Bhaskar Ppt

8/6/2019 Bhaskar Ppt

1/40

WELCOME


2/40

PRESENTED BY

VIJAYA BHASKAR


3/40

INTRODUCTION OF FUNDS FLOW ANALYSIS

Financial analysis is the process of identifying thefinancial strengths and weaknesses of the firm. It is done byestablishing relationships between the items of financialstatements viz., Balance sheet and Profit and Loss account.

The Funds Flow Statement is concerned withsources and applications of organization. Statement ofchanges in working capital shows the increase or decreasein the working capital. Funds from Operations statementshows how much funds from operations.


4/40

DEFINITIONIt is a statement which highlights the underlining financial

movements and explains the changes of working capital fromone point of time to another.

- BIERMAIMPORTANCE

1. The management can formulate its financial policies dividend, reserve etc. On the basis of the statement.

2. It services as a control device when comparing withbudgeted figures. The Financial manager can take remedial

steps, if there is any deviation.3. It points out the sound and weak financial position of the

enterprise.4. It points out of the causes for changes in working capital.


5/40

OBJECTIVES

1. To show how the resources have been obtained and used toindicate the results of current financial management.

2. To throw light upon the most important changes that has

taken place during a specific period.3. To show how the general expansion of the business has been

financed.4. It is a very useful tool in analysis of financial statements which

analyzes the Changes taking place between two balance sheetdates.


6/40

STEPS IN PREPARATION OF FUNDS FLOW STATEMENT

Preparation of change in working capital

Preparation of Funds from Operations

Preparation of Funds Flow Statement


7/40

1. Increases in current assets will increases in working capital2. Decreases in current assets will decreases in working capital

3. Increases in current liability will influence to decrease workingcapital.

4. Decrease in current liability will increase the working capital

STEP

2P

REP

ARATIONS OF FUNDS FROM OP

ERATIONSThe net profit is arrived at after taking into account all items ofincome and expenditure (both operating and non-operating, bothfund items and non-fund items). To arrive at funds from operation,adjustment are made in net profit for non-fund and non-operating

items it will be clear following. There are two methods to find out theamount of funds from operations

Statement form Account form


8/40

The basic rule in preparation of the fund s flow statement is as

follows

An increase in an asset over the year is an application offund

A decreases in an asset over the year is a source of fund

A decreases in liability over the year is an application offund

An increases in a liability over the year is a source of fund

The relationship between source and application of funds and itsimpact on working capital is explained in the format of statement and

sources and application of fund given below.


9/40

NEED FOR THE STUDY

Funds constitute the prime importance in starting andoperating any business enterprise. The need for maintaining thefinancial chastity of business operations, ensuring the reliabilityof recorded experience resulting from these operations andconducting a frank appraisal of such experience has made

accounting a prime activity along with such other activities asmarketing and production.

SCOPE OF THE STUDY

The study on analysis of flow of funds of G.S.ALLOY CASTINGLIMITED. It is confined to only G S Alloy casting limited andcannot be generalized to any other company. The study is onlyabout funds flow analysis of G S Alloy casting limited.


10/40

OBJECTIVES OF THE STUDY

1. To know the various sources from which the funds are raised andthe application of those funds in the company. To know theFinancial and Working Capital position of the company.

2. To determine the financial consequences of business operations.

3. To determine the exact financial position of the organization.

4. To give necessary suggestions that can be made by making athorough study on the financing and flow of funds on G.S.ALLOY

CASTING LIMITED.


11/40

SOURCES OF DATA

The sources of data collected for this study could be broadly

classified in to two categories.

Primary data: This information has been collected through direct

conversation with the manager of finance department.

Secondary data: this data was collected from the help of the

sources mentioned below:

The internal circulation copy of company's broachers.

The annual reports of the organization.

Other of the Journals, Internal


12/40

PROFILE OF STEEL INDUSTRYThe Steel Industry in the modern times was initiated

during the medium half of nineteenth century (during 1850s

to be precise). The initiator of it was a person named Mr.HenryBessemer ofEngland.

The Steel Industry was enriched and modernized throughthe introduction of Open-Hearth process of steel production

This process was first adopted by the steel industriessituated in United States OfAmerica in the year 1888.

