(Cane Accounting System)

(A UNIT OF MANSURPUR SUGAR LTD.)

Submitted to

U.P. Technical University, Lucknow for the partial fulfillment of

MASTER OF BUSINESS ADMINISTRATION(2014-16)

SUBMITTED TO: SUBMITTED BY :

Mr. Divesh Gupta AYUSH MITTAL
ROLL NO-1408570026
MBA IIIrd sem

S.D. COLLEGE OF MANAGEMENT STUDIES,

MUZAFFARNAGAR
(U.P .TECHNICAL UNIVERSITY, LUCKNOW)
who have helped me in this endeavor. I am ineffably indebted

to Mr.ALOK KUMAR GUPTA my HOD guide for this Industry

Internship Program, for his most valuable regular guidance

without which my project It gives me immense gratification to

place on records my profound gratitude and sincere

appreciation to each and every one of those would not have

been completed.

I extend my sincere thanks to Mr. D.C. POPLI of Mansoorpur

Sugar Mills Ltd. for his valuable suggestion and guidance to

initiate the study.

I also very much thankful to Mr. Arun Yadav, Mr Ram

kumar & specialally thanks to Mr.karan singh for there

continuous motivation throughout this program, which really

helped me in completing this analysis. Any omission in this

brief acknowledgement does not mean lack of gratitude.

Date: Ayush Mittal

 CANDIDATE’S DECLARATION

I do hereby declare that the piece of dissertation report entitled “Ratio Analysis”

has been prepared by me under the avid guidance and supervision of Mr.

D.C.POPLI (D.G.M ACCOUNT & FINANCE) & internal guidance of Mr. ALOK

KUMAR GUPTA (H.O.D MBA) as a part fulfillment for the requirement of the

degree in Master of Business Administration under U.P.TECHNICAL

UNIVERSITY during the session 2014-16.

To the best of my knowledge & belief, this is my own work and has not been

submitted anywhere earlier for any other degree.

(Ayush Mittal)
INTRODUCTION
 INTRODUCTION

Financial Statements report what actually happened to assets, earnings and

dividends. Investors use financial statements to predict future

earnings/dividends. Management uses financial statements to help anticipate

future conditions and as starting point for planning actions that will affect future

event.

A Complete set of Financial Statements (Decision Tool), including the

beginning and ending net worth statements, the income statement, the

cash flow statement, the statement of owner equity and the financial

performance measures can help you to do a comprehensive financial

analysis of your business. To help you assess the financial health of

your business, Financial Performance Measures allows you to give your

business a check-up. Interpreting Financial Performance Measures helps

you to understand what these performance measures mean for your

business.

As I have already mentioned analysis of financial statement is a study of

relationship among various financial facts and figures which actually

contain a whole lot of historical data. The complex figures as given in

these financial statements are broken up into simple and valuables

elements and significant relationships are established between the

elements of the same statements or different financial statements. This

process of dissection, establishing relationships and interpretation

thereof to understand the working and financial position of a firm is

called the analysis of financial statements.

As in all things financial, beauty is often in the eye of the beholder. It

pays to do your own work! Making good investment decisions does not

require scholars. It requires financial analysis.

I have chosen ‘Analysis of Financial Statements’ as my project title. This report

analyzes the different financial statements of Mansoorpur Sugar Mills Ltd. and

compares the trends over the past 4 years. The data in this report provides useful

way to analyze financial statements and evaluate the firm’s performance over

the period. Financial statements which mainly consist of Balance Sheet, Income

Statement, Cash Flow Statement and Statement of Retained Earnings

summarize the results of the firm’s activities at a point in time and on operations

over some past period which is very helpful in analyzing the performance of the

company during past.

"Analysis of Financial Statements" is a powerful business handbook for

investors, bankers, and other professionals who rely on financial statement

understanding and analysis. For investors who need to evaluate why increased
sales didn't lead to higher stock prices...for bankers who need to know the

underlying reasons a customer wants to borrow funds...for any business person

who needs to analyze and understand financial statements...Let "Analysis of

Financial Statements" be your guide to understanding the language of financial

statements.

Analysis of financial statement is the systematic numerical calculation of

the relationship between one fact with the other to measure the

profitability, efficiency, solvency and the growth potential of the business.

It is just a heart of industry. No doubt, fixed tangible asset like land and

building, plant & equipment provide a strong structural base but working capital

is all the more needed as a 'motor force' to make the fixed tangible more

effective and turn out what is mostly needed.

There might be many business in the world, where besides investment in fixed

assets, funds would not be needed for carrying on day to day operations of the

business. But in most companies, it is essential that a certain proportion of funds

be kept invested in the form of different current assets like inventories,

receivables, cash and marketable securities.

The mode of administration of finance and working capital determines to

a very large extent to overall success or failure of the operations of an

enterprises. The analysis of financial performance is of vital importance

for the success of a business. The manner of management of finance to

a very large extent determines the success of operation of a concern

because problem of trade off between risk and return is involved.

 RESEARCH
METHODOLOGY
RESEARCH METHODOLOGY

Research Methodology may be defined as a way to systematically solve

the research problem. Research Methodology constitutes of research

method, used in context of research study and explanation of using a

particular method or technique and way other techniques are not used.

It also includes the reasons for taking up a particular problem, the data

collection, its analysis and interpretation.

For this particular project the steps followed or the Methodology followed is as

given below :

 State of Problem

 Extensive Literature Survey

 Designing of Study

 Data Collection

 Analysis of data

 Conclusion & Interpretation of Research

1. Problem Defined :

Finance management is one of the important part of business. Presently in

a very tough competitive scenario every business organisation wants to

reduce costs in manufacturing their products so that they can offer quality

product at competitive rates to the consumers. Also every business

concern try to manage their receivables not making very much human

efforts. Working capital management is one of the problem areas of many

organisations as it affects their profitability as well as their present

operations. I personally feel that many small Indian organisations are

facing working capital problems and so they are even struggle for their

survival. In my project I try to analyse the working capital management

of the company Mansoorpur Sugar Mill.

2. Extensive Literature Survey :

For the purpose I made a through study of the topic to get in depth

knowledge of the subject. I concerned various books and newspapers like

Economic Times, Business Standard, Magazines, Journals etc., to get a

first head view regarding the problem.

3. Designing of Study :

We know that to get the best output from the research it has to be

conceptually so that minimum difficulties arise during the conduct of the

 research. To make my research successful I planned the methodology that

I have to adopt while doing my project.

4. Collection of Data :

This is the fourth step in the research process. This consisted of actually

gathering the data from various primary and secondary sources. The

methods used for collection of data are as follows:

a) For the collecting of primary data I decided to meet different managers

of different levels of the company and others employees from different

departments and collected related information from them. I tried to take

their views on the various subject matters.

b) Documented Sources of Data: The secondary data was collected from

various documented sources. I referred profit and loss account, balance

sheet, stock register, debtors and creditors registers of the company and

take the required data from that. I also collected various documents of the

company, like various pamphlets of the company, quality policy, product

details and relevant information was extracted from them. I also referred

were Business India, Business World, Business Today and Newspapers

Economic Times, Financial Express, Business Standard to understand the

current scenario of working capital management.

5. Analysis of Data :

Data Analysis may be defined as the process of computation of certain

parameters along with identification of relationship pattern that may exist

among data groups.

For analysis of data, the following steps were undertaken:

a) Data Editing: A thorough scrutiny of raw collected as done and was

detected in this step.

b) Classification of Data: In this the data was arranged in groups or

classes according to the resemblance and similarities. This process has

made the comparative analysis an easier take.

c) Calculation: From the various figures collected from different sources I

calculate the required results.

d) Tabulation of Graphical Depiction: As we know tabulation is an

orderly arrangement of data in columns and rows. This tabulation was

done to identify the frequency of occurrence of data. In the end graphical

depiction of this tabulated data is made to amplify the study further.

6 Conclusion :

The last step in the research was putting down the conclusion and its

interpretation as based on the study of primary and secondary data and its

analysis.

