of cash holdings. Cash

management is the central topic of corporate governance.

Orr argues against the view presented by Sprenkle in 1969 that the amount of cash held

by business firms is explained mostly by compensating balance requirements rather than

transaction cost demands. Sprenkle is in favor of compensating balance theory by

pointing out that one transaction demand model - Baumol-Tomin model fails to predict

the level of cash holdings in large business firms. However, Orr argues that the failure of

Baumol-Tomin model to predict the cash holdings in business firms cannot be regarded

as strong evidence to support the other view, because the variables used and data

predicting these variables are inadequate and irrelevant. Sprenkle finds that the

predictive mean cash level of 465 companies of Fortune’s 500 largest manufactures using

1966 data is underestimated to a significant extent comparing to actual reported cash

holdings with only one exception. Orr finds that holding the cash flow steady and

periodic is unreasonable under Baumol-Tomin model’s assumptions and presents a

related model - Miller-Orr model with better data and variables. This more realistic data

leads to the mean cash holdings twice as good as Sprenkle’s best prediction among the

fifty largest firms, but this model is still trapped in the limited assumptions.Compensating

balance theory is less developed, but explained by researchers as three hypotheses.

32
Collusive bank hypothesis (Hodgman, 1961) holds that High competition among banks is

limited due to increasing the borrowers’ mean balances as a result of the loan. The second

explanation provided by Davis and Guttentag (1963) holds that the compensating balance

that the firms will voluntarily keep is larger than the banks’ minimum requirements. Frost

point out that firms are not willing to hold much compensating balance as the banks

expect and therefore the fee system for bank service emerges. Orr doubt supports Davis

and Guttentag’s view that if the voluntary compensating balance is sufficient to the bank

requirements, cash holdings in business firms can be in effect explained by a theory of

demand for money.Orr concludes that B-T model‘s heavy underestimation of cash

holdings in business firms cannot overthrow the transaction demand model, as Sprenkle

argues in 1969. Sprenkle’s favor of compensating balances as a result of overthrowing B-

T model is little correspondence to other researchers’ view that either firms’ voluntary

compensating balance is sufficient to the banks’ requirement or bank service fee system is

invented in reward of insufficient compensating balance leads to the support of money

demand theory.

As early as late 90s and the beginning of 21st century, the topic about what are the

important factors that affect the cash reserves in business firms emerged vividly. As

indicated in the Dittmar et al.’s paper (2003), many factors have been examined before,

for example, tradeoff model and financial hierarchy model in which researchers have

already tested the impact of some of factors on the cash holding level in business firms.

Kim, Mauer and Sherman (1998) argue that optimal cash holdings are decreasing in the

rate of return on current investment opportunities, which is consistent with the transaction

cost motive. Almeida et al. (2002) intend to prove the precautionary motive but end up

with the results consistent with agency problems, but there is still little support for the

agency cost motive as mentioned in the authors’ paper. No one has really done the

research to test it. Therefore Dittmar et al. summarize previous research and use some of

33
their testing data to test agency cost and conclude a new result that agency problem is the

most important factor that determines the level of cash holdings, while other factors

either do not matter or are less important. According to Dittmar et al. (2003) to examine

whether the importance of proxies for the precautionary and transactions cost motive is

larger in the countries with more shareholder protection is an important task. Only the

full argumentation of these effects can prove that agency cost view is the dominant factor

that determines the cash holding level in the firms. As early as 1960s, topic of cash

management or perhaps more concrete, the level of cash holdings in the companies has

been paid attention to. This kind of research never stops and more and more research

emerges in recent years. As a incomplete summary:

 In 1969 Sprenkle presented that compensating balance affects the cash holdings

due to the uselessness of transaction demand model.

 In 1974 Orr re-examined Sprenkle’s argumentation and rejected his results. Orr

pointed out that the failure of transaction demand model is not because of the flaw

of the model per se, but because of the inappropriate assumption. Compensating

balance cannot be regarded as an alternative after giving up the transaction

demand model, because compensating balance theory is less developed at that

time and many hypotheses still exist which seem to object the Sprenkle’s

conclusion. Thus no explanation comes up to tell us what is the factor determining

the cash holdings.

 As mentioned in Dittmar et al.’s paper Opler et al in 1999 examine the tradeoff

model and hierarchy views of corporate cash holdings and find that the results

favor tradeoff model. In other word, they conclude that the transaction cost

motive and precautionary motive are the determinants of cash holding level in the

firms.

 In a couple of year before 1999 and after, many papers argue this topic. Some of

34
 them examine the effect of cash flow, some of them explore the effect of capital

structure and so on.

 In 2003 Dittmar et al. present the agency cost view.

35
 CHAPTER 4

INDUSTRY PROFILE

36
 INDUSTRY PROFILE

Uttar Pradesh Sugar Industry is one of the largest sugar industries in the Indian economy.

The lavish measures in form of new promotional policies for the Uttar Pradesh sugar

industry by the state government of Uttar Pradesh was introduced at a time when it was

much needed to further boost the growth of the Uttar Pradesh sugar industry. The

improvements in the plant capacity and the introduction of new techniques which enables

the optimization of the existing plant capacities has the further made the growth definite.

With the new promotional policies of the Uttar Pradesh sugar industry, the investors have

already starting eying the future prospects. There are 20 more sugar processing units are

coming up as a part of Uttar Pradesh sugar industry. The existing companies under the

Uttar Pradesh sugar industry are planning an investment pertaining to expansion of about

Rs 4,000 crore. At present the major companies in the Uttar Pradesh sugar industry are

Balrampur Chini, Simbhaoli Sugars Ltd., Bajaj Hindusthan Ltd., etc. A batch of

Brownfield and Greenfield expansion projects has already started their activities of

crushing cane. The increase in the capacity would help the Uttar Pradesh sugar industry

to churn out an extra 140,000 tons of crushed cane everyday to the existing 2.Y million

tons of sugar produced within a few years time. The total sugar production under the

Uttar Pradesh sugar industry would lead to 7.5 million tons, making Uttar Pradesh the

biggest manufacturer of sugar in India.

The Uttar Pradesh sugar industry has a bright future as one of the prospective players in

the global sugar market. The demand for sugar across the world has been growing

exponentially. The Uttar Pradesh sugar industry with its capacity can cater to this

international demand. The advantages of the Uttar Pradesh sugar industry are that the

cost of production is quite low and the climatic conditions and the conditions of the soil

are favorable to the sugarcane production. The region of India where the state of Uttar

Pradesh lies is one of the most fertile lands in India called the 'doab'. This is an extremely

37
fertile belt of lands between the rivers Ganges and Jamuna. To boost the production of

the Uttar Pradesh sugar industry, the government of Uttar Pradesh is likely to set up a

research and development unit which would develop better quality sugarcane plants to

have better yield and diseases-resistant crops to ensure that the industry has a sustainable

growth. The geographical position of the state of Uttar Pradesh is one of the key

advantages as it is very easy to access. With all these developments the Uttar Pradesh

sugar industry can meet the increasing domestic demands in India, which due to the

improvements in the economic conditions and the rise in the general income level. The

present consumption of sugar is nearly 19 mt annually and it may go up to 24 MT on a

yearly basis.

