INTRODUCTION

Financial analysis refers to an assessment of the viability, stability and profitability of a

business, sub-business or project. It is performed by professionals who prepare reports using
ratios that make use of information taken from financial statements and other reports. These
reports are usually presented to top management as one of their bases in making business
decisions. Based on these reports, management may:
a !ontinue or discontinue its main operation or part of its business"
b #ake or purchase certain materials in the manufacture of its product"
c $c%uire or rent&lease certain machineries and e%uipment in the production of
its goods"
d Issue stocks or negotiate for a bank loan to increase its working capital"
e #ake decisions regarding investing or lending capital"
f 'ther decisions that allow management to make an informed selection on
(arious alternatives in the conduct of its business.
Goals
)inancial analysts often assess the firm*s:
+. Profitability - its ability to earn income and sustain growth in both short-term and long-
term. $ company*s degree of profitability is usually based on the income statement, which
reports on the company*s results of operations"
,. Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term.
-. Liquidity - its ability to maintain positive cash flow, while satisfying immediate
obligations"
+
.. Stability-
The firm*s ability to remain in business in the long run, without having to sustain significant
losses in the conduct of its business. $ssessing a company/s stability re%uires the use of the
income statement and the balancesheet, as well as other financial and non-financial indicators.
Methods
)inancial analysts often compare financial ratios 0of solvency, profitability, growth, etc.:
Past Performance - $cross historical time periods for the same firm 0the last 1 years for
e2ample,
Future Performance - 3sing historical figures and certain mathematical and statistical
techni%ues, including present and future values, This e2trapolation method is the main source of
errors in financial analysis as past statistics can be poor predictors of future prospects.
Comarative Performance 4
!omparison between similar firms.These ratios are calculated by dividing a 0group of account
balance0s, taken from the balance sheet and & or the income statement, by another, for
52ample:
n / equity = return on equity
Net income / total assets = return on assets
Stock price / earnings per share = P/E-ratio
!omparing financial ratios are merely one way of conducting financial analysis.
)inancial ratios face several theoretical challenges:
They say little about the firm*s prospects in an absolute sense. Their insights about relative
performance re%uire a reference point from other time periods or similar firms.
'ne ratio holds little meaning. $s indicators, ratios can be logically interpreted in at least two
ways. 'ne can partially overcome this problem by combining several related ratios to paint a
more comprehensive picture of the firm*s performance.
,
$ 6easonal factors may prevent year-end values from being representative. $ ratio*s values
may be distorted as account balances change from the beginning to the end of an
accounting period. 3se average values for such accounts whenever possible.
B )inancial ratios are no more objective than the accounting methods employed. !hanges
in accounting policies or choices can yield drastically different ratio values.
! They fail to account for e2ogenous factors like investor behavior that are
not based upon economic fundamentals of the firm or the general economy.
-
O!"#CTI$#S OF T%# STUD&
The 6tudy is based upon the part of )inancial 7erformance that has been taken into
consideration i.e. )inancial 6tatements and $nalysis. The 6tudy predominantly aims at the turn
around period 0,889-+,.
To know the current position of various assets, liabilities and results of operation
activities during a certain period.
To find out )inancial 6trengths and weaknesses of the firm..
To know the causes of changes in the firms :orking !apital or !ash 7osition.
To find out important tools of 6hort-term, ;ong-term )inancial 7lanning.
To know the ability of the firm to meet its current obligations.
To know the overall operation efficiency and performance of the firm.
To offer suggestions if necessary.
.
SCOP# OF T%# STUD&
The analysis of financial statements is the last of four major steps of accounting. The first
three steps are as follows:
<ecording the transactions in the books of original entry i.e. subsidiary books.
!lassifying the transactions recorded in the subsidiary books in the ledger and
preparation of a trail balance from the ledger.
7reparation of financial statements 0profit = loss account, balance sheet.
The last and the most important step of accounting are the analysis and interpretation
of financial statements.
)inancial analysis depends primarily on financial statements to diagnose financial
performance there are three principle reasons.
$s long as the accounts bases remain more or less the some overtime, meaningful matter
can be drawn by e2amining trends in raw data and financial ratios.
6ince similar basis characteri>e various firms in the same industries, incur firm
comparisons are useful.
52perience seems to suggest the financial analysis works out on accounting basis and
more adjustments are made for the same.
The magnitude and scope of a project is generally defined by its objectives, constrains
and methodology that has adopted to analysis the information.
1
SI'INIFIC(NC# OF T%# STUD&
Financial analysis refers to an assessment of the viability, stability and profitability of a
business, sub-business or project. It is performed by professionals who prepare reports using
ratios that make use of information taken from financial statements and other reports. These
reports are usually presented to top management as one of their bases in making business
decisions. Based on these reports, management may:
!ontinue or discontinue its main operation or part of its business"
#ake or purchase certain materials in the manufacture of its product"
$c%uire or rent&lease certain machineries and e%uipment in the production of its goods"
Issue stocks or negotiate for a bank loan to increase its working capital"
#ake decisions regarding investing or lending capital"
'ther decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.
?
N##D FOR T%# STUD&
The analysis of financial statements is an attempt to determine the significance and
meaning of financial statements data, so that a forecast may be made of the prospects for the
future earnings, ability to pay interest and debt maturities and probability of sound dividend
policy.
(arious account balances appear in the financial statements. These account balances do
not represent homogeneous data, so this re%uires an analysis of data in the financial statements so
as to bring some homogeneity to the figures shown in the financial statements.
To understand this, conceptual idea is not only sufficient but also it needs a wide
knowledge and understanding of the factors that are affecting them. @ow, the study is all about
analy>ing, how this has been possible for a company whose figures were budgeted to negative
show finally ended with high positively.
3t most care was taken in preparing the budget relating to that period of the year. $s
days passed on, one could see the development in all the sectors is %uite appreciable. !oming to
the main topic, there is a need to analy>e the factors of the turnaround period 0,889-,8+,.
The analysis of financial statements which results in the presentation of data helps the
management, shareholders and creditors in forming an idea about the company.
A
)#T%ODOLO'&
The information for the study has been obtained from two sources namely:
7rimary Bata
6econdary Bata
*+ Primary Data,
It is the information collected directly without any reference. In this study it was mainly
the interviews with concerned officers and staff, either individually or collectively, sum of the
information has been verified or supplemented with 7ersonal observations.
The data includes.
+. Caving a discussion with finance manager.
,. Duidelines are taken from $sst. Deneral #anager 0)=$.
-+ Secondary Data,
This is taken from the annual reports, websites, company journals,
maga>ines and other sources of information.
LI)IT(TIONS OF T%# STUD&
9
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The period of study that is 9 weeks was not enough to go in the detailed aspects of the
study.
The study is carried bearing on the information and documents provided by the
organi>ation and based on the interaction with the various employees of the respective
departments.
'ne of the factors of the study was lack of availability of ample information. #ost of the
information has been kept confidential and as such as not assed as art of policy of
company.
I
INDUSTR& PROFIL#
5lectronics is the worlds largest and the fastest growing industries. )or the past two
decades&world wide predictors in the electronics sector has grown faster than any other industry
sector. 5lectronics is the most versatile technology of the present day world.
@ow over @ation has stand on the edge to face the world wide !ompetitors. To be
successful in the global their marketing, management 6tyles with constantly innovating and
relocating their business activities.
Hapanese companies are especially sensitive to the dependence of #$<G5TI@D
($<I$B;56. The price they can largely depends on the !ompany/s productivity, which is
influenced by personal policies as well as Investment decisions. 6imilarly, product %uality is
I@);35@!5B by 7roduction reliability and technology which in turn are influenced by
7ersonal management and <=B investment.
Thus marketers must not take price and product for granted but mustI@);35@!5 those
non marketing variables that will enable the company toduke down costs and produce higher
%uality products.
#L#CTRONICS INDUSTR& IN INDI(,
5lectronics is the versatile technology of the world. It can do virtually everything at a low
cost. It has the modern world and shrunk it to take a millisecond of instant communication.
5lectronic industry in India is around -8 years old. The decade +I?8-+IA8 was described as pre-
liberali>ation period during which it was finding its full hold.
Between +IA8-+I98 as focused on development of indigenous <=B and production
capabilities. $s +I98-I8 witnessed a pronounced effort towards self- reliance and liberali>ation.
6ince +II+ in fact, was watershed year for the Indian economy, with the government initiating
for reading changes along with new industrial and trade policies.
The (III five year plan document has set a production target of as <s. -88,888 million
and an e2port target of <s. ?-,888 million, to be achieved by +II.-I1. These are small figures,
compare to the global si>e of the electronics industry. The following are the production trends
over the past years.
+8
The electronics industry is the base of what we today term as information technology.
Today both these, industries are the fastest growing segment of Indian industry both of
production and e2ports.
7resently the electronics industry is completely deli censed with the e2ception of the
aerospace and defense electronics and along with the liberali>ation in foreign investments and
e2port import policies of the entire economy" this sector is attracting considerable interest not
only as a vast market but also as potential production base by international companies.
The important policy initiatives taken, since Huly +II+ dimmed at liberali>ing and
opening up the economy has %uite successful. 7romotion of India/s international trade has gained
increased importance in the national economy since the eighth plan 0+II,-IA" the electronics
industry has achieved a cumulative annual growth of ,8 percent production and over .8 percent
in e2ports. The production at the end of the ninth plan 0+IIA-,88, is targeted at about <s.+.-98
billion, with growth rate of -A percent and e2port at about <s..I8 billion with a growth rate of
1, percent.
$ fairly good measure of success has been achieved as e2port front. )rom a value of
about <s. 18 million e2ports of electronics items in +IA8, the e2port performance of electronics
industry was <s ++A,.88 million in ,88+-8,. 52port has increased not only in the financial terms
but also in terms of variety of items e2ported and number of e2ports engaged in this activity.
The software industry has emerged as of the fastest growing sectors in the economy with
a !$D< e2ceeding 18J and with a likely turnover an e2port of 36 K18 billion by the year ,889
for the Indian software industry.
#L#CTRONIC CO)PON#NTS,
The electronic component sector continued to be dependent on the performance of consumer
electronics industry. The new color picture tube 0!7T lines set up by the e2isting manufacturing
consolidated their production during the year. The fourth plants above significantly improved its
capacity utili>ation. In line with the consistent growth achieved by !T( industry, the !7T
industry recorded growth of over .8J during the year. The production of color picture tubes
during ,88, was around -A lakh numbers.
++
The e2port of !7T also increased considerably. #anufacture of color glass parts for ,+
inch flat !7T was further strengthened other components specific to consumer electronics like
color deflection components, soft fests, loud speakers, consumer grade 7!B, etc, also showed
positive growth during the year.
In the field of professional grade components, no significant developments took place.
The components re%uired for computer and Telecommunications hardware are largely based on
microelectronic devices and are surface mount type.
CONTROL INSTRU)#NT(TION (ND (UTO)(TION IN INDUSTR&
S#CTOR
The use of electronic control and instrumentation results in productivity improvement,
reduced maintenances costs and %uality end products and conse%uently contributes in overall
development of core sectors such as steel, mining, te2tile, suet, paper and pulp, tool processing
etc.In real time control systems, the trend is towards open system 0'!6s. '!6s are keys to
harnessing the rising tide to technological innovations, while at the same time preserving an
industry/s investment in e2isting e%uipment.
$n '!6 produces numerous benefits to process industry, including the fle2ibility to
selected best in the class hardware, $T# based networks database, applications, and field
deduces. Integration of control and business information has been a challenge for process
industry, attempting to adopt sales order driven manufacturing philosophy.
Buring the year ,88+-,88,, instrumentation sector production is estimated <s. .,+88
crores during the year ,88+-,88,, instrumentation sector production is estimated <s. .,+88.
CO))UNIC(TION (ND !RO(DC(STIN' S#CTOR,
!ommunication sector include non-public network telecom industry, two-way radio
communication, user specific transmission, switching, terminal e%uipments broadcast and cable
T( e%uipment. @ow telecom policy being drafted to address the various bottlenecks and issues
related basic telecom and telephony services.
The production of communication and broadcasting e%uipment during ,88+-8, is
estimated to be of the order of <s.., I88 crores as compared to production of <s. -,I18 crore in
+III-,888.
+,
Broadcast sector is undergoing technological revolution through the advent of
technologies such as Bigital (ideo Broadcast 0B(B Bigital (ideo !ompression 0#75D-,,
digital storages and retrieval systems, etc. there are already A8,888 cable operators and , crore
cable-homes in India.The infrastructure of communication and broadcasting is fast e2panding in
the country.
PRODUCTION PROFIL#,
7roduction of electronics e%uipment during the late ?8/s and early A8/s was restricted to
consumer and entertainment electronics, electronic components, and certain defense and
aerospace e%uipment. Buring +IA8-98,there was a marked focus on establishing indigenous
<=B and production capabilities, besides selling up units in the small sector.
In the public sector, B5; was permitted to import color picture tube 0!<T/s from <7$
countries, while 5!C was granted permission to manufacture small and medium-si>ed
computers. The TB! +, systems were completed or 5!C by +IA,-A- after which they started
developing -,-bit computers.
The period +I98-9. is significance from the point of view liberali>ation and self-reliance,
