1.

0 INTRODUCTION TO FINANCIAL MANAGEMENT

Financial management refers to that part of management activity, which is

concerned with the planning and controlling of firms financial resources. It deals with
finding out various sources for raising funds for the firm. The sources must be suitable
and economical for the need of the business. In simple words, financial management
study about the procuring and judicious use of financial resources with a view to
maximize the value of a business enterprise there by the value to the owner is
maximized.

Financial management is very important to every type of organization. It refers

to that part of managerial activity concerned with the procurement and utilization of
funds for the business purposes.

Finance is an important function in any business, as money is required to

support its various activities. It has given birth to Financial management as a separate
subject. As a separate subject, financial management is of recent origin and has not
acquired a body knowledge of its own. It draws heavily on Economics for its
theoretical concepts.

In the early half of the last century, the job of financial management was largely
confined to the acquisition of funds. But as business firms continued to expand their
markets and they became larger and more diversified, greater control of financial
operation became highly important. Thus now the scope of financial management is
very wide and it should not be considered to be merely restricted for rising of capital. It
also covers other aspects of financing such as assessing the needs of budgeting,
maintaining liquidity lending and borrowing policies, dividend policy and so on.

DEFINITIONS:
Ezra Solomon has defined The financial management deals with the
efficient use of an important economic resource namely capital funds.

Financial management is the activity concerned with the planning, raising,

controlling and administrating the funds used in the business.

- Guthman and Dougall.

Financial management is that managerial activity which is concerned with the

planning and controlling of the firms financial resources.
-I.M.Panday.
Financial management is concerned with the efficient use of an important
economic resource namely capital funds.

-Ezra Soloman

Financial management is the operation activity of a business that is responsible

for obtaining and effectively utilizing the funds necessary for efficient operations.

- Joseph and Massie.

SCOPE OF FINANCIAL MANAGEMENT

The approach to the scope and the functions of financial management is divided
for the purpose of expositions into two broad categories

A) Traditional Approach:
Traditional approach to the finance function relates to the initial stages of its
evolution during 1920s and 1930s when term corporate finance was used to describe in
the academic world today as the financial management.
The approach was focused on procurement of long-term funds. In that issue
allocation of funds which is so important today is completely ignored. The utilization of
funds was considered beyond the pure view of finance function.

B) MODERN APPROACH
The Modern approach views finance function in broader sense. It includes both
rising of funds as well as this effective utilization under the preview of finance. The cost
of raising funds and the returns from their use should be compared. The utilization of
funds requires decision making.
Finance functions covers financial planning rising of funds, allocation of funds,
financial control etc. Modern approach is an analytical way of dealing with financial
problems of firms.
In that approach considers there are three basic management decisions i.e.,
investment decisions, financing & dividend decisions within the scope of finance
functions.

OBJECTIVES OF FINANCIAL MANAGEMENT

The objectives of financial management are:

A) Profit Maximization:According to this approach actions that increase profits should be under taken
and those that decrease profits are to be avoided. In specific operational terms as
applicable to financial management, the profit maximization implies that the investment
financing and dividend policy decisions of affirm should be oriented to the
maximization of profits.

B) Wealth Maximization:This is also known as value maximization or net present wealth maximization.
In current academic literature value maximization is almost universally accepted and
appropriate operational criterion for financial management divisions as it removes the
technical limitation criterion. It operational features satisfy all the three requirements of
a suitable operational objective of financial courses of actions namely exactness, quality
of the benefits and the time value of money.

AN OVER VIEW OF FINANCIAL MANAGEMENT

Financial
Management
Maximization of share

Financial

Investmen
t

Dividend
Decision

Financing
Decision

Liquidity
Decision

Trade -off

Risk

Return

The financial manager in a bid to maximize owners wealth should strive to maximize
returns relation to given risk. To ensure maximum return funds flowing in and out of the
firm should be constantly monitored to assure that they are safe guarded and properly
utilized. FUNCTIONS OF FINANCIAL MANAGEMENT:
The financial functions can be divided into four broad categories:
1. Investment decisions.
2. Financing decisions
3. Dividend decisions.
4. Liquidity decisions.

1. Investment decision:
Investment decision or capital budgeting involves the decision of allocation of
capital or commitment of funds to long-term assets, which would yield, benefits in
future. Its one very significant aspect is the task of measuring the prospective
profitability of new investments. Future benefits are difficult to measure and cannot be
predicted with certainty.

2. Financing decision:
Financing decision is the second important function to be performed by the
financial manager. Broadly, he must decide when, where and how to acquire funds to
meet the firms investment needs. The central issue before him is to determine the
proportion of equity and debt. The mix of debt and equity is known as the firms capital
structure. The firms capital structure is considered to be optimum when the market
value of shares is maximized.

3. Dividend decision:
Dividend decision is the third major financial decision. The financial manager
must decide whether the firm should distribute a portion and retain the balance. Like the
debt policy, the dividend policy should be determined in terms of impact on the

shareholders value. The optimum dividend policy is one, which maximizes the market
value of the firms shares.

4. Liquidity decision:
Current assets management, which affects a firms liquidity, is an important
finance function. Current assets should be managed efficiently for safe guarding the
firm against the dangers of liquidity and insolvency. Investment in current assets affects
firms profitability, liquidity and insolvency. Investment in current assets affects firms
profitability, liquidity and risk. A conflict exists between profitability and liquidity while
managing current assets.
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm. It is done by establishing relationships between the items of
financial statements viz., balance sheet and profit and loss account. Financial analysis
can be undertaken by management of the firm or by parties outside the firm viz.,
owners creditors, investors and others.

FINANCIAL ANALYSIS
Financial analysis is the process of analyzing & interpreting the financial
statement via Balance sheet & profit & loss a/c (income statement) of a
compan y to gain valuab le ins ight into the co mp an ys performance &
position. Financial analysis provides a comprehensive assessment of the company
in various areas. The two powerful tools of financial analysis are,
I

Financial ratios &

II

Funds flow statement

Ration analysis evaluates liquidity profitability capital structure & operational

efficiently aspects of a company. Funds flow analysis provides insight into the
movement of funds & help in understanding the changes in the structure of
assets liabilities & owners equity.
Various types of the financial analysis of the financial statements are:

EXTERNAL ANALYSIS :
Analysis by creditors, shareholders, banks & financial institutions.

INTERNAL ANALYSIS :
Analysis by the management.
8

HORIZONAL ANALYSIS:
Compassion of financial statements.

VERTICAL ANALYSIS:
A study of a single statement for the relationship of the components of the total
by careering each amount in the statement to an X of percentage of total amount of
the ratio.

TREND RATIOS:
Computed in relationship to base year & these are index no. of changes of financial
data.
Funds flow statements
Break even analysis

1.1 NEED FOR THE STUDY

The main need of the study is to analyses the financial information of the ML Agro
products Ltd.
To find out the liquidity or short term solvency of the ML Agro products Ltd.
To know the different types of funds flow analysis and how it shows impact on different
organizations.
To allow the relationship among various aspects in such a way that it allows drawing
conclusion about the performance, strength and weaknesses of the company.
To know the short term servicing ability of the company.

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1.2 OBJECTIVES OF THE STUDY

The main objectives of the present study are given bellow.

The main objective of the study is to analyze the financial information of the ML Agro
products Ltd.
To study the tobacco industry in India and analyze the financial performance of ML
Agro products Ltd.
To present a theoretical framework relating to financial analysis.
To evaluate the liquidity position of ML Agro products Ltd.
To understand the operating efficiency of ML Agro products Ltd.

To offer suggestions if any for the betterment of the company

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1.3 SCOPE OF THE STUDY

All activities & concerned parties are interested to a varying to extent to know the
financial affairs of a business enterprise. The financial statements are the blueprints of its
financial affairs. A financial analysis can prove deep in to the financial statements& also in
to financial policies pursued by the Management& offer constructive suggestions to
overcome the financial problems of any and if diagnosed these statements out as a become
to management in ensuring goal orientation and effective performance of the business
enterprise.
The analysis of financial statements communicate useful information to interested
parties, the analysis highlights the significant facts & relationship concerning managerial
performance. Corporate efficiency financial strength & weakness & also its credit
worthiness.
In short, the scope of financial performance analysis does not need emphasis to the
owners of the enterprise. They reveal its progress as evidence by earning & current
financial conditions.

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1.4 RESEARCH METHODOLOGY

Methodology is scientific and systematic search for pertinent information on specific

topic. The reliability of management decision depends upon the quality of data.
Basically we have two types of data. These are primary data and secondary data.

Primary data:
Primary data can be collected either through experience or through survey.
That which is collected a fresh and for the first time and thus happens to be original in
character is called primary data. Primary data can be collected in the following ways.

By observation.

Through personal interview.

Through telephone interviews.

Secondary data:
Secondary data means data that is already available which was collected and
analyzed by someone else and which have already been passed through the statistical
process. Secondary data may either be published data or unpublished.

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1.5 LIMITATIONS OF THE STUDY

While the study is undertaken about the financial analysis of the ML Agro products
Ltd. the following limitations were encountered.
Due to shortage of time the overall analysis of the financial information of the
ML Agro products Ltd. became difficult.
Since the current year was not completed it was not possible to compare the
current year information with the previous information.
Some of the information was with registered office of the company due to
some statutory requirements so it became difficult to get the overall
information of the company.
Since we are new to the company, company refused to provide its financial
information.

14

2.0 INDUSTRY PROFILE

HISTORY:
Tobacco is a plant that grows natively in north and South America. It is in the
same family as the potato, pepper and the poisonous nightshade, a very dead plant.
The seed of a tobacco plant is very small. A 1 ounce sample contains about 300,000
seeds.
It is believed that tobacco began growing in the America about 6,000 B.C. As
early as 1 B.C., American Indians began using tobacco in many different ways, such
as in religious and medicinal practices. Tobacco was believed to be a cure-all, and was
used to dress wounds, as well as a pain killer. Chewing tobacco was believed to
relieve the pain of a toothache.
Soon after, sailors brought tobacco back to Europe, and the plant was being
grown all over Europe. The major reason for tobaccos growing popularity in Europe
was its supposed healing properties. Europeans believed that tobacco could cure
almost anything, from bad breath to cancer.
In 1571, a Spanish doctor named Nicolas Monardes wrote a book about the
history of medicinal plants of the new world. In this he claimed that tobacco could
cure 36 health problems.
In 1588, a Virginian named Thomas Harriet promoted smoking tobacco as a
viable way to get ones daily dose of tobacco. Unfortunately, he died of nose cancer
(because it was popular then to breathe the smoke out through the nose).
During the 1600s, tobacco was so popular that it was frequently used as
money! Tobacco was literally as good as gold! This was also a time when some of
the dangerous effects of smoking tobacco were being realised by some individuals. In
1610 sir Francis Bacon noted that trying to quit the bad habit was really hard.
In 1632, 12 years after the mayflower arrived on Plymoth Rock, it was illegal
to smoke publicly in Massachusetts! This had more to do with moral beliefs of the
day, than health concerns about smoking tobacco.