At present, the situation of the Indian sugar production can improve with all these

measures. In the financial year of 2004-2005, India had to import 8.89 lakh tons of sugar

from different countries due to the huge decline in the national sugar production. These

measures would have a long term effect on the sugar production of the state and therefore

of the entire country.

38
Sugar Industry in India is well developed with a consumer base of more than billions of

people. It is also the second largest producer of sugar in the world.

There is around 45 millions of sugar cane growers in India and a larger portion of rural

labourers in the country largely rely upon this industry. Sugar Industry is one of the

agricultural based industries. In India it is the second largest agricultural industry after

textile industry.

Statistics on Sugar Production

As to the statistics there were a total number of 571 sugar factories in India as on March

31, 2005 compared to 138 during1950-51. These 571 sugar mills produce a total quantity

of 19.2 million tones (MT). Sugar production in India increased from 15.5 MT in 1998-

99 to 20.1 MT in 2002-03.

39
Department of Agriculture and Co-operation, sugarcane production in 2004-05 is

estimated at 232.3 MT from 237.3 MT in 2003-04. Sugarcane production is expected to

reach 257.7 MT in 2005-06.

Sugar Production In states

The following table shows level of sugar production (In Lakh Tones) in Indian States:

State 2002-03 2003-04 2004-05 Estimated

Uttar Pradesh 58.74 46.08 50.32
Maharashtra 61.64 31.99 22.29
Karnataka 17.98 11.57 13
Tamil Nadu 17.04 11.9 9.84
Andhra Pradesh 11.88 8.81 9.75
Gujarat 12.38 10.77 8.32
Haryana 5.99 5.86 4.03
Uttaranchal 4.59 3.93 3.82
Punjab 5.11 3.88 3.37
Bihar 4.21 2.77 2.77
Madhya Pradesh 0.85 0.94 0.85
Other 0.91 1.09 1.58

The sugar production in the states largely depends upon monsoon. From 1998-03 good

monsoon resulted a larger production of sugar in the country.

Sugar Pricing:

Government of India fixes Statutory Minimum Price (SMP) for sugarcane according to

Clause 3 of the Sugarcane Order. This statutory Minimum Price is designed through the

consent of Commission for Agricultural Coast and Prices (CACP) and respective state

Governments. For the year 2004-05, the rate was fixed at Rs. 74.50 per quintal with a

basic recovery of 8.5%.

INDIAN GOVERNMENT ON SUGAR INDUSTRY

40
The following policy initiatives are taken to boost the Sugar industry:

 Government declared the new policy on August 20, 1998 with regards to

licenses for new factories, which shows that there will be no sugar factory

in a radius of 15 km.

 Setting up of Indian Institute of Sugar Technology at Kanpur is meant for

improving efficiency in the industry.

 In the year 1982, the sugar development fund was set up with a view to

avail loans for modernization of the industry.

Global recession/ slowdown, impact on sugar and ethanol industry:

Global sugar industry did not remain unaffected with the financial meltdown and recent

slowdown in the world economy. The recessionary trends have impacted the liquidity

position, which depressed values and created new correlations between commodities,

equities and emerging market currencies. The reduction in risk appetite and withdrawals

of funds from commodity markets has reduced its depth and market making abilities.

Lower capital is being earmarked for future expansions and the Brazilian industry is

already showing sign of falling short of market expectations with regard to production

estimates for 2009-10 and beyond. Fall in crude prices to a level below US $50 per barrel

may impact the commercial viability of ethanol as a substitute to petroleum products. The

environmental impact of ethanol as a renewable fuel, however, will keep its demand alive

and nearly constant. The changing currency conversion rates have started affecting

domestic cost calculations and import/export values. Falling freight rates, with Baltic

freight indices gone down by nearly 90% from 11500 in May 2008 to around 1000 in

November 2009, have made movement of sugar feasible to longer distances. The trade

clusters created in 2008-09 season are dismantling. While these issues are creating short

term disruption, the long term impact is difficult to ascertain at present. However, the

world sugar consumption is growing year after year. Indian sugar, however, is expected
41
to remain un-affected as it is driven by high domestic demand which is least elastic; sugar

constitutes small percentage of household budgets; rising indirect consumption; sugar

business is mostly in cash and carry; and Indian farmers are not credit dependant. Some

impact of slowdown, however, would be seen in the form of fewer transactions in

commodity exchanges, lower pipeline stocks and slower growth. Higher interest costs

would also affect the industry, which is highly capital intensive. The financial stress may

reduce flow of funds to the sugar sector resulting in low capacity expansion, lack of

working capital finance, and lower funds investments in commodities.

Outlook for 2009-10 sugar year:

2009-10 should witness a fall in global production by over 7.9 mmtrv; due to a fall in

production by over 5 mmt in India and around 3 mmtrv in EU. Unlike Brazil, the sugar

industry in these countries is largely dependent on their domestic markets, and lower

production will translate into lower exports from these countries affecting the globally

tradable sugar. Globally, floating sugar will reduce to 48.2 mmtrv from 51 mmtrv in

2009-10. India is likely to produce 20 mmtrv of sugar in the 2009-10, as per the latest

official estimates available. 2009-10 will largely be driven by emerging markets; with

India and China being the main drivers. On a regional basis, Asia and Africa will have a

more modest consumption growth. With lower production and rising consumption, the

stock to use ratio at the end of 2009-10 is expected to be lower by 12.1%, from 27.1

mmtrv to 23.8 mmtrv. A marked contraction in Indian production, followed by a modest

decline in Brazilian sugar production in 2009-10, will reduce global production by nearly

6% year-over-year in 2008/09 leaving the global balance in a 1.8 mmtrv deficit- a deficit

more than double is expected in 2009/10.

42
India Sugar balancing (figs in mmt)

Sugar Year 2007-08 2008-09 P 2009-10 E

Opening Stocks 3.6 9.2 8.1**
Production 28.3 26.3 19.5
Imports - - -
Total 31.9 35.5 27.6
Consumption- domestic 21.0 22.5 23.0
Exports 1.7 4.9* 0.80
Closing Stock 9.2 8.1 3.8
% age of consumption 43.8 35.9 16.5
*Till 12.09.2008, 4.8 mmt has been exported inclusive of 0.09 mmt awaiting loading at

the port.

**After accommodating for the stock adjustment

Source: ISMA/agst.xls/ras/sheet1updated on November10, 2009/ SSL estimates

Sugar Prices in 2009-10

Fig 3: Indian Sugar Prices

43
 Fig 4: World Sugar Prices

Global recession/ slowdown, impact on sugar and ethanol industry:

Global sugar industry did not remain unaffected with the financial meltdown and recent

slowdown in the world economy. The recessionary trends have impacted the liquidity

position, which depressed values and created new correlations between commodities,

equities and emerging market currencies. The reduction in risk appetite and withdrawals

of funds from commodity markets has reduced its depth and market making abilities.