The research methodology followed is in such manner that it will make the

study informative and interesting at all the levels.

 OBJECTIVES OF THE STUDY

The present study, which is under taken as a summer training for the

partial fulfillment of M.B.A. course is aimed to accomplish the following

objectives.

1. To make the analysis of data & interpret it on the basis of financial

statements of the company.

2. To find out the different ratios so that the financial position of the

company could easily calculated.

3. To study that how & in what way a company can manage its financial

statement.
 SCOPE OF THE STUDY

The study covers following aspects :

1- Brief Profile of the Company.

2- A thorough study about the theoretical background.

3- Analysis has done on the basis of past four years financial information

or statements of the Company.

.
The project report has been prepared during the summer training at
Mansoorpur Sugar Works, a unit of Mansoorpur Sugars Ltd. The
basic objective of the report is to analyze the accounting system of
the cane and provide a brief overview of the various steps involved
in it.
Purchase of raw material is must for the production of sugar. Sugar
production is dependent on the production of its raw material if the growth
of raw material is good the production of sugar is also good. If the
production is good it is beneficial for the company for its growth and
development Sugar is amongst the largest agro-processing industries in
India with 1.76 weight in the annual industrial production 35million
farmers and their families besides large means of agricultural labour
involved in sugarcane cultivation and its harvesting operation. Over one-
lakh workmen are directly employed. Employment is also generated in
various ancillary activities. The industry, center took over 7.5 of our rural
population. By way of sugar cane price about Rs. 10,000 crore are
dispersed amongst cane farmer every year. In no other industry is the
contract between the industry and the farmers to intense and as direct as in
the case of the sugar industry. Besides, its annual contribution to the
Central and State Exchange were by way of faxes is Rs. 1600 crore.
Through sugar exports, it has the potential to earn the motion of Rs. 2000
crore in foreign exchange every year.
The industry does not depend on fossil fuel but generates its own renewable
source of energy. Not only that it generate surplus power through cogeneration
for use by consumer in interior rural cores. The sugar industry has the potential
to generate 300 M.W. surplus power with such large expanse and wide horizon
of associated economic activities, which can transform rural India, the sugar
industry has indeed carved for itself a very important place in the Indian
economy
 ABOUT THE MANSOORPUR SUGAR LTD.

Mansoorpur Sugars Limited (Formerly known as SIEL Limited) emerged as an

independent entity in 1989 out of the restructuring of the erstwhile DCM Group.

Mansoorpur Sugars has been engaged in the business of manufacture and

selling of chemicals, sugar and edible oils.

Mansoorpur aspires to be one of the largest diversified Sugar and Sugar By

Products Company, in complete harmony with nature, while giving handsome
returns to all stakeholders.

Mansoorpur Sugar Works is also engaged in the generation of electricity.

Mansoorpur Sugar Works has an ISO-9001 & ISO-22000.

 BRIEF HISTORY OF THE COMPANY

Mansoorpur Sugar Works is a Sugar Unit of Shriram Group (DCM/The Delhi

Cloth & Genl. Mills Co. Ltd.) Lala Shriram was the founder of DCM. He was
born in 1884 in Delhi. The Delhi Cloth & General Mills Ltd. Delhi was founded
in 1884. Lala Shriram joined the company in 1909 at Bara Hindi Rao, Delhi.

Lala Shriram, self-taught and self-educated, went on to become one of the

pioneers of the Indian Industry. Lala Shriram had, no doubt, a profound
knowledge of commerce and industry. He was equally preoccupied with
business ethics. He always believed that businessman’s word should be as good
as his pledge.

Lala Shriram was the first in the country to establish the Labor Welfare Benefit
Fund Trust. He introduced several benefits for the working class in the thirties
and the forties when such welfare measures were hardly known. Sickness
insurance, pension fund, gratuity, incentive bonus, annual increment, hospital
facilities, holiday homes and various other measures were the products of his
imagination.

DCM started as a small textile unit originally, steadily grew from strength to
strength: textile to sugar production, on to chemicals, vanaspati & ultimately in
his lifetime to fertilizers.
Some important units of Shriram Group (DCM) are given here under:-

1. The Delhi Cloth General Mills Ltd. Delhi - Cloth Unit - 1889

2. Daurala Sugar Works, Daurala - Sugar Unit - 1938

3. Mansoorpur Sugar Works, Mansoorpur - Sugar Unit -

1949

4. DCM Chemical Works, Delhi - Chemical Unit - 1941

5. Swatantra Bharat Mills, Delhi - Cloth Unit - 1948

6. Hissar Textiles Mills, Hissar - Cloth Unit - 1956

7. Shriram Rayons, Kota - Rayons Unit - 1964

8. Shriram Fertilizers & Chemicals, Kota - Fertilizer & Chemical - 1969

In the year 1989, the above units were trifurcated as under:-

DELHI CLOTH & GENERAL MILLS CO. LTD.

______________________________________________

Headed By: Headed By: Headed By:

Lala Siddhartha Shriram Lala Bansi Dhar Dr. Bharat Ram
1. Mansoorpur Sugar Works 1. Daurala Sugar Works 1. Delhi Cloth Mills
2. DCM Chemical Works 2. Hindan River Mills 2. DCM Engg.
3. Shriram F&C. Kota 3. DCM Silk Mills
4. S.B.Mills 4. Hissar Textiles
5. Shriram Cement, Kota

After trifurcation of the DCM, Lala Siddhartha Shriram gave the name of his group as
Shriram Industrial Enterprises Ltd. (SIEL). Recently, Lala Siddhartha Shriram further divided
SIEL group in two parts as under:-

SIEL Limited
 SIDDHARTHA SHRIRAM - CMD

_______________________________________

SIEL LIMITED MANSOORPUR SUGARS LTD.

- Chemical Plant, Rajpura - Mansoorpur Sugar Works,
Mansoorpur, Distt. Meerut
- Titawi Sugar Complex,
Titawi, Distt. Muzaffarnagar
- Nanglamal Sugar Complex
Nanglamal, Distt. Meerut

Now, Mansoorpur Sugar Works is a unit of Mansoorpur Sugars Ltd., New Delhi
(Formerly known as SIEL Ltd.). Its crushing capacity is 13000 T.C.D. It is
about 120 kms. from Delhi and 25 kms. from Meerut & situated at Mansoorpur
on Meerut-Bijnor Highway. It is one of the best Sugar Mills in Asia.

The other sugar plant i.e., Titawi Sugar Complex, Titawi is in Distt.
Muzaffarnagar. Its crushing capacity is 11000 T.C.D. It is about 200 kms. from
Delhi and 15 kms from Muzaffarnagar.

The 3rd Sugar Mill of 6000 capacity at Nanglamal is in Distt. Meerut. It is

situated on Meerut-Garh Road and 25 kms from Meerut.

All the three units are producing good quality white crystal sugar. These units
are famous for their branded sugar product in the market.
 The Chemical Plant, Delhi of this group has been shifted to Rajpura, Punjab that
is also running successfully.

Mansoorpur Sugars invested Rs 535-cr for its capacity expansion

Mr Siddhartha Shriram, MD, Mansoorpur Sugars Ltd,

addressing a press conference in the Capital to announce
the company's expansion plans. — Kamal Narang

New Delhi , Aug 10, 2007

MANSOORPUR Sugars on Wednesday announced its plans to invest Rs 535

crore over the next two years towards setting up new sugar mills, co-generation
and distillery plants, and enhancing capacity of present units.

With these investments, the company's total cane crushing capacity is expected
to increased to 31,000 tonnes per day (TCD) from the current 17,000 TCD.

The company plans to set up a new 5,000 TCD capacity sugar unit in western
Uttar Pradesh, the exact location of which is yet to be decided. It is already in
the process of setting up a new 5,000 TCD sugar mill near Meerut (western
Uttar Pradesh), the first phase of which would be over by November 2005.

