Kesoram Funds Flow
120
CONTENTS CHAPTER – I 0 INTRODUCTION NEED FOR THESTUDY OBJECTIVE OF THE STUDY RESEARCH METHODOLOGY SCOPE OF STUDY LIMITATIONS OF THE STUDY CHAPTER – II 0 ORGANISATIONAL PROFILE Company profile CHAPTER – III 0 Theoretical frame work CHAPTER – IV 0 DATA ANALYSIS & INTERPRETATION CHAPTER – V 0 FINDINGS & SUGGESTIONS
Transcript of Kesoram Funds Flow
CONTENTS
CHAPTER – I 0
INTRODUCTION
NEED FOR THESTUDY
OBJECTIVE OF THE STUDY
RESEARCH METHODOLOGY
SCOPE OF STUDY
LIMITATIONS OF THE STUDY
CHAPTER – II 0
ORGANISATIONAL PROFILE
Company profile
CHAPTER – III 0
Theoretical frame work
CHAPTER – IV 0
DATA ANALYSIS & INTERPRETATION
CHAPTER – V 0
FINDINGS & SUGGESTIONS
BIBILIOGRAPHY 0
CHAPTER-I
INTRODUCTION
Funds constitute prime importance in starting and operating any business Enterprise the
most significant of all financial activities is the raising and management of funds financial
decisions are those which concern the generation and flow of funds various sources and the use
of these funds.
The accounting standards state that in many countries the approach to provide a
statement of changes in financial position as a part of audited accounts is the trend in India
companies are under no legal obligation to publish a statement of changes in financial position
statements along with financial statements especially in the case of companies listed on the stock
exchanges and other large commercial industrial and business enterprise in public and private
sectors.
The funds flow statement which shows the movement of funds and is the part of
financial operation of the business under taking. It indicates various means by which funds.
Where obtained during a particular period and the ways in which there funds where employed in
simple words. It is a statement of sources and application of funds.
Funds flow analysis refers to the process of determining the financial strengths and
weakness of the by establishing relationship between the items of balance sheet and profit and
loss account. Funds flow statement serves as a handy tool in financial analysis making financial
planning preparation of budget through this analysis firm group the change in the allocation
resources between the two balance sheets.
The Funds flow statement expresses the changes in working capital and assesses
the impact upon liquidity position of the undertaking with the help of this statement. The
financial management can plan the intermediate and long term financial of the concern repayment
of loans, expansions of business and distribution of resources. It is helpful in the crucial decision
making process incase of expansion. Diversification of conservation of more funds for profitable
utilization of sound projects in the sequent year. It is useful to economize financial institution,
investors and owners for analyzing performance of the firm.
OBJECTIVES OF THE STUDY
To identify the source of funds of the Kesoram Cements Limited.
To identify the application funds of the Kesoram Cements Limited.
To identify the changes in “working capital”
SCOPE OF THE STUDY
Only the FUNDS FLOW has been taking to measure the financial performance.
The study confines to the funds management at “Kesoram Cements Limited, ”
only.
This study can not reflect the Overall Industry’s funds management system.
METHODOLDY UNDER STUDY
RESEARCH:
Research is an academic activity and as such term should be used in a technical sense.
According to Clifford woody research comprises defining and redefining problems, formulating
Hypothesis or suggested solutions; collecting, organizing and evaluating data, making deduction
and reaching conclusion; and At last care fully testing the conclusions to determine whether they
fit the formulating the hypothesis.
DATA COLLECTION METHODS
PRIMARY DATA:
Primary data refers to information on that is generated to meet the specific requirements
of the investigation at hand it consist observation method; interview method; through
questionnaires; through schedules methods.
SECONDRY DATA:
The information that is collected for a purpose other than to solve the specific problem
under investigation is known as secondary data.
The data has been collected form primary as well as secondary sources. Primary data has
been collected through interaction with company managers.
Secondary data has been collected from books publications, websites, and annual reports.
NEEDS FOR THE STUDY
The basic financial statements i.e. the “Balance sheet”, “Profit and income statement”
reveal the net effect of the various transaction on the operational and “Financial position of the
company”. But these statements do not disclose the cases for changes in the ‘assets’ and
‘liabilities’ between two different points of time.
Even the ‘profit & loss account’ indicates the resources provided by operations. But there are
many transactions that take place in an undertaking
which do not operate through ‘profit & loss account’. Thus another statements has to be
prepared show the change in the ‘assets and liabilities’ from the end of one period of time to the
end of another period of time.