Lower capital is being earmarked for future expansions and the Brazilian industry is

already showing sign of falling short of market expectations with regard to production

estimates for 2009-10 and beyond. Fall in crude prices to a level below US $50 per barrel

may impact the commercial viability of ethanol as a substitute to petroleum products. The

environmental impact of ethanol as a renewable fuel, however, will keep its demand alive

and nearly constant. The changing currency conversion rates have started affecting

domestic cost calculations and import/export values. Falling freight rates, with Baltic
44
freight indices gone down by nearly 90% from 11500 in May 2008 to around 1000 in

November 2009, have made movement of sugar feasible to longer distances.

45
 CHAPTER 5

COMPANY PROFILE

46
 COMPANY PROFILE

DHAMPUT SUGAR MILLS LTD

HISTORY

The Dhampur Group began its operations at Dhampur, Uttar Pradesh in 1933 with a

crushing capacity of 300 TCD. The current capacity of Dhampur Group is 39,500 TCD.

Its products include Power, Ethanol, Chemicals, Refined Sugar and Plantation White

Sugar.

Leadership begins with a vision

Lala Ram Narain ji [1880 – 1943], founder of the Dhampur Group, took on the task of

supporting his entire family at a very young age and shouldered his responsibilities with

fortitude and confidence. During this period he worked with a forest contractor but the

craving to press forward and accomplish, burnt deep within his heart. He soon spotted an

opportunity in supply of wooden sleepers, for laying new railway tracks and boldly

struck out on his own. His determination defied logistics and laid the foundations of the

Dhampur Group.

From such modest beginnings, he hand-crafted the destiny of the corporate house that

today, directly and indirectly, provides employment and livelihood to a large number of

individuals and families of the rural India.

In the early 1930’s, while the strategists debated over choice of role models on which to

shape the Indian economy, Lala Ram Narain ji anticipated the need for industrialization.

The outcome of his foresight was investment in two sugar mills – one at Dhampur and

the other as a 50% partner, at Bareilly, in Uttar Pradesh.

The Dhampur Sugar Mill was commissioned in 1933.

47
Shri Murli Manohar ji [1916 – 1964], eldest son of Lala Ram Narain ji took up the

baton at an early age to carry forward the vision and legacy of his father. Even in face of

a youth spent in comparatively difficult circumstances, the indomitable will he inherited

from his father manifested itself in 1947 when the Indian Sugar Industry was passing

through a challenging phase.

He resisted efforts to divest the Dhampur unit and took over the Managing Agency of

the factory agreeing to pay a fixed dividend to his partners. He accomplished this task

with great élan and successfully turned around the fortunes of the Dhampur factory.

He passed away at the young age of 48 but the path for the future generations had

already been etched.

Dhampur Today

The Dhampur Group is spearheaded by its dynamic Chairman, Mr.V.K.Goel. His

visionary innovativeness and emphasis on continuous R&D have made the company a

technological leader in sugarcane processing and green energy solutions.

Starting from 300 TCD in 1933 the Dhampur Group has recorded an impressive

performance taking its crushing capacity of sugarcane to 39500 metric tonnes per day,

with power co-generation capacity of 145 MW and alcochem capacity of 270,000 liters

per day. Through its successful pioneering efforts, the Dhampur Group directed the

industry’s development by introducing new technologies like Fibrizors, Pressure

Feeders, Fiber based single tandem, Pressure Evaporation System with Falling Film

Type Evaporator Bodies, Vertical Continuous Pans etc. These innovations became the

mainstay of sugar technology in India.

Dhampur is one of the most integrated sugarcane processing companies in India.

Dhampur's sugarcane co-generation capacity is one of the largest in the country and it

has perhaps the highest ethanol manufacturing capacity relative to it’s cane crushing

capacity, in the country. It is also the first and the largest producer of refined sulphurless

48
sugar in the country.

MISSION & VISION

Dhampur stands tall with the collective confidence that our farmers, our workers, our

vendors and our stakeholders have pledged with us. Their sense of belonging, their

hopes and expectations motivate us to perform better each time. Preserving their trust

is our corporate mantra.

At Dhampur we have striven to realize a corporate environment of collaborative effort

and have worked towards continuous improvement in every sphere of our activity. In

our quest for excellence we have given special consideration to our social obligations,

whether it is caring for the rural hinterland or the environment we live in. A significant

and endearing feat for the Group is that some of its employees have been a part of the

Dhampur family for two to three generations.

Projections of the sugarcane based Industry in India are exceptionally promising and

Dhampur is totally geared up to think beyond the cube:

 To provide energy alternatives to an energy-starved country through co-generation

and ethanol.

 To value add on our product portfolio

 To maximize the potential of the agro industry in India.

 To continuously bring down the cost of conversion.

 To encourage creativity and resourcefulness, and focus on continuous R&D.

 To optimize the value of stakeholder investments with a continuous improvement

in financial performance.

 To diversify and protect the bottom-line during industry downturn.

 To attain the highest level of accountability, corporate governance and shareholder

value.

49
In a country where agriculture is the predominant activity, sugarcane processing units

wield a tremendous impact on the area of their location. We continue to play our role

with absolute commitment and watch with fascination and pride as even the most

backward areas where our units are located, slowly transform into a beehive of

activity, touching the lives of thousands of people, now a part of the ever increasing

Dhampur family.

50
 CHAPTER 6

PRODUCT PROFILE

51
 PRODUCT PROFILE

SUGAR:

BRAND : DHAMPUR

With the belief that the Indian consumer today is as quality and health conscious as any

other consumer today the world over, Dhampur Sugar Mills made an initiative to produce

a sugar comparable to the high standards of the western countries, in India. Dhampur

embarked on the project in 1996, under the aegis of the Sugar Technology Mission to

make sugar that would be sparkling white, pure and healthier. Dhampur perfected the

technique and the result was India's first double refined sulphurless sugar sold under it’s

brand Dhampur

Dhampur is a better sugar simply because its processing continues long after that of

ordinary sugar has stopped.

 The secret behind Dhampur's purity is the unique Defeco Remelt Process, in

which the sugar after it has crystallized is melted all over again and all the

impurities are removed without the use of sulphur.

 Since no sulphur is used in the manufacturing of Dhampur sugar, it meets even

the strict standards of the European Union on sulphur content.

 The double refined Dhampur sugar has no impurities, so its crystals have natural

translucent white colour and don't require bleaching with sulphur-dioxide.

 Dhampur is packed under a controlled environment, untouched by hand, assuring

impeccable hygiene.

52
POWER

 COGENERATION CAPACITY : 145 MW

(80 MW GRID INTERACTIVE)

BAGASSE, the residual fiber of sugarcane after crushing and extraction, is a valuable

by-product generated during the sugar manufacturing process. It has high calorific value

and is therefore used to generate steam and thereby electricity, which is a conventional

thermal alternative and eliminates emission of green house gases.

In 1994, Dhampur was the first sugar company in India to start eco-friendly cogeneration

at one of it’s units, with a low project outlay as compared to conventional power plants.

Conventionally, this was restricted to providing captive power in order to meet the

energy requirements of the sugar factory. However, Dhampur was one of the first to

realize the tremendous potential it had towards reducing the power deficit, by supplying

to the grid, thereby contributing to the bio-energy effort undertaken by the country.