and most essential for the drawn of the Lcomputer era/ in India. This period also saw the advance
of color T( transmission, followed an upsurge in the consumer electronic industry, especially the
T( industry.
C(P(CITORS,
!apacitor is a device which can store electronic charge or energy in it. !apacitance is the
capacity of the capacitor to store this charge. !harge is simply the electrical energy with some
polarity, positive or negative.3nlike in magnetism these two opposite charge can e2ist
independently. $nybody can be charge electrically by friction of electrostatic introduction
whose principle states that Mwhen a charged body is brought near an uncharged body then the
uncharged will develop a charge which is opposite to the charge present on body.N
This charge in the body is essentially static in the present case and is different from the free
charges present in. conductors 0dynamic charges, whose motions constitute a current. 3nder
normal conditions a body will have >ero net charge sense the charges present in it are aligned in
such a way to cancel each other/s effect. :hen an e2ternal force like voltage is applied these
charges drift from their normal are e%uilibrium position and align towards the applied force
+-
resulting in all like charges 0sag O ve aliened in one direction and the other like charges 0-ve in
the other direction with <espect to the applied force. Thus we say that the body is charged
0polari>ed.
)(NUF(CTUR# OF C(P(CITORS,
The first capacitor with considerable capacitance is M;eyden jarN invented by ;eyden in +A.1. It
consisted of a glass vial containing water and plugged with a cork through which a nail passed to
touch the water. The water constituted one electrode, the other provided by the hand which held
the vial.
The potent of this was only a small fraction of amount fre%uently re%uired in present day
electronic circuit. $lso ;eyden jars occupy verylarge space. $ ;eyden jar of one micro farad
would be as big as an officeelevator. But this provided the basic concepts of capacitor and further
studymade it possible to have various types of capacitor to meet the circuit
re%uirements.
6ince more than any other factor, the nature on condition of the dielectric determines the
characteristics as capacitor" study of various dielectrics were encouraged. This study revealed
that each dielectric had a factor with which it affects the capacitance for given dimensions. This
factor was called Ldielectric constant/ and was measured relative to air whose dielectric of -
could store - times the charge that can be stored when air is used a dielectric.
Cence naturally, dielectrics of greater dielectric constant were demanded and studies.
This resulted in the development of various types of capacitors using various types of dielectric.
5ach had its own advantageous mainly because their dielectrics. $ simple capacitor would have
to parallel !onductors separated by an insulator called dielectric.
!harging or strong energy in a capacitor is done by applying in electrical force or voltage
between two parallel plats or conductors. The 6tatic charges present in the dielectric are then
displaced from e%uilibrium position towards the applied force but will always come under a
restoring force which tends to pull them back to e%uilibrium position. The placement is
complete, the capacitor is charged.
!harging of a capacitor takes place when the two conductors of the charged capacitors
are shorted. The displaced charged would then return to their e%uilibrium position due to
restoring force. Cence the capacitor is discharged.
+.
Cere note that charging is similar to storing of potential energy 0in the form of
configuration a wounded spring. $lso, @ote that time is re%uired for the displacement of charges
for charging and discharging. This is important in study of circuit transients.
7resently there are various types of capacitors available in the market each having its own
applications and advantages. $ll this capacitors vary essentially in the dielectric material they
contain since the capacitor characteristics and capacitance depends on dielectric than any other
factor. The names ac%uired such as paper, mica, air, electrolytic etc.
#L#CTROL&TIC C(P(CITORS,
$;3#I@I3# 5;5!T<';ETI! !$7$!IT'<6:
$luminum electrolytic capacitors are widely used in the circuits of electronic devices.
5lectrolytic capacitors are attached to printed circuit boards, either individually or in batteries.
$ common type of aluminum electrolytic capacitor comprises a capacitor element formed by
winding an anode foil and a cathode foil through a separator, an electrolyte solution for driving
impregnating this capacitor element, a metal case accommodating the capacitor element, and an
elastic sealing member sealing the metal case.
!apacitors have been known for their limited shelf life and poor low temperature
characteristics. Because of this, they are traditionally used in short shelf life electronic e%uipment
with emphasis upon consumer audio and video imaging products.
In recent years, however, significant improvements have been reali>e, and both of these
historical shortcomings have been improved upon, so that aluminum capacitors are now used in
many applications.
+1
)(R.#T SI/# (ND CO)P#TITIONS,
Bemand for aluminum electrolytic capacitors continues to grow, and new applications
are emerging, prompting suppliers to increase production capacity and offer products of higher
%uality. 6uppliers are especially looking at higher- margin products, but the cost of building new
production lines is likely to e2clude small and medium-si>ed manufacturers from polymer
capacitor production for at least the ne2t +, months. 6olid aluminum capacitors or organic
onductive polymer aluminum electrolyte capacitors 0'!-!'@ with enhanced safety features are
gaining increased popularity.
7aumanok publications anticipate that in ,88, the global market for aluminum
electrolytic capacitors will be worth appro2imately K-.- billion 36B with appro2imately 98
billion pieces consumed. I8J of aluminum electrolytic capacitor production will occur in
Hapan, china and Taiwan.
@evertheless, more MtraditionalN standard aluminum electrolytic capacitors will remain in
great demand for years to come. Dreater !hina is one of the world/s biggest suppliers of
aluminum electrolytic capacitors, along with Hapan,6outh Gorea, 6ingapore and #alaysia.
#ainland !hina production of aluminum electrolytic capacitors reached +88 billion units worth
K+.-. billion in ,88?, accounting for over .8 percent of the global output, according to the !hina
5lectronic !omponent $ssociation.
:hile Hapan retains the lead in global aluminum electrolytic capacitor production, much
of the supply now originates from Dreater !hina, as Hapanese companies continue to relocate
their production facilities to this area, mostly to 6hen>hen.
5uropean manufacturers of aluminum capacitors include B! components Belgium, BC!
$erovo2 03.G, 57!'6 0Dermany and (ishay-<oederstein 07ortugal. 36 producers of
aluminum capacitors are also %uite limited with !ornel Bubiler 06outh !arolina, B!
components 06outh !arolina and @ippon cemicon 03!!-#ichigan the major domestic
manufacturers. The major producers include @ippon !hemi-con, <ubycon and 7anasonic.
$OLT('# R(TIN'
The majority of aluminum electrolytic capacitors are employed at voltage from ?.- volts
to 18 volts, with particular emphasis on the popular +? volt parts. Cowever, voltages of motor
starts aluminum electrolyte capacitors can be as high as ,,8(, .18(, and ?88(.6o aluminum/s
will generally run the gamut with respect to voltage. 'ne of the uni%ue aspects of
+?
$luminum electrolytic capacitors are their ability to offer high capacitance and high voltage in
the same package. The only other type of capacitor that can accomplish this is the power film
capacitor, but at a much higher price.
CONFI'UR(TIONS,
$luminum electrolytic capacitors are available in leaded and surface mount
configurations. 6urface mount aluminum electrolytic are still only a small portion of the business
companies that dominate the supply of surface mount aluminum electrolytic include @ichicom
and @ippon industries through @I! components.
The bulk of sales of aluminum electrolytic capacitors continue to be radial leaded
devices. <adial leaded devices are future dichotomi>ed between standard radial, snap-in and
screw-terminal. Bual and single-leaded annual designs are also available.
In most consumer electronic applications, capacitance values less than +888
#ew are generally radial leaded surface or surface mount in design" capacitance
values from +888 #f to .A88 #f are generally of multipoint snap in design" and
products with values greater than .&A88 #f are usually screw terminal 0computer grade.
6urface mount aluminum electrolytic capacitors topically fall into the 8 #f to .A #f
range and are generally found in large numbers only in personal computer and modern cards,
although these parts have been noted in smaller number on the computer add-on cards as video/s
and sound cards for B(B players and consumer entertainment boards.
CONSTRUCTION,
The construction of aluminum electrolytic capacitors re%uire high purity aluminum foil
for the anode and the cathode, which is usually supplied by GBG, H!! Becromal or 6atma.
$node foils accounts for the higher costs associated with producing aluminum electrolytic
capacitors. The foil is etched into tunnels that provided a surface area for the formation of
aluminum o2ide, which provides the capacitance.
+A
()#RIC(N C(P(CITOR CORPOR(TION
$merican !apacitor !orporation serves the film !apacitor market with both high volume catalog
styles and special designs. )ilm capacitors can be upplied in all dielectric systems, including
6uper #etali>ed 7olypropylene, #etali>ed 7olypropylene, #etali>ed 7olycarbonate, #etali>ed
7olysulfone, #etali>ed Teflon, #etali>ed 7aper, 7olypropylene = )oil, 7olycarbonate = )oil,
7olyster = )oil, #ylar = )oil, 7olypluse = )oil, 7olysulfone = )oil, 7olystyrene = )oil, Teflon
= )oil, #ica = )oil, 7aper = )oil and other Bielectrics and electric systems.
+9
CO)P(N& PROFIL#
I@!$7 !apacitors ;imited was incorporated in the year +II8 in $ndhra 7radesh at
@idamanuru in (ijayawada as a 7ublic ;imited !ompany and obtained certificate of
commencement of business on -8&81&+II8. it is located on @C-1, and connected by rail, road,
water and airways.
PRO)OT#RS
@!$7 ;imited is promoted by first generation entrepreneurs 6ri !.Bhagvantha <ao, 6ri
G. 6rinivasa <ao, 6ri G.<amakoteswara <ao, 6ri (.(.(.6atyanarayana and 6ri
$.(.6.7rakash.The chief promoter 6ri !. Bhagavantha <ao a post graduate in commerce has
about +1 years of e2perience in financial management, and e2ports and general Grishnaveni
$gro 'il 7roducts ;td., before promoting I@!$7 ;imited.
6ri.G.<amakoteswara <ao, a post graduate in mechanical engineering worked in various
capacities from +I9+-+II+ in BC5;. Ce has gained good e2perience in design during said
period and has been associated with erection and commissioning groups.
6ri G.6rinivasa <ao is an $griculturist, and does not have any %ualifications. )ormally he
was a director in Grishnaveni $gro 'il 7roducts ;td., 6ri (.(.(.6atyanarayana, a graduate in
electronics and telecommunications engineering.
T%# )(IN O!"#CTI$#S OF INC(P LTD
To carry on business of development, manufacture, buy, sell, deal, import and e2port of
the aluminum electrolytic capacitors.To manufacture, buy, sell, e2port, deal in, assemble, fit,
repair, convert, overhaul, alter maintain all types of capacitors used in electronic component
devices e%uipments and appliances, e%uipment such as T( transmitters, tape recorder, broadcast
relay object.
+I
)(N('#)#NT
The #anagement of I@!$7 is headed by the board of directors under the chairmanship of 6ri
)+ Prab0a1ar Rao+
The day to day operations of the company are looked after by Sri C+ !0a2avant0a Rao,
#anaging director.
Ce is assisted by Technical Birector 6ri P+.+ Purus0ot0aman, and other Birectors like 6ri 7.
<am <ao, 6ri G. <amakoteswara <ao, and 6ri G.
6rinivasa <ao, 6ri #. <amaiah, 6ri !h. $ppa <ao play a key role in the management.
INC(P3S CUSTO)#RS,
$ Telecom 6ector:
+ Bharatiya Telecom
, Tata telecom
- Indian telephone industry
B $udio-(ideo 6ector:
+ (ideocon
, B7;
- 6ony
. 'nida
! $huja
Telco = many othersP
INC(P3S COLL(!OR(TOR,
The company has purchased free hold land of ,.1 acres and the same is sufficient for the
project. The necessary deeds for the transfer of land in favor of company have been e2ecuted
civil work for factory as well as non factory building was completed. The company/s building
has a plinth area of ,A88 s%. #eters 0appro2 and the type of construction is <!! with false
selling and vinyl flooring.
,8
PL(NT 4 )(C%IN#R&,
The main plant = machinery is a automatic slitting machine, automatic switching
machines, winding machines and assembling machines with 0or without impregnation facility,
slaving machine, testing machine etc. the machinery has supplied by #&s ;elon electronics
!orporation, Taiwan = #&s 3)' !ompany ;td., Hapan. The indigenous machines comprises of
regulated power supplies, belongs low and high temperature chamber, two +,1G(B$ diesel
generator set and air conditioning plant.
)an Po5er,
The total employee of I@!$7 was +A.. The employees divided into various departments.
7roduction department Q I.
#aintenance department Q ,+
Ruality control department Q ,8
7.7.!.6tores Q +-
$dministration department Q ,?
The company must give the training to every employee. :hen the new employee joins the
company gives the A days training every month. !ompany gives the training to the employees
every month.
PR#LI)IN(R& R#6UIR#)#NTS,
Before the actual process is started, some re%uirements have to be met. These are essential to see
that the manufacturing process goes on continuously without interception. The re%uirements are:
+ 6litting of anode = cathode foils with re%uired width.
, 6litting of capacitors paper with re%uired width.
- ;ead-tab making.
. ;ead-tab treatment.
1 <ubber seal treatment.
? 5lectrolytic preparation.
A 6pecification printing on 7(! staves.
,+
T#C%NOLO'& 4 T#C%NIC(L COLL(!OR(TION,
The project is being implemented with technical know-how from #&s ;elon electronic
corporation, Taiwan, who are also one of the suppliers of imported e%uipment. The collaboration
agreement with e%uality participation by <BI vides its letters dated ,+&+8&+II,.
They e2port nearly 91J of their production to 36$, 6I@D$7'<5, #$;$E6I$ and
C'@DG'@D. ;5! has an associate company which is mainly engaged in the manufacture of
e%uipment included to provide technical assistance including drawings to erect technical and
install the plant = machinery to supervise the production till it achieves I8J capacity utili>ing
with %uality maintenance assisting in establishing <=B continue to provide improvements and
developments in technology and training the technical staff etc.
STR#N'T%S
Ruality of the product.
Dood <=B department.
7ersonal contacts with customers.
Technological support from ;elon electronics, Taiwan.
7#(.N#SS#S
Bependent on imports for raw materials.
!urrency fluctuation affects input costs.
;ocation of the unit.
CO)P#TITORS,
Geltron
7unsumi
Bc components
,,
TOT(L PRO"#CT COST IT#) 7IS#
PL(NT LOC(TION 4 (D$(NT('#S,
,-
I@ <s. ;akhs
IT5# !'6T ') IT5#
;and = site
+?
Building
9+
7lant = machinery imported 0!I)
.AI
Import duty
,+.
!learing = forwarding
I
Indigenous
.,
)oundation = installation
A
)oreign = Indian technologies
-
#iscellaneous fi2ed assets
1I
:orking capital
+,.
7reliminary = proprietary
++.
52penses contingencies
1,
T'T$;
+,88
The project is setup at village @idamanuru, Grishna district, $ndhra 7radesh on
national high way @o.1 and is about +, kms from the city of (ijayawada and it is well connected
by road and rail and has the necessary infrastructure. I@!$7 has the following favorable location
factors.
a It is connected to national highway no.1 with a railway link and airways
b $vailability of cheap man-power
c $vailability of fuel and power
d $vailability of water
e !limatic conditions
f )inancial aids 0$.7. Dovernment given a subsidy of +1 lakhs on total cost of
the project
g Dood community attitudes
h 7resence of other allied industries around it
i Dood facilities for e2pansion.
)(T#RI(L %(NDLIN',
The material handling system in I@!$7 is conventional type of handling system. They use
plastic tubs to transfer the material from one machine to another machine.
,.
Financial
Statements