15

In 1760, Pierre Lorillard establishes a company in New York City to process

tobacco, cigar, and snuff. Today, P. Lorillard is the oldest tobacco company in the U.S.

GROWTH:
In 1776, during the American revolutionary war, tobacco helped finance the
revolution by serving as collateral for loans the Americans borrowed from France!
Over the years, more and more scientists began to understand the chemical in tobacco,
as well as the dangerous health effects smoking produces.
In 1826, the pure form of nicotine was finally discovered. Soon after, scientists
concluded that nicotine was dangerous poison.
In 1836, New Englander Samuel Green stated that tobacco was an insecticide,
a poison, and can kill a man.
In 1847, the famous Phillip Morris was established, selling hand rolled
Turkish cigarettes. Soon after in 1849, J. E. Liggett and Brother was established in
St. Louis, Mo. (the company that has settled out of the big lawsuits recently).
Cigarettes became popular around this time when soldiers brought it back to England
from the Russian and Turkish soldiers.
Cigarettes in the U.S. were mainly made from scraps left over after the
production of other tobacco products, especially chewing tobacco. Chewing tobacco
became quite popular at this time with the cowboys of the American West.
In 1875, R. J. Reynolds Tobacco Company (better known for its Reynolds
wrap aluminum foil) was established to produce chewing tobacco. It wasnt until the
1900s that the cigarette became the major tobacco product made and sold. Still, in
1901 3.5 billion cigarettes were sold, while 6 billion cigars were sold. Along with the
popularity of cigarettes however, was a small but growing anti-tobacco campaign,
with some states proposing a total ban on tobacco?
In 1902, the British Phillip Morris set up a New York headquarters to market
its cigarettes, including a now famous Marlboro brand. The demand for cigarettes
grew however, and in 1913 R.J. Reynolds began to market a cigarette brand called
Camel.
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WAR & CIGARETTES: A DEADLY COMBO:

The cigarette exploded during world war (1914-1918), where cigarettes were
called the soldiers smoke. By 1923, Camel controls 45% of the U.S. market! In
1924, Phillip Morris began to market Marlboro as a womans cigarette that is a Mild
as May!
To battle this, American Tobacco Company, maker of the lucky strike brand,
began to market its cigarettes to women and gains 38% of the market. Smoking rates
among female teenagers soon tripled during the years between1925-1935. In 1939,
American Tobacco Company introduced a new brand, Pall Mall, which allowed
American to become the largest tobacco company in the U.S.
During World War II (1939-1945), cigarette rates were at an all time high.
Cigarettes were included in a soldiers C-Rations (like food). Tobacco companies sent
millions of cigarettes to the soldiers for free, and when these soldiers came home, the
companies had a steady stream of loyal customers. During the 1950s, more and more
evidence was surfacing that smoking was linked to lung cancer.
In 1952 P. Lorillard markets its Kent brand with the Micronite filter, which
contained asbestos! This was fortunately discontinued in 1956. In 1953, Dr. Ernst L.
Wynders find that putting cigarette tar on the backs of mice causes tumors! In 1954,
RJ Reynolds introduced the salem brand, which was the first filter-tipped menthol
cigarette.

HEALTH HAZARDS REVEALED:

In 1964, the Surgeon Generals Report on Smoking and Health came out.
This report assisted in allowing the government to regulate the advertisement and
sales of cigarettes. The 1960s in general was a time when much of health hazards of
smoking were reported.
In 1965, television cigarette ads were taken off the air in Great Britain. In
1966, those health warnings on cigarette packs began propping up. In 1968, Bravo, a
non-tobacco cigarette brand was marketed made primarily of Lettuce, it failed
miserably!

17

Because of the negative press about tobacco, the major tobacco companies
began to diversify their products. Phillip Morris began to buy into the Miller Brewing
company, makers of Miller Beer, Miller Lite, and Red Dog Beer. RJ Reynolds
Tobacco Company drops the Tobacco Company in its name, and becomes RJ
Reynolds industries.
It also began to buy into other products, such as aluminium. American
Tobacco Company also drops Tobacco from its name, becoming American Brands,
Inc. In 1971, television ads for cigarettes are finally taken off the air in the U.S.
cigarettes, however, were still the most heavily advertised product second to
automobiles. In 1977, the first national great American Smoke out took place.
In 1979, the surgeon general reported on the health consequences of smoking
for women. This is in light to the increasing number of women who were taking up
the bad habit. Some attribute is to slick and campaign of the Virginia Slims brand,
youve come a long way baby.

THE RECENT PAST:

During the 1980s there were many lawsuits filed against the tobacco industry
because of the harmful effects of its products. Smoking became politically incorrect,
with more public places forbidding smoking. In 1982, the surgeon general reported
that second hand smoke may cause lung cancer. Smoking in pubic areas was soon
restricted, especially at the work place. In 1985, lung cancer became the No.1 killer of
women, beating out breast cancer! Phillip Morris continued to diversify into other
products, buying into General Foods Corporation and Kraft Inc in 1985. R. Reynolds
also diversified, buying Nabisco and becoming RJR / Nabisco.
In 1987, congress banned smoking on all domestic flights lasting less than 2
hours. In 1990, smoking is banned, except to Alaska and Hawaii. In 1990, Ben &
Jeerys (of ice cream fame) boycotts RJR / Nabisco, and dropped Oreos from its ice
cream products.
During the 80s and 90s, the tobacco started marketing heavily in areas
outside the U.S., especially developing countries in Asia. Marlboro is considered the
worlds no.1 most valuable brand of any product with a value over $30 billion! Over
18

this period, there is a battle between Coca Cola and Marlboro as the No.1 brand in the
world.
In the recent years there is growing evidence that the tobacco industry has
known all along that cigarettes are harmful, but continue to market and sell them.
There is also evidence that they know that nicotine was addictive and exploited this
hidden knowledge to get millions of people hooked on this dangerous habit!
Tobacco industry is an agro based industry. Tobacco is cultivated mainly in the
states of Andhra Pradesh and Karnataka most of the tobacco is used for the
manufacture of cigarettes and for exports. Tobacco is also grown in Tamilnadu, West
Bengal, Uttar Pradesh, Gujarat, Madhya Pradesh, Maharashtra and Orissa also.
However the tobacco grown in these states is of very less quality and is not
used for manufacture of cigarettes and exports. Several varieties of tobacco such as
Virginia flue cured ,Virginia air cured light soil burley, sun cured Virginia ,nature,
chewing. Tobacco, HDBRG, wrapper tobacco, beedi tobacco and hookah tobacco etc.
are grown in India. Virginia flue cured is a major variety grown in India. More than
80% of Indian tobacco crop belongs to this variety.
The tobacco cultivation exports and some other industrial activities are
regulated by central government (ministry of commerce) through Tobacco board.
Tobacco board is headed by I.A.S officer of senior category generally from the
central government. The board consists of several central government officers, state
government officers, political leaders, representatives of farmers and reputed
industrialists. One of the directors of ML group is always representing the
industrialists in the tobacco board.
Tobacco board issues licenses to the farmers who are permitted to grow
tobacco. The licenses regulate the cultivations area the farmers have to restrict the
cultivation to the given area and must sell the grown tobacco through tobacco board
auctions only any violation is an offence and is punishable.
In Virginia flue cured variety the tobacco leaves are separated from the plant
and are cured in tobacco barns. Tobacco barns are like a furnace where the fumes
are used to cure the green leaves of tobacco plant. tobacco barns appear like small
go downs with firing chambers at the bottom fixed to the walls .the green tobacco
19

leaves of the plant will be arranged in the form of rows inside the barns .the
temperature inside the barn will be regulated by means of flow of hot air through the
firing chambers .
This is simple technical process by which the green leaf exposed to hot air at
high temperature and cooled slowly over a period of time. After the curing process,
the primary leaf tobacco turns into lemon yellow colour, gold colour, brownish yellow
colour, brown colour and dark brown colour. This tobacco is called katcha tobacco
leaf and is ready for sale. The formers pack different colours as a separate grade
which has a separate price in the market.
Tobacco must be sold only through tobacco board auction platforms under
strict rules and regulations. Farmer or buyer is permitted to transact in tobacco board
auction platforms. Central government has also established several tobacco research
institutes for betterment of quality of tobacco in India. The other varieties of tobacco
are not regulated by tobacco board.
The tobacco purchased from the tobacco board auction platforms will be
graded further wherever required. Grading is a process of manual separation of one
variety of leaf from the other and is done mainly on the basis if colour. Each grade
will generally have unique quality parameters.
The graded tobacco is further processed either manually or on machines; this
processing is called DEBUTTING and STRIPPING. Workers separate the butt of
the tobacco leaf from the leaf. This process can also be done on machines .The
machines processing is called THRESHING.
After stripping/threshing, the tobacco will be further processed for
stabilization of moisture. And this process is called REDRYING. In this process
the tobacco first of all will be dried completely then it will be given steam at the
required temperature.
After redrying process the tobacco will be packed in the required packing say
bale packing /case packing etc. The packed tobacco is ready for export. In India, the
first threshing plant which is working uninterruptedly for the last 25/30 years an
imported one by Maddi Lakshmaiah &co ltd. This was installed at Ganapavaram
and the plant is still running at high efficiency levels in the country with 98%
20

average efficiency level for the last 3 years. There are two plants owned by ITC
which can be compared with this plant in the country. ITC uses their threshing
plants for their own consumption.
Tobacco industry is fetching more than Rs 9000 crores of revenue to the
Central Government. It is providing employment to lakh of people directly and
millions of people indirectly and is also contributing RS 1000 crores of forex
reserves to the country. The Central Government is announcing several restrictions
on advertisement and consumption of cigarettes in the country. Encouraging the
farmers by providing subsidized fertilizers and by supporting through tobacco
board.