"These two projects involve Rs 250 crore of investment," said Mr Siddharth

Shriram, Managing Director, Mansoorpur Sugars Ltd, in a press conference.

"We would raise the Rs 535-crore partly through internal accruals, sale of
unproductive assets, and raising debt and equity from the market," said Mr
Shriram. He said exact details would be ironed out by December.
It plans to expand the existing plants at Mansoorpur and Titawi and the new unit
(under construction) with an investment of Rs 175 crore by 2007. The capacity
at Mansoorpur is expected to touch 8,500 TCD from 6,000 TCD, and that of
Titawi is expected to go up by 1,000 TCD from 11,000 TCD.

The company also plans to set up a 30 MW co-generation plant with an

investment of Rs 60 crore.

Also planned is an ethanol distillery that would produce 120 kilo litre a day with
an investment of Rs 50 crore.

For the year ending September, Mansoorpur (the company's fiscal year runs
from October 1 to September 30) projects a net profit of Rs 55 crore.

On exports to Pakistan, Mr Shriram said: "The Government hasn't released any

quota to anyone. Exports can't take place unless we have any export quota.
Many exporters have applied to the Government and they haven't got any
response so far. We are also looking at exporting some quantity to Pakistan."

On the ethanol-blending programme, he said given the soaring oil prices, "the
Government will have no option but to promote the use of ethanol."
 The Mansoorpur Sugars Brand
Consumer pack branding

Pioneered in 1992: our intentions –

o From commodity to packaged

o Clean/Hygiene
o Correct weight surety
o Consistent quality surety
o Over one thousand shops and sponsorships.

Today it is the largest selling sugar retail brand, with the highest brand
recall due to promotional activities like-

o Sponsorship on Red FM, which has a huge listnership

o Special edition Songs CD ‘Lamhe’ sold through retail music shops

Association with brand

o Purity cleanliness/Health/Family Value

Strong Distribution Network

o Consumer pack branded sugar travels through Mansoorpur

Sugars’s well established FMCG distribution channel reaching
10,000 retail outlets all over Northern India along with famous oil
brands such as Panghat, Cornola, Ruby etc.

New product launches –

o Mansoorpur Sugars plans to launch a premium range of refined

sugar under the brand name Mansoorpur Sugars SELECT. The
variants that will be launched under this brand name are:
 Mansoorpur Sugars SELECT double refined sugar.
 Mansoorpur Sugars SELECT sugar cubes.
 Mansoorpur Sugars SELECT sachets.
 VISION

To harness renewable natural resources effectively to make and distribute

quality

products needed by society, using evolving goals and techniques to create

sustainable

value in harmony with our Environment, our Community, our Stakeholders and
our self.

________________________________________________________________

OBJECTIVE

To create Mansoorpur Sugars as a separate entity by focusing on Sugars

Business for

achieving sustainable growth and profitability.

____________________________________________________________________________
 INDIAN SUGAR INDUSTRY-A RETROSPECT

India has been known as the original homes of Sugar and Sugarcane. Indian
mythologies support the above fact a sit contains some legends showing the
origin of Sugarcane. The growth of the sugar industry is full of tale of
adventure and conquest. It received attention of the builder of different
Empires from time to time.

About 800 B.C.: Sugarcane was perhaps eastward, i.e. China, where it
found suitable soil for development. About 327 B.C. when Alexander The
Great invaded the India he and his soldiers were the first Europeans to see
Sugar cane in India on their return westward they took Sugarcane to
Europe, but it was about 700 A.D., that it was actually cultivated there. It
was between fourth and sixth centuries that the art of making Sugar was
discovered in India. The cane was cut into pieces and crushed by a heavy
weight of an even shape and sizes were called Sarkara. The Sanskrit term
for Grovel. The modern word “SUGAR” is a derivative of the word
Sarkara.

The large solids were called Khand from which the word ‘Candy’ has
descended.

However for all practical purpose, the advent of modern Sugar processing
industry by direct vacuum-pan-method in India may be said to have started
with adoption of a policy of discriminating protection by the Government of
India in 1932. In the mid twenties a number of Sugar mills against the
Japanese Sugar then commanding the Indian market was referred to the
Tariff Bound and the Sugar Industry Protection act was passed by the Indian
legislature in 1932, foundation begins thus laid down for what proved to be
a dynamic enterprise of gigantic dimension with Profound economic value.

The Government of India again reviewed the position in 1934 and decided
on a two fold line of action through the adoption of the following measures:

(1) Imposition of excise duty on factory-Production Sugar at Rs.

1.31% from 1st April 1934
(2) Union Government passed legislation enabling the provincial
Government to enforce a minimum price to be paid by the Sugar
Factories to the cane growers in respect of cane supplied by them
as per the Sugarcane Act 1934.

The main object of the above act was to regulate the price of Sugarcane
intended for use in Sugar factories and assure Sugarcane growers a fair
price for their produce. Section 3 of the Act empowered that the State
Government to fix by notification in the official gazette the minimum price
for the Sugarcane intended for use in factory. In this connection, the
Government of U.P. enacted the U.P. Sugarcane rules, 1934 under that then
started notifying the minimum price of cane payable by Sugar factories in
the state. Similar action was took by the Government of Bihar under Bihar
and Orissa Sugarcane rules, 1934. These two state Governments were fixing
the minimum cane price very year till the Central Government took over
control of the Sugar industry under the industries (Development and
Regulation) Act 1951.

The post protection story of India’s sugar industry is rewaling from a Scanty
32 working unit in 1931-32. The number of factories rose to 130 by 1934-
35. The value of Sugar output stood at 1.72 lakhs tons by 1935-36. This rate
of expansion over so short a period constitutes almost a world record. At
any rate it judged by the number of the producing unit there is no parallel
for it in the history of Indian industries nor did the rate of growth half after
1934-35 and 1935-36. By 1938-39 the production of Sugar touched 12.77
lakh tons. During the five war years 1939-40 to 1943-44 a reverse trend
manifested itself the volume of production tending to decline from 12-lakh
tons level except from 1942-43. The merit 7 years till 1950-51 the industry
had to pass through a difficult time for various reasons when the output
fluctuated practice between 9 and 11 lakh tons mainly on account of the
stability of cane supplier caused by the Government preference to food
crops during the war years.

____________________________________________________________________________
 CONTRIBUTION OF SUGAR INDUSTRY TO NATIONAL
ECONOMY

Sugar is amongst the largest agro-processing industries in India with 1.76

weight in the annual industrial production 35million farmers and their
families besides large means of agricultural labour involved in sugarcane
cultivation and its harvesting operation. Over one-lakh workmen are
directly employed. Employment is also generated in various ancillary
activities. The industry, center took over 7.5 of our rural population. By way
of sugar cane price about Rs. 10,000 crore are dispersed amongst cane
farmer every year. In no other industry is the contract between the industry
and the farmers to intense and as direct as in the case of the sugar industry.
Besides, its annual contribution to the Central and State Exchange were by
way of faxes is Rs. 1600 crore. Through sugar exports, it has the potential to
earn the motion of Rs. 2000 crore in foreign exchange every year.

The industry does not depend on fossil fuel but generates its own renewable
source of energy. Not only that it generate surplus power through
cogeneration for use by consumer in interior rural cores. The sugar industry
has the potential to generate 300 M.W. surplus power with such large
expanse and wide horizon of associated economic activities, which can
transform rural India, the sugar industry has indeed carved for itself a very
important place in the Indian economy.

__________________________________________________________
 SUGAR EXPORT

India entered the world marketing as an exporter of sugar in the year 1957.
In a short period, India has emerged as an important exporter of sugar.

