Sankar Pro22

Funds Flow Statements of Lanco Industries ltd.
, Srikalahasti
INDUSTRY PROFILE
About the industry
India, in 1994 has become the 4th largest producer of cement in the world. This impressive record owes its origin to the progressive policies of the government since late 70s and enabled on assured 12% post tax return on net worth (70). It economy refers of July 91 gave a further fillip by abolishing the licensing system for setting up cement plants. Since then, innumerable technological development look place in cement production enabling cost reduction and mass production. The kilns of the late 70,s were replaced by dry kilns which reduced the fuel cost by 30%. Thermal efficiency, was improved by instilling pre-heaters, followed by the addition of pre-calcinatory. Optimal usage of fuel and power we achieved through computerization and quality control or raw materials. In a developing country like India, the requirement of housing and infrastructure is high and so the demand elasticity of the cement with respect to G.D.P of 1.6% is also high.
Plants under the Group

The pig iron and Lanco Cement are two plant are two plants, which are presently under the name of M/s. Lanco Industries Limited and Lanco Construction Limited is the sister of concern of it.
Lanco Pig-iron Division

It is located at Rachagunneri. The Pig-iron is commissioned in a record time of eleven months, drawing on the groups expertise in civil engineering and industrial construction.
YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati
Funds Flow Statements of Lanco Industries ltd., Srikalahasti
Highlights
State of art mini blast furnace. Strategic location with easy access. One of the few plants with its own railway siding. High quality ore from the neighboring Donimalai deposits, Access to best grade coke from China. 90,000 tpa capacity. Proximity to end-users. Manufacturing all grades of pig iron with the highest rating quality.
Cement Division
Lanco Industries limited has setup a Portland slag cement plant of 70,000 TPA capacities at Rachagunneri. The cement plant utilizing as a raw materials-slag, coke breeze& iron are time being generated by the pig iron plants as by product & waster. By this cement plant LANCO INDUSTRIES LIMITED adding values to by -products /waste generated from pig iron, in addition to solving the problem of storing slag in the plant promises. The main plant & machinery installed is lime stone crusher , raw mill system for blending and grinding iron ore, clay, limestone& coke breeze, a vertical shift kiln, a cement mill for grinding slag, clinker &gypsum & slag drying system.
Cement Industry Highlights

The India cement industry has return on investment. There exist a large markets which are not yet been completely taped. With the existing levels of supply and growing demand the prices tend to rise. But, the industry being a fast growing one, many players are attracted. Every year new capacities are added raising the supply levels, price stability is thus maintained and the high profits are observed by new entrants.
The per capita consumption of manufacture commodities like steel, power and cement are indicators of the economic state of a country. Of the total output nearly 95% is accounted for by the private sector. However, in terms of usage, the private sector, accounts for only 90% while the government sector accounts for 10%. The housing activity accounts for 55% of total consumption. Nearly 47% of the total costs, most of which are administrated prices are beyond the control of cement units. The cost elements include limestone, coal, transport, freight, power consumption and excise duty.
Production and Consumption Pattern Of Cement

In the case of cement production regional imbalance continue. Cement plants are generally put up where limestone is available. This is because, to produce I ton of cement 1 Vi tones limestone is required. Also it is easier to transport cement than limestone. Cement is mainly produced in the western and southern regions. Hence, only half of the cement produced is consumed within the region. Cement is usually transported from south to west, north no east and from west to north and east. North are the most deficit regions, while west is the most surplus region which are close to the consumption and excise duty. The destination of cement transport is mainly dependent on mode of transport available and the transportation cost incurred.
Cement Manufacturing Process

In wet process, limestone is crushed and grounded and mixed with water to from slurry which is fed in to the kiln. The slurry has water content of 3040%. Before the mineralogical process commences, the water content in the slurry has to be evaporated. This process consumes high energy and power. On the other hand, the dry process is more energy efficient. The raw materials are dried in a combined drying and grinding plant to reduce the
moisture content to less than 1%. Due to regular shifts from wet and dry process nearly 89% of the total industries kiln capacity is at dry process. Of the remaining, 9% wet process and 2%is coal consumption. The energy costs reduce by 30-40% and the kiln output also increases for a given size kiln, the output for dry process is 2503007- as compared to 130-1507- for semi dry and 100% for wet process. The capacity utilization is also higher for dry process plants.
Cement Branding
Cement has emerged as a commodity product .brand play and impotent role especially in metres like Delhi, Mumbai, Calcutta, Chennai etc, where the established brands surprise the success of small brands. In order to build up their brand loyalty, companies have tie-ups with real estate agents and construction companies. Some manufactures also organize workshops, training and seminars to educate the consumers on the maximum use of cement.
COMPANY PROFILE
The name Lanco has been derived from the promoter of the Group Shri. Lagadapati Amarappa Naidu. The Lanco group is a diversified multi faced conglomerate with the business interests in Pig Iron, Cement, Power, Graded Castings, Spun Pipes, Information Technology and Infrastructure Development. Young technocrats with exceptional entrepreneur skills promote the Lanco Group with a mission and a great vision and the top agenda to put the group on the global corporate may be during the next 10 years. "Economy builds the nation and industry builds the economy" LANCO industries limited are one of the best mini-blast furnace pig iron manufacturing units in our country and it was 5th plant under TATA KORE technology. The company was incorporated on 1st November 1991 under company's act-1956, in the name of LANCO FERROLTD., THE COMPANY starred construction work in august 1993. The entire construction work was completed in a record time of 12 months. This was achieved by teamwork of LANCO collective and the best efforts of the contractors. With this achievement the company started commercial productions in September 1994. The name LANCO Ferro limited was changed to LANCO INDUSTRIES L1MITDED ON JULY 6th, 1994. LANCO INDUSTRIES LIMITED is located in between Tirupathi and Srikalahasti with an access of about 30kms from Tirupati and about Rachagunneri village, Srikalahasti Mandal of Chittoor district Andhra Pradesh is as follows:
Cheap availability of required land. There is more water resource. The distance between the harbor and present work spot is less. Proximity to raw materials. Proximity to marketing. To have financial subsidy. Nearer to the railway sidings. Well connected to the road, rail and port. Availability of labour. LANCO industries are importing coke from china, Japan and Australia because; there is scarcity of prime cooking coal, which is the raw material for producing coke. The coke, which is imported, comes to Chennai port. Which is approximately 100km away from the site. And from there is brought to site, and also fluxes. Which are required to produce pig iron like Limestone, Dolomite, Quartzite and Manganese, are available in near by districts.
Plants under the group

The pig iron plant and LANCO cement plant are two plants, which are presently under of m/s, LANCO industries limited and LANCO Construction limited is the sister of concern of it. Administration: The general administration of the company is carried out by managing director, and general managers of finance, commercial, operations, materials, purchase, human resource and administration. The chairman and managing director are holding Overall control on administration in all aspects, with the help of Vice-President and-other General Managers. The board consists of five member's directors, Vice-Chairman, a
Managing Director and a Company Secretary.
Lanco industries limited