That statement is called Funds flow statement.
So, I have undertaken this study to examine the changes which are occurring in the
financial operation of the organization and to the “Funds management system” in “KESORAM
CEMENTS LTD”.
LIMITATIONS
The analysis made on the basis of secondary data.
The availability of date is only is pertaining to five years.
It is a major constraint for this project.
The project duration i.e. 45 days is also a constraint to give
realistic interpretations.
This analysis has done based on the information provided by
the bank. If any mistakes published in this reports, the same
information has taken into consideration.
This project is not a basis for further research.
CHAPTER – II
ORGANIZATION PROFILE
&
COMPANY PROFILE
HISTORY OF INDIAN CEMENT INDUSTRY
By stating production in 1914 the story of story of Indian cement is a stage of continuous
growth. Cement is derived from the Latin word “cementam”.
Egyptians and Romans found the process of manufacturing cement. In England during
the first century the hydraulic cement has become more versatile building material. Later on,
Portland cement was invented and the invention was usually attributed to Joseph Aspdin of
England.
India is the world’s 4th largest cement produced after China, Japan and U.S.A. The South
Industries have produced cement for the first time in 1904. The company was setup in Chennai
with the installed capacity of 30 tonnes per day. Since then the cement industry has progressing
leaps and bounds and evolved into the most basic and progressive industry. Till 1950 – 1951, the
capacity of production was only 3.3 million tonnes. So far annual production and demand have
been growing a pace at roughly 78 million tonnes with an installed capacity of 87 million tonnes.
In the remaining two years of 8th plan an additional capacity of 23 million tonnes will
actually come up.
India is well endowed with cement grade limestone(90 billion tonnes) and coal(190
billion tonnes). During the nineties it had a particularly impressive expansion with growth rate of
10%.
The strength and vitality of Indian Cement Industry can be gauged by the interest shown
and support gives by World Bank considering the excellent performance of the industry in
utilizing the loans and achieving the objectives and targets. The World Bank is examining the
feasibility of providing a third line of credit for further upgrading the industry in varying areas,
which will make it global. With liberalization policies of Indian Government. The industry is
posed for a high growth rates in nineties and the installed capacity is expected to cross 100
million tonnes and production 90 million tonnes by 2003 AD.
The industry has fabulous scope for exporting its product to countries like the U.S.A.,
U.K, Bangladesh, Nepal and other several countries. But there are not enough wagons to
transport cement for shipment.
Cement – The product:
The natural cement is obtained by burning and crushing the stones containing clayey,
carbonate of lime and stone amount of carbonate of magnesia. The natural cement is brown in
color and its best variety is known as “ROMAN CEMENT”. It sets very quickly after addition of
water.
It was in the eighteenth century that the most important advances in the development of
cement were which finally led to the invention of Portland cement.
In 1756, John Smeaton showed that hydraulic lime which can resist the action of water
can be obtained nit only from hard lime stone but from a limestone which contain substantial
proportion of clayey.
In 1796, Joseph Parker found that modules of argillaceous limestone made excellent
hydraulic cement when burned in the usual manner. After burning the product was reduced to a
powder, this started the natural cement industry.
The artificial cement is obtained by burning at a very high temperature a mixture of
calcareous and argillaceous material. The mixture of ingredients should be intimate and they
should be in correct proportion. The calcined product is known as clinker. A small quantity of
gypsum is added to clinker and it is then pulverized into very fine powder, which is known as
cement.
The common variety of artificial cement is known as normal setting cement or ordinary
cement. A mason Joseph Aspdn of Leeds of England invented this cement in 1824. He took out a
patent for this cement called it “PORTLAND CEMENT” because it had resemblance in its color
after setting to a variety of sandstone, which is found a abundance in Portland England.
The manufacture of Portland cement was started in England around 1825. Belgium and
Germany started the same 1855. America started the same in 1872 and India started in 1904. The
first cement factory installed in Tamilnadu in 1904 by South India limited and then onwards a
number of factories manufacturing cement were started. At present there are more than 150
factories producing different types of cements.
Composition of Cement:
The ordinary cement contains two basic ingredients, namely, argillaceous and calcareous.
In argillaceous materials the clayey predominates and in calcareous materials the calcium
carbonate predominates.
A good chemical analysis of ordinary cement along with desired range of ingredients.