In 1983-84 following adjustment due to short fall declaration the India

export quota under the ISA was reduced to 3.22 lakh tons raw value i.e.
2.99 lakh tons. The actual export during the year was only 2.84 lakh tons
earning and foreign exchange of Rs. 70 crore. In the latter half year
Government had decided to import 5 lakh tons of sugar to meet the
domestic requirement. As against this the quantity physically received was
3.26 lakh tons. India was not a importer of sugar in 1983-84. In the
subsequent three sugar seasons 1984-85 to 1986-87 sugar exports were
confined only to prefer quota. The country however remained a net importer
in the subsequent four seasons 1984-85 to 1987-88. The actual imports
being 11.87 lakh tons in 1984-85, 16.19 lakh tons in 1985-86, 9.53 lakh tons
in 1986-87, 0.71 lakh tons sugar in 1987-88. There was nil import of sugar
in 1988-89, season despite a record production in 1989-90 Government had
import 2.4 lakh tons of sugar to meet the initial domestic requirement as the
opening stocks were highly inadequate and the sugar prices showed a
bullish trend, towards the end of the season. Government having regarded to
the overall production and the surplus stocks available decided to export
5.25 lakh tons of sugar. The industry exported sugar under the Export
Promotion Act and the losses were shared by all the factories on per rata
basis according to production the actual by the end of the season was of the
orders of 5.25 lakh tons.

The Government released 5.25 lakh tons of sugar for export in 1991-92.
Total shipment of sugar was 4.83 lakh tons net foreign exchange earning
were of the order of Rs. 348.87 crore. The sugar mills on poor-rata to
production shared the loss on export of sugar as per provision laid down
under the Sugar Export Promotion Act. In the export and import policy
announced by the Government in 1991-92 sugar export were subject and
general industry export import corporation limited.

In view of the comfortable level of production and change achieved during

1994-95 and 1995-96, the Government beginning from August 1995,
sanctioned a release of 13.25 lakh tons of sugar for export from this release,
11 lakh tons had been physically exported till January 1997.

However, on 15 January 1997, the sugars exported reported and sugar exports
were decanlised. ISMA petitioned the Government to reconsider its decision to
decanlised sugar exports as in its opinion, the objectives visualized by the
Government would not be achieved without complete decontrol. Consequent to
decanlised, the Government appointed due agricultural proceeded products export
monitoring
 ACCOUNTING POLICIES FOLLOWED BY THE COMPANY

Significant Accounting Policies: - The financial statements of the Company are prepared in
accordance with applicable accounting standards and are based on the historical cost
convention. The significant accounting policies followed are stated below:

1. Fixed assets: -Fixed assets are stated at cost of acquisition / construction less
accumulated depreciation. The cost includes all pre-operative expenses
relating to construction period in the case of new projects and expansion of
existing factories.

2. Depreciation: -
i) The Company follows the straight-line method of depreciation (SLM).
ii) The rates of depreciation charged on all fixed assets are those specified
in Schedule XIV to the Companies Act, 1956.
iii) On assets sold/discarded during the year, depreciation is provided upto
the date of sale /discard.
iv) Depreciation is calculated on a pro-rata basis from the date of
acquisition / installation of the asset and in case of assets costing upto
Rs.5000 each, such asset is fully depreciated in the year of purchase.

3. Investments: -Investments are stated at cost less provision for permanent

diminution in the value of long- term investments, if any.

4. Inventories: -
i) Stores and spares are valued at cost or under.
ii) Raw materials, components, work-in-progress and finished goods are
valued at the lower of cost and net realisable value.
 iii) Cost of inventory is ascertained on the weighted average basis. Further,
in respect of process stocks and finished goods, an appropriate share of
manufacturing expenses is included on absorption costing basis
including excise duty.
5. Revenue recognition: -Sale of goods is recognized at the point of despatch of
finished goods to customers. Sales are inclusive of excise duty and exclusive
of sales tax.

6. Research and Development Expenditure: -Revenue expenditure on

research and development is expensed out under the respective heads of
accounts in the year in which it is incurred.

7. Retirement benefits: -Pursuant to the Scheme of Arrangement, the Company

has presently continued with the various schemes of retirement benefits of
undivided Siel Limited such as provident fund, superannuation fund, gratuity
fund and leave encashment. The Company’s contribution to these funds
recognized by the income-tax authorities and provision for employees’ leave
encashment determined on an actuarial basis at the year end are charged
against revenue every year. Contributions to provident fund, superannuation
fund and gratuity fund have been made to the trusts of undivided Siel Limited
except that contribution to the gratuity fund of Rs. 18.14 Millions relating to
the employees of the Company upto March, 31, 2003 and Rs. 37.52 millions
upto September 30, 2006 (Previous year upto September 30, 2005 Rs. 19.22
Millions) though provided for in books of account have not yet been funded
by undivided SIEL Limited and the Company respectively.

8. Income-tax: -The provision for taxation is ascertained on the basis of

assessable profits computed in accordance with the provisions of the Income-
tax Act, 1961.
 Deferred tax is recognized, subject to the consideration of prudence, on
timing differences, being the differences between taxable income and
accounting income that originate in one period and are capable of reversal in
one or more subsequent periods.

9. Foreign exchange transactions: -Exchange differences are dealt with as

follows: -
Transactions in foreign currency are recorded on initial recognition at the
exchange rate prevailing at the time of the transaction.
Monetary items (i.e. receivables, payables, loans etc.) denominated in foreign
currency are reported using the closing exchange rate on each balance sheet
date.
The exchange difference arising on the settlement of monetary items or on
reporting these items at rates different from rates at which these were initially
recorded/reported in previous financial statements are recognized as
income/expenses in the year in which they arise except where the foreign
currency liabilities have been incurred in connection with fixed assets
acquired upto September, 30, 2004 and subsequent thereto in case of fixed
assets acquired from a country outside India, where the exchange differences
are adjusted in the carrying amount of concerned fixed assets.

10.Write off of miscellaneous expenditure: -Deferred revenue expenditure

representing amounts paid to employees under voluntary retirement scheme is
written off over a period of three years.

11.Share issue expenses are written off against share premium account.
 12.Pre-operative expenses: -Pre-operative expenses, pending allocation
represents indirect expenditure incurred during the construction period which
will be allocated to capital/revenue on commissioning of the project.

THEORITICAL ASPECT OF STUDY

 CONCEPT OF FINANCIAL STATEMENT

 TYPES OF FINANCIAL ANALYSIS

 IMPORTANCE OF FINANCIAL ANALYSIS

 TECHNIQUES OF FINANCIAL STATEMENT

 CONCEPT OF RATIO ANALYSIS

 TYPES OF RATIO

 CONCEPT OF WORKING CAPITAL.

 COMPONENTS OF WORKING CAPITAL.

 MANAGEMENT OF WORKING CAPITAL.

 THEORY OF FINANCIAL STATEMENT

A financial statement is an organized collection of data according to logical and

consistent accounting procedures. Its purpose is conveying an understanding of

some financial aspect of a business firm. It may show a position at a moment of

time as in the case of a balance sheet, or may reveal a series of activities over a

given period of time, as in the case of an income statement.

The term financial statements generally refer to 4 basic statements;

(1) The income statement,

(2) The balance sheet. Of course, a business may also prepare

(3) A statement of retained earnings, and

(4) A statement of changes in financial position.

FINANCIAL STATEMENTS

STATEMENT
INCOME BALANCE STATEMENT OF OF
STATEMENT SHEET RETAINED CHANGES IN
EARNINGS FINANCIAL
I POSITION

INCOME STATEMENT
The income statement is generally considered to be the most useful of all

financial statement. the nature of the ‘income” which ie focus of the income

statement can be well understood if a business is taken as an organization that

uses ‘inputs” to ‘produce” output. The outputs are the goods and services that

the business provides to its customers. The values of these outputs are the

amounts paid by the customers for them. These amounts are called “revenues”

in accounting. The inputs are the economic resources used by the business in

providing these goods & services.

BALANCE SHEET

It is a statement of financial position of a business at a specified moment of

time it represent all assets owned by the business at a particular moment of

time. The important distinction between an income statement and a balance

sheet is that the income statement is for a period while balance sheet is on a

particular date. Income statement is a flow report, as contrasted with the balance

sheet which is a static report. However, both are complementary to each other.