An additional benefit of using bagasse is that it is a renewable source of fuel and does

not contribute to Greenhouse gasses as the sugarcane plantation consumes more carbon

dioxide than that generated in burning bagasse. Today, the Group’s combined co-

generation capacity stands at 145 MW with 80 MW of grid interactive power.

Dhampur is the first in the world to install 105 kg.cm2 boiler and turbine in its sugar

division, which has increased efficiencies in bagasse usage and made it perhaps the most

efficient cogeneration unit in the world. Dhampur additionally installed energy saving

53
devices which would further increase bagasse savings. This saving would enable the

company to run its power plants without external bagasse purchases. Power generation in

non-sugar season as well, will result in consistent cash inflows.

Dhampur was the first sugar company in Uttar Pradesh, which was allowed export of

power under ‘Open Access’ (during off-season), from 1st October, 2009, resulting in

higher realizations.

ETHANOL

 CAPACITY : 270 KL Per Day

Ethanol is a generic name for Ethyl Alcohol which is a product of sugarcane molasses

and juice, prepared by fermentation and distillation processes. It is a volatile, flammable

and colourless liquid, widely used as a solvent of substances intended for human contact

or consumption, including fragrances, flavoring, colouring and medicines. When

blended, as an additive with fuel for motor vehicles, it is known as Motor Fuel Grade

Alcohol or Power Alcohol. It can be blended with petrol in varying quantities up to any

extent depending upon the technology of the engine. Up to 15% blend no modifications

are required in the engines.

Usage of ethanol-blended gasoline began in the late 1970s. Environmentally, the use of

ethanol blends has assisted in reducing carbon monoxide emissions. In the United States,

one out of every eight gallons of gasoline sold contains ethanol. Most of this ethanol is

purchased as blends of 10% ethanol and 90% gasoline, known as E10, and is used as an

octane enhancer to improve air quality.

In India we are presently using E5 that is, 5% ethanol blend with gasoline but a

government order for 10% blend is expected in the near future.

A SUGAR INDUSTRY PERSPECTIVE & ETHANOL PRODUCTION

54
Most sugar companies in India are evolving into integrated players as diversification into

distillery, ethanol and power has become possible. This has improved the demand for

molasses and ensures better economics.

The Government of India has made blending of 5% Ethanol in motor vehicle fuels,

compulsory all over India. This directive has provided sugar mills the opportunity to

implement forward integration.

A 5% ethanol blend on an all-India basis would require around 500 million liters. The

current installed capacity would be adequate to meet this requirement as also for E10

blend, even after fully meeting the requirement of the chemical industry and potable

sectors, as India is the second largest producer of sugar in the world.

Ethanol blended fuels are advantageous due to the following characteristics:

 Renewable source of energy

 Renewable source of energy

 Use Molasses which is readily available and is a by-product of the sugar

manufacturing process

 Diversifies the Sugar Industry

 Utilizes industrial installed capacity, improving the economy of the industry.

 Energy security, trade balance and risk reduction.

 Reduce use of gasoline and ensures less dependence on imports of oil

 Market opportunity for agricultural crops

 Rural economic development and boost to the agricultural sector

 Environmental benefits (reduced carbon dioxide and carbon monoxide emission.

It does not contribute to the harmful greenhouse gasses)

 Displaces dangerous and environmentally damaging components in gasoline, such

as benzene.

55
India presently has an installed capacity of over 3,000 million liters per annum but is

producing less than 50% of installed capacity.

CHAPTER 7

RESEARCH

METHODOLOGY

56
 RESEARCH METHODOLOGY

• Research Methodology:

Research is a diligent and systematic inquiry or investigation into subject in order to

discover or revise facts, theories, applications, etc. methodology is the system of methods

followed by particular discipline. Thus, research methodology is the way how we

conduct our research..

 Research design: For the study, exploratory design was undertaken understand

the various aspects of cash management.

 Sampling method- For this research work I have chosen non- probability

convenience sampling method. I have chosen this method for timely completion

of the work and also managers and employees were not available all the time.

• Research Objective: This research is basically conducted for studying how cash

is utilized by the organization. The main objectives of the report are as under:

 Recognize key concepts, terminology, goals and tools used in the

management of corporate cash

 Examine the cash conversion and operating cycles of a company and methods

used to forecast cash flows

 Recognize fundamental financial ratio analyses used to measure liquidity

 Identify objectives and methods used to collect receipts quickly and control

disbursements

 Identify basic borrowing and investment techniques used to ensure adequate

liquidity

 Explore fundamental techniques specific to cross-border cash management

Area of study- DHAMPUR SUGAR MILLS

Duration – 6 WEEKS

57
  Types of Data collection method-

• Research Design

Research design is simply the framework or plan for a study, used as a guide in collecting

and analyzing data. There are three types of Research Design:-

1. Exploratory Research Design:- The major emphasis in exploratory Research design

is on discovery of ideas and insights.

2. Descriptive Research Design:- The Descriptive Research Design Study is typically

concerned with determining the frequency with which something occurs or the

relationship between two variables.

3. Casual Research Design:- A Casual Research Design is concerned with determining

cause and effect relationship.

Sampling Design

Sampling Design:

(a) Population Element: Servicemen in DSM Sugar, Asmoli

(b) Extent: DSM Sugar, Asmoli

(c) Time: July- August

(d) Sampling Unit: -Employees of Dhampur Sugar Mill

 Sampling Method: There are two methods of sampling:

1. Probability Sampling: It is based on the concept of random selection of a controlled

procedure that assures that each Population element is gives a non-zero chance of

selection. Probability Sampling is of following types:

Simple Random

Systematic

Cluster

Stratified

Double
58
2. Non-Probability Sampling: Non probability sampling is non-random and subjective.

That is each member does not have a known non zero chance of being included. Types of

Non-Probability Sampling

1. Convenience

2. Judgment

3. Quota

Researcher selects the sample as per their convenience.

 Data Collection Technique are:

Data for the present study is collected from two sources:

• Primary sources: The data are collected directly from the universe by conducting

interviews, etc. these are the original sources from which the researcher directly

gathers data which are not previously referred.

• Secondary sources: The data are collected from the secondary sources such as

magazines, journals, etc. These sources consist of already variable data in the

form of statements, and reports, which may include sensory reports, financial

statements of the company, reports of governments departments, etc.

Data Approach- There are several Approach of data collection. The primary sources of

data collection are done through –

Observation

Interviewing

Stimulation

Mail survey

Projective techniques

Observation: Observation is a mode of primary data collection through which we

directly get the data from a universe and based on that data one can carry on the research.

59
Interviewing: Interviewing is another mode of direct data collection, which provides

complete information about the universe.

Stimulation: Stimulation is a technique of performing experiments on the model of a

particular system. The experiment is done on the model and not on the real system

because the latter will be inconvenience and expansive.

Mail survey: Through Mail survey, we can get direct data from the universe, the

responds and the feedback based on which the research can be carried out.

Projective techniques: Projective techniques are based on the theory that the description

are the vague objects and requires interpretation, and this interpretation can be based on

the individual own background, attitudes, and values.