The major players in tobacco industry in India are as under:

Name of the company

Occupation

% of business in India

Cigarette manufacturing & un

manufactured tobacco
ITC ltd

50%

exports
Cigarette manufacturing & un
manufactured tobacco

VST industries ltd

12%

exports
Cigarette manufacturing & un
manufactured tobacco

GTC industries ltd

6%

exports
Cigarette manufacturing & un

8%

manufactured tobacco
Godfrey Phillips India ltd

exports

The consumption is linked with the habits of the people; the tobacco usage cannot be
eradicated, even in countries like USA where anti tobacco campaign started in 1962,
the production of cigarettes and consumption of cigarettes is still progressing.

21

Exporters:
S.No

Name of the company

Occupation

% of business in India

Cigarette manufacturing
A

& un manufactured
ML group

tobacco exports

5%

Cigarette manufacturing
B

& un manufactured
Polisetty group

tobacco exports
5%
Cigarette manufacturing

& un manufactured
Bommidala group

tobacco exports
3%
Cigarette manufacturing

& un manufactured
Mittapalli group

tobacco exports
3%
Cigarette manufacturing

& un manufactured
Other companies

tobacco exports
8%

Our ML company has developed strong relationship with overseas

manufacturing in Europe, Russia and Middle East though there is very good demand
from Russian market. Our company is not exporting much because of poor economic
conditions of the country.
ML Company is now exporting cigarettes to Middle East and U.S.A by
manufacturing the cigarettes on job work basis. The company foresees a very bright
future for this company in tobacco in the coming years.
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ML group is the first tobacco company who exported tobacco to China and is
the first company who imported tobacco also from China. There was imported
tobacco in Indian tobacco history before this and after till now. The group maintains
good relationship with the Chinese tobacco monopoly.
One of the trade delegates that accompanied our honorable Prime Minister
during his recent visit to China is from ML Company. Three ambassadors of China
have visited our company in the past as our guests and expressed their satisfaction
on our infrastructure facilities.

Production of different varieties of tobacco in India:

VFC Tobacco

Traditional/NCOs/My sore

200 million

VFC Tobacco

HDBRG

12 million

ISB Tobacco

ISB (Releswaram/Warangal)

10 million

IAS Tobacco

25 million

3.0 COMPANY PROFILE

23

HISTORY:
The highly competitive tobacco market represented tremendous growth
potential to Mr. Maddi Lakshmaiah. Foreseeing the and for quality Indian tobacco a
long term strategy was formulated. Right from its inception, the company adhered to
international standards and made rapid in roads to global tobacco markets.
A sophisticated threshing plant of international standards was commissioned
in 1976 first in Andhra Pradesh. It created a revolution in tobacco processing and led
to a huge upsurge in demand. This led to the commissioning of two modern plants
with threshers, redryers and other sophisticated equipment for the processing of
quality tobacco.
ML Group has taken its credo of total quality to the furthest, whether in the
quality of process, products or working conditions for the vast workforce. The
foresighted innovation of Sri Maddi Lakshmaiah has given the group strong edge. The
personal involvement of the directors in all aspects of the business has resulted in high
quality operational parameters.
The company can proudly claim some of the most skilled work force and a
highly efficient management people who have contributed significantly to the
prominent position the company. The company has earned recognition from apex
institutions and is a recognized leader in tobacco markets the world over.
The quantum growth in ML group: Spread of investment in infra structure and
diversification into other business.
ML GROUP under its umbrella, various companies have an annul turnover
of Rs 1550 million and an asset base of Rs 2000 million. A real estate development
wing was setup to develop and lease commercial properties with working
environment that rival the best internationally.
The information about the establishment of the group which consists of five
concerns as displayed on the preceding pages, let us have a look on the various
concerns of ML Group individually:
ML group of companies (ML group) was founded by Mr.Maddi Lakshmaiah
in 1970. He joined in his family business in 1952 after completing his engineering
24

degree. The joint family business started payback in 1943 dealing with tobacco
exports, well before India.
ML group of companies (ML group), a pioneer in Indian un manufactured
tobacco industry has been exporting tobacco to all over the world for the past three
decades. It has solidified its relationship with overseas tobacco merchants&
manufactures.
ML Agro products Ltd. was set up at Chilakaluripet, a village in Andhra
Pradesh that produces some of the best tobacco in the country. Today it has evolved
into a diversified, multi products conglomerate known as ML Group that is
recognised world over for its excellence. The company processes tobacco and
another agro based products that are used both in the country and exported to the
most quality conscious world markets.
An emphasis on total quality and dedication to the interests of its clients
world wide is a hallmark of ML group. The group is performing excellently well
from the date of its incorporation and has been exporting large volume of tobacco to
Russia, CIS countries, U.K, Europe, African countries, China, Latin American
countries, Middle East countries, Bangladesh & Nepal etc. The group established its
branches in Russia & European countries and has strong tie up with African and
Latin American countries and especially with the neighbour giant China.
The group is founded by Sri Maddi Lakshmaiah, a mechanical engineer after
15 years of versatile experience in tobacco industry in 1970 at Chilakaluripet ,
Guntur dist, A.P .the group has 5 major concern namely;
Maddi Lakshmaiah & Co Ltd (MLCO)
ML Agro Products (MLAP)
K.S Subbaiah Pillai & co ltd (KSSP)
ML Exports (MLE)
Coromandal Agro Products & Oils Ltd (CAPOL)
Expecting CAPOL which is engaged in edible oils all are engaged in tobacco
industry. MLCO & MLAP have concentrated on processing activities where as
KSSP&MLE are leading exporters and are recognised by government of India as
export house.
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Vision:
Descriptions of some thing can organization corporate culture, business
technology an activity in the future.
The company is trying to develop world class information technology building
in Bangalore, china and Hyderabad in the coming 5 years time.
The company is going for sheet tobacco plant in joint venture with on of the
Indian best tobacco cigarette manufacturer.
The company is also contemplating for 100% tobacco joint venture association
with one of the best cigarette manufacturer.
The company exports with second strongest country china, Russia and
Germany.
The ambassadors are coming to ML Company limited in August.
The ambassadors of South Africa are hold up and the company is having top
joint venture with U.K.

Mission:
A mission statement is an enduring statement of purpose that distinguishes one
business from others similar firms. This statement identifies the scope of firms
operations in product and market terms.
M.L & company limited mission is to produce good quality of tobacco and get
number one position in India in producing and exporting tobacco.

Policies:
Policies can be considered a guide to action it is desirable that persons
responsible for implementation of policies use discretion and judgment in appraising
and deciding among alternative courses of action.
The company has well defined policies for exports the quality tobacco.
To conduct its operation with honesty integrity and transpoarency.
Employment policy is formulation and adoption.

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 This company shall maintain quality leadership by providing products and

services that completely and consistently meet the agreed.
Requirements of all customs and unsure fitness for use of all products there by
ensuring total confidence to every customer.
Employment policy formulation and adoption.
Canteen, cleaning, security maintenance of good industrial relation.

Future plans : The ML Agro products for an ECB for 50 million dollars and development
of regular trade and also infrastructure projects in India.
ML Agro products is also working on joint venture basis with UK based
Commodities Company for supply of agri products to South Asian countries.
The company already entered into joint venture with an US based company
by name CARGIL for the south Indian needs.
They have worked for joint venture arrangements with Yugoslavian
government for their requirement for India.
This for above five million dollars of investment in supply of 5000 tonnes
every year.

27

Achievements / awards: ML Agro products has no particular achievements/ awards.

Maddi Lakshmaiah group (CAPOL Chirala, Prakasam Dist ) got several
achievement awards .
All India Cotton Feed Crushers Association, Mumbai awarded CAPOL as III
highest exporter and II highest domestic seller of cotton seed extraction for the
year 1992-93.
CAPOL is the highest exporter and III highest domestic set of cotton seed
extraction for the year 1993-94.
CAPOL is the III highest domestic seller of cotton seed extraction in the year
1994-95.
CAPOL is the II highest domestic seller of cotton seed extraction in the year
1995-96.
CAPOL is the II highest domestic seller of cotton seed extraction in the year
1997-98
CAPOL is the III highest domestic seller of cotton seed extraction for the year
1999-2000.
CAPOL is the II highest extraction of cotton linter for the year 2000-01.
CAPOL is the III highest exporter of cotton linter and III highest domestic
seller of cotton seed extraction for the year 2001-02.
The company (CAPOL) has been awarded may commendation led by
government of AP for its continuous harmonious relations with its employees
in the years 1994,95,96,97.

28

Track record:The company has 30 years of performance.

It never failed in meeting the scheduled repayments of loans with the bank.
Rather it postponed most of the loans with the lenders.

LAND MARKS: ML Agro products Ltd was the first Indian company to join with China to do
business.
It was the first company to import tobacco and export tobacco.
Ambassadors have already come here and 4th one is coming in this august.

GRADING POINTS:ML Agro products has three grading points at Chilakaluripet i.e.
Martur, Muppavaram and some other on national highway between Guntur and
Chilakaluripet and three more in Guntur city.

NEGOTIATIONS: . The company is trying to develop world class information technology

building in Bangalore, Chennai and Hyderabad in the coming five years time
The company is going for sheet tobacco plant in joint venture with one of the
Indian best tobacco cigarette manufacture.
The company is also contemplating for 100% tobacco joint venture in
association with one of the best cigarette manufacture.
The company exports with the second strongest country china, Russia and
India.
29

 The finance manager is assisted by a team of experienced management and

non management staff who takes care of finance & accounts activities of the
organisation.
The export manager (ML Agro products) deals all the matters regarding the
exports department and directly reports to the managing director.
ML group was a multifaceted corporate leader of which the group consists of
five concerns namely.
Maddi Lakshmaiah& Co .Ltd- Tobacco threshers, packers & exporters, real
estate &leasing.
ML Agro Products - Tobacco threshers, packers &exporters.
KS Subbaiah Pillai & Co (India) ltd - Tobacco export.
ML Exports. - Exports house.

Coromandal Agro Products & Oils ltd. - Bulk producers of oils

Maddi Lakshmaiah & Co Ltd:ML & company Limited, the fore runner of all the companies of ML group,
the company enjoys a pre eminent standing in the world of tobacco, exporting to
China, Russia, Western Europe, Africa and Bangladesh among others.
Supported by a team of experts, technicians, engineering and a skilled world
force, the company has forged a head setting standards that have become benchmarks
in the industry. Today Chilakaluripet is a well known name in the global tobacco
business in no little measure due to the pioneering efforts of the intrepid founder, Sri
Maddi Lakshmaiah.