Established in the year of 1993. An ISO 9002 Company, it had setup a state of the art integrated manufacturing facility for Pig Iron through mini-blast furnace route conforming to the latest international technology with initial capacity of 1,00,000 TPA. Its quality products of S G-Grade pig iron are being supplied to foundries in the south. As a forward integration, it has utilized the slag produced in the Pig Iron are being supplied to foundries in the south. As a forward integration, it has utilized the slag produced in the Pig Iron manufacturing process to install the cement plant is being met through a 2.5 mw co-generation power plant. Due to severe completion and survival, company has increased the production capacity from 90,000 TPA to 1, 50,000 TPA from 2003.
Location
A Lanco industry limited is a rural based factory sprawling over many areas of land with deep resources and congenial soil. It is located in Rachagunneri village near Tirupati. Nearly 50% of the consumption of electrical power is supplied by APSES, Government of Andhra Pradesh and other 50% of power is maintained by the company owned Dg sets and power plants. Since it is a rural area labour potential is available and also company is enjoying the subsides from state government, the Lanco group is a diversified multifaceted onglo merale, with business interests I n Pig Iron, Cement, Power Graded Castings, Spun Pipes, Real Estate Development, Information Technology a past from infrastructure use development promoted by entrepreneurial skills and the agenda to put the group on the global corporate
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map during the next 10 years Lanco Kalahasti Castings Limited: Merged with Lanco Industries Limited: Established in 1997 and strategically located in close proximity to the mini-blast furnace of the Pig Iron Plant, it has a clear economic mileage over other casting sites. The molten metal from the blast furnace is directly used as a basic raw material to produce graded castings, cast iron pipes and Ductile iron spun pipes with a capacity of 60,000 TPA, which will be gradually expanded for the to meet the surging demand of the products. The ups to the pipe plant will be met through 10 MW captive power plants. To emerge to enhance the necessities and the self-sufficiency, it was decided to enhance the production capacity from 60,000 TPA to 90,000 TPA from 2003. Brief History of Lil Since Incorporation Till Date Lanco Industries Limited (LIL) was incorporated on 1st November 1991 by Lanco Group of Companies to manufacture Pig Iron using Korf (German) technology and Cement. The unit is located at Rachagunneri Village on Tirupati Srikalahasti road, which is about 30 Kms from Tirupati and 10 Kms from Srikalahasti. The installed capacity of Pig Iron was 90,000 TPA and with similar capacity 90,000 TPA for cement. Due to the poor demand and other reasons, the operations of the cement unit of the Company was suspended and the unit was reengineered for producing a different product mix having potential in South India. As a measure of forward integration project for adding value to the Pig Iron manufactured by the Company, LIL floated an another
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company named Lanco Kalahasti Castings Limited (LKCL) on 4th March 1997 to manufacture iron castings and spun pipes in the same campus of the Company with an annual capacity of 40,000 TPA and 35,700 TPA respectively. However, due to falling Pig Iron prices, increase additional capacity in the industry, competition and the technical and financial assistance, the operations of both LIL and LKCL were affected and the Company was exploring financial and technical strategic alliance with Indian 1st Foreign Partner. During the same time Mrs. Electrosteel Castings Limited, was also looking for additional capacities for producing spun pipes. Considering the synergies involved, Lanco Industries Limited entered into a strategic alliance partnership during December 2002, with Mis. Electrosteel Castings Limited (ECL), Kolkatta a. leading manufacturer of CI, Pipes and DI pipes. This was win-win situation for both LIL and ECL. After takeover, a financial re-engineering and re-structuring of LIL was undertaken by ECL by implementing the following: Immediately after take over an amount of RS.2200 lakhs was infused as share capital of the Company by Mis ECL to strengthen the equity base of the company. During 2002, the capacity of Pig Iron was increased from 90,000 TPAto 150,000 TPA. With effect from 1st April, 2002 LKCL was merged with the company to take advantage of the close synergy in the business of the two companies, since a large part of Molten Iron/Pig Iron is consumed by LKCL for manufacture of 01 Pipes. After the merger, the shctre capital of LIL, the paid up share value of RS.101- was reduced to RS.2.50 per share and accordingly one share of
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RS.101- each fully paid up in LIL was issued to all the existing shareholders for every 4 shares held by them. During 2003, the capacity of the 01 pipes was increased to 90,000 TPA. During 2004, the company took the step of backward integration by setting up 150,000 TPA coke oven plant in the same complex, which was commissioned in June 2005. During 2005, the company started setting up of a Captive Power Plant of 12 MW by using the waste heat recovered from the coke oven plant which is expected to be commissioned by March 2006. An additional amount of RS.25 crores is being spent on other capital works like revamping of bitumen coatings machine, balancing equipment and facilities for production of higher diameter DI pipes etc. to increase the capacity of 01 pipes. The above has resulted in the company witnessing a profitable years after a gap of 8 years during the years ended 31st March, 2003, 2004 and 2005 and a dividend of 10% was declared for the years ended 31 st March 2004 and 2005 to the shareholders. Step-by-Step Company's Growth 1991 1994 1995 1997 2002 2003 2004 TPA 2005 Capacity of 01 pipes iron was increased to 90,000 TPA Incorporation of Lanco Setting up of Mini Blast Furnance with 90,000 TPA capacity Setting up a 250 TPO Mini cement Plant Setting up of LKCL for manufacture of 40,000 TPA castings and Infusion of Rs. 2200 lakhs to the equity and inancial restructing Merger of LKCL with LIL for synergy Capacity of Pig Iron was increased to 90,000 TPA to 150000
35,000 TPA 01 pipes.
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2006 2007 heat
Commissioning of 150,000 TPA coke oven plant. Setting up of Captive power plant of 12 MW by using the waste
Recovered from the coke oven plant. 2008 Merger of LKCL with LIL for synergy.
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Committee of LANCO Executive and Directors (COLEAD)