For this I have taken DESCRIPTIVE RESEARCH because it characterized a problem

on specific aspects.

Objective of the study:

 To understand the cash inflow and outflow of the organization

 To compare the cash inflow and outflow of the organization with the help of two

years financial data.

 To compare the actual and budgeted cash inflow and outflow of the organization

60
CHAPTER 8

FINDINGS

AND

ANALYSIS

61
 FINDINGS AND ANALYSIS

CASH FLOW STATEMENT

For the year-2005-06

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2002-03 2003-04 2003-04 2003-04
inflow (operations)
direct against advances
non social security disability 13435 17650 29792 32166
recept against current desp.
1) social security disability. incl. libya. 19482 905 4420 3109
2) non social security disability 77356 94889 68390 68062
sub – total 110273 113544 102602 103337
expert insentive 3310 2817 2891 2696
other recipt 5062 2125 2808 3490
sub – total 8372 4942 5699 6186
cash inflow (operation) 118645 118486 108301 109523
outflow (operations)
1. material (indigenous)
1) social security disability 6528 4250 6765 9610
2) non social security disability 10440 9836 12498 11961
2. material (imported) 26657 25343 20163 19764
3. cutom duty 1802 1702 1622 1602
4. pmt. to sub-cont (fab) 849 1150 1045 1096
sub- total 46276 42281 42093 44033
personnel payments 23999 25187 23744 24423
sales tax 2915 3970 3313 3186
excise duty 8599 10866 9456 9310
other expenses
1) social security disability 2099 2524 2438 2332
2) non social security disability 4853 5983 6839 6793
interest:
direct (others) 44 50 65 56
allocation from corp. off -306 1000 -411 -530
exchange variation 485 0 0 0
sub-total 42688 49580 45444 45570
total outflow (operations) 88964 91861 87537 89603
operating sur./deficit 29681 26625 20764 19920
inflow non- operations 0 0 0 0
sub total (inflow non- operations) 0 0 0 0
out flow (non-operation)
share of tax & div. & others 2863 4562 6975 6975
capital expenditure 7606 7390 4975 4740
repmt. of loan (direct) 0 0 2170 91
payment on behalf of others 1345 1473 1153 1110
out flow (non operation) 11814 13425 15273 -12916
total out flow (operation) 100778 105286 102810 102519
overall sur./deficit 17867 13200 5491 7004

62
 CASH FLOW STATEMENT

For the year- 06-07.

ACTUAL BUDGET BUDGET ACTUAL

2003-04 2004-05 2004-05 2004-05
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 32166 15950 21994 25524
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. Incl. 3109 50592 49804 49735
Libya.
2) NON SOCIAL SECURITY DISABILITY 68062 72831 79223 84619
SUB – TOTAL 103337 139373 151021 159878
EXPERT INSENTIVE 2696 2033 1204 904
OTHER RECIPT 3490 2090 3117 3155
SUB – TOTAL 6186 4123 4321 4059
CASH INFLOW (OPERATION) 109523 143496 155342 163937
OUTFLOW (OPERATIONS)
1. MATERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 9610 7260 12558 12614
2) NON SOCIAL SECURITY DISABILITY 11961 14163 17269 18303
2. MATERIAL (IMPORTED) 19764 41430 48051 49988
3. CUTOM DUTY 1602 2420 1556 1360
4. PMT. TO SUB-CONT (FAB) 1096 2400 1490 1512
SUB- TOTAL 44033 67673 80924 83777
PERSONNEL PAYMENTS 24423 25550 25057 24788
SALES TAX 3186 4313 3271 3261
EXCISE DUTY 9310 1640 8125 7985
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 2332 2552 3162 3345
2) NON SOCIAL SECURITY DISABILITY 6793 6582 6822 6880
INTEREST:
DIRECT (OTHERS) 56 95 70 51
ALLOCATION FROM CORP. OFF -530 322 -400 -680
EXCHANGE VARIATION 0 0 0 14
SUB-TOTAL 45570 41054 46107 45644
TOTAL OUTFLOW (OPERATIONS) 89603 108727 127031 129421
OPERATING SUR./DEFICIT 19920 34769 28311 34516
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 6975 8940 6588 8074
CAPITAL EXPENDITURE 4740 4666 2016 2012
REPMT. OF LOAN (DIRECT) 91 166 118 117
PAYMENT ON BEHALF OF OTHERS 1110 1620 986 928
OUT FLOW (NON OPERATION) -12916 -15392 9780 -11131
TOTAL OUT FLOW (OPERATION) 102519 124119 136739 140552
OVERALL SUR./DEFICIT 7004 19377 18603 4587

63
64
 CASH FLOW STATEMENT

YEAR : 07-08
FORM NO : 25
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2004-05 2005-06 2005-06 2005-06
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY 25524 18650 21342 20730
DISABILITY
RECEPT AGAINST CURRENT
DESP.
1) SOCIAL SECURITY DISABILITY. 49735 19745 20326 20396
Incl. Libya.
2) NON SOCIAL SECURITY 84619 142871 1149091 118862
DISABILITY
SUB – TOTAL 159878 181266 156569 159988
EXPERT INSENTIVE 904 4478 1749 2108
OTHER RECIPT 3155 2580 3786 4015
SUB – TOTAL 4059 7058 5535 6123
CASH INFLOW (OPERATION) 163937 188324 162104 166111
OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 12614 10250 17150 18305
2) NON SOCIAL SECURITY 18303 24874 33408 34574
DISABILITY
2. MATERIAL (IMPORTED) 49988 48605 37038 36579
3. CUTOM DUTY 1360 2480 2675 2616
4. PMT. TO SUB-CONT (FAB) 1512 2800 2560 2528
SUB- TOTAL 83777 89009 92831 94602
PERSONNEL PAYMENTS 24788 26974 27857 27490
SALES TAX 3261 6801 4378 4178
EXCISE DUTY 7985 18444 10228 10304
OTHER EXPENSES
1) SOCIAL SECURITY 3345 3581 3265 2511
DISABILITY
2) NON SOCIAL SECURITY 6880 8065 7620 7196
DISABILITY
INTEREST:
DIRECT (OTHERS) 51 120 70 56
ALLOCATION FROM CORP. OFF -680 -200 -500 -1007
EXCHANGE VARIATION 14 0 0 0
SUB-TOTAL 45644 63785 52918 50728
TOTAL OUTFLOW (OPERATIONS) 129421 152794 145749 145330
OPERATING SUR./DEFICIT 34516 35530 16355 20781
INFLOW NON- OPERATIONS 0 0 0 0

65
SUB TOTAL (INFLOW NON- 0 0 0 0
OPERATIONS)
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 8074 11678 127078 12710
CAPITAL EXPENDITURE 2012 8730 2392 2141
REPMT. OF LOAN (DIRECT) 117 242 195 300
PAYMENT ON BEHALF OF 928 1750 996 1043
OTHERS
OUT FLOW (NON OPERATION) -11131 -22400 -16290 -16194
TOTAL OUT FLOW (OPERATION) 140552 175194 162039 161524
OVERALL SUR./DEFICIT 23385 13130 65 4587