Ingredients Percent Range
Lime(CaO)
Silica(SiO2)
Alumina(Al2O3)
Calcium sulphate (CaSO4)
Iron Oxide (Fe2O3)
Magnesia(MgO)
Sulphur (S)
Alkalies
62
22
5
4
3
2
1
1
62-67
17-25
3-8
3-4
3-4
1-3
1-3
0.2-1
Industry Structure and Development:
With a capacity of 115 million tonnes of large cement plants, Indian Cement industry is
the fourth largest in the world. However per captia consumption in our country is still at only
100Kgs of developed countries and offers significant potential for growth of cement
consumption as well as addition to cement capacity. The recent economic policy announcement
by the government in respect of housing, roads, power etc., will increase cement consumption.
Opportunity and threats:
In view of low per captia consumption in India, there is a considerable scope for growth
in cement consumption and creation of new capacities in coming years.
The cement industry does not appear to have adequately exploited cement consumption
in rural segment where damaged where damaged growth is possible.
Landed cost of cement (with import duty)continues to be higher than home market prices
but with reduced import duty, increasing imports, may pose a serious threat to the domestic
cement industry.
Outlook
The recent change in the budget 2003- 2004 relating to fiscal incentives for individual
housing and reduction in borrowing cost for this purpose and with the government reaffirmation
to accelerate the reform process, infrastructure development should logically get priority leading
to increase in demand of cement in coming years. The addition capacity of cement in the pipeline
is limited and therefore the demand and supply situations is expected to be more favorable and
cement prices are likely to firm up.
Risks and Concerns
Slow down of Indian economy or drop in growth rate of agriculture may adversely affect
the consumption. The recent increase in railway freight coupled with diesel / petrol price like
will increase the cost of production and distribution, as being bulky, cement is freight intensive
increase in Limestone royalty also adds to the cost of production, which is considerably higher
than corresponding costs of many other developing countries.
In our country there is a need to undertake a massive programme of house construction
activity into the rural and urban areas. It is impossible to construct a house without cement and
steel, in other words, cement is one of the basic construction materials and therefore it is one of
the vital elements for the economic development of the nation.
India inspite of being the 4th biggest producer of cement in the world has still a very low
per capital consumption of cement.
Cement Companies 51 Nos
Cement plant 99Nos
Installed Capacity 64.8mt
Total Investment (approx) Rs.10,000 Crores
Total Manpower Over 1.25 Lakhs
Management Awards of the Government of Andhra Pradesh. Kesoram is also conscious
of its social responsibilities. It’s rural and community development programmes include adoption
of two nearby villages, running an Agricultural Demonstration Farm, Model Dairy Farm etc.,
impressed by these activities, FAPCCI chose Kesoram to confer the Award for “Best efforts of
an Industrial Unit in the year 1994 as well as in1998. Kesoram also has to its credit the National
Award (Shri S.R. Rangta Award for Social Awareness) for the year 1995- 1996, for the Best
Rural Development Efforts made for “Best Workers Welfare” Kesoram got the first Prize for
Mine Environment and pollution Control for year 1999 too, for the 3 rd year in succession in July,
2001 Kesoram annexed the “Vana Mithra” Award from the Government of Andhra Pradesh.
Quality conscious and progressive in its outlook, KESORAM CEMENT is an OHSAS
08001 Company and also joined the select brand of ISO9001-2000 Companies.
History
The first unit was installed at Basanthnagar with a capacity of 2.5 lacks TPA (tonnes per
annum) incorporating humble supervision, preheated system, during the year 1969.
The second unit followed suit with added a capacity of 2 lack TPA in 1971.
The plant was further expanded to 9 lack by adding 2.5 lack tonnes in August, 1978, 1.13
lack tonnes in January, 1981 and .87 lack tonnes in September, 1981.
Power
A Singareni colliery makes the supply of coal for this industry and the power was
obtained form AP TRANSCO. The power demand for the factory is about 21MW. Kesoram has
got 2 diesel generator sets of 4MW each installed in the year 1987.
Kesoram cement now has a 15KW captive power plant to facilitate for uninterrupted
power supply for manufactured of cement.
KESORAM CEMENT
One among the industrial giants in the country today, serving the nation on the industrial
front Kesoram Industries Limited has a chequeres and evenful history is dating back to the
Twenties when the industrial House of Birlas acquired it. With only a Textile Mill under it
banner in 1924, it grew from strength and paper, spun pipes and Refractories, tyres, Oil Mills and
Refinery Extractions.
Looking to the wide gap between demand and supply, of a vital commodity, cement,
which plays an important role in nation – building the government of India de-licensed the
Cement industry in the year 966 with a view to attract private entrepreneurs to argument the
cement product Kesoram rose to the occasion and decided to setup a few cement plants in the
country.