ML AGRO PRODUCTS LTD:ML agro products ltd was born of an increase in demand for quality tobacco in
both the domestic and foreign markets. Building on the rich experience of running a
profitable operation, a new plant was set up in 1976 at Martur, Prakasam district.
30

It is fully self sufficient with modern threshers, lamina redryers, and

automatic double ram press, sophisticated quality control laboratory and mammoth
ware houses. It ranks among the largest threshing units in the country apart from its
export commitments.

KS Subbiah Pillai & Co (India) ltd:

K.S.S.P & Co Ltd was acquired in 1982 with all its assets K.S
Subbaiah Pillai & Co (India) Ltd is the group with leading tobacco exporting unit. In a
field that is extremely competitive, the excellent performance of the company is an
indicator of the trust that it enjoys across the globe.

COROMANDAL AGRO PRODUCTS & OILS LTD (CAPOL):

CAPOL started in 1976, extracts and refines cotton seed oil. Today it is a multi
products company with equipment to process all kinds of oil seeds. The plant has a
storage capacity of 2100 tones for different types of oil.
Extreme care is taken to ensure that at every stage in the process of production
right from selection of the raw material to packing the products, only the best is
passed.
Minimum human intervention and rigorous application of quality control
process ensures the final product conform to all appropriate standards. The byproducts, hulls and de-oil cakes are in high demand in many parts of the world.

ML EXPORTS:
ML exports is a totally export oriented unit, with clients in a variety of markets
around the world. The company enjoys a reputation for excellent delivery schedules
and transparent business practice in global markets.
31

SHARE HOLDING PATTERN & MANAGEMENT OF GROUP:

The group has been successfully improving its business in all of its activities
such as domestic sales, export sales, tobacco processing & other tobacco development
activities, warehousing facilities etc. The group has two tobacco processing plants and
one solvent extraction plant in South India. The group owns around 1, 00,000 sq. mts
of warehousing complexes in south India.

INCORPORTATION:
ML Agro products is a limited company ( ML Agro products Ltd) which was
originally incorporated on 8th day of October 1970 under the name, ML Agro products
Ltd. Private Limited having passed the necessary special resolution on the 23 rd day of
March 2002, in terms of Sec 31(1)/44 of the Companies Act 1956 the name of the
company changed to Maddi Lakshmaiah and co.Ltd

NATURE OF ACTIVITY:
o

This factory produces good quality tobacco.

The production capacity per each day is 1 lakh 20 tones

FINANCIAL STRUCTURE:
The initial investment of ML Company is 10, 00,000.

TURN OVER OF THE GROUP:

The turn over of the group for the financial year 1989-99 standards is at
around Rs 800 million. The net earnings after taxes of the group have been maintained
at Rs 150/200 million per annum.
The group has sound assets base having assets spread in most of the prime
centres & ports of South India.
The group has developed excellent infrastructure during the past 30 years which
has been yielding a promising regular income of more than Rs 225 million every year.

32

TURNOVER OF THE COMPANY:

The turnover of ML Company for the following years of 19972003 is as follows:
S NO

NO OF YEARS

AMOUNT IN RS IN LAKHS

1994

2370

1995

1693

1996

488

1997

2372

1998

3358

1999

1778

2000

1000

Profit after tax:

SNO

NO OF YEARS

AMOUNT IN RS IN LAKHS

2002

109

2003

270

2004

203

2005

312

2006

262

2007

134

2008

103

2009

123

The above table represents the profit for the following years after paying all
the taxes.

The products of the M.L Company &their main uses:

33

The various products of the MLCompany and their economic uses are as
follows.

Karnataka light soil-Mysore:

This tobacco is preferred for low nicotine content, high filling capacity and
suitability to blend well with any tobacco.

Monsoon burley:
Used in U.S. blended cigarettes

Traditional burley:
Used for pipe mixture, chewing plugs and hookah tobacco paste.

Kurnool and Telangana (natu):

Primarily used for cigarette blending and for hookah tobacco paste making.

Eluru (natu tobacco):

Mainly used for cheroots, snuff pipe tobacco, cigarette blending and for
hookah paste making.

Oriental:
Used for cigarette blending.

Century fire cured tobacco:

Used in pipe mixtures and hookah tobacco paste

Bidi tobacco:
Used in the manufacture of bidis, a hand rolled smoking products made by
wrapping tobacco with natured bony leaves.
34

Cigar wrapper tobacco:

Mainly used for wrapping the cigars.

Cigar filler tobacco:

Mainly used in the manufacture of cigars &exported to some countries for use
in hookah tobacco paste.

Cheroot tobacco:
Used for the manufacture of cheroots and hookah tobacco paste.

Lanka tobacco:
Used for the manufacture of cigars & cheroots

Tamilnadu:
Used for chewing & cheroot.

Black Chopadia:
Used as chewing tobacco.

Red Chopadia:
Mostly used for chewing also called lat Chopadia and safna. The export
packing ranges from 250gms-1000gms and is available in bales of up to 100kg.

Rustic tobacco:
Used as chewing tobacco, hookah tobacco for tobacco sheet making, for
kreteks in Indonesia, pipe mixers& cigarette blending to some extent

Motihari:

35

Used in manufacture of various tobacco products such as chewing tobacco,

hookah paste, bidis etc.

Southern light soil:

Blends with any tobacco.

Black soil (traditional):

Blends well with any tobacco.

Northern light soil (nls):

This tobacco is flavoured to semi flavoured with excellent ageing properties.

Objectives of the company:

36

 To serve the nations vital interest in the tobacco related sectors.

To earn a reasonable return on investment.
To work towards achievement of self reliance in the field of tobacco,
threshing formulation& distribution system.
To create strong research& development in the field of tobacco and
stimulate R&D of exports.
To maximize utilization of the existing facilities in order to improve
efficient and increased productivity.
To import training, conduct seminars, workshops and educational
courses on computers, computer maintenance software development
and software exports and to develop and design software in India.
Abroad and to start software technology part in India or abroad and to
offer

relationship

management

solutions

for

individuals

and

organizations both individually and through strategic alliances with

others companies.
To employ experts to investigate and examine into the conditions,
prospects, value character and circumstance of any business concern
and undertaking and generally of any assets property or right.
To carry on all kinds of agency business.
To carry on business as merchants in all kinds of goods.

BOARD OF DIRECTORS:
Managing Director

Sri Maddi Lakshmaiah

Director

: Sri Maddi Seetha Devi

Director

: Sri Maddi Venkateswara Rao (M.B.A in USA)

Director

: Sri Maddi Ramesh

Excutive Director

: Sri Mallavarapu Rama Mohana Rao

Excutive Director

: Sri Meaden Sekhar

37

MANAGEMENT TEAM:
Managing Director

M. Venkateswara Rao

Director

M. Lakshmaiah

General Director

M. Rama Mohana Rao

Personnel Manager

B. Babu Rao

Leaf Manager

M. Rama Mohana Rao

Finance Manager

M. Shekhar

Export Manager

M. Shekhar

Production Manager :

K.S. Rami Reddy

Circle Manager

Factory coordinator

Anji Babu

P. Subba Rao

ORGANIZATION STRUCTURE:
The company (ML Company) is under the complete administrative control of the
managing director and he is reported by the director and he is reported by general
manager.
The General Manager (ML Company) is assisted by five General
Managers.
o Manager personnel.
o Manager leaf department.
o Manger finance.
o Manager exports.
o Manager production.
38

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Da
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Responsibilities:
39

The ML Agro products managing director M.Venkateswara Rao is under the

complete administrative control of the managing direction and he is reported by the
director and he is reported by general manager
The general manager of ML Agro products is M. Ram Mohan Rao assisted by
fine general manager i.e., personal manager, leaf manager or department manager,
finance manager, exports manager and production manager.
The personal department manager B. Babu Rao is headed by who reports
directly to G.M. he looks after the areas of personnel & administration under there
may be a personal offices welfare officer and a safely officer.
The finance manager M.Shekhar is assisted by a team of experienced
management and non management staff who takes care of the finance is accounts
activities of the organization.
The export manager M.Shakhar deals all the matters regarding the export
departments and directly reports to managing director.
The production manager K.S.Rami Reddy is headed by the G.M. is assisted by
a plant engineer and staff of the production department.

FUNCTIONS OF THE COMPANY:

The group has the following different departments.

PERSONNEL DEPARTMENT:
This department deals with the matters of industrial relations, HRD, welfare
activities, labour legislations, recruitment and issues of wages etc. which is the main
department in the organisation

LEAF DEPARTMENT:
This department deals with the matters of tobacco leaf. It looks after buying
tobacco from the farmers for the processing of tobacco.

EXPORT DEPARTMENT:

40

It looks after the export matters of the organisation. This organisation exports
tobacco leaf to China, Bangladesh & UK.

PRODUCTION DEPARTMENT:
This department takes care to produce quality tobacco to customers.

MARKETING DEPARTMENT:
This department takes care of marketing the company tobacco to other
countries such as Russia, Europe, Middle East, Bangladesh, African countries etc.
They sell varieties of tobacco in market and maintain good relationship with the
customers. This is one of the main/important departments in this organization.
M.L group was concentrating on domestic market.
It ties up with Indian strongest cigarette manufacturing company, ITC.

41

Methods:In ML Company the methods of purchasing tobacco is of various types i.e.

With tenders raised in market, documents will be filled up by various

companies or merchants can purchase them.

They have good contacts with various merchants (mediators between

manufacture & exporters) in reputed companies at Guntur.

Every year they are procuring 1000 tonnes of various varieties /grades of
tobacco.

They usually do their business with the international reputed companies like.
o Universal
o Damon
o Standard commercial
The company have some direct contacts with other countries and

they directly ask them at the time of requirement.

Marketing channels:

Normally they send samples/verities.

At the time of requirement, they send samples through couriers.

Participating in exhibitions- every year ML Company was taking participation

in 5-6 exhibitions.

The people who have connection in tobacco visit tobacco stalls usually, even
from Europe, Russia & china.

People like manufactures, dealers, bankers, merchants of tobacco may visit the
tobacco exhibitions.

They display the samples of the company and sell the samples.

42

Another mode:The other mode of marketing (channel) is through business delegations of

Tobacco Board of Central government, Ministry of Commerce. Government. of India,
Guntur. The tobacco board usually:

Regularize crop.