STATEMENT OF RETAINED EARNINGS

The term retained earning means the accumulated excess of earning over losses

and dividend. it is fundamentally a display of things that have caused the

beginning-of- the- period retained earning balance to be changed into the one

shown in the end-of –the- period balance sheet.

The statement is also termed as profit and loss appropriation account in case of

companies.

STATEMENT OF CHANGES IN FINANCIAL POSITION

The balance sheet shows the financial condition of the business at a particulars

moment of time while the income statement discloses the result of operations of

business a period of time. This information is available in the statement of

changes in financial position of the business.

 TYPES OF FINANCIAL ANALYSIS

 ON THE BASIS OF MATERIAL USED: According to this basis,

financial analysis can be of two types.

 External analysis: This analysis is done by those who are Outsider for

the business. The position of these analysis has improved in recent

times on account of increased governmental control over companies and

governmental regulations requiring more detailed disclosure of

information by the companies in their financial statement

 Internal analysis: This analysis is done by persons who have Access

to the books of account & other Information related to the business.

 ON THE BASIS OF MODUS OPERANDI : According to this basis,

Financial analysis can also be of two types:

 Horizontal analysis: financial statement for a number of years are

reviewed and analyzed. Te current year’s figures are compared with the

standard or base year. Such an analysis gives the management

considerable insight into levels and areas of strength and weakness. It is

also termed as “dynamic analysis”.

 Vertical analysis: Analysis a study is made of the quantitative

Relationship of the various items in the financial statement on a

particular date. It is also called “static analysis”.

 IMPORTANCE OF FINANCIAL STATEMENT

The information given in the financial statement is very useful to a number of

parties as given below;

 OWNERS; The owners provide funds for the operations of a

business and they want to know whether their funds are being properly

utilized or not. The financial statements prepared from time to time

satisfy their curiosity.

 CREDITORS; The creditors want to know the financial position of

a concern before giving loans or granting credit. The financial statement

helps them in judging such position.

 INVESTORS: prospective investors, who want to invest money in

a firm, would like to make an analysis of the financial statement of what

firm to know how safe proposed investment will be.

 EMPLOYEES: employees are interested in the financial position of

a concern they serve, particularly when payment of bonus depend upon

the size of the profit earned.

 GOVERNMENT: Central and state governments are interested in

the financial statement because they reflect the earnings for a particular

period for purpose of taxation.

 RESEARCH SCHOLARS: the financial statements, being a mirror

of the financial position of a firm, are of immense value to the research

scholars who wants to make a study into financial operations of a

particular firm.

 CONSUMERS: consumers are interested in the establishment of

good accounting control so that cost of production may be reduced with

the resultant reduction of the prices of goods they buy.

 MANAGERS: management is the art of getting things done

through others. This requires that the subordinates are doing work
properly. Financial statements are an aid in this respect because they

serve the manager is appraising the performance of the subordinates.

STAGES OF FINANCIAL STATEMENT ANALYSIS

The following are the stages of financial statement analysis.

1. ESTABLISHED RELATIONSHIP: A relationship is established among

financial statements with the help of tools and techniques of analysis such

as ratio, trend, common-size, fund flow etc.

2. RE-ARRANGEMENT: Whatever information is available must be re-

arrangement with a view to derive the maximum information from the

analysis of financial statement. Re-arrangement depends upon the

purpose of analysis.

3. COMPARISION: It is also required to connect data in such a from

whereby comparison is done easily. For this purpose data of some more

years is required.

4. ANALYSIS AND INTERPRETATION: Data is analyzed as per

purpose and them interpreted. Interpretation should be precise.

5. CONCULUSION: The conclusion draws from interpretation are

presented to the management in the form of report.
 LIMITATION OF ANALYSIS OF
FINANCIAL STATEMENT
Analysis of financial statement is most important device but the person

using this device must keep in mind its limitation. The following are the

main limitation of the analysis:

 HISTORICAL NATURE OF FINANCIAL STATEMENT: The basic nature

of these statements is historical, i.e., relating to the past period. Past can

never be a precise and infallible index of the future and can never be

hundred per cent helpful for the future forecast and planning.

 FINANCIAL ANALYSIS IS ONLY A MEANS: Financial analysis is a

means to an end and not the end itself. The analysis should be used as

a starting point and the conclusion should be drawn not in isolation, but

keeping in overall picture and the prevailing economic and political

situation.

 FINANCIAL STATEMENT IS ESSENTIALLY INTERIM REPORT: The

profit shown by profit and loss account and the financial position as
 depicted by the balance sheet is not exact. The exact position can be

known only when the business is closed down.

 CHANGE IN ACCOUNTING METHOD: Analysis will be effective if the

figures derived from the financial statement are comparable. Due to

change in accounting methods, the figures of the current period may

have no comparable base, and then the whole exercise of analysis will

become futile and will be of little value.

 SHORTCOMING OF THE TOOL OF ANALYSIS: There are different

tools of analysis available to the analyst. Which tool is to be used in a

particular situation depends on the skill, training, and expertise of the

analyst.

 IGNORING QUALITATIVE ASPECT: Financial analysis does not

measure the qualitative aspect of the business. It is the quantitative

measurement of performance. It means that analysis of financial

statement measures only the one sided performance of the business.

 IGNORING PRICE LEVEL CHANGE: The comparability of ratio suffers if

the prices of the commodities in two different years are not the same.

Change in price affects the cost of production, sales and also the value

of assets.

 FINANCIAL STATEMENTS IS ONLY A TOOL, NOT THE FINAL

REMEDY: Analysis of financial statement is a tool to measure the

profitability, efficiency and financial soundness of the business. It should

be noted that personal judgment of the analyst are most important in

financial analysis. We should not rely on single ratio.

 TECHNIQUES OF FINANCIAL ANALYSIS
A financial analysis can adopt one or more of the following techniques/tools

of financial analysis:

FINANCIAL ANALYSIS
TECHNIQUES

COMPARATIVE CASH FLOW RATIO

STATEMENT ANALYSIS ANALYSIS

 COMPARATIVE STATEMENT: A Comparatives statement is those in

which figures reported are converted into percentages to some common

base. In the income statement the sale figure is assumed to be 100 and

all figures are expressed as a percentage of this total.

The comparative statements show the percentages of each item to the total in

each period but not variations in respective items from period to period. On

account of this reason comparative statement are not much useful for financial

analysis. However, comparative statements are useful for studying the

comparative financial position of two or more business.

Advantages of comparative statement:

 Such statements are easily understandable;

 It helps in the comparison between two or more years or two or

more firms

 Variations are in proportions instead of being absolute

 Analysis becomes qualitative instead of qualitative

 Qualitative analysis helps in the formulation of future financial

policies.

 CASH FLOW STATEMENT: cash plays very important role in the

entire economic life of business. It is very essential for a business to

maintain an adequate balance of cash. Cash flow statement is a

statement of changes of financial position in business due to inflow or

outflow of cash and their statement is required for short-range business

premises. A cash flow statement summarizes the causes of change in

cash position of a business enterprise between dates of two balance

sheets. A cash flow statement is useful for short-term planning. Cash

flow analysis is an important financial tool for the management.

Advantages of cash flow statement:

 Helps in efficient cash management

 Helps in internal financial management

 Discloses success or failure of cash planning

 Helps in declaring dividends etc.

CONCEPT OF RATIO ANALYSIS

This is most important tool available to financial Analysis for this work.

An accounting ratio shows the relationship in mathematical terms

between two interrelated accounting figures. Ratio analysis is a

technique of analysis and interpretation of financial statements. It is the

process of establishing and interpreting various ratios for helping in

making certain decisions. Thus, ratio analysis measures the profitability,

efficiency and financial soundness of the business.