The utilization of the Open-Hearth system of steelproduction continued approximately from the year 1910 to theyear 1960.

The early 1960s a new process was incepted by the steelindustry for the production of steel known as the Process ofElectric Arc Furnace. This process helps these industries inproduction of stainless steels and also in recycling of scrapsteel items.


13/40

The Indian steel industry began expanding into Europe in the 21st

century. In January 2007 Indias Tata steel made a successful $11.3

billion offer to buy European steel maker Corus GroupP

LC. In 2006Mittal Steel (based in London but with Indian management) acquiredArcelor for $38.3 billion to become the worlds biggest steel maker.

Steel Industry in India:

Indiahassetavisiontobeaneconomicallydevelopednationby2020. Thesteelindustryisexpectedtoplayamajorrolein Indiaseconomicdevelopmentinthecomingyears.

The major sectors where consumption of steel is expected togrow in the coming years are Construction Housing Ground transportation


14/40

PROFILE OF G.S.ALLOY CASTINGS LIMITED

GSAC is started by Mr. G. Prasad Rao, a technocrat with 35

years experience in foundry industry. The top managementconsists of people with rich, long experience from renownedfoundries like L&T and KCP.

The 250 strong dedicated work forces is the back-bone of this

company. G.S. Alloy Castings Ltd. Company is started in 1987with initial capacity of 1800 Mt/annum and later grown into oneof the biggest foundries in South India with capacity of4800mt/annum. One more branch with higher tonnage capacityat Surampalli village.

They are having a competent technical team headed byTechnocrat with 25 + years experience in various aspects offoundry with well established QMS & got ISO 9000:2000certification by LRQA-UKAS for Unit-1 and aiming to get ISO9001:2000 for Unit-11 also at the earliest.


15/40

The QualityPolicy:

GSACS Commitment is for manufacture and supply of criticalsteel and Alloy Steel Casting to meet Quality requirements of itscustomers and their schedule adherence at a competitive price.

GSAC has acquired skills in producing castings ranging from

few kgs to 6000kgs single piece in.1. Plain Carbon Steel2. Alloy Steels3. Heat Resistant Steels

4. Wear Resistant Steels5. Stainless Steel


16/40

VisionTo achieve the 1000 tons per month

Increase the productivity level

Mission1000 tons per month.Row unit 1-1-400 tones acquiring they established a unit-11and they want to do 600 tones in that unit.Reasonable price given to the customers.

Achievements

Major CustomersMNCs- Taking orders from MNCsIn the year of 2004-05 crossed 25 Crores turn over4500 tons per year


17/40

Particulars 2005 2006 Effect on Working Capital

Increase

Rs

Decrease

Rs

CURRENT ASSETS

Inventories 0.83 3.06 2.23

Sundry debtors 4.48 9.02 5.00

Cash and bank balance 0.20 0.32 0.12

Loans and advances 1.11 1.79 0.68

Advances against purchases 0.14 0.02 0.12

Advance against capital goods 1.24 0.01 1.23

Total (A) 8.00 14.22

CURRENT LIABILITIES

Outstanding liabilities 0.86 1.30 0.44

Creditors for purchase 2.98 6.40 3.42

Creditors for capital goods 0.86 0.29 0.47

Advances against sales 0.44 0.53 0.09

Total (B) 5.14 8.16

Net current assets (A-B) 2.86 6.06

Increasing working capital 3.2 3.2

6.06 6.06 8.5 8.5

Table 5.1 Statement of changes in working capital of G.S Alloy Casting Limited during the period2005-06

(Rs in crores)


18/40

Particulars Amount

Rs.

(Crores)

Particulars Amount

Rs.

(Crores)

To Depreciation 1.33 By balance b/d 0.23

To Preliminary Expenses 0.01

To Balance c/d 0.05 By funds from operations 1.16

1.39 1.39

Table 5.2 Adjusted profit and loss account of G.S.Alloy Casting Limited during theperiod of 2005-06

Dr Cr


19/40

Sources Rs.

(in crores)

Application Rs.