The Cement plant of Kesoram with a capacity of 2.5 lack tonnes per annum based on dry
process, was established in 1969 at Basanthnagar a backward area in Karimnagar District,
Andhra Pradesh, and christened it Kesoram Cement. The second unit followed suit, which added
a capacity of 2.00 lack tonnes in 1971. The plant was further expanded to 9.00 lack tonnes by
adding 2.5 lack tonnes in August 1978. 1.14 lack tonnes in January, 1981 and 0.87 lack tonnes in
September, 1981.
Kesoram Cement has outstanding track of performance and distinguished itself among all
the Cement factories in India bagging the coveted National Productivity Award for two
successive years, i.e., in 1985 and 1936, so also the National Awards for Mines Safety for two
year 1985-86 and 1986- 87. Kesoram also bagged NCBM’s (National Council for Cement
Building Materials) National Award for Energy Conservation for the year 1989-90.
Kesoram got the prestigious state Award “Yajamanya Ratna” & “Best Management Award” for
the year 1989: so also the FAPCCI (Federation of Andhra Pradesh Chamber of Commerce and
Industry) Award for Best Family Planning effort in the State. Foe the year 1987-88, Kesoram
also got the FAPPCI Award for Best Industrial Promotion/ Expansion effort in the State. In the
year 1991 Kesoram also got the May day Award of the Government of Andhra Pradesh for “Best
Management” and Pandit Jawaharlal Nehru Silver Rolling Trophy for Best Productivity effort in
the State, Sponsored by FAPCCI, for 1993 Kesoram got the Best.
Performance:
The performance of Kesoram Cement industry had been outstanding achieving over
percent capacity utilization although despite many odds like power cuts and which most 40%
was due to wagon shortage etc.
The company being a continuous process industry works round the clock and has an
excellent record of performance achieving over 100% capacity utilization.
Kesoram has always combined technical progress with industrial performance. The
company had a glorious track record for the last 27 years in the industry.
Technology
Kesoram Cement uses most modern technology and the computerized control in the
plant. A team of dedicated and well – experienced experts manages the plant. The quality is
maintained much above the bureau of Indian Standards.
The raw materials used for manufacturing cement are:
Lime stone
Bauxite
Hematite
Gypsum
Environmental and Social Obligations
For environmental promotion and to keep-up the ecological balance, this section has
undertaken various social welfare programs by adopting ten nearly villages, organizing family
welfare camps, surgical camps, children immunization camps, animal health camps, blood
donation camps, distribution of fruit bearing trees and seeds, training for farmers etc., were
arranged.
Welfare and Recreation Facilities
For the purpose of recreation facility 2 auditoriums were provided for playing indoor
games, cultural function and activities like drama, music and dance etc.
The industry had provided libraries and reading rooms. About 1000 books are available
in the library. All kinds of newspaper, magazines are made available.
Canteen is provided to cater to the needs to the employees for supply snacks, tea, coffee
and meals etc.
One English medium and one Telugu medium school are provided to meet the
educational requirements.
The company has provided a dispensary with a qualified medical office and paramedical
staff for the benefit of the employees. The employees covered under ESI scheme have to avail
the medical facilities from the ESI hospital.
Competitions in sports and games are conducted every year for August 15, Independence
Day and January 26, Republic Day among the employees.
Electricity
The power consumption per ton cement has come down to 108 units against 113 units
last year, due to implementation of various energy saving measures. The performance of captive
power plant of this section continues to be satisfactory. Total power generation during the years
was 84 million units last year. This captive power plant is playing a major role in keeping power
costs with in economic levels.
The management has introduced various HRD Programs for training and development
and has taken various other measures for the betterment of employee’s efficiency / performance.
The section has installed adequate air pollution systems and equipment and is ISO 14001
such as Environment Management System is under implementation.
Awards
Kesoram cement bagged many prestigious awards including national awards for
productivity, technology, conservation and several state awards since 1984. The following are
the some of important awards.
Awards of Kesoram
No Year Awards National / State
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
1984
1985-86
1985-86-87
1987-88
1987-89
1988-89
1988-89
1988-89
1989
1989
Best family planning effort in the state
National Productivity Award
Mines Safety
Best industrial promotion/expansion effort
Productivity Award
Best industrial promoter
Expansion effort in the state
Award for contribution given for rural economy
Best family planning effort
Yajmanya Ratna & Best Management Award
State
National
National
State
State
State
State
State
State
State
11.
12.
13.
14.
15.