Objective of ratio analysis:

 Measuring the profitability

 Judging the operational efficiency of business

 Assessing the solvency of the business

 Measuring short and long-term financial position of the

company

 Facilitating comparative analysis of the performance

Advantages of ratio analysis:

 Helpful in financial analysis

 Helpful in explaining financial health of the enterprise

 Helpful in locating shortcomings/weaknesses

 Helpful in future forecasting

 Helpful in comparing inter-firm performance

 Helpful in simplifying accounting figure

 Helpful in assessing operating efficiency of the business

 TYPES OF RATIOS

 CURRENT RATIO: Current Ratio depicts the relationship

between Current Assets and Current Liability. Current ratio is

required to evaluate the ability of a firm to meet its short term

obligations in time. It helps to access the short term financial

position of the business enterprise. It shows how many times

current assets are in excess of current liability.

CURRENT RATIO = Current Assets

Current liability

 QUICK RATIO: Also known as Liquid Ratio or Acid Test Ratio.

Quick Ratio establishes the relationship between Liquid Assets

and Current Liability. In current assets, a rupee of cash is

considered equal to a rupee of inventory but in fact a rupee of cash

is more liquid to meet obligations than a rupee of inventory.

Considering this fact, liquid ratio offers a better measure to

immediately evaluate the short-term liquidity of the firm. Here liquid

assets refers to those current assets which can be immediately

converted into cash without any loss.

QUICK RATIO = Liquid Assets

Current Liabilities
 DEBTORS TURNOVER RATIO: Debtors Turnover Ratio

establishes the relation between Receivables and Net Credit Sales

. It shows with which debtors or receivables are converted into

cash. Its tests the liquidity of debtors of a firm.

DEBTORS TURNOVER RATIO = Net credit sales

Average Debtors

 AVERAGE COLLECTION PERIOD: It is a step further for

measuring the liquidity of firms debtors. Average age of

receivables is the time margin between credit sales and its

conversion into cash.

AVERAGE COLLECTION PERIOD = Days in a year

Debtors Turnover

 WORKING CAPITAL TURNOVER RATIO: This ratio shows the

number of times working capital is turned over in a stated period.

Also, it indicates the extent to which the working capital funds have

been employed in the business towards sales. This ratio indicates

the efficiency in the utilization of short-term funds in making the

sales. Interestingly, amount of capital employed can be easily

reduced by handling short-term assets with due care, thereby

improving the resulting turnover.

WORKING CAPITAL TURNOVER RATIO = Net Sales

 Net Working Capital

 CURRENT ASSETS TURNOVER RATIO: This ratio measures the

relationship between net sales and current assets. This ratio

shows how efficiently the current assets are utilised in achieving

the targetted sales of the business enterprise.

CURRENT ASSETS TURNOVER RATIO = Net Sales

Current Assets

 NET PROFIT RATIO: This ratio establishes the relationship

between net profit and net sales. Increase in net profit ratio

indicates better efficiency of the business enterprise. It shows the

net results of operational activities of business enterprise.

NET PROFIT RATIO = Net Profit × 100

Net Sales

INVENTORY TURNOVER RATIO: It indicates the number of

times inventory is replaced during the year. It shows the

relationship between the cost of goods sold and the inventory level.

It is also called Stock or Merchandise Turnover Ratio. The point to

be noted here is that cost of goods sold is considered as against

sales because stock account is maintained at cost price.

 INVENTORY TURNOVER RATIO = Sales

Average Inventory

 CREDITORS TURNOVER RATIO: It establishes the relation

between Payables and Net Credit Purchases. It shows the speed

with which creditors or payable are to be paid. The entities, to

whom amount is owed by the business enterprise, on account of

credit purchases of goods and services are known as creditors and

when bills are accepted in lieu of such credit purchases such bills

are known as bills payables.

CREDITORS TURNOVER RATIO = Net Credit Purchases

Average Creditors

STRUCTURE OF CURRENT ASSETS AND CURRENT

LIABILITIES

CURRENT ASSETS :-

1. Cash & Bank Balances.

2. Investment held for short-term purposes and also securities which are

easily marketable (Money Market Securities and other like

Instruments).

3. Short - term Fixed Deposit (with in one year maturity).

4. Sundry Debtors or Receivables (Bill purchasing & discounting by Bank /

non-banking financial institutions included).

5. Deferred receivables limited to installments due with in one year.

6. Raw Material in transit.

7. Raw materials / components in stock and is used in course of normal

production.

8. Stock of work - in - progress.

9. Finished goods and goods in transit.

10. Consumable stores.

11. Pre-paid expenses including advance payment of tax.

12. Advances to suppliers for raw materials, consumables etc.

13. Security / Earnest Money Deposit returnable within reasonable

production cycle.

CURRENT LIABILITIES :-

1. Creditors for raw materials, consumables etc.

2. Advance payment or stage payment received from customers.

3. Deposit from authorized agents and the like.

4. Deferred installment payable within a year whether for repayment of

term loan / debenture or deferred payment for credit.

5. Interest / other charges payable.

6. Public deposit repayable within a year.

7. Unsecured loans payable within a year.

8. Statutory liabilities like ESI, Co-operative Dues, P.E., Sales Tax,

Excise Duty, Salaries and Wages.

9. Other current liabilities like dividend, gratuity payable yearly, other

similar liabilities for expenses.

 MANAGEMENT OF ACCOUNTS RECEIVABLE

Meaning of Account Receivable :-

Selling goods is the most prominent force of modern business. Modern firms

resort to credit sales for increasing the volume of their sales and earning

maximum profits. Selling goods on deferred payment basis is termed as 'trade

credit'. Trade credit is also known as account receivables or book debts or

sundry debtors. Thus, accounts receivables, popularly termed as receivables, are

a direct consequence of trade credit which become an inevitable marketing tool

in modern business. Receivable constitute a significant portion of the total

current assets of the firm, next to inventories and cash. Generally, 5 to 25

percent of the total assets of the companies account for the investment in

account receivables, depending upon the nature of business. This percentage

varies between 5 to 10 percent in case of manufacturing companies, and 20 to

25 percent in cash of trading companies.

It is, therefore, necessary on the part of the financial manager to pay to due

attention to the management of account receivables. A contant vigilance in

respect of the level of receivables, credit policy and procedures is essential for

the growth and expansion of the firm.

Receivables or account receivable are the asset account representing amount

receivable by the firm on account of sale of goods and services on deferred

payment basis.

Receivable therefore, represent the claim of the firm against its customers, and

are carried to the assets sides of the balance sheet under titles such as book

debts, account receivables, trade receivables or customer receivables.

Trade credit is a very useful source of finance. Controlling trade credit requires

different techniques which are different from those applies to assets because the

decision process is different.

It we presume that a discount is offered by supplier at 2% if payment is made

with 10 days as against usual period of payment of 45 days. Here the buyer will

have to take decision whether he will pay within 10 days and avail of 2%

discount or he will pay on 45 days. In such cases, the simplest way is to

compare the rate of investment opportunity the buyer may get by not paying

within 10 days with the rate of discount offered if payment is made within 10

days. Thus if the amount of trade credit Rs.100, the buyer will have to pay latest

on 10th day Rs.98 (Rs.100-Rs.2)

The rate come to 2/98*100% = 2.04%

This 2.04% return on investment applies for 35 days and hence to find out

annual rate equivalent we get :

 2.04*365/35% = 21%

This 21% is the annual before tax cost of trade credit for the supplier

who has offered this discount.

This rate is compared with buyer's investment rate to take the discount' If he can

earn more than 21% on the comparable low risk investment, it will be advisable

to delay the payment till 45 days and reject the offer of discount.

In case where there is a problem of cash flow and the suppler cannot be paid

within 10 days for availing of discount of 2%, it will be wise to arrange a Bank

overdraft of 10% interest than forego a discount of 21%.

 MANAGEMENT OF INVENTORIES

MEANING OF INVENTORIES :-

Inventories are the stock of goods held by a firm for eventual sale or use in

manufacturing goods meant for sale. It includes raw materials, work in progress

and finished goods. Raw Materials are those goods, which have not yet been

committed to production in a manufacturing concern. They consist of basic raw

materials or components, 'work in progress' includes those materials which have

been committed to production process but have not yet been converted to

finished products. 'Finished goods' are the completed products awaiting sale.