COLEAD is the apex review and decision making body of LANCO Group. Pradip Kumar Khait G. Bhaskar Rao L.Sridhar G. Venkatesh Babu J.Suresh Kumar P.Panduranga Rao Chairman, LANCO Group of Companies Vice Chairman, LANCO Group of Companies Director, LANCO Group Joint Managing Director, LANCO Group Chief Financial Officer, LANCO Group Director and Chief Executive Officer, LANCO Kondapalli Power Private Limited and ABAN Power D.V.Rao K. Raja Gopal D.N.Reddy K.K.V. Nagaprasad Company Limited. Director and Chief Executive Officer, LANCO Green Power Private Limited Director and Chief Executive Officer, LANCO Amarkantak Power Private Limited Director Operations, LANCO Infratech Limited Director and Chief Executive Officer, Rithwik Energy Systems Limited and Clarion Power Corporation V. Sreenivas M.N.Srinvas Limited. Director Corporate Affairs LANCO Group Limited. Executive Director LANCO Electric Utility Limited
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Competitors of Lanco cements; In the cement industry the Lanco industries are facing the competition from the following cement industries: Sagar cements limited, Ambuja cements limited, Bheema cements limited, Sri Chakra cements limited, Priya cements limited, K C P cements limited, Ultratek cements limited, Ambuj a cements limited, Maha cements limited, Raasi cements limited, Vishnu cements limited, Nagarjuna cements limited. Bharati cements limited.
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PRODUCT PROFILE
GROUP COMPANIES
POWER PROJECTS With operational experience in gas, wind and biomass; based power projects and a strong foothols in coal and hydropower generation, LANCO is emerging as a key player in the Indian power sector.
INFORMATON TECHNOLOGY
LGS is a strategic initiative to provide world-class Information Technology solutions to global customers, delivering them maximum business value through continuous innovation.
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CIVIL CONSTRUCTION
Power projects, industrial structures, institutional facilities, mass housing, water supply projects, flyovers and bridges such varied operations serve to explicate the diversification roadmap of LANCO.
PROPERTY DEVELOPMENT Being a Pioneer in Civil Construction and Infrastructure Development, LANCO is venturing into property Development with the winning of the bid for IT Parks-cum-Commercial and residential complex in Hyderabad and Visakhapatnam of Andhra Pradesh.
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MANUFACTURING
Being one of the largest integrated foundried in India with Ductile Iron Spun Pipes, Metallurgical Coke, Pig Iron and Slag cement as products, LANCO has a towering presence in the Indian manufacturing sector.
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STATEMENT OF THE PROBLEM
Funds flow statements are major tools in the hands of the finance management and analyzing the existing data. Funds flow statements are calculated for finding the trend in liquidity position, marginal solvency and utilization of funds and inventory maintenance over a period of time. This study mainly focuses in above said area by using financial ratios.
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OBJECTIVES OF THE STUDY

The major objective of the study is to assess the inflow and outflow of the funds in the LANCO INDUSTRIES LIMITED. The specific objectives of the study are: To assess the financial position of the LANCO INDUSTRIES LTD., To study and analyze the changes those have taken place in the financial position of the company. To analyze the funds flow operations. To identify sources and applications of the funds. To find out operating efficiency of the organization. To examine the working capital position of the company To suggest some measures to improve the performance of the company.
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SCOPE OF THE STUDY

The scope of the study covers the previous five -years financial reports of the company. An extensive study is done on the investment made by LANCO INDUSTRY; on its funds flow statements and its adequacy, and the factors determining that investment. The study concentrates on the liquidity position of the firm and the brief study. The technique used by the firm of the management of its current assets and sources though which the finance of the funds flow statement in availed for the firm. The study covers all the financial information of the firm.
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NEED OF THE STUDY

The main need of the study is to study the sources and applications of funds in the company and methods to evaluate the financial performance of the company. With the help of funds flow statements to evaluate the pattern of the firm. The funds flow reveals clearly the causes for the financial difficulties of the company. To know about the need of the funds for the growth of the firm. To know the working capital position of the company. With the help of the funds flow statements we can estimate the cash balance of the company. To find out the out flow and inflow of the funds.
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LIMITATIONS OF THE STUDY

The funds flow analysis of the organization fully depends upon the secondary data. The primary data were used only to throw light on the company's history and growth. Thus the following are the main limitations of the study.
These statements were over all reports (2005-06 to 2010-11). Hence it is a postmortem analysis of the financial statement.
The figures taken from the financial statement like profits and loss Accounts and balance sheets were historical in nature. Time value of money is not being considered.
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REVIEW OF LITERATURE
In our present day economy, finance is defined as the provision of money at any time when it is required. Every enterprise, whether big, medium and small, needs finance to carry out its operations and to achieve its targets. In fact, finance is so indispensable today that it is rightly said that it is the lifeblood of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives. Finance may be defined as the provision of money at the time when it is required. Finance refers to the management of flows of money through an organization. It concerns with the application of skills ion the manipulation uses and control of money divestment authorities have interpreted the term finance differently. Finance is concerned with the task of providing funds to the Enterprises on the term that is most favorable towards the attainment of the Organizational goal's objects. The function of finance is not merely Furnishing funds to the organization. Finance has a broader meaning and it covers financial planning, forecasting of cash receipts and disbursements, rising of funds, use and allocation of funds and financial control. The area of operation of finance manager is vague from one compact to another and industry - to - industry etc. There are many definitions of finance of all the best was of Howard and Upton. "That administrative area of set of administrative area of organization will have the means to carry out as objectives to satisfactorily as possible and at the same time meet its obligations as they become due".
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The fundamental principle of finance:

A business proposal - regardless of whether it is a new investment or acquisition of another company or restructuring initiative - raises the value of the firm, only if the present value of the future stream of net cash benefits expected from the proposal is greater than the initial cash outlay required to implement the proposal. The difference between the present value of future cash benefits and the initial outlay represents the net present value of NPV of the proposal.
Net present value = Present value of future cash benefits initial cash outlay
Significance of financial management;

Financial management is the managerial activity, which is concerned with planning and controlling of the firms financial resources. The subject of financial management is of immense interest both to the academicians and the practicing managers. The practicing managers all interested in this subjects become the most crucial decisions of the firm all those which results to the finance, and on understanding of the theory of financial management provides them with conceptual and analytical insights to make these decisions skillfully. As a separate activity as discipline it is of recent origin. It was a branch of economic till 1890, today financial management is recognized as the most important branch of business administration. According to Howard, and Upton, financial management involves the application of general management principals to particular financial operation. N.G. Wright financial management is intimately itself woven into the
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fabric of the management itself its central role is concerned with the same objectives as these of the management which the way in which the way in which the resources of the management in to three main areas. Decision on the capital structure. Allocation of available funds to specific uses. Analysis and appraised of problems. Financial management includes planning of finance cash budgets and source of finance. Era sloman and John prigle insists that financial management must attend to investment decision because if these decisions.
The Balance sheet:

The balance sheet shows the financial conditions or the state of affairs of the firm at a particular point of time. More specifically the balance sheet conditions detailed information of the firm's assets and liabilities. Assets represents economic resources possessed by the firm while the liabilities are the amounts payable by the firm. The balance sheet gives concise summery of the firm resources and obligations and measures the firms liquidity and solvency.
Profit and loss account:

The profit and loss account shows the profitability of the firm by giving the details about income and expenses. It is simply income and expenditure account. Revenues are benefits, which customers contribute to the firm in exchange of goods and services. The cost of economics resources used in providing goods and services to the customer are called expenses. Profit and loss account provides a concise summary of firm's revenues and expenses during the period of time and measures its profitability. The above two statements provide useful information regarding the operations of the firm.
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They fail to explain the financial data required for financing and investing decisions by the management i.e. causes for changes in assets and liabilities and owner's equities. They do not indicate the movement of funds between sources and uses from the end of the period to the end of next periods. It is therefore; necessary to prepare an additional statement called funds flow statements to overcome the above difficulties. Funds flow statement; The funds flow statement is a statement, which shows the movement of funds and is a report the financial operations of the business undertaking. It indicates various means by which funds were obtained during a particular period and the ways in which these find were employed. In simple, the funds flow statement is a statement of sources and application of funds. In short, it is a technical device designed to high light the change in the financial condition of a business enterprise between tow Balance' Sheets. According to Robert Anthony The funds flow analysis describes the sources fro which additional funds were derived and the uses to which these funds were put." According to Fouke, "A Statement of sources and Applications of funds is a technical device designed to analyze the changes in the financial position of a business enterprise between two periods."
Funds flow statement is widely used by the financial analyst and credit granting institution and financial managers in performance of their jobs. It has become a useful tool in their analytical kit. This is because the financial statement like income statement and- balance sheet have limited role to
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perform. Income statement measures flows restricted to transaction that pertain to rendering of good and services to customers. The balance sheet is merely a static statement's these statements do not sharply focus those major financial transactions, which have behind the n\balance sheet changes. However financial analyst must know the purpose for which the loan was unitized and the sources from which it has rises. This will help him in making a better estimate about the company's financial position and polices.
Uses, significance and importance of funds flow statement;