Income
Statement
!alance
S0eet
Retained
#arnin2s
Financial
Position
T%#ORITIC(L FR()# 7OR.
INTRODUCTION:
$ccounting process involved recording, classifying and summari>ing various business
transactions. The aim of maintaining various records is to determine profitability of the
enterprise from operation of the business and also to find out is financial position. )inancial
statements are in term reports, presented annually and reflect a division of the life of an
enterprise in to more or less arbitrary accounting period more fre%uently a year. The financial
statement is an organi>ed collection of data according to logical and consistent accounting
procedures its purpose is to convey of a business firm.
Definitions,
$ccording to Hohn @.#yer MThe financial statements provide a summary of the accounts of
business enterprises, the balance sheet reflecting the assets, liabilities, and capital as on a certain
date and the income statement showing the results of operations during a certain periodN.
The term financial statement generally refers to following basic statements:
+. The income 6tatement.
,. The Balance 6heet.
-. $ 6tatement of <etained earring.
.. $ 6tatement of !hanges in financial position.
,1
Income Statement
The income statement 0also termed as profit and loss account is generally considered to
be the most useful of all financial statements. It e2plains what has happened to a balance sheet
dates. The nature of the Lincome/ which is the focus of the income statement can be well
understood if a business is taken as an organi>ation that uses Linputs/ to Lproduce/ output.
!alance S0eet,
It is a statement of financial position of a business at a specified moment of time. It
represents all assets owned by the business at a particular moment of time and the claims of the
owners and outsiders against those assets at that time. The important distinction between as
income statement is for a period while balance sheet is on a particular date.
Statement of Retained #arnin2s,
The term retained earnings means the accumulated e2cess earnings over losses and
dividends. The balance shown by the income statement is transferred to the balance sheet
through this statement after making necessary appropriations. It is fundamentally a display of
things that have caused the beginning of the period retained earnings balance to be changed in to
the one show in the end-or-the-period balance sheet.
Statement of c0an2es in financial osition,
The balance sheet shows the financial condition of the business at a particular moment of
time while the income statement discloses the results of operations of business over a period of
time for a better understanding of the affairs of the business, it is essential to identify the
movement of working capital or cash in the statement of changes in financial position.
Nature of Financial Statements,
The financial statements are prepared on the basis of recorded facts. The recorded facts
are those which can be e2pressed in monetary terms. The statements are prepared for a
particular period, generally one year. The transactions are recorded in a chronological order as
and when the events happen. The financial statements by nature are summaries of the items
recorded in the business and there statements are prepared periodically generally for the
accounting period.
,?
T0e follo5in2 oints e8lain t0e nature of financial statements
*+ Recorded Facts,
The term L<ecorded facts" refers to the data taken out from the accounting records. The
records are maintained on the basis of actual cost data. The figures of various accounts such as
cash in hand, cash at bank, bills receivables, 6unday debtors, fi2ed assets are taken as per the
figure recorded in the accounting books. $s the recorded facts are not based on replacement
costs the financial statements do not show current financial condition of the concern.
-+ (ccountin2 Conversions,
!ertain accounting converters are followed while preparing financial statements. The
conversion of valuating inventory at cost or market price, whichever is lower, is followed. The
valuing of assets at cost less depreciation principle for balance sheet purposes statements
comparable, simple and realistic.
9+ Postulates,
The accountants make certain assumption while making accounting records. 'ne of
these assumptions is that the enterprise is treated as a going concern. The other alternative to this
postulate is that the concern is to be li%uidated the concern. 6o the assets are shows on a going
concern basis. $nother important assumption is to presume that the value of money will remain
in the same in different periods.
:+ Personal "ud2ments,
5ven though certain standard accounting conversions are followed in preparing financial
statement but still personal judgment of the accountant plays on important part.
C0aracteristics of financial statement
The financial statements are prepared with a view to depict financial position of a
concern. The financial statements should be prepared in such a way that they are able to give a
clear and orderly picture of the concern. The ideal financial statement has the following
characteristics.
,A
*+ Deict true financial osition,
The information contained in the financial statements should be such that a true and
correct idea is taken about the financial position of the concern.
-+ (ttractive,
The financial statements should be prepared in such a way that important information is
underlined so that it attracts the eye of the reader.
9+ Comarability,
The results of financial analysis should be comparable. The financial statements should
be presented in such a way that they can be compared to the previous year/s statements.
7revious year/s figures in the balance sheet.
:+ !rief,
If possible, the financial statements must be prepared in brief. The reader will be able to
form as idea about the figures.
Imortance of financial statements
)inancial statements contain a lot of useful and valuable information regarding
profitability financial position and future prospective of business concern. The utility of
financial statement to different parties may be summari>ed as follows:
*+ )ana2ement,
The financial statements are useful for assessing the efficiency of different cost canters.
The management is able to decide the course of action to be adopted in future.
-+ Creditors,
The trade creditors are to be paid in a short period. The !<6 will be interested in current
solvency of the concerns. The calculations of current ratio and li%uid ratio will enable the
creditors to assess the current financial position of the concerns in relation to their debts.
,9
9+ Investors,
The investors include both short-term and long term investors. They are interested in the
security of the principal amounts of loan and regular payments by the concern. The investors ill
not only analy>e the parent financial position but will also study the future prospectus and
e2pansion plans of the concern.
:+ 'overnment,
The financial statements are used assess ta2 liability of business enterprises. The
Dovernment studies economic situation of the country from these statements. These statements
enable the government to find out whether business is following various rules and regulations or
not.
;+ Trade (ssociations,
These associations provide service and protection to the members. They may analy>e the
financial statements for the purpose of providing facilities to these members. They may develop
standard ratios and design uniform system of accounts.
<+ Stoc1 #8c0an2e,
The stock e2change deal in purchase and sale of securities of different companies. The
financial statements enable the stock broker to judge the financial position of different concerns.
The fi2ation of prices for securities etc. is also based on the statements.
,I
LI)IT(TIONS OF FIN(NCI(L ST(T#)#NTS,
)inancial statements are relevant and useful for the concern, still they do not present a final
picture of the concern, and otherwise misleading conclusions may be drawn. The financial
statements suffer from following limitation:
*+ I2norin2 of non=monetary asects,
These statements are prepared with the help of accounting information which mainly consider
monetary aspects only. The value of business depends both on %ualitative and %uantitative
factors.
-+ %istorical cost,
The statements are prepared on the basis of historical cost. The values of fi2ed assets are at there
original cost less depreciation. The balance sheet value are not shown the value of assets may be
sold more over they do not reflect the market value which is as important factor in determining
the solvency of an enterprise.
9+ Personal "ud2ment,
In preparing financial statements certain items are left to the personal Hudgment of the
accountant. If any accountant is not following accounting principles correctly his judgment will
give wrong picture.
:+ Conversion of Conservation,
Bue to conversion of conservation the income statement may not disclose true income of the
business. This is due to ignorance of probable incomes and accounting probable losses.
FIN(NCI(L (N(L&SIS,
)inancial analysis is the process of identifying the financial strength and weakness of the
firm by properly establishing between the items of the balance sheet and profit and loss account.
There are various methods or techni%ues used in analysis financial statements such as
comparative statements, trend analysis, common si>e statements, schedule of changes in working
capital, funds flow and cash flow analysis 4 !ost (olume 7rofit $nalysis and <atio $nalysis.
-8
)eanin2 and concet of financial analysis,
The terms Lfinancial analysis/ also known as analysis and interpretation of financial
statements refers to the process of determining financial strength and weaknesses of the firm by
establishing strategic relationship between the items of the balance sheet, profit and loss account
and other operative data.
Tyes of financial analysis
)inancial analysis can be classified in to different categories depending up on:
+. 'n the basis of material used.
,. 'n the basis of modules operandi.
>*? On t0e basis of material used,
$ccording to the basis, financial analysis can be of two types.
#8ternal (nalysis,
This analysis is done by those who are outsiders for the business. These
persons mainly depend up on the published financial statements. Their analysis serves only a
limited purpose.
Internal (nalysis,
This analysis is done by persons who have access to the books of account and at other
information related to the business. 6uch as analysis can be done by e2ecutives and employees of
the organi>ation. The analysis is done depending up on the objective to be achieved through this
analysis.
>-? On t0e basis of modules oerandi,
$ccording to this financial analysis can also be of two types:
%ori@ontal (nalysis,
In case of this type of analysis, financial statements for a number of years are reviewed
and analy>ed the current year/s figures are compared with the standard or base year. The
analysis statement usually contains figures for two or more year and the change are shown
regarding each item from the base year usually in the form of percentage. 6ince this type of
analysis based on the data from year to year rather than on date, it is also termed as MBynamic
$nalysisN.
-+
$ertical (nalysis,
In case of this type of analysis a study is made of the %uantitative relationship of various
items in the financial statement on a particular date. 6ince this analysis depends on the data for
one period, this is not very conductive to a proper analysis of the company/s financial position.
It is also called Lstatic analysis/ as it is fre%uently used for referring to ratio developed on one
date or for one accounting period.
Tec0niques of financial analysis,
$ financial can adopt one or more of the following techni%ues &tools of financial analysis:

+. CO)P(R(TI$# FIN(NCI(L ST(T#)#NTS ,
The statements which have been designed in a way so as to provide time perspective to the
consideration of various elements of financial position embodied in such statements figures for
two or more period side by side to facilitate comparison.
Both the income statement and balance sheet can be prepared in the form of comparative
financial statements.
-,
Financial
(nalysis
Tec0niques
!omparative
)inancial
6tatements
!ommon
6i>e
)inancial
6tatements
<atio
$nalysis
!ash )low
$nalysis
The comparative financial statements contain the following items.
$bsolute figures 0amount in <s. $s given in the final accounts,
$bsolute figures e2pressed in terms of percentages.
Increase of decrease in absolute figures in terms of money value.
Increase or decrease in terms of percentages.
!omparison e2pressed in ratios.
7ercentages of totals.
Comarative Income Statements,
The income statement 0profit = loss $&c gives the results of the operations during a definite
period. It reveals the profit carried or loss incurred by the cancers. The comparative study if
income statement for more than + year may enable us to know the program of the concern. )irst
two columns gibe figures of various items for two years. The third and fourth column used to
show increase or decrease in figures in absolute adopted in preparing comparative balance sheet.
+. In first step, find out the changes in absolute figures i.e., increase or decrease should be
calculated.
,. In second step percentage of change should be calculated with the help of following
formula.
!hange in amount
7ercentage of change Q 2 +88
Base year amount
'uidelines for interretation,
The increase or decrease in sales should be compared with increase or decrease in cost
of goods sold. If increase in sales is more than the cost of goods sold. It means that the
profitability of the concerns is increased.
The amounts of gross profit should be studied.
--
'perating profits should be studied. The e2press should be deducted from gross profit to
find out operating profit and then operating incomes should be added.
The ne2t step is some of the non operating e2penses are to be deducted from the
operating profits and non operating incomes should be added to get net profit
The opinion should be formed the profitability of the business concern and it should be
given at the end.
Comarative balance s0eet
The balance sheet prepared on a particular date reveals the financial position of the concern
on the date to study the trends of business over a period of time comparative balance sheet
reveals the cause for changes in the financial position on amount of various transactions. The
comparative studies throw light on financial policies adopted by management.
The comparative balance sheet consists of two columns for the original data. $ third column
used to show increase or decrease in various items. $ south column containing the parentage of
increase or decrease may be added.
'uide lines for interretation of balance s0eet,
+. The short term financial position can be studied comparing the working capital of
both years.
,. To study the li%uidity position changes in li%uid assets must be ascertain if there is
any increase in li%uid assets. :e must understand that is an improvement in the
li%uidity position of the concern and vice versa.
-. $ high increase in sundry debtors and bills receivable mean in increase in risk in
collecting the amount of dues.
.. $ high increase in closing stock may mean that decrease in the demand.
1. ;ong term financial position of the business concern can be analy>ed by studying the
changes in fi2ed assets, long term liabilities and capital.
?. )i2ed assets must be compared with long term loans and capital. If the increase in
fi2ed assets is more than the increase in long term financiers from the working capital
which is not good.
-.
CO))ON SI/# ST(T#)#NTS
The common si>e statements, balance sheet and income statement are shown in analytical
percentages. The figures are shown as percentages of total assets, total liabilities and sales.
The total assets are taken as +88 and different assets are e2pressed as percentage of the total.
6imilarly various liabilities are taken as a part of total liabilities. These statements are also
known as component percentage or +88J statements because every individual item is stated as a
percentage of the total +88 the short statements because every individual item is stated as a
percentage of the total +88 the short-comings in comparative statements and trend percentages
where changes in item could not be compared with the total have been covered up. The common
si>e statements may be prepared in the following way:
i. The totals of assets or liabilities are taken as +88.
ii. The individual assets are e2pressed as a percentage of total assets i.e., +88 and
different liabilities are calculated in relation to that liability.
Common Si@e Income Statement,
The items in income statement can be shown as percentages of sales to show the relation
of each item to sales. $ significant relationship can be established between items of income
statement and volume of sales. The increase in sales will certainly increases selling e2pression
and volume of sales. The increase in sales will certainly increases selling e2presses and not
administrative or financial e2penses. In case the volume of sale increases to a considerable
e2tent, administrative and financial e2penses may go up. In case the sales are declining, the
selling e2penses should be reduced at once. 6o, a relationship is established between sales and
other in income statement and this relationship is helpful in evaluating operational activities of
the enterprises.
Common Si@e !alance S0eet,
6tatement in which balance sheet items are e2pressed as the ratio of each asset to total
assets and the ratio of each liability is e2pressed as a ratio of total liabilities is called common
si>e balance sheet. The common si>e balance sheet is a hori>ontal analysis. The comparison of
figures in different periods is not useful becomes total figure may be affected by a number of
factors. It is not possible to establish standard norms for various assets. The trends of year to
year may not be studied and even they may not give proper results.
-1
R(TIO (N(L&SIS
)inancial analysis depends to very large e2tents of the use of ratios through there are
other e%uality important tools of such analysis. Thus, a direct e2amination of the magnitude of
two released items is somewhat enlightening but the comparison is greatly facilitated by
e2pressing the relationship as a ratio.
<atio analysis of business enterprises enters on efforts to derive %uantitative measures or
guides concerning the e2pected capacity of the firm to meet its future financial obligation or
e2pectations present and past data are used for the purpose and whatever e2trapolations appear
necessary. They are made to provide no indication of feature performance. $le2ander walt, who
critici>ed the bankers for its lapsided development owing to their decisions regarding the grant of
credit on current ratios a lone, made the presentation of an elaborate system of ratio analysis
in+I+I.
Ratio,
<atio is an e2pression of the %uantitative relationship that e2ists between the two
numbers. The ratio is defined as Mthe indicated %uotient of two mathematical e2pressionsN the
ratio should be determined between related accounting variables to be meaningful and effective.
C(S% FLO7S,
)#(NIN' OF C(S% FLO7 N(TUR#,
!ash plays very important role in the entire economic life of a business. $ firm needs
cash to make payments to its suppliers, to insure day-go-day e2penses and to pay salaries, wages,
interest and dividends etc. In fact, what blood is to a human body, cash is to a business
enterpriseS It is very essential for a business to maintain an ade%uate balance at cash. But many
a times, a concern operates profitability and yet it becomes very difficult to pay ta2es and
dividends this movement of cash is of vital importance to the management.A statement of
changes in the Financial Position of firm on cash basis is called a cash flow statement.$ cash
flow statement summari>es the causes of changes in cash position of a business enterprise
between dates of two balance sheets. This statement is very much similar to the statement of
changes in )inancial 7osition 7repared on working capital basis, i.e., a funds flow statement,
e2cept that a cash flow statement focuses attention on cash instead of working capital. It is
called a cash flow statement because it describes the Inflow 06ources and out flow 0use of cash.
-?
)ana2ement of Cas0
Importance, 6ydney <obbins describes M!ash 4 what a strange commodity. $ business
wants to get hold of it in the shortest possible time but to keep the least possible %uantity on hand
Increased sophistication in the handling of cash has enabled companies to cut down on the
balances needed to sustain any given level of operationsN.
!ash in a firm may be compared to the blood of the human body. 52cess cash should be
avoided and cash should not be kept idle. It should be utili>ed in an optimum manner, which
results in profits and solvency as well as matching of inflow and outflow of funds. $s in case of
inventory, a finance manager has to follow five </s of money as follows:
<ight %uality for li%uidity
<ight %uality of money
<ight time for solvency
<ight source
<ight cost of capital
#ffective Cas0 )ana2ement
The following are raw strategies for effective !ash #anagement:
i. !ash planning, the re%uirement of cash has to be planned carefully, for this purpose
two kinds of cash forecast 4 short term and long-term are re%uired estimating the cash
inflow as well as cash outflow 0i.e., cash budget.
ii. #anaging the cash flows. Both the cash inflow and cash outflow are to be managed
carefully in such a way as to improve the cash inflow and delay the cash outflow.
iii. 7roductive utili>ation of e2cess funds. If the e2cess is permanent, it may be utili>ed
for e2pansion or for repayment of long-term loans, which will reduce the burden of
Interest. But if the e2cess is temporary. It may be invested in short-term deposits for
+1 days or more or in marketable securities even if it is for +1 days. It carries an
interest rate of -J per annum. It may be noted that current accounts will not fetch
any interest.
iv. 'ptimum cash level. The cost of e2cess cash and dangers of cash deficiency are to be
considered while working out the optimum cash level.
-A
Cas0 !ud2et
$s very transaction of the business is effected eventually by cash, the cash budget is often
the last and the most difficult subsidiary budget to be prepared. The cash budget is a forecast of
e2pected cash receipts and payments for a future period. !ash forecasting is the estimating of
cash receipts and payments for a future period B5)'<5 any necessary adjustments have been
made cash Budgeting is the estimating of cash receipts and payments for a future period $)T5<
due consideration has been given to e2pected conditions and the overall budget plan. 6easonal
factors must be taken into account and in practice cash budget is prepared on a monthly basis.
The most important points are that the viability of other budgets is tested in terms of cash
availability. If the sufficient funds are not available, either the policy must be changed or fresh
capital raised.
T0e cas0 bud2et consists of t0ree arts i+e+
5stimates of cash receipt"
5stimates of cash disbursement" and
!ash balance each month of budget period.
!ash budget is also called as cash flow statement which indicates the e2pected cash inflow and
cash outflow. It does not include deprecation and other non-cash e2penses. @on actual items