They are the final output of the production process In a manufacturing concern.

In case of wholesale and retail trade the finished goods inventory is referred to

as merchandise inventory.
 ANALYSIS AND
INTERPRETATION
 FINANCIAL STATEMENT OF

Mansoorpur sugar mill India Ltd.

PARTICULARS 2006-07 2007-08 2008-09 2009-10
Sales & Other Income 1012.23 856.26 1077.06 1088.76
Profit before Dep. & 175.96 133.41 138.36 156.90
Financial Charges
Less :
Depreciation Financial 18.31 22.46 35.05 39.38
charges
31.45 34.91 65.26 70.01
Profit before Tax 126.20 76.04 380.50 47.51
Less : Provision for
Tax 32.93 0.99 0.81 0.50
Profit after Tax 93.27 66.15 29.97 42.52
Add : Profit brought
from last year 179.75 251.20 298.50 328.50
Profit available for 273.02 317.35 328.50 371.03
Appropriation
 MANSOORPUR SUGAR MILL INDIA LTD
BALANCE SHEET AS AT 31ST MARCH 2010

PARTICULARS SCHEDULE CURRENT YEAR PREVIOUS YEAR

NUMBER FIGURES (Rs.) FIGURES (Rs.)

SOURCES OF FUNDS
SHARE HOLDER’S FUNDS
Share Capital 1 66.600,000.00 66,600,000.00
Reserves & Surplus 2 37,800,000.00 104,400,000.00 37,800,.000.00 104,400,000.00
LOAN FUNDS
Secured Loans 3 157,163,026,.35 129,717,131.35
Unsecured Loans 4 56,167,769.00 213,330,975.35 43,117,769.00 172,834,900.35

DEFERRED TAX LIABILITY 2,261,000.00

TOTAL Rs. 319,991,795.35 277,234,900.35

APPLICATION OF FUNDS
FIXED ASSETS
Gross Block 5 210,753,113.15 205,833,993.31
Less : Depreciation 07,188,208.62 143,584,904.53 56,581,672.62 149,252,320.69

CURRENT ASSETS, LOAMS & ADVANCES

Inventories 6 73,155,394.04 47,716,234.24
Sundry Debtors 7 108,021,793.00 68,370,049.00
Cash & Bank Balances 8 2,416,249.45 4,016,407,35
Loans & Advances 9 15,747,180.63 9,361,492.94
199,340,617312 129,464,183.53
Less: Current Liabilities & Provisions 10 32,300,661.65 167,039,955.47 15,898,002.01 113,566,181.52

PROFIT & LOS ACCOUNT

(As per Profit & Loss Account Annexed) 9,366,935.35 14,416,398.14

TOTAL Rs. 319,991,795.35 277,234,900.35

NOTES ON ACCOUNTS
Schedule 1 to 11 and 17 form an 17
integral part of Balance Sheet
 MANSOORPUR SUGAR MILL INDIA LTD
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING 31ST MARCH 2010

PARTICULARS SCHEDULE CURRENT YEAR PREVIOUS YEAR

NUMBER FIGURES (Rs.) FIGURES (Rs.)

INCOME
Turnover -- 237,740,448.00 198,010,097.00
Less: Excise Duty Recovered 2,794,863.00 234,945,585.00 5,326,496.00 192,683,601.00
Increase\(Decrease) in Stock 11 8,448,249.84 5,038,509.42
243,393,834.84 197,722,110.42
EXPENDITURE
Goods Purchases 57,022,142.00 18,966,448.00
Raw Material Consumed 12 88,414,768.89 74,340,730.20
Manufacturing Expenses 13 52,513,793.19 65,332,280.24
Payments to and Provisions for Employees 14 2,704,357.00 2,527,141.00
Administrative & Selling Expenses 15 1,989,220.22 2,669,460.50
Finance Charges 16 22,845,176.75 18,053,809.01
Depreciation 5 10,586,536.00 8,918,195.72
236,076,004.05 190,808,064.67
PROFIT FOR THE YEAR 7,317,830.79 6,914,045.76
Provision for Tax
Income Tax 1,133,,731,.00 712,123.00
Fringe Benefit Tax 4,242.00 43,044.00
Mat Credit Entitlement (1,130,605.00) (712,147.00)
Deferred Tax 2,261,000.00 2,268,368.00 -- 43,020.00
PROFIT AFTER TAX 5,049,462.79 6,871,025.76
Less : Loss brought forward from previous
year 14,416,398.14 21,287,423.90
BALANCE BEING LOSS CARRIED OVER TO
BALANCE SHEET 9,366,935.35 14,416,398.14

NOTES ON ACCOUNTS 17
Schedule 5 and 12 to 17 form an integral
part of Profit & Loss Account
 CONSOLIDATED FIGURES

(AS ON 2005-06 TO 2008-09)

PARTICULARS 2005-06 2006-07 2007-08 2008-09

Current Assets 281.16 295.63 306.65 358.90

Current Liabilities 230.36 135.74 133.74 212.31

Quick Current Asset 199.56 195.08 209.03 217.26

Inventory 81.60 100.05 97.62 141.64

Average Inventory 48.00 50.27 48.81 78.20

Debtors 142.64 105.02 133.81 161.84

Average Debtors 71.32 52.81 66.91 80.92

Net Working Capital 50.80 159.89 172.91 146.59

Sales 992.88 833.91 1063.25 1080.91

 CALCULATION OF CURRENT ASSETS &
CURRENT LIABILITIES
(Rs. In Lacs)
PARTICULARS 2005-06 2006-07 2007-08 2008-09
Current Assets :
Inventory 81.60 100.53 97.26 141.64
Debtors 142.64 105.62 133.81 161.84
Cash & Bank 1.28 7.02 14.31 16.42
Balance
Loans & 55.63 82.42 61.26 38.99
Advances
Total (A) 281.16 295.63 306.65 358.90

Current Liabilities :
Sundry Creditors 2.53 0.99 4.92 27.68
Advances from 1.26 - 1.98 5.98
Customers
Other Liabilities 220.70 131.28 123.48 178.05
Provisions 5.87 3.47 3.36 0.69
Total (B) 230.36 135.74 133.74 212.31
 CALCULATION OF CURRENT RATIO

Current Ratio = Current Assets

----------------------
Current Liabilities

(Rs. In Lacs)

PARTICULARS 2005-06 2006-07 2007-08 2008-09

Current Assets 281.16 295.63 306.65 358.90

Current Liabilities 230.36 135.74 133.74 212.31

 GRAPH SHOWING
CURRENT RATIO

2.5
2.29
2.18

1.69

1.5
CURRENT RATIO

1.22

0.5

0
2005-06 2006-07 2007-08 2008-09

FIG. –2 - Graph showing current ratio of last 4 years.

 INTERPRETATION
Current Ratio is also a measure of the firm's short solvency. It indicates

the availability of current liabilities. The current ratio represents a margin

of safety i.e., a "cushion" of protection for creditors. Higher the ratio the

greater the margin of safety. Larger amount of working capital shows

more favourable position. Normally 2:1 ratio is preferable.

The current ratio is calculated by dividing current assets by current

liabilities. This ratio, no doubt improved from 1.22:1 in 2005.06 to 2006-

07 is an increasing trend but got deteriorated in 2002-03 to 1.91:1. The

volume of other liabilities has increased in 2008-09. The working capital

in the year 2005-06 is 50.80 Lacs compared to 146.57 Lacs in the year

2008-09. it has been seen that in the year 2008-09 inventory increases

to 141.64 Lacs. Due to increase in inventory other liabilities increases,

which leads to decrease in of current ratio in 2008-09.