Analysis of financial operations: A funds flow statement shows bow the resources have beer obtained and the uses to which they are put. The funds flow statements determining the financial consequences of business operation. It also useful in guiding whether tne firm has expanded at too fast rate and whether financing is strained, it also point out to the effectiveness with which the management has handled working during the period under review. Evaluation of the firms: This statement can consist the financial manager in planning intermediate and long-term finance for obtaining sources in the further and determining how they are to be used. That is analysis of the major sources of funds in the past reveals what positions of the firms growth was financed internally and what position externally. Comparison with the budget: The statement defines the past flow of funds and gives insight in to the evolution of the present situation. It provides certain useful information about the firms. Financial policies to the outside world like bankers, government, etc;
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Funds flow statement is becoming popular with the management because it helps to explain why in spite of earning sizable amount of profits, the company is experiencing difficulty in making payments to creditors, the rate of dividend on equity; shares can not be increased and the bank balance is getting thinner. The funds flow statements has an analytical value and is an important planning tool. It helps in guiding the destiny of the business by enabling the executives to visualize the movements of funds that constantly takes place. This statement also helps in working capital requirements. It highlights and future need for funds and provides sample time to work out suitable arrangements. The funds flow statement shows what portion externally. The analysis of funds flow statement for the future is externally available to the executive in planning.
General Rule:
The flow of funds occurs vhen a transaction changes on the one hand a non-current account and vice versa. A current asset and a fixed asset. A fixed asset and a current liability. A current asset and a fixed liability. A fixed liability and a current liability.
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Uses-of Funds Flow Analysis:

It helps in the analysis of financial operations. It throws light on many perplexing question of general interest. It helps in the formation of a realistic dividend policy. It helps in the proper allocation of resources. It acts as a future guide. .
Limitations of funds Flow Analysis;

It is essentially historic in nature and projected funds flow statement cannot be prepared with much accuracy. It cannot be reveal continues changes. It is not an original statement but simply a re - arrangement of data given in the financial statements.
Different names of funds Flow Statement:

A statement of sources and Uses of funds. A statement of Sources and Application of funds. Where got and where gone Statement. Inflow and out flow of funds statement.
Main purpose of funds Flow Statement:

To help to understand the changes in assets and which are not evident Financial statements or I the income statement. To inform on to how the loans to the business has been used. To point out the financial strengths and weakness of the business. To help in planning sound dividend policy.
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Procedure for preparing a Funds Flow Statement:

The preparation of funds flow statement consists of some parts: Statement or schedule of changes in working capital. Statement of sources of funds. Statement of application of funds. Finding out the hidden transactions or changes in non-current assets and non-current liabilities.
Statement or Schedule of changes in Working Capital;

The increase or decrease in working capital can be calculated by preparing the schedule of changes in working capital. Working capital means the excess of current assets over current liabilities. Statement of changes in working capital is propose to show the changes in the working capital between two balance sheets data. This statement is prepared with the help of current assets and current liabilities derived from two balance sheets.
While preparing a schedule of changes in working capital, it should be note that

Increase in Current Assets, Increases the Working Capital. Decrease in Current assets, Decreases the Working Capital. Increase in Current Liabilities, Decreases the working capital. Decrease in Current Liabilities, Increases the Working Capital. An increase in current assets and increase in current liabilities does not affect working capital. A decrease in current assets and decrease in current liabilities does not affect working capital. Changes in fixed (non-current) assets and fixed (non-current) liabilities
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affect working capital. The changes in all current assets and current liabilities are merged into one figure only either an increase of decrease in working capital over the period for which funds statements has been prepared. If the working capital at the end of the period is more than the working capital at the beginning the difference is expresses as "increase in working capital". On the other hand, if the working capital at the end of the period is less than at the commencement, the difference is called "decrease in working capital". Working Capital = Current assets - Current Liabilities
Current Assets:
The expression 'current assets' denotes those assets, which are continually on the move. Since they are constantly in motion, they are known as the circulating capital of the business. These assets can or will be converted into cash during a complete operating cycle of the business. Current assets include: Stock-in-trade or inventories, Debtors, Payments in advance or prepaid expenses, Stores, Bills receivable, Cash at bank, Cash in hand and Work-in-progress etc.
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Current Liabilities:
Current Liabilities are those liabilities, which are to be paid in the near future, i.e., during a complete operating cycle of the business. Current liabilities include: Trade creditors, Accrued or outstanding expenses, Bills payable, Income tax payable, Dividends declared and Bank overdraft. Note: - according to the experts opinion 'bank overdraft' has a tendency to become more or less permanent source of financing and hence it need not be included among current liabilities.
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FORMATION OF STATEMENT OF CHANGES IN WORKING CAPITAL

Particulars Previous year Current Assets (CA) Inventories Raw material Consumable stores Finished goods Sundry debtors Cash in hand Balance with bank Other current assets Deposit Income tax Sales tax Total current assets Current liabilities Trade Creditors Dealers deposited Expense payable Total current liabilities Working capital Current assets current liabilities) Net increase / decrease Working capital Current Change in working year capital Increase Decrease -
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Statement of Sources and application of funds

Funds flow statement is a statement, which indicates various sources for which funds have been obtained during a chain period and the uses or applications to which these funds have been put during that period. Source of funds Application of funds Source of funds Funds from operations Issue of shares and Debentures Receipt of dividend and interest Sales proceed of non-current asset Long term borrowings Decrease in working capital Amount Application of funds Funds lost in operation Repayment of debentures Reduction in share capital Interest and dividend paid Payment of long term Amount -
loans Increase in working capital -
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Introduction of Ratio Analysis

Accounting is the process of identifying, measuring and communicating economic information to present informed judgments and decisions by users of the information. It involves recording, classifying and summarizing various business transactions.
Financial Statements
Financial statements are the sources of information on the basis of which conclusions are drawn about the profitability and liquidity position of the business enterprise at the financial year. The primary objective of financial statement is to assist decision - making. Financial statement are end products of financial accounts, prepared by the accountant that purpose to reveal financial position of the enterprise, the result of its resent activities and an analysis of what has been done with the analysis.
Types of financial statement