Register of foreigners.

Fixing the crop size.

The board explore marketing possibilities with the help of exporters.

Another type of business mode is tobacco trade delegations from different

countries (usually every year 5-6 delegations may takes place).

The tobacco delegations meet exporters and inspect all the tobacco.

They get the business through reputation.

Customers usually approach them because of the good will of

the company.

Mode of payment: Exporters normally receive payment from their buyers through L.CS (letters
of credit).
Some time through advance payment ion terms of D.A&D.P.
o Document against payment
o Document against acceptance.
After customers checkers in the Madras port it may send to abroad.
Shipment of tobacco is through Chennai port only.
At the same time shipment of tobacco the pay/buyers send payment to bank in
the companys account.

Credit: Some parties ask/need some time for payment with in certain period from
these date of bill of payment (up to 180 days).
43

 In India there is a rule that on credit basis, the payment must be done with in
180 days from the date.

Market range:ML Company was marketing 7-10 million kilos of tobacco every year. But the
market range is not fixed. The market range depends on supply &demand forces.
When there is demand, the company produces more.
In the tobacco field, the marketing/market range may be flexible based on
international supply -demand.

FINANCE DEPARTMENT:
In this department
Cash payments will be checked by cashiers.
Cash bills and credit bills may be received from trashing factory and
engineering department.
Concerned accounts may be generalized by the accountants and may be sent to
concerned heads.
Credit bills payment will be given in the form of cheques or DDs.

44

4.0 INTRODUCTION TO FUNDS FLOW ANALYSIS

Significant technique of financial analysis is Funds Flow Analysis. It is
designed to highlight changes in the financial conditions of a business concern
between two points of time which generally conform to beginning and ending
financial statement dates. Funds flow statement is also termed as a statement of
sources and applications of Funds, statement of changes in working capital,
statement of changes in Financial Position, statement of Funds supplied and
Applied, statement of Funds Generated and Expended, where got and where gone
statement, funds statement.
All though financial statements supply useful information to the management
and describe the nature of changes ownership as a result of the periods productive
and commercial activities, these statements fail to mirror the funds changes that have
taken place over a given time span. They do not spell out the movements of funds. It
is more important to describe the sources from which additional funds sere derived
and the uses to which these funds were put, because the ultimate success of a
business enterprise depends on where got and where gone situations. The funds flow
statement is, therefore, prepared to uncover the information which the financial
statements fail to describe clearly.

Funds Flow Statement:

The following are the definitions of funds flow statement.
R.N. Anthony: "The funds flow statement describes the sources from which additional
funds were derived and the uses to which these funds were put.
R.A.Foulk: A statement of sources and applications of funds is a technical devise
designed to analysis the changes in the financial conditions of a business between two
dates.
Bigman: It is a statement which highlights the underlying financial movements and
explains the changes of working capital from one point of time to another.

45

Thus funds flow statement is a report which summarizes the events taking
place between the two accounting periods. It spells out the sources from which funds
were derived and the uses to which these funds were put. This statement is essentially
derived from an analysis of the changes that have occurred in assets and liabilities
items between two balances sheet dates. In this statements only the net changes are
shows that the outcome of a transaction as of a series of transactions upon the
financial condition of a business enterprise is reflected more sharply.

Concept of Fund:
The term Funds has a variety of meanings. Some people take funds
synonymous to cash, and to them there is a no difference between a cash Flow
Statement prepared on this basis and a Funds Flow Statement. While others include
marketable securities and cash to constitute business funds. However, the most
common definition of the term funds is Working Capital or Net current Assets.
Thus the difference between Current Assets and Current Liabilities is called Funds.

46

Objectives of financial analysis:

Analysis of financial statements may be made for a particular purpose in view.
However, the following are generally considered to be the objectives of financial
analysis.
1. To find out the financial stability and soundness of the business enterprise.
2. To assess and evaluate the earning capacity of the business
3. To estimate and evaluate the fixed assets stock etc of the concern.
4. To estimate and determine the possibilities of future growth of business.
5. To assess and evaluate the firms capacity and ability to repay short-term and
long term loans.

Parties interested in financial analysis:

The analysis and interpretation of financial statements is an important
accounting activity. The end users of business financial statements are interested these
statements primarily as an aid to determine the financial position and the results of the
operations. There are different parties interested in the financial analysis of these
statements. But their aim and objectives of analysis differ significantly. The users of
financial statements can be divided into two broad groups; (i) internal users and (ii)
external users.

1. Internal users:
1. Financial executives:
The first party interested in the financial statement analysis is the financial
department of the company itself. This analysis helps the finance manager to have a

47

deep insight into the financial condition of the enterprise. This analysis helps him in
taking appropriate decisions from future point of view.
I.

Top management:

The top management of the concern is also

interested in the analysis of financial statements. It helps them in

reaching conclusion on the following.
a) Is the firm in a position to meet its current obligations?
b) What sources of long-term finance are employed by the firm? What is the
relationship between them? Is there any danger to the solvency of the firm
due to the employment of excessive debt?
c) How efficiently does the firm use its assets?
d) Are the earnings of the firm adequate?
e) Do investors consider the firm as profitable and safe for the purpose of
investing their money in its shares?

2. External users:
Investors:

Those who are interested in buying the shares of a company are

naturally interested in the financial statements to know how safe the

investment already made is and how safe the proposed investment will be.
1. Creditors:

Lenders are interested to know whether their loan, principal and

interest, will be paid when due suppliers and other creditors and also interested
to know the ability of the firm to pay their dues in time.
2. Workers: In our country, workers are extitled to payment of bonus which
depends on the size of profit earned. Hence, they would like to be satisfied that
the bonus beung paid to them is correct. This knowledge also helps them in
conducting negotations for wages.
3.

Customers:

They are also concerned with the stability and profitability of

the enterprise. They may be interested in knowing the financial strength of the
company to take further decision relating to purchase of goods.

48

4. Government: Financial analysis helps governments in determining tax

liability. This also helps government is knowing the role and status of industry
in general and companies in particular for framing macro-economic policies.
5. Public: The public at large is interested in the functioning of the enterprise
because it may make a substantial contribution to the local economy in many
ways including the number of people employed and their patronage to local
suppliers.
6. Researches:

The financial statements being a mirror of business conditions,

is of great interest to schalours undertaking research in accounting theory as

well as business affairs and practices.

Significance of Funds Flow Statement:

The funds flow statement is an important tool of financial analysis. The utility
of the funds flow statement items from the fact that it enables management,
shareholders, investors, creditors and other interested in the enterprise to evaluate the
uses of financial policies of the management.

i.

Decisions relating to financing:

With the people of the funds flow statement the analyst can evaluate the
financing patterns of the enterprise. An analysis of the major sources of funds
in the past reveals what portion of the growth was financed internally and
what portion externally. The statement is also meaningful in judging whether
the company has grown at too fast a rate, credit has increased at relatively
higher rate, one would wish to evaluate the consequences of slowness in the
trade payments on the credit standing of the company and its ability to finance
in future.

ii.

Decision on capitalization:
49

The funds flow statement serves as handmaid to the finance manager

in deciding the make up of capitalizations. Estimated uses of funds for new
fixed assets working capital, dividend, and repayment of debt are made for
each of several future years. Estimates are made of the funds to be provided by
operations, and the balance must be obtained by borrowing or issuance of new
securities, if the indicated amount of new funds required is greater than what
the finance manager thinks possible to raise, then plans for new fixed assets
acquisition and the dividend policies are re-examined so that the uses of funds
can be brought into balance with the anticipated sources of financing them. In
particular funds statements are very useful in planning intermediate and long
term financing.

iii.

Reveals the reasons for financial difficulties:

The funds flow statement reveals clearly the cause for the financial difficulties
of the company. The difficulties may be due to improper mix of short and long
term sources, un necessary accumulation of inventory of fixed assets etc.,
These can be found out by a careful study of the funds flow statement.

iv.

Others uses:
Funds Flow Statement is useful to the management in following cases.
a) Estimating the amount of funds needed for growth;
b) Improving the rate of income on assets;
c) Planning the temporary investment of idle funds;
d) Securing additional working capital when needed ;
e) Securing economies in the centralized management of cash in organisation
whose management is decentralized;
f) Planning the payment of dividend to shareholders and interest to creditor and
g) Lasting the effects of insufficient cash balance.

50

Useful as control device:

The funds flow statement also serves as a control device in that the statement
compared with the budgeted figures will show to what extent the funds were put to
use according to plan. This enables the finance managers to find out deviation from
the planned course of action and take remedial steps to correct the deviations.

Useful to the external parties:

The outside parties can have a clear knowledge about the financial policies
that the company has persuade. In the light of the information so supplied by the
statement the outsiders can decide whether or not to invest in the enterprise and on
what terms funds have to be invested. The funds statement provides an insight into the
financial operations of a business enterprise an insight immensely valuable to the
finance manager in analyzing the past and future expansion plans of the enterprise and
the import of these plans an its liquidity. He can detect imbalances in the issue of
funds and undertake remedial actions.
Thus, the funds statement draws the attention of finance manager to problems
which call for detailed analysis and immediate action. In view of these funds flow
statement is becoming more popular with management. Even some bank managers
make it obligatory for the borrowers to furnish a funds statement along with their
annual balance sheet now a days many Indian companies are publishing this statement
in their annual reports although they are not obliged to do so under the companies Act.