are included in the cash budget it is generally prepared for one year in respect of running
business or even for new business. Then it is divided into monthly cash budget.
T0e main Functions of cas0 bud2et are
+. To ensure that sufficient cash is available when re%uired.
,. To reveal any e2pected shortage of cash-long-term or short term.
-. To reveal any e2pected surplus of cash long-term or short term.
.. To preserver li%uidity.
1. To reveal the seasonal re%uirements such as payment of Income Ta2 as the end of
Hune.
?. To assist in sound investment policy, both on a long-term and a short-term basis.
A. To indicate the availability of cash discounts.
9. To indicate the availability of funds for replacement of assets, additions to assets,
e2pansion schemes, new schemes and modification of e2isting plant etc.
-9
I. There are three methods of preparing cash budget.
+8. <eceipts and payments method.
!ash is generated from cash sales, collection from debtors, capital receipts and other income
like rent, dividends and interest earnings on investments. !ollection from debtors is dependent
upon the credit sales and credit period e2tended to the customers. !ash payments include the
payments to suppliers for salaries and wages, overheads, capital e2penditure, investments,
repayment of loans, hire purchase installments etc. 7ayment to suppliers is dependent upon
credit purchases and credit period e2tended by suppliers. 6imilarly salaries and wages will be
payable on the last day of the month or on the first day of the following month. 7ayments for
overheads and other liabilities are estimated as per the due dates taking the credit period into
account. Then the monthly balances will be arrived, minimum cash balance is to be kept in a
business for all times. $ction will be taken for surplus or shortage of cash as follows:
$!TI'@
+. 6hortage of cash-long-term 'btain long term loans
,. 6hortage of cash-short-term 'btain overdraft on short-term basis
-. 6urplus of cash-long-term <epayment of loans or investment
on long-term basis.
.. 6urplus of cash-short-term Invest in short-term deposits fetching
-J to IJ interest p.a.
)ana2in2 t0e cas0 flo5
!ash flow includes both inflow and outflow. $ firm has to maintain an optimum cash
balances for meeting the day-to-day operating e2penses and for precautionary purposes in order
to maintain the li%uidity and solvency. $ good bank relationship has to be maintained. !ash
inflow may be improved by increasing the cash sales, speedy and decentrali>ed collections from
the customers. In this connection lock-bo2 system can be operated. 3nder this system, the
company rents lock-bo2 from post officers and the customers are re%uested to main che%ues to
the local bo2. The company/s bank branch collects all such che%ues. Beposits then in the bank
and remit the funds on the same day by telegraphic transfer to the company/s account at Cead
'ffice.
-I
6imilarly cash outflow also should be controlled by delaying the disbursements to the
suppliers and other creditors. If the salary payments are made weekly the system can be changed
to fortnightly or monthly payments.
)inally a finance manager may use the float very continuously as it is a very risky one.
There will be a gap between the issue of a che%ue by the firm and collection f che%ue by the
customer. Buring the period of gap, the bank balance will be higher and cash book balance will
be lower. These funds can be utili>ed carefully and very cautiously by monitoring the position at
bank daily. But it is a risky game then cash book may show even negative balance. 6imilarly
che%ues deposited by the firm will take time or reali>ation. $ll these points should be taken care
of while using the float. 52cess funds should be utili>ed for productive purposes as already
discussed above. ;i%uidity is the life blood of company li%uidity maybe defined as the ability of
a company to reali>e value in money in time and with certainly. #.C.B. $bd 5I-#ottal suggests
a comprehensive test of li%uidity with the help of the following three ratios.
i. ;i%uid assets to current assets 0;$&!$
ii. :orking capital to current assets
iii. 6tock to current assets.
)inally the objects should be to keep the cash available in the right amount and at the
right time to meet the financial obligations as the minimum cost.
Otimum Cas0 Level
If the firm maintains lower cash balance, its li%uidity position is affected. )or urgent
payments it has to sell some marketable securities incurring penal interest and transaction costs.
But the profitability will be higher by utili>ing the released funds if the firm maintains the higher
cash balance its li%uidity will improve but profitability will decline by lasting the interest on it,
which involves an opportunity cost. Thus the optimum cash balance is to be arrived by matching
the transaction costs and opportunity costs 6imilar to 5'R formula, optimum cash balance is the
amount of cash balance at which the sum of both the transaction costs and opportunity costs will
be minimum.
Uses and si2nificance of cas0 flo5 statement
!ash flow statement is of vital importance to the financial management. It is an essential
tool of financial analysis for short-term planning. The chief advantages of cash flow statement
are as follows:
.8
*+ 6ince a cash flow statement is based on the cash basis of accounting, it is very useful
in the evaluation of cash position of a firm.
-+ $ projected cash flow statement can be prepared in order to know the future cash
position of a concern so as to enable a firm to plan and coordinate its financial
operations properly. By preparing this statement a firm can come to know as to how
much cash will be needed into the firm and how much cash will be needed to make
various payments and hence the firm can well plan to arrange for the future
re%uirements of cash.
9+ $ comparison of the historical and projected cash flow statements can be made so as
to find the variations and the deficiency or otherwise in the performance so as to
enable the firm to take immediate and effective action.
:+ $ series of intra-firm and inter-firm cash flow statements reveal whether the firm/s
li%uidity 0short-term paying capacity is improving or deteriorating over a period of
time and in comparison to other firms over a given period of time.
;+ !ash flow statement helps in planning the repayment of loans, replacement of fi2ed
assets and other similar long-term planning of cash. It is also significant for capital
budgeting decisions.
Limitation of Cas0 Flo5 Statement
Bespite a number of uses, cash flow statements suffer from the following limitations:
a. It is difficult to precisely define the term McashN. There are controversies over a
number of items like che%ues, stamps, postal orders, etc. to be included in cash.
b. $ cash flow statement reveals the inflow and outflow of cash but the e2clusion of
near cash items from cash obscures the true reporting of the firm/s li%uidity position.
c. :orking capital being a wider concept of funds, a funds flow statement presents a
more complete picture than cash flow statement.
.+
Determinants of Cas0 flo5,
The following factors will determine the cash flow:
a. 'perating decisions-operating e2penses, sales revenue and net profit.
b. !apital e2penditure decisions-investment decisions, e2pansion etc.
c. !redit policy-credit period allowed to customers and followed by suppliers.
d. Inventory decisions-inventory control and management.
e. Ta2 on profits-ta2 planning, investment in IBBI etc.
f. 7ayment of Interest, dividends and issue of bonus shares.
g. 7roductive decisions.
h. ;i%uidity gaps 4 arising out of delay in cash reali>ation, utili>ation of working capital
for capital e2penditure, high fi2ed charges obligation and finally low generation of
internal resources which may be due to lower production and sales etc.
Procedure for rearin2 a Cas0 Flo5 Statement
!ash flow statement shows the impact of various transactions on cash position of firms. It is
prepared with the help of financial statements, i.e., balance sheet and profit and loss account and
some additional information. $ cash flow statement starts with the opening balance of cash and
balance at bank, all the inflows of cash are added to the opening balance and the out flows of
cash are deducted from the total. The balance i.e., opening balance of cash and bank balance
plus inflows of cash minus outflows of cash is reconciled with the closing balance of cash. The
preparation of cash flow statement involves the determining of:
Inflow of cash
'ut flows of cash
$. 6ources of cash Inflows:
The main sources of !ash flows are:
+. !ash flow from operations
,. Increase in e2isting liabilities or creation of new liabilities.
-. <eduction in or 6ale of $ssets.
.. @on-trading <eceipts.
.,
B. $pplication of cash or cash flows
+. !ash lost in operations.
,. Becrease in or discharge of liabilities.
-. Increase in or purchase of assets.
.. @on-trading payments
'enerally cas0 flo5 statement is reared in t5o forms,
a. <eport form
b. T form or an account form or self-Balancing types
.-
SP#CI)#N OF R#PORT FOR) OF C(S% FLO7 ST(T#)#NT
!ash Balance in the beginning. <s.
$BB: Cas0 Inflo5s,
!ash flow from operations
6ale of $ssets
Issue of shares
Issue of debentures
<aising of loans
!ollection from debentures
Non tradin2 receits suc0 as
Bividend received
Income ta2 refund
222
222
222
222
222
222
222
222
;ess: $pplications or outflow of cash:
<edemption of preference shares
<edemption of debentures
<epayment of loans
7urchase of assets
7ayment of dividend
7ayment of ta2es
!ash lost in operations
222
222
222
222
222
222
222
Cas0 !alance at t0e end, 222
..
T FOR) OR (N (CCOUNT FOR) OF C(S% FLO7
ST(T#)#NT
<s. <s.
!ash balance in the beginning
(DD, Cas0 Inflo5s,
!ash flow from operations
6ales of assets
Issue of shares
Issue of debentures
<aising of loans
!ollection from debtors
Bividends received
<efund of ta2
222
222
222
222
222
222
222
222
222
222
'ut flow of cash
<edemption of
7reference shares
<edemption of dentures
7ayment of ;oans
7ayment of dividends
7ayment of ta2
!ash lost in operations
222
222
222
222
222
222
222
222
!ash balance at the end 222
.1
D(T( (N(L&SIS (ND INT#RPR#T(TION
$ financial analysis can be e2ternal or internal. The most important objective of the
analysis and interpretation of financial statements are to understand the significance and meaning
of financial statements data to know the strength and weakness of a business undertaking so that
a forecast may be made of future prospects of that business undertaking.
)et0ods used in analysis and interretation of financial statements,
The following methods can be used in connection with the analysis and interpretation of
financial statements:
+ !omparative financial statements of two or more years are prepared to show:
0a $bsolute data of two or more years.
0b Increases and decreases in absolute data.
0c Increases or decreases in absolute data in terms of percentages.
, )unds flow and cash flow statements.
- $ccounting ratios.
. !ommon-measurement statements are those statements which indicate the relationship of
various items to some common item as sales or total assets or total liabilities by taking
percentage of every item to common item.
1 The percentages so calculated can be easily compared with the corresponding
percentages in other periods and meaningful conclusions can be drawn common
measurement can be prepared.
.?
CO)P(R(TI$# !(L(NC# S%##T (S (T 9*ST )(RC%A -BBC (ND -BBD
ERs in CroresF
P(RTICUL(RS (s at 9*st (s at 9*st Increase Decrease
)ar=BD )ar=BC
LI(!ILITI#S
S%(R# %OLD#RS
FUNDS
a 6hare !apital ..?1-,888 ..?1-,888 8 8
b <eserves and
6urplus +.IIA1+,9 +.II9?,? 8.88+++-,
LO(N FUNDS
a 6ecured ;oans +..9.,,A+ 8.I,-9?1. 8.1?8-?+A
b 3nsecured ;oans +.9,.9?81 ,.8.-189- 8.,+9?.A9