(in crores)

Issue of equity shares 3.1 Payment of shares application of

money

1.5

Raising secured loans 10.17 Reduction of unsecured loans 0.01

Funds from operations 1.16 Purchase of fixed assets 9.85

Decrease in deferred

tax

0.13 Increasing working capital 3.2

14.56 14.56

Table 5.3 Funds flow statement of G.S.Alloy Casting Limited during the

period of 2005-06


20/40

From the above table 5.1 it is observed that the Working Capital of the companyshows increased trend. The current assets of the company were increased fromRs.8.00 crores, in 2004-05 to Rs.14.22 crores, in 2005-06. The current liability of thecompany was increased from Rs.5.14 crores in 2004-05 to Rs.8.16 crores in 2005-06.In 2004-05, the net working capital of the company stood at Rs.2.786 crores and itwas increased to Rs.6.06 crores in 2005-06.

It is also evident from the above table 5.3 that the total funds flow during theperiod from 2005-06 amounts to Rs.14.56 crores. In the total funds 1.16 crores wasreceived from funds from operation, 3.1 crores from issue of equity share, 10.17crores from secured loans and0.13 lakes from decreased differed tax.

Whereas the application of funds 1.5 crores is used for payment of shareapplication money,0.01 lakes for redemption of unsecured loans, 9.85 crores forpurchasing fixed assets, and increasing working capital is 3.2 crores.

I T RPR T TI


21/40

Particulars 2006 2007 Effect on working capital

Increase Decrease

CURRENT ASSETS







Total (A) 14.22 24.01

CURRENT LIABILITIES



Creditors for capital goods 0.29 0.29


Total (B) 8.16 16.00



8.01 8.01 10.26 10.26

Table 5.4 Statement of changes in Working Capital of G.S. Alloy casting Limited during theperiod 2006-07

(Rs in crores)


22/40

Particulars Amount

Rs.

(Crores)

Particulars Amount

Rs.

(Crores)

To Depreciation 2.79 By Balance b/d 0.05


To Balance c/d 0.24 By Funds from

operations

3.02

3.07 3.07

Table 5.5 Adjusted profit and loss account of G.S.Alloy Casting Limitedduring the period of 2006-07

Dr Cr


23/40

Sources Rs.

(in Crores)

Application Rs.

(in Crores)

Issue of shares application

money

0.39 Payment of secured

loans

0.30

Issue of secured loans 0.01 Purchase of fixed assets 0.98

Funds from operations 3.02 Decreasing deferred tax 0.19

Increasing working

capital

1.95

3.42 3.42

Table 5.6 Funds Flow Statement of G.S.Alloy Casting Limited during thePeriod of 2006-07


24/40

From the above table 5.4 it is observed that the Working Capital of thecompany shows increased trend. The current assets of the company wasincreased Rs.14.22 crores in 2005-06 to Rs.24.01 crores in 2006-07. The currentliability of the company is increased from Rs.8.16 crores in 2005-06 to Rs.16.00crores in 2006-07. In 2005-06 the net working capital of the company stood atRs.6.06 crores and it was increased to Rs.8.01 crores in 2006-07.

It is evident from the above table 5.6 that the total funds flow during theperiod from 2006-07 amount Rs.3.42 crores. In the total funds 3.02crores wasreceived from funds from operation, 0.39 lakhs from issue of share applicationmoney, 0.01 lakhs from unsecured loans.

Regarding the application of funds 0.30 lakhs is used for payment ofsecured loans, 0.30 lakhs for redemption of secured loans, 0.98 lakhs forpurchasing fixed assets, and increasing working capital was 1.95 crores

INTERPRETATION:


25/40


Increase Decrease

CURRENT ASSETS






Advance against capital goods 0.59 - 0.59

Total (A) 24.14 24.93

CURRENT LIABILITIES



Creditors for capital goods - -


Total (B) 16.00 16.19



8.74 8.74 1.81 1.81

Table 5.7 Statement of changes in Working Capital of G.S. Alloy Casting Limited during theperiod 2007-08

(Rs in crores)


26/40

Particulars Amount

Rs.

(In Crores)

Particulars Amount

Rs.

(In Crores)



To Balance c/d 0.01 By Funds from operations 2.35

2.57 2.57

Table 5.8 AdjustedProfit And Loss Account of G.S.Alloy Casting Limitedduring the period of 2007-08

Dr Cr


27/40

Sources Rs.