Financial statements primarily comprise two basic statements. The position statement (or) the balance sheet The income (or) profit and loss account. Analysis Meaning The term financial analysis also known as analysis and interpretation of financial statement refers to the process of determining financial strengths and weakness of the firm by establishing strategic relationship between the items of balance sheet, profit and loss account of other operative data.
Classification of Ratios
The use of ratio analysis is not confined to financial manage only. There are different parties interested in the ratio analysis for different purposes. In view of several of ratios, there are many types of ratio's, which can be
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calculated from the information given in the financial statements. The particular purpose of the user determines the particular ratio's that might be used for financial analysis. Various Accounting Ratios can be classified as follows Traditional Classification Functional Classification Significance Ratios
Liquidity Ratio's
Liquidity refers to the ability of a concern to meet its current obligations as and when these become due. The short-term obligations are met by realizing amounts from current floating (or) circulating assets. The bankers, suppliers of goods and other short-term creditors are interested in the liquidity of the concern. They will extend credit only if they are sure that current assets are enough to payout the obligations. Current Ratio Quick or Acid Test (or) Liquid Ratio Absolute Liquid Ratio or cash position ratio Net working capital Ratio.
Current Ratio
Current Ratio may be defined as the relationship between current assets and current liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm.
Current Ratio = Current Assets Current liabilites
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A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time as and when they become due. On the other hand a relatively low current ratio represents that the liquidity position of a firm is not good and the firm shall not able to pay its current liabilities in time. "Two to one ratio" is referred to as a banker's rule of thumb (or) arbitrary standard of liquidity for a firm. Current assets include cash and those can be easily converted into cash with in a short period of time generally, one year such as marketable securities, debtors, inventories, work-in-progress etc. Current liabilities are those obligations which are payable within a short period of time generally one year and include outstanding expenses, bills payable, sundry creditors, accrued expenses short term advances, income tax etc.
Quick Ratio (or) Acid Test Ratio

Quick ratio is known as acid test ratio or liquid ratio is a more rigorous test of liquidity then the current ratio. The term liquidity raffs to the ability of a firm to pay its short-term obligations as and when they become due. The two determinants of current ratio as a measure of liabilities. Quick ratio may be current or liquid liabilities. Inventories cannot be termed to be liquid asset because they cannot be converted into cash immediately without a sufficient loss of value. The quick ratio can be calculated by dividing the total of the quick assets by total current liabilities. As a rule of thumb (or) as a convention quick ratio of 1 1 is considered satisfactory.
Quick /Liquid (or) Acid Test Ratio = Current (or) Liquid Assets Current liabilites
40
Absolute Liquid Ratio

Although receivables, debtors and bills receivables are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately (or) in time. Absolute liquid assets include cash in hand and at bank and marketable securities or temporary investment. The acceptable norm for this ratio is 50% (or) 0.5 (or) 12.
Absoulte Liquid Ratio = Absolute Liquid Assets Current liabilites
One of the value aids to the financial manager or the creditor is funds flow statement, with which evaluate how a firm uses funds and determine how these uses are financed. In addition to studying the past flow, the analyst can evaluate the future flows by means of the funds statement based on forecasts. Such as statement provides an efficient method for the financial manager to assess the growth of the firm and its resulting financial needs as well as to determined the best way in which those needs may be financed. In particular, funds statements are very useful in planning intermediate and long term financing.
Net working capital Ratio.

The difference between the current assets and the current liabilities excluding short-term bank borrowings is called net working capital. It is some times used as a measure of a firm's liquidity. It is considered that between two firms, the one having the larger networking capital has greater ability to meet its current obligations. This is no necessary so; the measure of liquidity is a relationship, rather than the difference between Current Assets and Current Liabilities.
Net working Capital Ratio = Net working capital Net Assets
Net working capital = current assets - current liabilities

41
Funds flow statement (report from) Sources of Funds 1 2 3 4 5 6 7 Funds from Operations Issue of share capital Issue of debentures .......... long term loans ........... sale of fixed assets .......... non-trading receipts ........... Eg, dividend,rent, interest on donation decrease in working capital (as per Schedule of changes in working capital) ........... ..........
42
43
RESEARCH METHODOLOGY
Sources:
The data have been collected from both the primary and secondary sources. The data was collected from the officials of the organization. The data collected related to the study was from the two sources. Primary data Secondary data
Primary Data
For the study most of the data were collected from the primary data i.e. Income statements, financial reports etc. Consulting financial manager and accounting assistance gathered income statements of the company.
Secondary data:
The information collected to the company profile from the company past records and websites are secondary data. However, the entire study was based on the primary data and secondary, which are collected from the books, records, journal, newspaper, survey and profiles of the organization.
44
DATA ANALYSIS AND INTERPRETATION

LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR 2005-06 Source of funds Share holder funds A) Share Capital B)Reserve and Surplus Loan Funds : A) Secured Loans B )Unsecured Loans Total Application of funds Fixed Assets A ) Gross Block B) Less : Depreciation Net Block Capital work in progress Investment Current Assets, Loans and Advances A) Inventories B )Sundry Debtors C) Cash and Bank Balance D) Loans and Advances Less: Current liabilities and Provisions A) Current Liabilities B) Provisions Net Current Assets Miscellaneous expenditure 2005 5191.23 385.97 2855.27 1826.19 9908.69 7069.46 2718.85 4350.61 719.09 235.54 1193.26 2011.67 629.03 338.81 2828.57 66.55 1277.65 11.14 2006 5191.23 385.97 3691.52 2004.22 11272.94 7.39.98 2373.82 4666.16 57.7 2752.56 2619.99 1669.89 332.21 3536.64 40.39 3797.62 20.58
LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR 2006-2007 Source of funds Share holder funds A) Share Capital B)Reserve and Surplus Loan Funds : A) Secured Loans B )Unsecured Loans Total Application of funds
2006 3976.36 2160.18 10723.23 5404.59 22264.36
2007 5191.23 385.97 2855.27 1826.19 9908.69
45
Fixed Assets A ) Gross Block B) Less : Depreciation Net Block Capital work in progress Investment Current Assets, Loans and Advances A) Inventories B )Sundry Debtors C) Cash and Bank Balance D) Loans and Advances Less: Current liabilities and Provisions A) Current Liabilities B) Provisions Net Current Assets Differed Tax Assets Miscellaneous expenditure
17884.47 4648.10 13236.37 2652.95 5924.05 4098.66 447.49 1462.76 5294.57 572.72 5677.67 683.48 13.83
7069.46 2718.85 4350.61 719.09 235.54 1193.26 2011.67 629.03 338.81 2828.57 66.55 1277.65 11.14
46
LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR 2007-2008 Source of funds Share holder funds A) Share Capital B)Reserve and Surplus A) Secured Loans B )Unsecured Loans Differed tax liability Total Application of funds Fixed Assets A ) Gross Block B) Less : Depreciation Net Block Capital work in progress Investment Current Assets, Loans and Advances A) Inventories B )Sundry Debtors C) Cash and Bank Balance D) Loans and Advances Less: Current liabilities and Provisions A) Current Liabilities B) Provisions Net Current Assets Differed Tax Assets Miscellaneous expenditure 2007 3976.36 3804.74 10886.36 9588.74 424.17 28680.37 2002136 5417.03 14604.33 6015.09 589.83 7075.18 7197.89 247.72 1616.75 8090.45 586.14 7460.95 10.17 2008 3976.36 2610.18 10723.23 5404.59 22264.36 17884.47 4648.10 13236.37 2652.95 5294.05 4098.66 447.49 1462.76 5052.57 572.72 5677.67 683.48 13.83
LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR 2008-2009 Source of funds 2008 2009 Share holder funds A) Share Capital 3976.36 3976.36 B)Reserve and Surplus 3993.06 3804.74 A) Secured Loans 9244.82 10886.36 B )Unsecured Loans 15069.11 9588.74 Deferred tax liability 618.06 424.17 Total 32901.40 28680.37 Application of funds Fixed Assets A ) Gross Block 25035.39 2002316
47
B) Less : Depreciation Net Block Capital work in progress Investment Current Assets, Loans and Advances A) Inventories B )Sundry Debtors C) Cash and Bank Balance D) Loans and Advances Less: Current liabilities and Provisions A) Current Liabilities B) Provisions Net Current Assets Differed Tax Assets Miscellaneous expenditure
6510.29 18525.70 5604.02 9194.04 6705.59 350.67 2070.42 9202.1 354.42 8765.23 6.45
5417.03 14604.33 6015.09 589.83 7075.18 7197.89 247.72 1616.75 8090.45 586.14 7460.95 10.17
LANCO INDUSTRIES LIMITED BALANCE SHEET FOR THE YEAR 2009-2010 Source of funds 2009 2010 Share holder funds A) Share Capital 3976.36 3976.36 B)Reserve and Surplus 7179.70 3993.06 A) Secured Loans 17832.33 9244.82 B )Unsecured Loans 12271.32 15069.11 Deferred tax liability 2576.95 618.06 Total 43836.66 32.91.40 Application of funds Fixed Assets A ) Gross Block 35516.23 25035.39 B) Less : Depreciation 9127.88 6510.29 Net Block 26388.35 18525.70 Capital work in progress 862.01 5604.02 Investment Current Assets, Loans and Advances A) Inventories 12092.91 9194.04 B )Sundry Debtors 8814.31 6706.59 C) Cash and Bank Balance 420.10 3505.67 D) Loans and Advances 5289.66 2070.42 Less: Current liabilities and Provisions A) Current Liabilities 9319.38 9202.11 B) Provisions 711.30 3545.42 Net Current Assets 16586.30 8765.23
48
Differed Tax Assets Miscellaneous expenditure
6.45
49
STATEMENT OF CHANGES IN WORKING CAPITAL