D#F#RR#D T(G
LI(!ILIT& EN#TF +.88.++?- +.+.+8-I1 8.+-?I,-,

CURR#NTLI(!ILITI#S
4 PRO$ISIONS
a !urrent liabilities +.,88A+99 -..A+,?I+ ,.,A8118-
b 7rovisions 8.I1-9-.1 8.9A,9I+1 8.898I.-

Total Liabilities *9+**C:H *;+*B:9DDC *+DC;D-DC

(SS#TS
FIG#D (SS#TS
a Dross block ++.?+A?,IA ++.,9,?81, 8.--18,.1
b ;ess: Bepreciation A.1-?.??- ?.I.A9A.. 8.1991I+I
c @et Block ..89++?-. ..--.A-89 8.,1-1?A.
IN$#ST)#NTS 8 8.,8.AA-8 8.,8.AA-8

CURR#NT (SS#TSALO(NS
4 (D$(NC#S
a Inventories ..-,.9... ..AA9989+ 8..1-I?-A
b 6undry Bebtors ,..9I19++ ,.+-911I, 8.-1+8,+I
c !ash and Bank
Balances +..A91,?8 ,.?1A?A.8 +.+AI+.98
d 'ther !urrent assets 8.+18,A.A 8.,.?819? 8.8I1A9-I
e ;oans and
$dvances 8.1I.898. 8.A.-AI?+ 8.+.IA+1A