Limitations of financial analysis:

Every coin has two sides. Same is the case with analysis of financial
statement. Although this analysis has much significant and usefulness yet it has
certain limitations. Financial analysis may not provide exact answers to these
51

questions but it does indicates what can expected in the future. The limitations of
financial analysis are given below.
1. Historical data: Analysis of the financial statements indicates about the
performance of the business in the preceding periods. It does not indicates the
present position of the business. Financial statements are prepared on historian
facts and not throw light on the current and present position of the business.
2. Lack of standard terminology: Accounting is not an exact science. It does not
universally accepted terminology. Different meanings are given to a particular
term. These are different methods of providing depreciation. Interest may be
charged on different rates. In this way, there is sufficient possibility of
manipulation and the financial statements have suffer. As a consequence
financial analysis also proves to be defective. However, in the recent past the
International Accounting Board is taking active interest and taking measures
for standard sing the accounting terminology as well as bringing standards for
bring informing in accounting system.
3. Affects of price level changes: The results shown by financial statements may
be misleading, if price level changes havent been accounted for. The ratio
may improve with the increase in price, where as the actual efficiency may not
improve. Ratios on the two years will not be meaningful for comparison, it the
prices of commodities are different. Changes in price affects cost of
production, sales and value of assets and as a consequence comparability of
suffers.
4. Non-consideration qualitative aspects: Financial analysis does not measure the
qualitative aspects of the business. It does not show the skill, technical know
how and the efficiency of its employees and managers. It is the qualitative
measurement of the performance. It means that analysis of financial
statements measures only one sided performance of the business. It completely
ignores human resources.
5. Mis leading results: Results shown by financial analysis my be misleading in
the absence of absolute data. For example, the analysis of one firm revels that
the increase in profits form Rs.20,000 to Rs.80,000 shows that the profit has
increased by four times. In case of another firm the analysis reveals that the
52

profit of this firm also increased for Rs.100 crores to Rs.400 crores, showing
four fold increase. But this analysis ignored the size of the firms. As such, the
results may mislead.

Financial Statements and Funds Flow Statement:

Financial statement means the profit and loss account and the balance sheet.
All the organizations more particularly, the company from of organizations is required
to present the annual financial statements every year. The financial statements differ
with the funds flow statement in many ways.
A Funds Flow Statement is a statement measuring the inflows the inflows and
outflows of net working capital that result from any type of business activity between
two dates. An Income statement in a statement measuring the inflows and outflows of
net assets of revenue nature that result form rendering goods on services to customers
between two dates.

A Funds Flow Statements has become a useful tool in the hands of financial
analyst. That is be cause the financial statements i.e., Income statement measures the
flows restricted to transaction relating to rendering of goods and services to
customers. It is not capable of any accurate information of the resources from
operating unless the income data is converted into funds data. It does not depict the
major financial transactions which have resulted in changes in Balance Sheet.
Preparation of Funds Flow Statement:
In order to prepare funds flow statement, it is necessary to find out the
Sources and Applications of funds.

53

Sources of Funds:
Particulars

Amount

Particulars

Amount

By Opening Balance of P&L

To Depreciation

A/c

To General Reserve Account

By Profit on fixed Assets

To Loss on fixed asset

To Provision for Taxation
To Closing Balance of P&L

By Funds from operations

A/c

1. Funds from Operations: Funds from operations is the only internal sources of
funds. Some adjustments are to be made in calculating funds from operations
to the net profit given in the financial statement.
2. Calculation of funds from operations:

The following procedure is to be followed in the calculation of funds from

operations.
1. Start with the Net Profit given in the profit and loss account.
2. Add the following items to the net profit as they do not result in outflow of
funds.
i.

Depreciation on fixed assets.

ii.

Preliminary expenses or good will etc., written off.

iii.

Contribution to debenture redemption funds, transfer to general reserve

etc., if they have been deducted before arriving at the figure of net
profit.
54

iv.

Provision for taxation and proposed dividend. These may be taken as

appropriations of profits or current liabilities for the purposes of Funds
Flow Statement. Tax or dividends actually paid are taken as
applications to funds. Similarly interim dividend paid is known as an
application of funds. All these items will be added back to net profit if
already deducted, to find funds from operations.

v.

Loss on sale of fixed assets.

1. Deduct the following items from net profit as they do not increase the funds:
i.

Profit on sale of fixed assets, since the full sale proceeds are taken as a
separate source of funds and conclusion here will result in duplication.

ii.

Profit on revaluation of fixed assets.

iii.

Non-operating incomes such as dividend received or accured rent.

These items increase funds but they are not operating incomes. They
will be shown under separate heads as sources of funds in the Funds
Flow Statement.
In case the profit and loss account shows net loss this should be
taken as an items which decrease the finds.

Statement of changes in working capital:

The increase or decrease in working capital can be calculated by preparing the
schedule of changes in working capital.
Working capital represents the excess of current assets over current liabilities.
Several items of all current assets and current liabilities are the components of
working capital. In order to ascertain the working capital at the beginning and at the
end of the period and to measure the increase or decrease therein it is necessary to
prepare a statement or schedule of changes in working capital.

55

Schedule of changes in working capital of the company for the year

ended
Particulars

Previous

Current

Year(Rs.)

Year(Rs.)

Effect on working capital

Increase (Rs.)

Decrease(Rs.)

Current Assets:
Stock
Debtors
Cash Bank
Bills receivable
Prepaid expenses
Total (A)
Current liabilities:
Creditors
Bills payable
Outstanding expenses
Total (B)
Working changes:(A-B)
Increase/decrease in
Working capital

While preparing a schedule of changes in working capital it should be noted that.

56

1.
a. an increase in current assets increases working capital;
b. a decrease in current assets decrease working capital;
c. an increase in current liabilities decreases working capital;
d. a decrease in current liabilities increase working capital;
e. an increases in current asset and increase in current liabilities

does not

affect working capital.

f. a decrease in fixed assets and fixed liabilities affects working capital .
2.

The changes in all currents assets and current liabilities are merged into one
figure only either an increase or decrease in working capital over the period
for which funds statements has been prepared. If the working capital at the end
of the difference expressed as increase in working capital. On the other hand,
if the working capital at the end of the period is less than that at the
commencement, the difference is called decrease in working capital.

Current Assets:
The expression current assets denotes those assets which are
continually on the move since they are constantly in motion, they are also known as
the circulating capital of the business. These assets can or will be converted into cash
during a complete operating cycle of the business. Current assets include;
a. stock-in-trade or inventories
b. debtors
c. payments in advance or prepaid expenses
d. stores
e. bills receivables
f. cash at bank
g. cash in hand
57

h. work in progress

Current liabilities:
Current liabilities are those liabilities which are to be paid in the near future,
i.e., during a complete operating cycle of the business. Such liabilities include;
a. Trade creditors
b. Accrued or outstanding expenses.
c. Bills payable.
d. Income tax payable
e. Dividends declared;
f. Bank overdraft
Note: Some experts are of the opinion that as bank over draft has a tendency to
become more or less a permanent source of financing and hence it need not be
included among current liabilities.

Statement of Sources and Application of Funds:

1

Funds from operation:It is an internal source of funds. Funds from operations

are to be calculated as per the method stated above.

Funds from long term loans: Long term loans such of debentures, borrowing
from financial institutions will increase the working capital and therefore,
there will be inflow of funds. However, if the debentures have been issued in
consideration of some fixed assets, there will be no inflow of funds.

Sale of fixed assets:

Sale of land, buildings, and long-term investments will

result in generation of funds.

4

Funds from increase in share capital: Issue of shares for cash or for any other
current asset or in discharge of current liability is another source of funds.
However, shares allotted in consideration of some fixed assets will not result
58

in funds. However, it is recommended that such purchase of fixed assets as

well as issue of securities to pay for them be revealed in funds flow statement.
5

Decrease in working capital: Decrease in working capital is the result of

decrease in current asset or increase in current liabilities. In both the cases
inflow of funds takes place. Suppose stock, a current asset reduce from
Rs.15,000 to Rs.12,000 the decrease of Rs.3,000 is assumed to be due to the
disposal of stock which undoubtedly brings funds into the business. In the
fame way, increase in current liabilities means lesser payment, so retaining
funds is also a source.

Funds flow Statements

59

Particulars

Amount (Rs.)

Sources of funds:
Issue of shares

XXX

Issue of debentures

XXX

Long term borrowings

XXX

Sale of fixed assets

XXX

* Decrease in working capital

XXX

Total sources

XXX

Application of funds:
Redemption of redeemable

XXX

Preference shares

XXX

Redemption of debentures

XXX

Purchase of fixed assets

XXX

Payment of other long term loans

XXX

Payment of dividends, taxes, etc

XXX

*increase in working capital

XXX

Total uses

XXX

Note: * only one will be there.

Treatment of adjustments:
60

Some times the factors affecting the funds from operations may not be given
in the problems directly and there may be some hidden information. As such, some of
the transactions have to digged out using the additional information provided as
adjustments to the balance sheet. These items include: a) provision for tax (b)
proposed dividends (c) sale purchase of fixed assets.
a

Provision for tax: it is current liability while preparing a funds flow

statement, these are two options available.

Provision for tax may be taken as a current liability in such a case, when
provision for tax is made the transaction involves profit and loss
appropriation account which is a fixed liability and provision for tax
account which is a current liability. It will thus decrease the working
capital. On payment of tax these will be no change in working capital
because it will in-values one current liability (i.e., provision for tax) and
the other a current assets (i.e., bank or cash balance).

Provision for tax may be taken only as an appropriation of profit. It

means that, there will now change in working capital position when
provision for tax is made since it will involve two fixed liabilities, i.e.,
profit and loss appropriation account and provision for tax account.
However, when tax is paid, it will be taken as application of funds,
because it will when involve Provision for tax account which has been
taken as a fixed liability and bank which is current assets.

Proposed dividends: Whatever has been said about the provision for tax is
also applicable to proposed dividends. Proposed dividends can also be dealt
with in two ways;

Proposed dividends may be taken current liability since declaration of

dividends by the share holders is simply a formality. Once the
dividends are declared in the general meeting, they will have to be paid
within 42 days of theirs declaration. In case proposed dividends is
taken as a current liability it, will appear as one of the items decreasing
working capital in the schedule of changes in working capital. It will
not be shown as an application of funds when dividend is paid later on.
61

Proposed dividends may simply be taken as an appropriation of profits.

In such a case proposed dividend for the current year will be added
back to current years profit in order to find out funds from operations
if such amount of dividend has already been charged to profits.
Payment of dividend will be shown an application of funds.

Sale or purchase of fixed assets: For arriving at the final figure we have to
prepare the asset account, depreciation account, assets sold as purchased
account. This can be illustrated well with the following extracts of the balance
sheet.

Asset account (plant and machinery account):

This is maintained at the cost price. The accounts is debited with the cost of
the machinery as at the beginning of the year (i.e., balance in the machinery
account at the beginning) and with purchases during the year. It is credited
with the cost price of the machinery sold and with cost of the machinery as at
the close of the year (i.e., balance in the machinery account at the end). In the
problems either the total value of purchases during the year may be missing or
the cost of the machinery sold may be missing. The missing figure can be
found out by feeding the account with the available information and balancing
it.