(Rupees in Lakhs)
Particulars Current Assets (I) Inventories Sundry debtors Cash and bank balances Loans and advances Total current assets Current liabilities (II) Current Liabilities Provisions Total current liabilities Working capital (I-II) Net working capital TOTAL
2003-04
2004-05
Changes in working capital Increase Decrease 1559.29 608.32 1040.85 26.15 3234.63
2752.55 2619.99 1669.88 332.21 7374.65 3536.64 40.39 3577.04 3979.61 3797.62
1193.25 2011.67 629.03 338.81 4172.77 2828.57 66.55 2879.51 1277.65 2519.95 3797.62
6.59 708.07 2519.95 3234.63
Net decrease in working capital 2519.95 Interpretation From the above table is observed that the networking capital of the company shows decreasing trend. The total current assets of the company have decreased from 2003-04 to Rs. 7374.65. in 2004-05 to Rs. 4172.77 in 2006-07. But the bank balance decreased from Rs. 1699.86 to Rs. 629.03 i.e, 1040.81. The total current liabilities increased from Rs. 3577.04 to Rs. 2879.51. The networking capital decrease Rs. 2519.96.

(Rupees in Lakhs)
Particulars Current Assets (I)
2004-05
2005-06
Changes in working capital Increase Decrease
50
Inventories Sundry debtors Cash and bank balances Loans and advances Total current assets Current liabilities (II) Current Liabilities Provisions Total current liabilities Working capital (I-II) Net working capital TOTAL
1193.26 2011.67 629.04 338.81 4172.78 2828.58 66.55 2985.13 1277.65 4400.02 5677.67
5294.05 4098.66 447.49 1462.76 113.02.96 5052.57 572.72 5625.29 5677.67 5677.67
4100.79 2086.99 1132.95 7311.73
181.55 2223.99 506.17 4400.02 7311.73
Net decrease in working capital 2519.95 Interpretation From the above table is observed that the networking capital of the company shows decreasing trend. The total current assets of the company have decreased from Rs. 4172.78. in 2004-05 to Rs.11302.96 in 2005-06 But the bank balance decreased from Rs. 629.04 to Rs. 447.49 i.e, 181.55. The total current liabilities increased from Rs. 2828.58 to Rs. 5052.57. The networking capital decrease Rs. 4400.02.

(Rupees in Lakhs)
Particulars Current Assets (I) Inventories Sundry debtors Cash and bank balances Loans and advances Total current assets Current liabilities (II)
2005-06
2006-07
Changes in working capital Increase Decrease 199.77 -
5294.05 4098.66 447.49 1462.76 11302.96
7075.18 7197.89 247.72 1616.75 16137.54
1781.13 3099.23 153.99 -
51
Current Liabilities Provisions Total current liabilities Working capital (I-II) Net working capital TOTAL
5052.57 572.72 5625.29 5677.67 1783.28 7460.95
8090.45 586.14 8676.59 7460.95 7460.95
5034.35
3037.88 13.42 1783.28 5034.5
Net decrease in working capital 2519.95 Interpretation From the above table is observed that the networking capital of the company shows decreasing trend. The total current assets of the company have decreased from2005-06 Rs. 11302.96. in 2006-07 to Rs. 16137.54 in 2008-09. But the bank balance decreased from Rs. 447.49 to Rs. 247.72 i.e, 199.77. The total current liabilities increased from Rs. 5677.67 to Rs. 8676.59. The networking capital decrease Rs. 1783.28.

(Rupees in Lakhs)
2006-07
2007-08
Changes in working capital Increase Decrease 491.3 1111.66 1304.48 2907.24
7075.18 7197.89 247.72 1616.75 16137.54 8090.45 586.14 8676.59 7460.95 1304.48 8765.23
9194.08 6706.59 350.67 2070.42 18321.76 9202.11 354.42 9556.53 8765.23 8765.23
2118.9 102.95 453.67 231.72 2907.24
52
Net decrease in working capital 2519.95 Interpretation From the above table is observed that the networking capital of the company shows decreasing trend. The total current assets of the company have decreased from 2006-2007 Rs. 16137.54. in 2007-08 to Rs. 18321.76 in 2009-10. But the bank balance decreased from Rs. 247.72 to Rs. 350.67 i.e, 102.95. The total current liabilities increased from Rs. 8676.59 to Rs. 9556.53. The networking capital decrease Rs. 1304.48.