Total (ssets *9+**C:H *;+*B:9DDC *+DC;D-DC
.A
INT#RPR#T(TION FOR -BBC=-BBD,
The short term position can be studied by difference between working capital of both the
years
,88I ,889
!urrent assets 9...-,,?, I.9,+8III
!urrent liabilities +.,88A+99 -..A+,?I+
A.,.,18A. ?.-.I9-89
The working capital change is A.,.,18A.-?.-.I9-89Q 8.9I,?A??
The li%uidity position is known as there are changes in li%uid assets i.e. increased which
means improvement in li%uidity position.
There is increase in sundry debtors/ as there is increase in sales from this one can say that
the organisation has reached to e2pected level.
There is decrease in closing stock as there is decrease in fi2ed assets, the turnover
decreases.
Buring the year it shows that the sales have been decreased, which indicates the fi2ed
assets turnover ratio is less with a decrease in fi2ed assets. Cowever the working capital
of the company increases, because during the year the liability has been increased and it
shows that the income of the year proportionately decreases from the earlier year.
.9
CO)P(RITI$# !(L(NC# S%##T,
CO)P(R(TI$# !(L(NC# S%##T (S (T 9*ST )(RC%A -BBD (ND -B*B
ERs in CroresF
P(RTICUL(RS (s at 9*st (s at 9*st Increase Decrease
)ar=*B )ar=BD
LI(!ILITI#S
S%(R# %OLD#RS
FUNDS
a 6hare !apital ..?1-,888 ..?1-,888 8 8
b <eserves and
6urplus +.II918,? +.IIA1+,9 8.888I9I9
LO(N FUNDS
a 6ecured ;oans ,.?,.,8I? +..9.,,A+ +.+-II9,1
b 3nsecured ;oans +.?..+-8I +.9,.9?81 8.+98A,I?

D#F#RR#D T(G
LI(!ILIT& EN#TF 8.A,???+. +.88.++?- 8.,AA.1.I

CURR#NTLI(!ILITI#S
4 PRO$ISIONS
a !urrent liabilities +.?I-AI1, +.,88A+99 8..I-8A?.
b 7rovisions +..9?I8?8 8.I1-9-.1 8.1--8A+1

TOT(L LI(!ILITI#S *:+C-H:B;H *9+**C:H *+HBCD9;H
(SS#TS
FIG#D (SS#TS
a Dross block ++.9-18+.+ ++.?+A?,IA 8.,+A-9..
b ;ess: Bepreciation 9.+.8-,+? A.1-?.??- 8.?8-911-
c @et Block -.?I.?I,1 ..89++?-. 8.-9?.A8I
IN$#ST)#NTS 8.98?+?-+ 8 8.98?+?-+

CURR#NT (SS#TSALO(NS
4 (D$(NC#S
a Inventories -.9118-8, ..-,.9... 8..?I9+.,
b 6undry Bebtors +.I9A1,.I ,..9I19++ 8.18,81?,
c !ash and Bank
Balances -..I1-8,+ +..A91,? ,.8+?AA?+
d 'ther !urrent assets 8.+119-18 8.+18,A.A 8.8811?8-
e ;oans and
$dvances 8.9-,91AI 8.1I.898. 8.,-9AAA1

TOT(L (SS#TS *:+C-H:B;H *9+**C:H *+HBCD9;H
.I
INT#RPR#T(TION FOR -BBD=-B*B,
The short term position can be studied by difference between working capital of both the
years
,8+8 ,88I
!urrent assets I..I-?I,, 9...-,,?,
!urrent liabilities +.?I-AI1, +.,88A+99
A.AII9IA8 A.,.,18A.
The working capital change is A.AII9IA8-A.,.,18A.Q 8.11A-9I?
The li%uidity position is known as there are changes in li%uid assets i.e. increased which
means improvement in li%uidity position.
There is decrease in sundry debtors/ as there is decrease in sales from this one can say
that the organisation didn/t reach the e2pected level.
There is decrease in closing stock as there is decrease in fi2ed assets, the turnover
decreases.
Buring the year it shows that the sales have been increased, which indicates the fi2ed
assets turnover ratio is more even though there is a decrease in fi2ed assets. Cowever the
working capital of the company increases, because during the year the liability has been
increased and it shows that the income of the year proportionately decreases from the
earlier year.
18
CO)P(R(TI$# PROFIT 4 LOSS (CCOUNT (S (T 9*
ST
)(RC%A -B*B (ND -B**
ERs in croresF
P(RTICUL(RS (s on 9*st (s on 9*st Increase Decrease
)ar=** )ar=*B
INCO)#
6ales +-.1?,??9- +,.89?--I1 +..A?-,99
'ther Income 8.,9?I1.I 8..+I-+. 8.+-,-1I+
Increase&Becrease
in stocks -8..,98-1. -8..1A,99I 8.8,I,1-1

TOT(L E(F *9+:-*;CC *-+B:C9<:< *+9H9--9-

#GP#NDITUR#
<aw materials consumed I.18+11++ 9.8?9.1- +..--8I9+
6tores = spares consumed 8.++,.1,- 8.+8+I-?+ 8.8+81+?,
7ayments and benefits to
employees 8.A,99,1+ 8.A-.8.,I 8.881,+A9
#fg.,$dmn.,6elling and
other e2penses +.,I91IA+ +.,IA++. 8.88+.9-+
!entral 52cise duty 8.+?A1I,A 8.1,I.919 8.-?+9I-+
Interest 8.,+9?1++ 8.+-+I,-, 8.89?A,AI
;oss on revaluation of invst. 8 8 8
;oss on sale of asset 8 8.88.--., 8.88.--.,
Bepreciation 8.1991I+I 8.11II1?+ 8.8,9?-19
TOT(L E!F *-+<*<-<* **+:-H-:;9 *+*CDB*<

7rofit before ta2 0$-B 8.981-,?1 8.?,+++I- 8.+9.,8A,
;ess: 7rovision for ta2ation 8..+,A9+9 8.--+1?I? 8.89+,+,,
;ess: 7rovision for ).B.T 8 8 8
$dd: Beferred Ta2 ;iability 8.+-?I,-, 8.,.,81-, 8.+81+-

@et profit for the year 8.1,I.?AI 8.1-+?8,I 8.88,+-1
Balance brought forward
from previous year 8.88,-,+9 8.88+.I1- 8.8889,?1
(mount available for
aroriation B+;9*HCDH B+;99BDC- B+BB*9BC;

(PPROPRI(TIONS
7roposed Bividend 8..?1-,88 8..?1-,88 8 8
Ta2 on Bividend 8.8?1,?++ 8.8?1,?++ 8 8
Ta2 provisions relating to 7.E 8.888+I1- 8.888+I1-
6urplus carried to
balancesheet 8.88+,89? 8.88,-,+9 8.88+++-,
B+;9*HCDH B+;99BDC- B+BB*9BC;
1+
INT#RPR#T(TION FOR -B*B=-B**,
The table indicates comparative profit = loss account of incap ltd. for the year ,8+8-++.
The gross profit has been decreased in the year ,8+8 when compared to ,8++ as there is
decrease in sales and increase in e2penses.
There is a slight increase in the net profit in the year ,8+8 when compared to ,8++
because the deferred ta2 liability was more for the year ,8+8 and provision for ta2ation
was more in the year ,8++.
There was no loss on revaluation of investments in the years ,8+8 and ,8++.
But there was a loss on sale of assets in the year ,8+8 and it doesn/t e2ist in the year ,8++
There was decrease in the level of stock in both the years i.e. ,8+8 and ,8++.
)rom the table one can observe that there is a surplus in both the years and transferred to
balance sheet.
1,
CO)P(RITI$# PROFIT 4 LOSS (COOUNTS,
CO)P(R(TI$# PROFIT 4 LOSS (CCOUNT (S (T 9*
ST
)(RC%A -B** (ND -B*-
ERs in CroresF
P(RTICUL(RS (s on 9*st (s on 9*st Increase Decrease
)ar=*- )ar=**
INCO)#
6ales ++.1?-,9,- +-.1?,??9- +.III-9?
'ther Income 8.1,,A?1A 8.,9?I1.I 8.,-19+89
Increase&Becrease
in stocks 8.-+,11.. -8..,98-1. 8.A.819I9

TOT(L E(F *-+9DC<B-: *9+:-*;CHC *+B--DC;:
#GP#NDITUR#
<aw materials consumed 9.8.,1?,I I.18+11++ +..19I99,
6tores = spares consumed 8.+8,,.1- 8.++,.1,- 8.8+8,8A
7ayments and benefits to
employees 8.9+II?++ 8.A,99,1+ 8.8I++-?
#fg.,$dmn.,6elling and
other e2penses +.,+198-. +.,I91IA+ 8.89,AI-A
!entral 52cise duty 8.,-.?-8I 8.+?A1I,A 8.8?A8-9,
Interest 8.,9.A991 8.,+9?1++ 8.8??+-A.
;oss on revaluation of invst. 8.,I-9-?I 8 8.,I-9-?I
;oss on sale of asset 8.88-,1I+ 8 8.88-,1I+
Bepreciation 8.?8-911- 8.1991I+I 8.8+1,?-.
TOT(L E!F **+<BBD:9: *-+<*<-<*9 *+B*;9*HD
7rofit before ta2 0$-B 8.AIA?1I 8.981-,?1 8.88A??A1
;ess: 7rovision for ta2ation 8.1,,.A 8..+,A9+9 8.+8I?99,
;ess: 7rovision for ).B.T 8.88A,A?, 8 8.88A,A?,
$dd: Beferred Ta2 ;iability 8.,AA.1.I 8.+-?I,-, 8.+.81-+A

@et profit for the year 8.1.1-?AA 8.1,I.?AI 8.8+19II9
Balance brought forward
from previous year 8.88+,89? 8.88,-,+9 8.88+++-,