Depreciation account: Depreciation is not source of funds. Source of funds is

constituted by those transactions, where one account belongs to current
category and the other is longs to non-current category. In case of depreciation
both items belong to non-current category, as such it does not make any
change in the funds and is not a source of funds. In support of the answer
journal entry regarding depreciation is presented herewith.
Profit and loss account is a non-current liability and fixed assets are noncurrent asset. As both of them belong to non-current category, so depreciation
is not a source of funds.

Asset sold account: the purpose of preparing this account is to ascertain the
profit or loss made on sale of the asset. The account is debited with the cost of
62

the assets sold (transferred from the asset account). It is credited with the
accumulated depreciation on the asset sold (transferred from depreciation
account). It is also credited with the money received on sale of the machinery.
The difference between the two sides would be profit (if credit balance or loss
(if debit balance).

5.0 DATA ANALYSIS AND INTERPRETATION

63

TABLE 5.1
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE
YEAR 2009-2010
Working capital
Particulars

2009

2010
Increase
Rs.

Decrease
Rs.

A) Current assets:
1) Inventories

172256321

187934012

15677691

2) Sundry Debtors

24937024

26860540

1923516

3) cash & bank balance

33465753

6059037

4) other current assets

28656816

48679846

5) Loans & Advances

14928012

11723019

274243926

281256454

108391431

139624184

31232753

7256927

12018960

4762033

Total Current Liabilities

115648358

151643144

Net working capital (A-B)

158595568

129613310

Total Current Assets

27406716
20023030
3204993

B) Current liabilities:
1) Current Liabilities

2) Provisions for taxation

Decrease in working capital

Total

158595568

28982258

28982258

158595568

66606495

Source: Compiled from annual reports of the company

INTERPRETATION:
64

66606495

It is observed from table 5.1 that the net increase in working capital for the year 200910 is Rs 2,89,82,258. The current assents of the company are decreased comparing
with previous year results. The current liabilities of the company are increased
comparing the previous results.

TABLE 5.2
ADJUSTED PROFIT & LOSS ACCOUNT FOR THE YEAR
2009-10
Dr.

Cr.
Particulars

Amount Rs.

Particulars

To Depreciation A/c

105478021

By Opening Balance of
Reserves and surplus A/c

135167525

To Closing Balance of
Reserves and surplus A/c

130270036

By Funds from operations

100580532

235748057

Amount Rs.

235748057

Source: Compiled from annual reports of the company.

INTERPRETATION:
From the table 5.2, has been observed the company gains
profit from the operation to an extent Rs 10,05,80,532.

TABLE 5.3
65

FUNDS FLOW STATEMENT FOR THE YEAR 2009-10

Sources

Amount Rs.

Applications

Amount Rs.

Raising unsecured loans

23688279

Payment on secured loan

74848773

Funds from operations

100580532

Purchase fixed assets

79411683

Sale of investment
Decrease in working capital
Increase in differed tax

736800
28982258
272587
154260456

154260456

Source: Compiled from annual reports of the company

INTERPRETATION:
From the table 5.3, net decrease in working capital is Rs 2,89,82,258. This
year raising the unsecured loans and selling some investments. This year changes in
differed tax increased, the company paying some funds to secured loans holders.

TABLE 5.4
66

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE

YEAR 2010-2011
Working capital
Particulars

2010

2011
Increase
Rs.

Decrease
Rs.

A) Current assets:
1) Inventories

187934012

239880075

51946063

2) Sundry Debtors

26860540

35992686

9132146

3) cash & bank balance

6059037

7150276

1091239

4) other current assets

48679846

69640943

20961097

5) Loans & Advances

11723019

12529745

806726

281256454

365193725

1) Current Liabilities

139624184

202449314

2) Provisions for taxation

12018960

9073986

Total Current Liabilities

151643144

211523300

Net working capital (A-B)

129613310

153670425

Increase in working capital

24057115

Total Current Assets

B) Current liabilities:

Total

153670425

67

2944974

24057115
153670425

Source: Compiled from annual reports of the company

INTERPRETATION:

62825130

86882245

86882245

It is observed from table 5.4 that the net increase in working capital for the year 201011 is Rs 2,40,57,115. The current assents of the company are increased comparing
with previous year results. The current liabilities of the company are decreased
comparing the previous results.

TABLE 5.5
ADJUSTED PROFIT & LOSS ACCOUNT FOR THE YEAR
2010-11
Dr.

Cr.
Particulars

Amount Rs.

Particulars

To Depreciation A/c

145033137

By Opening Balance of
Reserves and surplus A/c

130270036

To Closing Balance of
Reserves and surplus A/c

151136957

By Funds from operations

165900058

296170094

Amount Rs.

296170094

Source: Compiled from annual reports of the company.

INTERPRETATION:
From the table 5.5, has been observed the company gains profit from the operation to
an extent Rs 16,59,00,058.compare to the last year there is an increase in the funds
from operation

TABLE 5.6
FUNDS FLOW STATEMENT FOR THE YEAR 2010-11
68

Sources

Amount Rs.

Increase in differed tax

451322

Funds from operations

165900058

Applications

Amount Rs.

Payment on secured loan

10888974

Purchase fixed assets

125206678

Payment Unsecured loan

6198613

Increase in working capital

24057115

166351380

166351380

Source: Compiled from annual reports of the company

INTERPRETATION:
It shows the table 5.6, net increase in working capital is Rs 2,40,57,115. This
year company is paying unsecured loans, at present time no change in investments.
And this year change in differed tax increased and the company pay some funds to
secured loan holders.

TABLE 5.7
SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR
69

2011-2012
Working capital
Particulars

2011

2012

239880075

236975762

2) Sundry Debtors

35992686

36258591

265905

3) cash & bank balance

7150276

13998934

6848658

4) other current assets

69640943

93687132

24046189

5) Loans & Advances

12529745

10864119

365193725

391784538

202449314

158452146

9073986

21580520

Total Current Liabilities

211523300

180032666

Net working capital (A-B)

153670425

211751872

Increase in working capital

58081447

Increase
Rs.

Decrease
Rs.

A) Current assets:
1) Inventories

Total Current Assets

2904313

1665626

B) Current liabilities:

1) Current Liabilities

2) Provisions for taxation

Total

211751872

70

12506534

58081447
211751872

Source: Compiled from annual reports of the company

INTERPRETATION:

43997168

75157920

75157920

It is observed from table 5.7. That the net increase in working capital for the year
2011-12 is Rs 5,80,81,447. The current assents of the company are increased
comparing with previous year results. The current liabilities of the company are
decreased comparing the previous result

TABLE 5.8
ADJUSTED PROFIT & LOSS ACCOUNT FOR THE YEAR 2011-12
Dr.

Cr.
Particulars

Amount
Rs.

Particulars

Amount
Rs.

To Depreciation A/c

182491726

By Opening Balance of
Reserves and surplus A/c

151136957

To Closing Balance of
Reserves and surplus A/c

194200158

By Funds from operations

225554927

376691884

376691884

Source: Compiled from annual reports of the company

INTERPRETATION
from the table 5.8,has been observed the company gains profit from the operation to
an extent Rs 22,55,54,927. compare to the last year there is an increase in the funds
from operation

TABLE 5.9
71

FUNDS FLOW STATEMENT FOR THE YEAR 2011-12

Sources

Amount Rs.

Applications

Amount Rs.

Raise secured loans

99207205

Payment on unsecured loan

111445151

Funds from operations

225554927

Purchase fixed assets

154511989

Decrease in differed tax

Increase in working capital

324762132

723545
58081447

324762132

Source: Compiled from annual reports of the company

INTERPRETATION:
from the table 5.9, net increase in working capital is Rs 5,80,81,447. This
year changes in differed tax decreased and the company raising some funds to secured
loan holders.

TABLE 5.10
72

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR

2012-2013
Working capital
Particulars

2012

2013
Increase Rs.

Decrease
Rs.

A) Current assets:
1) Inventories

90436781

236975762

327412543

2) Sundry Debtors

36258591

22361498

3) cash & bank balance

13998934

73891461

59892527

4) other current assets

93687132

151568707

57881575

5) Loans & Advances

10864119

13966691

3102572

391784538

589200900

1) Current Liabilities

158452146

143360960

2) Provisions for taxation

21580520

90860140

Total Current Liabilities

180032666

234221100

Net working capital (A-B)

211751872

354979800

Decrease in working capital

143227928

Total

354979800

Total Current Assets

13897093

B) Current liabilities:

73

69279620

143227928
354979800

Source: Compiled from annual reports of the company

INTERPRETATION:

15091186

226404641

226404641

It is observed from table 5.10. That the net increase in working capital for the year
2012-13 is Rs 14,32,27,928. The current assents of the company are increased
comparing with previous year results. The current liabilities of the company are
decreased comparing the previous results.

TABLE 5.11
ADJUSTED PROFIT & LOSS ACCOUNT FOR THE YEAR 2012-13

Dr.

Cr.
Particulars

Amount
Rs.

Particulars

Amount
Rs.

To Depreciation A/c

218501632

By Opening Balance of
Reserves and surplus A/c

194200158

To Closing Balance of
Reserves and surplus A/c

345901071

By Funds from operations

370202545

564402703

564402703

Source: Compiled from annual reports of the company

INTERPRETATION:
From the table 5.11, the has been observed company gains profit from the operation to
an extent Rs 37,02,02,545 compare to the last year there is an increase in the funds
from operation

TABLE 5.12
74

FUNDS FLOW STATEMENT FOR THE YEAR 2012-13

Sources

Amount
Rs.

Raise unsecured loans

1790474

Funds from operations

Increase in differed tax

Amount
Rs.

Applications
Payment on secured loan

49556343

370202545

Purchase fixed assets

215836650

36627902

Increase in working capital

143227928

408620921

408620921

Source: Compiled from annual reports of the company

INTERPRETATION:
. from the table 5.12, net increase in working capital is Rs 14,32,27,928. This
year is paying unsecured loans comparing with previous year. This year changes in
differed tax increased, the company raising some funds from secured loan holders

TABLE 5.14
75

SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR

2013-2014
Working capital
Particulars

2013

2014
Increase Rs.

Decrease Rs.