(Rupees in Lakhs)
2007-08
2008-09
Changes in working capital Increase Decrease 117.27 356.61 7821.34 8295.22
9194.08 6706.59 350.67 2070.42 18321.76 9202.11 354.42 9556.53 8765.23 7821.34 16586.30
12092.91 8814.31 420.10 5289.66 26616.98 9319.38 711.03 10030.68 16586.30 16586.30
2898.83 2107.72 69.43 3219.24 8295.22
Net decrease in working capital 2519.95 Interpretation From the above table is observed that the networking capital of the company shows decreasing trend. The total current assets of the company have decreased
53
from 2007 -08 Rs. 18321.76. in 2008-09 to Rs. 26616.98 in 2007-08 But the bank balance decreased from Rs. 350.67 to Rs. 420.10 i.e, 69.43. The total current liabilities increased from Rs. 9556.53 to Rs. 10030.68. The networking capital decrease Rs. 7821.34.
54
The statement showing the working capital from 2003-04 to 2008-09 Year 2005-06 2006-07 2007-08 2008-09 2009-10 Increase 4400.02 1783.28 1304.48 7821.34 Decrease 2519.95 -
55
10000 8000 6000 4000 2000 0 -2000 -4000

2005-06 -2519.95 2006-07 1783.28 1304.48 4400.02 7821.34
2007-08
2008-09
2009-10
Interpretation The above diagram clearly shows that the net working capital of the LIL showing an increase with a decreasing trend. As the net working capital for the year 2005-06 is -2519.95 it is decrease in the net working capital but for the year after 2006-07 the net working capital of the firm was increasing at a decreasing rate i.e., 4400.02, 1783.28, 1304.48 and 7821.34 respectively for the years 2006-07, 2007-08, 2008-09, 2009-10 and 2009-10 and 8534.21.
56
Statement of Sources and Applications of Funds for the year ending at 31st March 2005.
Sources Decreasein working Capital
Rs 2519.96
Applications Purchase of fixed assets Capital W-in-Progress Secured loan paid Unsecured loans paid Purchase of investments Funds lost in operation
2519.96 Interpretation
Rs 29.49 719.09 836.25 178.02 178.49 578.62 2519.96
It is evident from the above table the total funds during the period from 20042005 amounts to Rs. 2519.95 In the application side we can see the 15% of funds were utilized for purchase fo fixed assets, 33% of funds were utilized to pay secured loans and 8% to unsecured loans. Funds lost in operation are of 44%
57
Sources Sale of shares Secured loans Unsecured loans Sale of investment Differed tax asset Funds from operation
Rs 1214.88 7866.95 3578.39 235.54 683.48 3569.64 17148.88
Applications Capital in W-in-P Purchase of fixed assets Increase in working Capital
Rs 1933.86 10815.00 4400.02
17148.88
Interpretation It is evident from the above table the total funds during the period from 200506 are of amounted Rs. 17148.88 lakhs. The acquisition of funds through taking secured loans of 46% unsecured loans 21% and funds from operation are of 33%. The application of unds is reducing the share capital 7%, purchase of fixed assets 67%, utilized for working capital 26%.
58
Sources Secured loans Unsecured loans Funds from operation
Rs 163.13 4184.15 3524.86
Applications Purchase of fixed assets Capital W-in-P Purchase of investments Increase in working capital
Rs 2136.89 3362.14 589.83
7872.14 Interpretation
1783.28 7872.14
It is evident from the above table that the total flow during the period from 2006-07 amount R.s 7872.14 lakhs. In the total funds 3% of funds were received through secured loans, 87% of funds received through the unsecured loans and the remaining 10% of funds received from funds from operation. Regarding application of the funds the 63% were invested in fixed assets i.e. purchase of fixed assets and remaining 37% of funds were utilized for working capital.
59
Statement of Sources and Applications of Funds for the year ending at 31st March 2008. Sources Unsecured loans Capital W-in-P Sale of investment Funds from Operation Amount 5480.37 411.07 589.83 Applications Investment Purchase of fixed assets Increase in working capital 1478.19 7960.46 7960.46 Amount 5014.63 1641.55 1304.28
Interpretation It is evident from the above table that the total flow during the period from 2007-08 amount Rs. 7960.46 laksh. In the total funds 3% of funds were received through secured loans, 87% of funds received through the unsecured loans and the remaining 10% of funds received from funds from operation. Regarding application of the funds the 63% were invested in fixed assets i.e. purchase of fixed assets and remaining 37% of funds were utilized for working capital.
60
Sources Secured loan
Rs 1449.41
Funds from operations
10172.09 11621.50
Applications Purchase of fixed assets Capital W-in-Progress Unsecured loans paid Increase in working Capital
Rs 2230.27 107.56 1462.33 7821.34 11621.50
Interpretation It is evident from the above table the total funds during the period from 20082009 amounts to Rs. 11621.50. In the application side we can see the 19.19% of funds were utilized for purchase of fixed assets, and 12.58% to unsecured loans. Funds from operations are of 87.53%.
61
Sources Secured loan Unsecured loans
Rs 4813.21 3189.14
Applications Purchase of fixed assets Capital w-in-progress increasing working capital
Rs 1851.63 436.64
Funds from operations
2820.13 10822.48
8534.21 10822.48
Interpretation It is evident from the above table the total funds during the period from 20092010 amounts to Rs. 10822.48. In the application side we can see the 17.52% of funds were utilized for purchase of fixed assets, and 26.58% to unsecured loans. Funds from operations are of 25.51%.
62
RATIO ANALYSIS
Current Ratio: Year Current Assets Current Current Ratio
Liabilities 2005-06 4,172.78 2,895.13 1.44 2006-07 11,302.96 5,625.29 2.01 2007-08 16,137.54 8,676.29 1.86 2008-09 18,321.76 9,556.63 1.92 2009-10 26,616.98 10,030.68 2.65 Source: Collected from the annual Report of Lanco Industries Ltd, Tirupati.
63
C urrent R atio 3 2.5 2 1.5 1 0.5 0

2.65 2.01 1.4 1.86 1.92
Ratios
2005-062006-072007-082008-092009-10
Y ears
Inference The above table shows that the current ratios of the company from 2005-06 to2009-10. From the current ratio table it is clear that the current ratio of the year 2005-06 is satisfactory because it satisfies the rule of thumb ratio i.e., 2:1 ratio. But the current ratio of the remaining two years i.e., 2005-06 and 200607 is not satisfactory 2007-08, 2008-09 and 2009-10 is satisfactory. For better performance the company should hold optimum current assets to meet the current liabilities.
64
Quick Ratio (or) Acid Test (or) Liquid Ratio Year Current Assets Current Current Ratio
Liabilities 2005-06 2,979.52 2,985.13 1.03 2006-07 6,008.91 5,625.29 1.07 2007-08 9,062.36 8,676.59 1.04 2008-09 12,062.26 9,556.53 1.08 2009-10 14,120.10 10,030.68 1.45 Source: Collected from the annual Report of Lanco Industries Ltd, Tirupati.
Q uic k R a tio (o r) A cid T e st (or) L iquid Ratio
2 1.5
1.03 1.45 1.07 1.04 1.08
Ratios
1 0.5 0
2005-06 2006-07 2007-08 2008-09 2009-10
Y e ars
Inference: From the above table shows indicates Acid test ratio the Company. Acid test ratio from 2005-06 to 2009-10 is more than the normal standard of 1:1. Liquid Assets are quite sufficient to provide a cover to the current liabilities.
65
Absolute Liquidity Ratio: Year Current Assets Current Current Ratio Liabilities 2005-06 2,979.52 2,895.13 1.03 2006-07 6,008.91 5,625.29 1.07 2007-08 9,062.36 8,676.59 1.04 2008-09 12,062.26 9,556.53 1.08 2009-10 14,120.10 10,030.68 1.45 Source: Collected from the annual Report of Lanco Industries Ltd, Tirupati.
A bs o lute L iq u id R atio
2 1.5 Ratios 1 0.5 0
2005-062006-072007-082008-092009-10 1.45 1.03 1.07 1.04 1.08
Y ears
Inference: The above table shows the absolute liquid ratios from 2005-06 to 2009-2010. The more rigorous ratio i.e., absolute liquid ratio is slightly low when compared to the accepted standard is 0.5. So, it is necessary to improve the short-term financial position 2008-09 is the liquid ratio is very high 1.98.
66
Net working Capital: Year Current Assets Current Current Ratio
Liabilities 2005-06 3797.62 9908.69 0.13 2006-07 5677.67 22264.36 0.26 2007-08 7460.95 28680.37 0.26 2008-09 8765.23 32901.40 0.27 2009-10 16586.30 43836.66 0.38 Source: Collected from the annual Report of Lanco Industries Ltd, Tirupati.
Net W o rking C ap ital R atio