(mount available for
aroriation B+;:<;H<9 B+;9*HCDH B+B*:HC<<
(PPROPRI(TIONS
7roposed Bividend 8..?1-,88 8..?1-,88 8 8
Ta2 on Bividend 8.8AI81AI 8.8?1,?++ 8.8+-AI?9
6urplus carried to
balancesheet 8.88,+I9. 8.88+,89? 8.888I9I9

B+;:<;H<9 B+;9*HCDH B+B*:HC<<
1-
INT#RPR#T(TION FOR -B**=-B*-,
The table indicates comparative profit = loss account of incap ltd. for the year ,8++-+,.
The gross profit has been decreased in the year ,8+, when compared to ,8++ as there is
decrease in sales.
There is a slight increase in the net profit in the year ,8+, when compared to ,8++
because the provision for ).B.T 0)ringe Benefit Ta2 was not provided in the year ,8++
There was a loss on revaluation of investments in the year ,8+8 and there e2ists no loss
in the year ,8++.
6imilarly there was a loss on sale of assets in the year ,8+, and it doesn/t e2ist in the
year ,8++.
)rom the table one can observe that there is a surplus in both the years and transferred to
balance sheet.
1.
Commonsi@e !alance s0eets,
CO))ONSI/# !(L(NC# S%##T (S (T 9*ST )(RC%A -B*- (ND -B*9
ERs in CroresF
LI(!ILITI#S (s at 9*st I (s at 9*st I
)ar=*9 )ar=*-
S%(R# %OLD#RS FUNDS
a 6hare !apital ..?1-,888 -+.-9 ..?1-,888 -1..A
b <eserves and
6urplus +.II918,? +-..9 +.IIA1+,9 +1.,-
Total S0are %olders3 FundsE*F <+<;*HB-< ::+C< <+<;BH*-C ;B+HB
LO(N FUNDS
a 6ecured ;oans ,.?,.,8I? +A.A8 +..9.,,A+ ++.-+
b 3nsecured ;oans +.?..+-8I ++.8I +.9,.9?81 +-.I+
D#F#RR#D T(G
LI(!ILIT& EN#TF 8.A,???+. ..I8 +.88.++?- A.?1
Total Lon2=term Loans
4Ta8 liability E-F ..II188+I --.?I ..-+-,8-I -,.9A
CURR#NT LI(!ILITI#S
4 PRO$ISIONS
a !urrent liabilities +.?I-AI1, ++.., +.,88A+99 I.+1
b 7rovisions +..9?I8?8 +8.8- 8.I1-9-.1 A.,A
Total Current Liabilities E9F -.+98A8+, ,.+1.11-- +?..,
Total LiabilitiesE*J-J9F *:+C-H:B;H *BB+BB *9+**C:H *BB+BB
(SS#TS

FIG#D (SS#TS
a Dross block ++.9-18+.+ AI.9, ++.?+A?,IA 99.1?
b ;ess: Bepreciation 9.+.8-,+? 1..I8 A.1-?.??- 1A..1
c @et Block -.?I.?I,1 ,..I, ..89++?-. -+.++
Total Fi8ed assets EaF -.?I.?I,1 ,..I, ..89++?-. -+.++
IN$#ST)#NTS 8.98?+?-+ 1... 8.88 8.88
Total Investments EbF 8.98?+?-+ 1... 8.88 8.88
CURR#NT (SS#TSALO(NS
4 (D$(NC#S
a Inventories -.9118-8, ,1.II ..-,.9... -,.IA
b 6undry Bebtors +.I9A1,.I +-..8 ,..9I19++ +9.I9
c !ash and Bank
Balances -..I1-8,+ ,-.1A +..A91,?8 ++.,A
d 'ther !urrent assets 8.+119-18 +.81 8.+18,A.A +.+.
e ;oans and
$dvances 8.9-,91AI 1.?, 8.1I.898. ..1-
Total Current (ssets K *B+9-<;;B* <D+<9 D+B9H9B<< <C+CD
Total (ssets EaJbJcF *:+C-H:B;H *BB+BB *9+**C:H *BB+BB
11
INT#RPR#T(TION FOR -B*-=*9,
)rom the above table one can say there is decrease in J of reserves and surplus i.e. from
+1.,-J to +-..9J.
There is an increase in J of loan funds taken i.e. from ,1.,,J to ,9.AIJ.
There is a decrease in deferred ta2 liability i.e. from A.?1J to ..I8J.
There is an increase in J of current liabilities i.e. from I.+1J to ++..,J.
$s there is decrease in net block of fi2ed assets therefore one can say that there is
decrease in J of fi2ed assets i.e. from -+.++J to ,..I,J.
$s there are no investments in ,8+, there is no possibility to calculate J of investments
in that year.
$s there is more demand for stock there is a decrease in closing stock which implies
decrease in J i.e. from -,.IAJ to,1.IIJ.
There is a decrease in J of sundry debtors i.e. from +9.I9J to +-..8J.
$s there is more cash in hand and in bank there is an opportunity for organisation to meet
immediate liability and increase in J i.e. from ++.,AJ to ,1.IIJ.
There is an increase in loans and advances i.e. one can say that the organisation paid
advances before and there is increase in J i.e. from ..1-J to 1.?,J.
1?
C(S% FLO7 ST(T#)#NT,
C(S%FLO7 ST(T#)#NT FOR T%# &#(R #ND#D -B*9

P(RTICUL(RS ()OUNT
Rs+ In Crores

7rofit before ta2 8.98

@et cash flow from operating activities ,..8

@et cash used in investing activities -8.98

@et cash used in financial activity 8..,

@et inc&dec in cash e%uivalent ,.8,

$dd: !ash e%uivalent at the beginning of the year +..9

!ash e%uivalent at the end of the year -.18
INT#RPR#T(TION,
There is net increase in cash flow during the year ,8+-.
$s the company invested in various activities it shows a
negative balance during the year.
The net cash flow from operating activities after adjusting
profit before ta2 is <s.,.. !r.
The cash e%uivalent at the end of the year ,8+, is <s. -.18
!r.

1A
C(S%FLO7 ST(T#)#NT FOR T%# &#(R #ND#D -B*-

P(RTICUL(RS ()OUNT
Rs+ In Crores

7rofit before ta2 8.9+

@et cash flow from operating activities -+.+1

@et cash used in investing activities 8.+?

@et cash used in financial activity -8.+I

@et inc&dec in cash e%uivalent -+.+9

$dd: !ash e%uivalent at the beginning of the year ,.??

!ash e%uivalent at the end of the year +..9
INT#RPR#T(TION,
There is net decrease in cash flow during the year ,8+,.
The company shows a negative balance in operating
activities as e2penses of day to day operations were more
during the year.
The net cash flow from operating activities after adjusting
profit before ta2 is <s.-+.+1 !r.
The cash e%uivalent at the end of the year ,8++ is <s. +..9
!r.

19
C(S%FLO7 ST(T#)#NT FOR T%# &#(R #ND#D -B**

P(RTICUL(RS ()OUNT
Rs+ In Crores

7rofit before ta2 8.?,

@et cash flow from operating activities 8.?,

@et cash used in investing activities 8.I,

@et cash used in financial activity -+.+I

@et inc&dec in cash e%uivalent 8.-1

$dd: !ash e%uivalent at the beginning of the year ,.-8

!ash e%uivalent at the end of the year ,.?1
INT#RPR#T(TION,
There is net increase in cash flow during the year ,8++.
$s the company invested in various activities it shows a negative balance during the year.
The company shows a negative balance in operating activities as e2penses of day to day
operations were more during the year.
1I
FINDIN'S
$ccording to the Information and e2planations given to us, a substantial part of
)i2ed assets have not been disposed off by the !ompany during the year.
@et effect of the depreciation is shown in the balance sheets..
The company should try to reduce more dependence on current liabilities.
The !ompany has not either granted or taken any loans. 6ecured or unsecured to&from
!ompanies, firms.
$ccording to the information and e2planations given to us, there are ade%uate internal
control procedures commensurate with the si>e of the company and the nature of its
business with regard to purchases of inventory, fi2ed assets and with regard to the sale of
goods.
The !ompany is regular in depositing with appropriate authorities undisputed statutory
dues including 7rovident )und, Income ta2. 6ales ta2. !ustoms duty. 52cise duty. :ealth
ta2, 6ervice ta2, !ess.
The !ompany has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
.
?8
SU''#STIONS
The over all performance of the organi>ation is satisfactory.
The working capital is decreasing in the year ,88I and ,8+8. 6o necessary steps to be
taken to increase the working capital.
In order to have consistency in fund investments, it is necessary that speed inflows
should match with fund outflows and vice versa.
5very company should have upper and lower limits, which produces reasonable
combination of profitability in management of :orking !apital.
To the investor, if accounting information is supplemented with funds statement he can
judge potentiality and capability of the management and can take investments decisions
more accurately.
There has been decreasing trend in !ash = bank balance in the year ,88I -,8+8. 6o
necessary steps to be taken to improve the cash balance.

?+
CONCLUSION
The financial statements analysis provides a clear-cut picture about the financial
position, profitability, li%uidity, solvency and the application of financial sources of an
organi>ation. The financial management has to formulate wide varieties of plans and policies
regarding total assets and total liabilities with respect to the movement.
The financial management is also called as the custodian of financial resource of the
investors.Therefore the financial management should take care of all the available resources and
make them into real and e2act application. The financial department is also a Mwatch dogN or Ma
policeN for the financial resources, which are invested by the company into different ventures
and portfolios and invested by different publics.
Cence the financial statement analysis acts as a supplier in distribution of all the inputs
which are playing a vital role in the managerial decision making. The organi>ation is the
composition of different departments such as marketing, human resources, production etc.
?,
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, )inancial
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Tata #c
Draw-Cill
,88+
- )undamental
s of )inancial
#anagement
!handra Bose.B 7rentice Call
of India
+II9
. )inancial
#anagement
7rasanna
!handra
Tata #c.
Draw Cill
,88+
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