A) Current assets:
1) Inventories

327412543

341906868

14494325

2) Sundry Debtors

22361498

83013158

60651660

3) cash & bank

balance

73891461

156006572

82116110

4) other current
assets

151568707

219855601

68286894

5) Loans &
Advances

13966691

16218625

2251934

Total Current Assets

589200900

8170018236

1) Current
Liabilities

143360960

125982205

2) Provisions for
taxation

90860140

127893051

Total Current
Liabilities

234221100

253875256

Net working capital

(A-B)

354979800

563126567

Decrease in working
capital

208146767

------

563126567

563126567

B) Current liabilities:

Total

Source: Compiled from annual reports of the company

INTERPRETATION:
76

17378755

37032911

208146767
245179678

245179678

It is observed from table 5.13. That the net increase in working capital for the year
2013-14 is Rs 20,81,46,767. The current assents of the company are increased
comparing with previous year results. The current liabilities of the company are
decreased comparing the previous results

TABLE 5.14
ADJUSTED PROFIT & LOSS ACCOUNT FOR THE YEAR 2013-14

Dr.
Particulars

Cr.
Amount
Rs.

Particulars

Amount
Rs.

To Depreciation A/c

256813736

By Opening Balance of
Reserves and surplus A/c

345901071

To Closing Balance of
Reserves and surplus A/c

424599303

By Funds from operations

335511968

681413039

681413039

Source: Compiled from annual reports of the company.

INTERPRETATION:
To find the table 5.14, the company gains profit from the operation to an extent Rs
33,55,11,968. compare to the last year there is an decrease in the funds from
operation.

TABLE 5.15
77

FUNDS FLOW STATEMENT FOR THE YEAR 2013-14

Sources

Amount

Applications

(Rs)

Raise unsecured loans

171565663

Funds from operations

4832584

Increase in differed tax

335511968

Decrease in capital work in

process

Amount
(Rs)

Payment on secured loan

31648312

Purchase fixed assets

273665497

Increase in working capital

208146767

1550361
513460576

513460576

Source: Compiled from annual reports of the company

INTERPRETATION:
from the table 5.15, net increase in working capital is Rs 20,81,46,767. This
year the company is raising funds through secured loans, differed tax increased and
decrease in capital work in process. This year The Company spend funds for
purchasing of fixed assets and unsecured loans

6.0 FINDINGS
78

1. It has been observed the share capital of company is not increasing from 2009 to
2014.
2. The company is having good reserves and surplus position. These are increasing
year to year from 2009 to 2014. It has been observed that reserves increased to Rs
from 13,02,70,036 to 42,45,99,303.
3. The company is taking loans from other sources like banks, financial institutes etc.
it observed from 2009 to 2014, the loan amount has deceased from Rs
52,96,65,603 to Rs 51,25,12,335. But 2010 the company is raising up to
65,24,29,686.
4. It has been observed that the company is investing less on fixed assets from 2009
to 2014. The decrease is from 60,60,14,108 to 57,09,03,729.
5. It has been observed that the company made investments in 2005 only. Afterwards
till 2011 no new investments have been made.
6. The total increase in current assets of the company has overcome the total increase
in current liabilities in 2009 to 2014. Current assets are increasing year to year.
But in 2010 only the increases in current liabilities overcame the increase in
current assets.
7. It has been observed that the net working capital has decreasing in 2009-2010 (to
Rs 2,89.82.258) while in all other years till 2011, it increased. And the companys
funds from operations is satisfactory
8. It has been observed that the company is raising funds from secured and
unsecured loans, sale of fixed assets and funds from operations and it is spending
to purchase fixed asset, redemption of loans and other payments.

SUGGESTIONS
79

1. It has been observed that the share capital of the company is not increasing from
2009 to 2010. This is obstructing the growth of the company. Hence I suggest the
company to increase the share capital.
2. It has been observed that the companys contribution to the fixed assets is
gradually decreasing through out the study. This would be a problem for the
company procuring funds. Hence I suggest the company to focus on this and
increase the allocation for fixed assets.
3. It has been observed that the company has made investments only in 2009.
Afterwards there are no investments at all though all these years. This may affect
the reputation of the company in the public. Hence I advise the company to
increase investments and improve its image.
4. It has been observed that the increase in current assets of the company is less than
current liabilities in 2009-10. This shows that the company has less liquidity
capacity. Hence I suggest the company to maintain the current ration to 2:1 by
increasing current assets or reducing current liabilities.
5. It has been observed that the position of the working capital in 2009-10 has
decreased. This will have on effect on sources of funds of the company. Hence I
advice the company improve the position of current assets than current liabilities
and control the decrease in working capital.
6. The company is getting favorable funds from operations in all years of the study.
This is due to the excellence in operations. This is a good trend and it should be
carefully maintained.

CONCLUSION
80

ML Agro products Ltd. was the flat ship company of Maddi Lakshmaiah
Group after successful beginning and performance of ML Agro products Ltd. It was
the India based infrastructure in tobacco based operations in entire un manufacturing
tobacco industries.
The company is having experienced professionals in management and also in
supervisory levels.
The company is having the efficiency of the plant operations on average for
the last 3 years in 98% which is recorded as the best in India. The company is having
scientists in Leaf Management. The company is developing tobacco in certain areas of
the country which is said to be of high quality standards in the international market.
The company is having experts in almost all departments and running their company
always at better standards than the competitors in India.
They had satisfied their strength and now they are setting on fixed properties
worth about Rs 400 crores. The group is own in fixed properties of Rs 400 crores and
they were enjoying the financial limits.
The company started diversifying into infrastructure projects and developed a
software technology building named as Maddi Lakshmaiah Towers in Mumbai.
This is per the architecture of Maharashtra Development Company. The best of its
kind in entire greater Mumbai city.
This is a project of around 7,500 acres. This would flex around 1,25,000 a
month. It is concentrated on tobacco trading is reduced. The company is enjoying
working capital limits with Canara Bank, Guntur.
They have also developed warehousing complexes in southern areas of south
India. This was the first class warehousing company near Kakinada Port and
International Company warehousing near ICDI, Hyderabad and one in ICD Guntur.
The company is negotiating two complexes near Madras Port & Cochin.
The company for an ECB for 50 million dollars and development of regular
trade and also infrastructure projects in India.

81

The only delegate from tobacco industry who is permitted along with P.M Atal
Bihari Vajpayee to the recent tole to china is form Maddi Lakshmaiah Company.

82

6.1 BIBLIOGRAPHY

S.NO

AUTHOR NAME

TITLE OF THE

NAME OF

BOOK

PUBLISHER

Financial

Vikas publishing

management

house

Financial

Tata Mc Graw Hill

management

publishing co.

Financial

Anmol

management

publications Pvt.

I.M.Pandey

M.Y.Khan &
P.K.JAIN

V.K.Bhalla

Ltd

ML Agro products Ltd, ANNUAL REPORTS.

www.indiantobacco.com

www.pogakuvedika.com

www.icra.in

83

YEAR

2003

2003

2003

6.2 Annual reports of ML Agro products Limited

for year 2009-10
Particulars

Amount

Sources of Funds:
Share capital
Reserves & Surplus
Loan Funds
Secured loans
Unsecured loans
Differed Tax liabilities
Total
Applications of Funds
Fixed Assets:
Gross Block
Less Depreciation
Net Block
capital work in progress
Investments
Current Assets:
Inventories
Sundry Debtors
Cash & Bank Balance
Other Current Assets

13000000
130270036
390364244
199239493
5796209
738669982
711492129
105478021
606014108
59399
2983165
187934012
26860540
6059037
48679846

Loans & Advances

11723019
281256454

(-)Current liabilities:
Current Liabilities
Provisions

139624184
12018960
151643144

Net current Assets

129613310
Total

738669982

Particulars

Amount

Sources of Funds:
Share capital
Reserves & Surplus
Loan Funds
Secured loans
Unsecured loans
Differed Tax liabilities
Total
Applications of Funds
Fixed Assets:
Gross Block

13000000
151136957
379475270
193040880
6247531
742900638
746114635

84

Less Depreciation
Net Block
capital work in progress
Investments
Current Assets:
Inventories
Sundry Debtors
Cash & Bank Balance
Other Current Assets

145033137
581081498
5165551
2983165
239880075
35992686
7150276
69640943

Loans & Advances

12529745
365193725

(-)Current liabilities:
Current Liabilities
Provisions

202449314
9073986
211523300

Net current Assets

153670425
Total

742900638

Annual reports of ML Agro products Limited

for year 2010-11

Annual reports of ML Agro products Limited

for year 2011-12

85

Particulars
Sources of Funds:
Share capital
Reserves & Surplus
Loan Funds
Secured loans
Unsecured loans
Differed Tax liabilities
Total
Applications of Funds
Fixed Assets:
Gross Block
Less Depreciation
Net Block
capital work in progress
Investments
Current Assets:
Inventories
Sundry Debtors
Cash & Bank Balance
Other Current Assets

Amount
13000000
194200158
478682475
81595729
5523986
773002348
738903208
182491726
556411482
1855829
2983165
236975762
36258591
13998934
93687132

Loans & Advances

10864119
391784538

(-)Current liabilities:
Current Liabilities
Provisions

158452146
21580520
180032666

Net current Assets

211751872
Total

773002348

Annual reports of ML Agro products Limited

for year 2012-13
86

Particulars
Sources of Funds:
Share capital
Reserves & Surplus
Loan Funds
Secured loans
Unsecured loans
Differed Tax liabilities
Total
Applications of Funds
Fixed Assets:
Gross Block
Less Depreciation
Net Block
capital work in progress
Investments
Current Assets:
Inventories
Sundry Debtors
Cash & Bank Balance
Other Current Assets
Loans & Advances

Amount
13000000
345901071
429126132
83386203
42151888
913565294
772553600
218501632
554051968
1550361
2983165
327412543
22361498
73891461
151568707
13966691
589200900

(-)Current liabilities:
Current Liabilities
Provisions

143360960
90860140
234221100
354979800
913565294

Net current Assets

Total

Annual reports of ML Agro products Limited

for year 2013-14
87

Particulars
Sources of Funds:
Share capital
Reserves & Surplus
Loan Funds
Secured loans
Unsecured loans
Differed Tax liabilities
Total
Applications of Funds
Fixed Assets:
Gross Block
Less Depreciation
Net Block
capital work in progress
Investments
Current Assets:
Inventories
Sundry Debtors
Cash & Bank Balance
Other Current Assets
Loans & Advances

Amount
13000000
424599303
600691795
51737891
46984472
1137013461
827717465
256813736
570903729
2983165
341906868
83013158
156006572
219855601
16218624
817001823

(-)Current liabilities:
Current Liabilities
Provisions

12598225
12789505
25387526
5631268
1137013461

Net current Assets

Total

88