The current assets is a test of quantity and not quality. In general the firm's

keeping more current assets is not good. This is because it will affect the

company's profitability. Actually current assets are non-producing ones. The are

needed only for the day-to-day dealings. Therefore keeping more current assets

is non-productive.
 CALCULATION OF

INVENTORY TURNOVER RATIO

Inventory Turnover Ratio = Sales

-------------
Inventory

(Rs. In Lacs)

PARTICULARS 2005-06 2006-07 2007-08 2008-09

Sales 992.28 833.91 1063.25 1082.91

Inventory 81.60 100.55 97.26 141.64

 GRAPH SHOWING
INVENTORY TURNOVER RATIO

14
12.16
12 11.24

10
8.29
7.63
inventory turnover ratio

0
2005-06 2006-07 2007-08 2008-09

FIG. –4 - Graph showing inventory turnover ratio of last 4 years.

 INTERPRETATION

This is a test of inventory to discover possible trouble in the form of

overstocking or overvaluation. Generally, a high inventory turnover ratio

is an indication of good inventory management. If there is decreasing

trend of ratio of net sales and inventory would become excessive, any

sudden drop in inventory value would involve losses. If the inventory will

be excessive, it can result into bankruptcy.

Company is maintaining high inventory turnover ratio in 2005-06 but it is

showing decreasing trend which company has to control to prevent the

overstocking. In not shall company is having satisfactory inventory turnover

ratio according to the industry.

CALCULATION OF AVERAGE

COLLECTION PERIOD

Average Collection Period = 360

------------------------
Debtors Turnover
(Rs. In Lacs)

PARTICULARS 2005-06 2006-07 2007-08 2008-09

No. of Days 360 360 360 360

Debtors Turnover 13.92 15.79 15.89 15.24

Ratio

Average Collection 25.86 22.80 22.60 23.62

Period

GRAPH SHOWING
 AVERAGE COLLECTION PERIOD

27

26 25.86

25

24 23.62
inventory turnover ratio

23 22.8
22.6

22

21

20
2005-06 2006-07 2007-08 2008-09

FIG. –5 - Graph showing Average collection period of last 4 years.

INTERPRETATION

Average collection period measure the quality of debtors since it indicates the
rapidly or slowness of their collectively. The shorter the average collection
period the better the quality of debtors, as short collection period implies the
prompt payment by debtors.

In case of Aggarwal Duplex Board Mills Ltd. Muzaffarnagar period is 25.80

days in 1997-98 which decreased to 22.8 days in 2006-07 and after that the
average collection period is almost same which shows the company has good
credit policy and company is making effort for the collection of the account
receivables and in formulating credit policy.

CALCULATION OF

DEBTORS TURNOVER RATIO

Debtors Turnover Ratio = Sales

 ------------------------
Average Debtors

(Rs. In Lacs)

PARTICULARS 2005-06 2006-07 2007-08 2008-09

Sales 992.88 933.91 1063.25 1080.91

Average Debtors 71.32 52.81 66.90 70.92

Debtors Turnover 13.92 15.79 15.89 15.24

Ratio

GRAPH SHOWING

DEBTORS TURNOVER RATIO

16.5

16 15.79 15.89
TURNOVER RATIO

15.5 15.24
15

14.5

14 13.92
 DEBTO
13

12.5
2005-06 2006-07 2007-08 2008-09

Fig. 6 - Graph showing debtors turnover ratio of last 4 years.

INTERPRETATION

The liquidity position of the firm depends on quality of debtors. The debtor’s

turnover ratio indicates the number of items, as the average debtors turnover

each year. Generally, higher the value of the debtor’s turnover the more

efficient is the management of credit.

Company is maintaining it’s debtor turnover at the constant level of 15.7 from

2007 it shows that the company has efficient credit management and company

is able to realize from debtor, expected.

CALCULATION OF

CURRENT ASSET TURNOVER RATIO

Current Asset Turnover Ratio = Sales

------------------------
Current Assets

(Rs. In Lacs)
 PARTICULARS 2005-06 2006-07 2007-08 2008-09
Sales 992.88 933.91 1063.25 1080.91

Current Assets 281.16 295.63 306.65 358.90

Current Assets 3.53 2.82 3.47 3.01

Turnover Ratio

GRAPH SHOWING

CURRENT ASSET TURNOVER RATIO

CURRENT ASSET TURNOVER RATIO

4
3.53 3.47
3.5
3.01
3 2.82

2.5

1.5

0.5
 0
2005-06 2006-07 2007-08 2008-09

Fig. 7 - Graph Showing Current asset turnover ratio of last 4 years.

INTERPRETATION

A firm’s ability to produce large volume of sales for a given amount of current

assets is the more important aspect of operating performance. It indicates

whether the investment in current assets or net assets has been properly utilized.

Company is operating almost at the same level of efficiency, which is 3.53 in

2005-06 and 3.01 in 2008 but company needs to improve its efficiency to

further its performance.

CALCULATION OF

NET PROFIT TO NET SALES RATIO

Net Profit to Net Sales Ratio = Net Profit

----------------------- X 100
Net Sales

(Rs. In Lacs)

PARTICULARS 2005-06 2006-07 2007-08 2008-09

Net Profit 126.20 76.04 38.05 47.51

Net Sales 992.80 833.90 1063.20 1080.90

Net profit 12.71 9.10 3.50 4.39

Net Sales Ratio (%)
GRAPH SHOWING NET PROFIT TO NET
SALES RATIO

14
12.71
12

10
9.1
net profit to net net sales ratio

6
4.39
4 3.5

0
2005-06 2006-07 2007-08 2008-09
 Fig. –9 - Graph showing Net profit to net sales ratio of last 4 years.

INTERPRETATION

This is the ratio of net profit to net sales and also expressed as percentage. It

indicates the amount of sales left for shareholders after all costs and expenses

had been met. The higher the ratio, the greater will be the profitability and

higher the return to the shareholders, 5% to 10% may be considered normal. It

is a very useful tool to control the cost of production as well as increased sales.

The ratio was 12.7% in 2005-06 after that it has declined upto 3.5% in 2007-08

but after 2007-08 company has improved it’s operating efficiency and ratio

starts increasing 4.39% in 2008-09.

FINDINGS AND
SUGGESTIONS
 FINDINGS & SUGGESTIONS

Findings :

After analysis the financial statements of BHEL HARIDWAR for 4 years

following findings can be put forward.

1. After comparing the financial statement of last 4 years there is a decrease

in working capital requirement due to the payment of loans & advances

as well as increase in current liability that was a positive sign to company

for managing working capital.

2. Company has good credit profile policy but in the year 2008-09 there is a

decrease in debtors turnover ratio.

3. Net Profit Ratio of the company is considerable decrease during the last 3

years.

Burden of financial charges has increased due to rise in short term

borrowings.
4. There is considerable rise in creditors during 2008-09 due to fall in

profitability and diversification of funds to long term.

5. There is considerable increase in interest burden due to the modernization

of plant & machinery in 2006-07 and 2007-08.

6. Company’s stock turnover ratio has a declining trend which has declined

from 12.16 in 2005-06 to 7.63 in 2008-09.

7. Company has marinating sound, liquid position, as its quick ratio is

1.02:1.
Suggestions :

1- Net profit has decreased abruptly the company has to take steps to

increase the operating efficiency.

2- Stock Turnover of the company quite low at 7.63 in 2008-09 as

compared 12.16 in 2005-06. Therefore company must take steps to

increase the inventory turnover.

3- There has to be on optimization of investment in inventory.

4- The company has to check its increasing creditors.

5- The company improved its profitability.

From the above findings we can say that BHEL HARIDWAR is in good

financial position. Above analysis shows that company has adopted sound

financial policies and it require to improve its efficiency to increase its

profitability.
BIBLIOGRAPHY
BIBLIOGRAPHY

1- I.M. Pandey Financial Management.

2- Khan & Jain Financial Management.

3- Uma Sharma Management of Working

Capital

4- R.M. Shrivastav Financial Decision Making

5- S. Kr. Pul Financial Management.

6- Subir Kr. Banerjee Financial Management.