0.4 0.3
Ratios
0.26 0.13 0.26 0.27 0.38
0.2 0.1 0
2005-062006-072007-082008-092009-10
Y ears
Interpretation The net working capital ratio shows the relationship between the net current assets and the net total assets. The above diagram shows the firm is having an increasing net working capital.
67
Lanco industries balance sheet as on 2005-10

Particulars I. Sources of Funds 1. Share holders fund a) Share Capital b) Reserves and Surplus 2. Loan Fund a) Secured Loans b) Unsecured Loan s 3. Differed Tax Liability TOTAL II. Application of funds 1. Fixed Assets a) Gross-Block b) (-) Depreciation c) Net Block d) Capital Work-in-Progress 2. Investment 3. Current Assets Loans and Advances a) Inventories b) Sundry Debtors c) Cash & Bank balances c) Loans and Advances Total Less: Current Liabilities & Provisions a) Current Liabilities b) Provision Net Current Assets 4. Differed tax asset 5. Miscellaneous Expenditure Profit and Loss account TOTAL 5052.57 572.72 5677.67 13.83 8090.45 586.14 7460.95 9202.11 354.42 8765.23 9319.38 711.30 16586.30 43836.66 10108.38 774.95 25120.51 25090.51 53755.86 2005-06 (In Lacs) 3976.36 2610.18 2006-07 (In Lacs) 3976.36 3804.74 2007-08 (In Lacs) 3976.36 3993.06 2008-09 (In Lacs) 3976.36 7179.70 17832.33 12271.32 2576.95 43836.66 35516.23 9127.88 26388.35 862.01 2009-10 (In Lacs) 3976.36 8549.77 22645.54 15460.46 3123.73 53755.86 38974.86 10734.88 28239.98 425.37
10723.23 10886.36 6244.81 5404.59 9588.74 15069.11 424.17 618.06 22264.36 28680.37 32901.40 17884.47 20021.36 25035.99 4648.10 5417.03 6510.29 13236.37 14604.33 18525.70 589.83 -
5294.05 4098.66 447.49 1462.76 11302.96
7075.18 7197.89 247.72 1616.75 16137.54
9194.08 6706.59 350.67 2070.42 18321.76
12092.91 8814.31 420.10 5289.66 26616.98
14436.48 11966.16 3463.66 6107.54 35973.84
10.17 6.45 22264.36 28680.37 32901.40
68
FINDINGS
In 2005-06 financial year 34% of funds generated through trading activity and if we observe at application side the share capital was reduced by 7% purchase of fixed assets is by 67% and not increase in working capital is of 26%. In 2006-07 financial year 10% of funds generated through trading activity and another 90% through secured loans and unsecured loan. In applications the 63% of.funds were utilized to purchase fixed assets. In 2007-08 financial year 7% of funds generated through trading activity and another 93% through secured loans and unsecured loan. In applications the 42% of funds were utilized to purchase fixed assets. Current ratio of the company is in below the standard norms. Quick ratio;: is in standard norm position. This means current liabilities are very high than compare with the current assets. In 2009-10 financial year 19.19% of funds utilized for purchase of fixed assets, and 12.58% to unsecured loans. Funds from operations are of 87.53% In current ratios of the company from 2004-05 to 2009-10 from the current ratio of the year 2005-06 is satisfactory. But the current ratio of the remaining two years i.e., 2004-05 and 2005-06 is not satisfactory. For better performance the company should hold optimum current assets to meet the current liabilities. The quick ratio (or) Acid test (or) liquid ratio the company acid test ratio from 2005-06 to 2009-10 is more than normal standard at 1:1 liquid assets are quite sufficient to provide a cover the current liabilities.
69
SUGGESTIONS
Sales should be increased to get more returns In the financial senses acquiring the share capital will makes profitable not borrowing the loans thorough secured and unsecured. Trading activity should be operated effectively to generate more funds. By increasing share capital the customers will increase by that awareness of the company will take place. Promoting sales in Andhra Pradesh will generate sales volume more.
70
CONCLUSION
The following conclusions are arrived at based on the observations made on the present study Except of the first year the study period it is observed that the fund for operations is on loss. It generated the funds in application of total funds. Except of the first year of the study of period, funds were utilized for financing the working capital requirements. The study revealed a mixed trend of application and sources of funds in respect of secured and unsecured loans.
71
BIBLIOGRAPHY
James C.Vann Home Financial Management, 9th edition Prentice -Hall of India Private Limited, New Delhi, 1994. Khan M.Y. & Jain P.K. Financial Management, 2nd Edition Tata Me. Graw-Hill Publishing Co. Ltd., New Delhi. Pandey I.M., Financial Management, 7th Edition, Vikas Publishing House Pvt. Ltd., New Delhi, 1995. Kothari C.R. Research Methodology, 2nd Edition, Wishwa Prakasham, New Delhi, 1990. Maheswari S.N., Financial Management, 4th Edition, Sultan Chand & Sons, New Delhi. 1997. Man Mohan & Goyal S.N., Principles of Management Accountings 6th Edition, Sathiya Bhavan, Agra, 1998. Prasanna Chandra, Financial Management, Website : www.lancoindustries.com 3rd Edition, Tata Mc.Graw-Hill Publishing Co., Ltd., New delhi, 1984.
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2006 2007 heat

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

Committee of LANCO Executive and Directors (COLEAD)

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

STATEMENT OF THE PROBLEM

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

OBJECTIVES OF THE STUDY

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

SCOPE OF THE STUDY

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

NEED OF THE STUDY

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

LIMITATIONS OF THE STUDY

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

YOGANANDA INSTITUTE OF TECHNOLOGY & SCIENCE, Tirupati

Funds Flow Statements of Lanco Industries ltd., Srikalahasti

The fundamental principle of finance:

Significance of financial management;