66
 CASH FLOW STATEMENT

YEAR : 08-09
FORM NO : 25
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2005-06 2006-07 2006-07 2006-07
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 20730 17980 43090 50856
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. 20396 3799 2742 2946
Incl. Libya.
2) NON SOCIAL SECURITY 118862 178266 171832 161272
DISABILITY
SUB – TOTAL 159988 200045 217664 215074
EXPERT INSENTIVE 2108 692 464 464
OTHER RECIPT 4015 3240 4045 4134
SUB – TOTAL 6123 3932 4509 4598
CASH INFLOW (OPERATION) 166111 203977 222173 219672
OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 18305 18020 19650 21176
2) NON SOCIAL SECURITY 34574 30925 35583 35007
DISABILITY
2. MATERIAL (IMPORTED) 36579 43570 41040 40907
3. CUTOM DUTY 2616 2570 3691 3677
4. PMT. TO SUB-CONT (FAB) 2528 3000 2596 2638
SUB- TOTAL 94602 98085 102560 103405
PERSONNEL PAYMENTS 27490 29081 28261 28216
SALES TAX 4178 8236 6849 6750
EXCISE DUTY 10304 13697 11491 11633
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 2511 3706 3441 3198
2) NON SOCIAL SECURITY 7196 8589 9244 9343
DISABILITY
INTEREST:
DIRECT (OTHERS) 56 110 118 108
ALLOCATION FROM CORP. OFF -1007 -500 -2000 -2000
EXCHANGE VARIATION 0 0 0 0
SUB-TOTAL 50728 62919 57404 57248
TOTAL OUTFLOW (OPERATIONS) 145330 161004 159964 160653
OPERATING SUR./DEFICIT 20781 42973 62209 59019
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- 0 0 0 0
OPERATIONS)
OUT FLOW (NON-OPERATION)
67
SHARE OF TAX & DIV. & OTHERS 12710 17441 15613 15612
CAPITAL EXPENDITURE 2141 10750 6084 6363
REPMT. OF LOAN (DIRECT) 300 490 316 320
PAYMENT ON BEHALF OF OTHERS 1043 1150 2015 1895
OUT FLOW (NON OPERATION) -16194 -29831 24028 -24190
TOTAL OUT FLOW (OPERATION) 161524 190835 183992 184843
OVERALL SUR./DEFICIT 4587 13142 38181 34829

68
 CASH FLOW STATEMENT

YEAR : 09-10
FORM NO : 5.1
DIVISION : DHAMPUR SUGAR MILLS LTD.
|
DESCRIPTION ACTUAL BUDGET ACTUAL APPOVED
2006-07 2007-08 2007-08 BE 2008-09
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY 50856 40050 59338 57800
DISABILITY
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. 2946 3419 2837 1394
Incl. Libya.
2) NON SOCIAL SECURITY 161272 216954 182316 284978
DISABILITY
SUB – TOTAL 215074 260423 244487 344172
EXPERT INSENTIVE 464 750 279 750
other recipt 4143 4050 4085 4225
sub – total 4598 4800 4364 4975
cash inflow (operation) 219672 265223 248851 349147
outflow (operations)
1. material (indigenous)
1) social security disability 21176 20150 24179 22541
2) non social security disability 35007 31280 41556 40075
2. material (imported) 40907 51070 37371 96058
3. cutom duty 3677 5250 6603 14510
4. pmt. to sub-cont (fab) 2638 3300 3431 3800
sub- total 103405 111050 113140 176984
personnel payments 28216 33173 32151 38590
sales tax 6750 9100 5234 7300
excise duty 11633 20237 13883 23270
other expenses
1) social security disability 3198 4177 3410 4348
2) non social security disability 9343 12600 12514 16021
INTEREST:
DIRECT (OTHERS) 108 170 130 219
ALLOCATION FROM CORP. OFF -2000 -2100 -3670 -3801
EXCHANGE VARIATION 0 0 -63 0
SUB-TOTAL 57248 77357 63589 85947
TOTAL OUTFLOW (OPERATIONS) 160653 188407 176729 262931
OPERATING SUR./DEFICIT 59019 76816 72122 86216
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- 0 0 0 0
OPERATIONS)
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 15612 20116 23228 23035

69
CAPITAL EXPENDITURE 6363 20448 7720 22426
REPMT. OF LOAN (DIRECT) 320 415 326 524
PAYMENT ON BEHALF OF OTHERS 1895 1190 1718 1540
OUT FLOW (NON OPERATION) -24190 -42169 -32992 -47525
TOTAL OUT FLOW (OPERATION) 184843 230576 209721 310456
OVERALL SUR./DEFICIT 34829 34647 39130 38691

Cash inflow (operation)Actual

actual

109523
2004-05
248851 118645 2005-06
2006-07
163937
219672 2007-08
166111
2008-09
2009-10

Interpretation: Cash inflow are rising every year with a slow pace .There hasn’t been any

steep rise after year 2009-2010.

70
 Cash outflow (operation)Actual

actual

2004-05

176729 88964 2005-06

89603
2006-07
160653 129421
145330 2007-08
2008-09
2009-10

Interpretation: Cash outflow are rising every year with a slow pace. There hasn’t been

any steep rise after year 2009-2010

Overall surplus/deficit (Actual)

actual

17867 7004
39130 2004-05
23385 2005-06
34829 2006-07
2007-08
2008-09
2009-10
4587

71
• Interpretation: It is showing an irregular trend i.e steep rise & steep fall in

financial year 07 -08. however during current year rise is slow.

• In 08-09 it declined heavily but soon it recovered drastically in 09 -10.

Cash inflow (budget)

budget

0
2005-06
265223 118486
143496 2006-07

203977 188324 2007-08

2008-09

2009-10

• Interpretation: Cash inflow (budget) is rising with a slow pace. there hasn’t been

any steep risen show in 2009-2010.

72
CHAPTER 9

CONCLUSION

73
 CONCLUSION

It is very difficult to elaborate all the work of cash section. But I have tried my level best

to cover all the work done by it. This project was undertaken in order to know the

effectiveness of cash section of finance department of the company. Cash department is

the backbone of the finance department and organization itself. All money transactions

are done through this department. Cash department should be totally connected with

corporate office. It works on the instruction of corporate office. That is why the system is

called centralized cash management system. All tools should be used by cash department

& in an efficient and reliable way. Salary disbursement, system should be marvelous and

other tools like bank book, cash book, voucher, cash draft etc. should be helpful to

maintain account up to date and in a systematic form. Staff of cash section should be a

mixture of youth & experience, knowledgeable and hard working. This stems out from

the reason that company is able to get raw material on credit basis and supply good to

buyers on cash basis. There is a continuous increase in cash inflow (operations) actual

and same is been reflected in cash inflow budgeted.

On the other hand same trend is followed by cash outflow (operations) and cash outflow

(budgeted).

Overall surplus/deficit (operational) as well as overall surplus/deficit budgeted are

showing uneven trend. This might be because of the recession that the economy was

facing in the recent years Cash management tools should be used by cash department &

in a more efficient and reliable way. Salary disbursement, system should be marvelous

and other tools like bank book, cash book, voucher, cash draft etc. should be helpful to

maintain account up to date and in a systematic form.