( in crores)

Application Rs.

(in crores)

Issue of s ares application

oney

0.52 Purc ase of fixe assets 5.6

Raisin of secure loans 3.17 Increasin orkin capital 0.6

Raisin of unsecure loans 0.30 Increasin eferre tax 0.14

un s fro operations 2.35

6.34 6.34

Table 5.9 un s lo State ent of G.S.Alloy Castin Lt urin t e perioof 2007-08


28/40

From the above table 5.7 it is observed that the Working Capital of thecompany shows increased trend. The current assets of the company were

increased Rs.24.14 crores in 2006-07 to Rs.24.93 crores in 2007-08. The currentliability of the company is increased from Rs.16.00 crores in 2006-07 to Rs.16.19crores in 2007-08. In 2006-07 the net working capital of the company stood atRs.8.14 crores and it was increased to Rs.8.74 crores in 2007-08.

It is evident from the above table 5.9 that the total funds flow during theperiod from 2006-07 amount Rs. 6.34 crores. In the total funds 2.35 crores wasreceived from funds from operation, 0.52 lakhs from issue of share applicationmoney, 0.30 lakhs from unsecured loans.

Regarding the application of funds 3.17 lakhs is raised from secured loans,

received from unsecured loans Rs. 0.30 lakhs, 5.6 crores for purchasing of fixedassets, and increasing working capital is 0.6 lakhs, 0.14 increase in deferred tax.

INTERPRETATION:


29/40


Increase Decrease

CURRENT ASSETS




Loans and advances 1.91 1.6 0.31Advances against purchases 0.24 0.23 0.01

Advance against capital goods - 3.31 3.31

Total (A) 24.93 32.28

CURRENT LIABILITIES


Creditors for purchase 13.8 20.11 6.31Creditors for capital goods - -


Total (B) 16.3 22.59



9.69 9.69 9.50 9.50

Table 5.10 Statement of Changes in Working Capital Of G.S Alloy Casting Limited during the period2008-09

(Rs in crores)


30/40

Particulars Amount Rs

(in crores)

Particulars Amount Rs

(in crores)



To Balance c/d 0.11 By Funds from operations 2.68

2.69 2.69

Table 5.11 AdjustedProfit And Loss Account of G.S.Alloy Casting Limitedduring the period of 2008-09

Dr Cr


31/40

Sources Rs.

( in crores)

Application Rs.

( in

crores)

Issue of s ares application

oney

0.22 Re uction of unsecure

loans

0.07

Raisin of secure loans 2.8 Purc ase of fixe assets 3.92

un s fro operations 2.68 Increasin orkin

capital

1.06

Increasin iffere tax 0.07

Preoperative expenses 0.57

5.7 5.7

Table 4.12 un s lo State ent of G.S.Alloy Castin Li ite urin t eperio of 2008-09


32/40

From the above table 5.10 it is observed that the working that the working capitalof the company shows increased trend. The current assets of the company haveincreased from Rs.24.93 crores, in 2007-08 to Rs.24.93 crores in 2008-09. The currentliability of the company is increased from Rs.16.3 crores in 2007-08 to Rs.22.59 crores in2008-09. In 2007-08 the net working capital of the company stood at Rs.8.63 crores andit was increased to Rs.9.69 crores in 2008-09.

It is evident from the above table 5.12 that the total funds flow during the periodfrom 2008-09 amount Rs.5.7 crores. In the total funds 2.68 crores was received fromfunds from operation, 0.22 lakhs from issue of share application money, 2.8 crores fromsecured loans, and 0.07 lakhs from unsecured loans.

Regarding the application of funds 3.92 crores for purchasing fixed assets, andincreasing working capital is 1.06 lakhs.0.07 lakhs increasing differed tax.

I T RPR T TI :


33/40


Increase Decrease

CURRENT ASSETS







Total (A) 32.25 32.28

CURRENT LIABILITIES


Creditors for purchase 20.11 17.66 2.50 Creditors for capital goods


Total (B) 22.59 20.87



9.89 9.89 3.6 3.6

Table 4.13 Statement of Changes in Working Capital of G.S Alloy Casting Limited during the period2009-10

(Rs in crores)


34/40

Particulars Amount

Rs

(in crores)

Particulars Amount

Rs

(in crores)


ByPreliminary

Expenses

0.04


operations

4.79

4.94 4.94

Particulars Amount

Rs

(in crores)

Particulars Amount

Rs

(in crores)


ByPreliminary

Expenses

0.04


operations

4.79

4.94 4.94

Table 5.14 AdjustedProfit and Loss Account of G.S.Alloy Casting Ltd during theperiod of 2009-10

Dr Cr


35/40

Sources Rs.

( in crores)

Application Rs.

( in crores)

Issue of shares application

money

0.22 Reduction of secured loans 1.18

Raising of pre-operative

expenses

0.57 Reduction of unsecured

loans

0.01

Raising Funds from operations 4.79 Purchase of fixed assets 3.96

Increasing working capital 0.23

5.38 5.38

Table 5.15 Funds Flow Statement of G.S.Alloy Casting Limited during thePeriod of 2009-10


36/40

From the above table 5.13 it is observed that the working that the working

capital of the company shows increased trend. The current assets of thecompany have decreased Rs.32.25 crores, in 2008-09 to Rs.30.76 crores in 2009-10. The current liability of the company is decreased from Rs.22.59 crores in2008-09 to Rs.20.87 crores in 2009-10. In 2008-09 the net working capital of thecompany stood at Rs.9.66 crores and it was increased to Rs.9.89 crores in 2009-10.

It is evident from the above table 5.15 that the total funds flow during theperiod from 2009-10 amount Rs.5.38 crores. In the total funds 4.79 crores wasreceived from funds from operation, 0.22 lakhs from issue of share applicationmoney, 0.57 lakhs from pre-operative expenses.

Regarding the application of funds1.18 crores is used for payment of

secured loans, 0.01 lakes for redemption of unsecured loans, 3.96 crores forpurchasing fixed assets, and increasing working capital is 0.23 lakhs.

INTERPRETATION:


37/40

FINDINGS:

An overview of working capital position of the company has beenincreasing during the period of 2005-06 to 2009-10. From the point of view ofcurrent assets of the company was also increased from Rs. 8.00 crores to Rs.32.25 crores where as the current liabilities of the company was increased toRs. 5.14 crores to Rs. 22.59 crores.

The funds from operations of G.S.Alloy casting limited during theperiod of 2005-06 to 2009-10. It was increased trend for foresaid period. Theseare including Rs. 1.16 crores, Rs. 3.02 crores, Rs. 2.35 crores, Rs. 2.68 crores,and Rs. 4.79 crores for the respective period of 2005-06 to 2009-10.

The funds flow statement of G.S. Alloy casting limited during theperiod of 2005-06 to 2009-10, it was decreased of sources and applications ofthis company for the above said period, and during the period of 2005-06 itwas Rs. 14.5 crores where as in 2009-10. This was reduced Rs. 5.38 crores.


38/40

SUGGESTIONS

It may be suggested that the current assets position of the company has beenincreasing year to year. This indicates good position of the company because

the firm having good liquid position to meet the day to day expenditures.

The current liability of the company was also increasing during the above saidperiod. It is suggested that the company will try for reducing current liabilities.In case the requirements of funds has to be mobilized from long term sources

that is good for the company. On the other hand the companies will redemptionof short term liabilities with in the near future. It is not good for the companybecause of the business is uncertainty.

The funds flow statement of G.S. Alloy casting limited during the period of

2005-06 to 2009-10 is not satisfactory. The main reason is that the company hasnot been mobilization of the funds from the public. Due to this reason not thatmuch of changes in sources and application of G.S. Alloy casting limited for theabove said period.


39/40

CONCLUSION:

The funds flow statement highlights the amounts raised from varioussources of finance during a period and then explains how that finance has beenused in the business. It analyzes the net increase or decrease in working capital into changes in the constituent item that is Stock, Debtors, Creditors, and Cash etc.

It is an analysis of funds flow between two balance sheets along with

funds flow statement another statement is also prepared to analyze the impact offunds flow working capital position.

The funds flow statement list out the sources from which working capitalhas been derived during the accounting period and the ways in which workingcapital has been used up.


40/40

Bhaskar Ppt

Documents

Transcript of Bhaskar Ppt