74
CHAPTER 10

SUGGESTIONS

75
 SUGGESTIONS

• No doubt SOCIAL SECURITY DISABILITY and its cash department are very

good. They are performing their functions in a very impressive way but if the

company thinks about the working will be better.

• Staff of the cash department should be sufficient because the load is always very

much there on them. So it will be good if organization increase its working force

for their cash department.

• Network should be advance in nature, so that the information may get easily &

fester to the other department

• Cash section should not be very far away from other departments like finance

department which controls the cash section. So that employees would not have to

face difficulties, because every time they have to go there again and again.

• Extra curricular activities should be held.

• Cash section should not be very small in size. Specially book keeping section. It

should not be very congested. So organization must provide enough space.

76
CHAPTER 11

LIMITATION

77
 LIMITATIONS

 The study is largely based on secondary data.

 There are no special arrangements for trainees and moreover this was for the first

time any management trainee was going under training in the organization.

 A period of 2 months is not enough to gain a deep insight of the cash management

of an organization.

 Except few, other employees were not interested to provide data to the trainees

 Internal audit was going on in the organization due to which very less time was

available for collecting information.

 The finance department was doing their work under pressure due to the reason of

external auditor.

78
 BIBLIOGRAPHY

BOOKS:

• Cooper and Schindler (1998), “Business Research Methods”, Tata Mc Graw Hill, 9th

edition

• Kothari C R, “Research Methodology Method and Techniques”,2004, New Age

International Publisher2nd edition.

• Maheshwari S.N. & Maheshwari S.K., “An Introduction to Accounting, 2000, Vikas

• Pandey I M, “Management Accounting”, 2004 Vikas 3rd edition.

• Pandey I M, “Financial Management”,2004, Vikas 9th edition.

Websites:

• http://business.mapsofindia.com/sugar-industry/uttarpradesh.html

• http://www.indiansugar.com/briefings/wsm.htm

• http://google.com/

• http://beginnersinvest.com/od/analysingbalancesheet/a/current-

ratio.htm

• http://en.wikipedia.org/wiki/Cash_management

79
• Nirmal Agarwal, “Economic analysis of Sugar Industry”,

http://www.scribd.com/doc/35888350/Analysis-of-the-Sugar-Industry ,

• “http://www.economywatch.com/business-and-economy/sugar-industry.html,

80
81
 ANNEXURE

CASH FLOW STATEMENT

YEAR : 03-04
FORM NO : 25
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2002-03 2003-04 2003-04 2003-04
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 13435 17650 29792 32166
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. Incl. Libya. 19482 905 4420 3109
2) NON SOCIAL SECURITY DISABILITY 77356 94889 68390 68062
SUB – TOTAL 110273 113544 102602 103337
EXPERT INSENTIVE 3310 2817 2891 2696
OTHER RECIPT 5062 2125 2808 3490
SUB – TOTAL 8372 4942 5699 6186

CASH INFLOW (OPERATION) 118645 118486 108301 109523

OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 6528 4250 6765 9610
2) NON SOCIAL SECURITY DISABILITY 10440 9836 12498 11961
2. MATERIAL (IMPORTED) 26657 25343 20163 19764
3. CUTOM DUTY 1802 1702 1622 1602
4. PMT. TO SUB-CONT (FAB) 849 1150 1045 1096
SUB- TOTAL 46276 42281 42093 44033

PERSONNEL PAYMENTS 23999 25187 23744 24423

SALES TAX 2915 3970 3313 3186
EXCISE DUTY 8599 10866 9456 9310
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 2099 2524 2438 2332
2) NON SOCIAL SECURITY DISABILITY 4853 5983 6839 6793
INTEREST:
DIRECT (OTHERS) 44 50 65 56
ALLOCATION FROM CORP. OFF -306 1000 -411 -530

EXCHANGE VARIATION 485 0 0 0

SUB-TOTAL 42688 49580 45444 45570

TOTAL OUTFLOW (OPERATIONS) 88964 91861 87537 89603

OPERATING SUR./DEFICIT 29681 26625 20764 19920
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 2863 4562 6975 6975
CAPITAL EXPENDITURE 7606 7390 4975 4740
REPMT. OF LOAN (DIRECT) 0 0 2170 91
PAYMENT ON BEHALF OF OTHERS 1345 1473 1153 1110
OUT FLOW (NON OPERATION) 11814 13425 15273 -12916
TOTAL OUT FLOW (OPERATION) 100778 105286 102810 102519
OVERALL SUR./DEFICIT 17867 13200 5491 7004

82
 CASH FLOW STATEMENT

YEAR : 04-05
FORM NO : 25
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2003-04 2004-05 2004-05 2004-05
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 32166 15950 21994 25524
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. Incl. Libya. 3109 50592 49804 49735
2) NON SOCIAL SECURITY DISABILITY 68062 72831 79223 84619
SUB – TOTAL 103337 139373 151021 159878
EXPERT INSENTIVE 2696 2033 1204 904
OTHER RECIPT 3490 2090 3117 3155
SUB – TOTAL 6186 4123 4321 4059

CASH INFLOW (OPERATION) 109523 143496 155342 163937

OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 9610 7260 12558 12614
2) NON SOCIAL SECURITY DISABILITY 11961 14163 17269 18303
2. MATERIAL (IMPORTED) 19764 41430 48051 49988
3. CUTOM DUTY 1602 2420 1556 1360
4. PMT. TO SUB-CONT (FAB) 1096 2400 1490 1512
SUB- TOTAL 44033 67673 80924 83777

PERSONNEL PAYMENTS 24423 25550 25057 24788

SALES TAX 3186 4313 3271 3261
EXCISE DUTY 9310 1640 8125 7985
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 2332 2552 3162 3345
2) NON SOCIAL SECURITY DISABILITY 6793 6582 6822 6880
INTEREST:
DIRECT (OTHERS) 56 95 70 51
ALLOCATION FROM CORP. OFF -530 322 -400 -680

EXCHANGE VARIATION 0 0 0 14
SUB-TOTAL 45570 41054 46107 45644

TOTAL OUTFLOW (OPERATIONS) 89603 108727 127031 129421

OPERATING SUR./DEFICIT 19920 34769 28311 34516
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 6975 8940 6588 8074
CAPITAL EXPENDITURE 4740 4666 2016 2012
REPMT. OF LOAN (DIRECT) 91 166 118 117
PAYMENT ON BEHALF OF OTHERS 1110 1620 986 928
OUT FLOW (NON OPERATION) -12916 -15392 9780 -11131
TOTAL OUT FLOW (OPERATION) 102519 124119 136739 140552
OVERALL SUR./DEFICIT 7004 19377 18603 4587

83
 CASH FLOW STATEMENT

YEAR : 05-06
FORM NO : 25
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2004-05 2005-06 2005-06 2005-06
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 25524 18650 21342 20730
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. Incl. Libya. 49735 19745 20326 20396
2) NON SOCIAL SECURITY DISABILITY 84619 142871 1149091 118862
SUB – TOTAL 159878 181266 156569 159988
EXPERT INSENTIVE 904 4478 1749 2108
OTHER RECIPT 3155 2580 3786 4015
SUB – TOTAL 4059 7058 5535 6123

CASH INFLOW (OPERATION) 163937 188324 162104 166111

OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 12614 10250 17150 18305
2) NON SOCIAL SECURITY DISABILITY 18303 24874 33408 34574
2. MATERIAL (IMPORTED) 49988 48605 37038 36579
3. CUTOM DUTY 1360 2480 2675 2616
4. PMT. TO SUB-CONT (FAB) 1512 2800 2560 2528
SUB- TOTAL 83777 89009 92831 94602

PERSONNEL PAYMENTS 24788 26974 27857 27490

SALES TAX 3261 6801 4378 4178
EXCISE DUTY 7985 18444 10228 10304
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 3345 3581 3265 2511
2) NON SOCIAL SECURITY DISABILITY 6880 8065 7620 7196
INTEREST:
DIRECT (OTHERS) 51 120 70 56
ALLOCATION FROM CORP. OFF -680 -200 -500 -1007
EXCHANGE VARIATION 14 0 0 0
SUB-TOTAL 45644 63785 52918 50728

TOTAL OUTFLOW (OPERATIONS) 129421 152794 145749 145330

OPERATING SUR./DEFICIT 34516 35530 16355 20781
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 8074 11678 127078 12710
CAPITAL EXPENDITURE 2012 8730 2392 2141
REPMT. OF LOAN (DIRECT) 117 242 195 300
PAYMENT ON BEHALF OF OTHERS 928 1750 996 1043
OUT FLOW (NON OPERATION) -11131 -22400 -16290 -16194
TOTAL OUT FLOW (OPERATION) 140552 175194 162039 161524
OVERALL SUR./DEFICIT 23385 13130 65 4587

84
 CASH FLOW STATEMENT

YEAR : 06-07
FORM NO : 25
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET BUDGET ACTUAL

2005-06 2006-07 2006-07 2006-07
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 20730 17980 43090 50856
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. Incl. 20396 3799 2742 2946
Libya.
2) NON SOCIAL SECURITY DISABILITY 118862 178266 171832 161272
SUB – TOTAL 159988 200045 217664 215074

EXPERT INSENTIVE 2108 692 464 464

OTHER RECIPT 4015 3240 4045 4134
SUB – TOTAL 6123 3932 4509 4598

CASH INFLOW (OPERATION) 166111 203977 222173 219672

OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 18305 18020 19650 21176
2) NON SOCIAL SECURITY DISABILITY 34574 30925 35583 35007
2. MATERIAL (IMPORTED) 36579 43570 41040 40907
3. CUTOM DUTY 2616 2570 3691 3677
4. PMT. TO SUB-CONT (FAB) 2528 3000 2596 2638
SUB- TOTAL 94602 98085 102560 103405

PERSONNEL PAYMENTS 27490 29081 28261 28216

SALES TAX 4178 8236 6849 6750
EXCISE DUTY 10304 13697 11491 11633
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 2511 3706 3441 3198
2) NON SOCIAL SECURITY DISABILITY 7196 8589 9244 9343
INTEREST:
DIRECT (OTHERS) 56 110 118 108
ALLOCATION FROM CORP. OFF -1007 -500 -2000 -2000

EXCHANGE VARIATION 0 0 0 0
SUB-TOTAL 50728 62919 57404 57248

TOTAL OUTFLOW (OPERATIONS) 145330 161004 159964 160653

OPERATING SUR./DEFICIT 20781 42973 62209 59019
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 12710 17441 15613 15612
CAPITAL EXPENDITURE 2141 10750 6084 6363
REPMT. OF LOAN (DIRECT) 300 490 316 320
PAYMENT ON BEHALF OF OTHERS 1043 1150 2015 1895
OUT FLOW (NON OPERATION) -16194 -29831 24028 -24190
TOTAL OUT FLOW (OPERATION) 161524 190835 183992 184843
OVERALL SUR./DEFICIT 4587 13142 38181 34829

85
 CASH FLOW STATEMENT

YEAR : 07-08
FORM NO : 5.1
DIVISION : DHAMPUR SUGAR MILLS LTD.

DESCRIPTION ACTUAL BUDGET ACTUAL APPOVED

2006-07 2007-08 2007-08 BE 2008-09
INFLOW (OPERATIONS)
DIRECT AGAINST ADVANCES
NON SOCIAL SECURITY DISABILITY 50856 40050 59338 57800
RECEPT AGAINST CURRENT DESP.
1) SOCIAL SECURITY DISABILITY. Incl. 2946 3419 2837 1394
Libya.
2) NON SOCIAL SECURITY DISABILITY 161272 216954 182316 284978
SUB – TOTAL 215074 260423 244487 344172
EXPERT INSENTIVE 464 750 279 750
OTHER RECIPT 4143 4050 4085 4225
SUB – TOTAL 4598 4800 4364 4975

CASH INFLOW (OPERATION) 219672 265223 248851 349147

OUTFLOW (OPERATIONS)
1. METERIAL (INDIGENOUS)
1) SOCIAL SECURITY DISABILITY 21176 20150 24179 22541
2) NON SOCIAL SECURITY DISABILITY 35007 31280 41556 40075
2. MATERIAL (IMPORTED) 40907 51070 37371 96058
3. CUTOM DUTY 3677 5250 6603 14510
4. PMT. TO SUB-CONT (FAB) 2638 3300 3431 3800
SUB- TOTAL 103405 111050 113140 176984

PERSONNEL PAYMENTS 28216 33173 32151 38590

SALES TAX 6750 9100 5234 7300
EXCISE DUTY 11633 20237 13883 23270
OTHER EXPENSES
1) SOCIAL SECURITY DISABILITY 3198 4177 3410 4348
2) NON SOCIAL SECURITY DISABILITY 9343 12600 12514 16021
INTEREST:
DIRECT (OTHERS) 108 170 130 219
ALLOCATION FROM CORP. OFF -2000 -2100 -3670 -3801

EXCHANGE VARIATION 0 0 -63 0

SUB-TOTAL 57248 77357 63589 85947

TOTAL OUTFLOW (OPERATIONS) 160653 188407 176729 262931

OPERATING SUR./DEFICIT 59019 76816 72122 86216
INFLOW NON- OPERATIONS 0 0 0 0
SUB TOTAL (INFLOW NON- OPERATIONS) 0 0 0 0
OUT FLOW (NON-OPERATION)
SHARE OF TAX & DIV. & OTHERS 15612 20116 23228 23035
CAPITAL EXPENDITURE 6363 20448 7720 22426
REPMT. OF LOAN (DIRECT) 320 415 326 524
PAYMENT ON BEHALF OF OTHERS 1895 1190 1718 1540
OUT FLOW (NON OPERATION) -24190 -42169 -32992 -47525
TOTAL OUT FLOW (OPERATION) 184843 230576 209721 310456
OVERALL SUR./DEFICIT 34829 34647 39130 38691

86