1988-90
1988-90
1991
1991
1993
Community development programs
Energy conservation
May Day award of the Government of Andhra
Pradesh for best Management
Pandit Jawaharlal Nehru rolling trophy for best
national productive effort
Indira Gandhi National Award for excellence in
Industry(Best Management Award)
State
National
State
State
State
16.
17.
18.
19.
20.
21.
22.
23.
1994
1994-95
1995
1995-96
1996
1996
1996-97
1999
Best industrial rebellion award
Rural development chief minister environmental
and mineral conservation award
Best industrial rebellion award
Best effort of an industrial unit to develop rural
economy
Shri S.R.Rungta award for social awareness for
best rural development efforts
Best workers welfare
Best family welfare award
First prize for mine environment & pollution
control for the 3rd year in succession.
State
State
State
State
National
State
State
State
24.
25.
26.
27.
2001
2005
2007
2010
Vana Mithra award from Andhra Pradesh
Government.
Best workers welfare
Best Family welfare award
FAPCCI Award for Excellence in Industrial
Productivity from Andhra Pradesh Government
State
State
State
State
In the mines safety week celebrations, under the auspices of the Director General of
Mines Safety, Kesoram’s Basanthnagar limestone Mines won 2 first prizes for environment and
pollution control and safe drilling and blatting and 14 2nd prizes for overall performance,
productivity, operation and maintenance of machines publicity / propaganda etc.
This section also bagged the award for Environment Protection in the Godavari River
belt, sponsored by the Godavari Pradushana Pariharana Pariyavarana.
Production
Last 20 years production of Kesoram Cements industry, Basanthnagar.
Year Production(in tonnes)
1984-85 749197
1985-86 761581
1986-87 805921
1987-88 760708
1988-89 550254
1989-90 601453
1990-91 643307
1991-92 343663
1992-93 748258
1993-94 685596
1994-95 731177
1995-96 784555
1996-97 782383
1997-98 731049
1998-99 746474
1999-2000 688305
2000-2001 777092
2001-2002 692424
2002-2003 727447
2003-2004 735012
2004-2005 746418
2005-2006 754834
2006-2007 1046166
2007-2008 1056742
2008-2009 1199445
Note: Production including internal consumption also.
Cement and clinker production were lower than the previous year mainly because of
lower dispatches of cement due to recession prevailing in cement industry wit slowdown in
demand during the year under review. This section had to curtail production due to accumulation
of large stocks of clinker. However, sales realization during the second half of the year has
improved and it it=shoped that prices will stabilize at some reasonable levels.
Directors of Kesoram industries Limited
Chairman
Sri.B.K.birla
Directors
Smt. K.G.Maheshwari
Shri. Pramod Khaitan
Shri.B.P.Bajoria
Shri.P.k.Chokesy
Smt.Neeta Mukerji
(Nominee of ICICI
Shri. D.N.Mishra
(Nominee of L.I.C.)
Shri P.K.Malik
Smt Manjushree Khaitan
Secretary
Shri. S.K.Parik
Senior Executives
Shri.K.C.Jain (Manager of the Company)
Shri J.D.Poddar
Shri O.P.Poddar
Shri P.K.goyenka
Shri D. Tandon
Auditors
Messrs Price Waterhouse
Subsidiary Companies of Kesoram Industries
Bharat General & Textile Industries Limited
KICM Investment Limited
Assam Cotton Mills Limited
Soft shree Estates Limited
CHAPTER-III
THEORETICAL FRAME WORK
FINANCIAL STATEMENTS
INTRODUCTION
The basis for financial planning, analysis and decision-making is the
financial information. Financial information is needed to project, compare
and evaluate the firm’s earning ability. It is also required to aid in economic
decision-making investment and financial decision-making. The financial
information of an enterprise is contained in the financial statements or
accounting reports. Three basic financial statements of great significance to
owners, management and investors are balance sheet, profit and loss account
and cash flow statement.
BALANCE SHEET
Balance sheet is the most significant financial statement. It
indicates the financial condition or the state of affairs of a business at a
particular moment of time. More specially, balance sheet contains
information about resources and obligations of a business entity and about its
owner’s interest in the business at a particular point of time. Thus, the
balance sheet communicates information about assets, liabilities and owner’s
equity for a business firm as on a specific date. It provides a snapshot of the
financial position of the firm at the close of the firm’s accounting period.
Assets are valuable economic resources owned by the firm. They
embody future benefits and are measured in monetary terms. Assets
represent: (a) stored purchasing power (e.g., cash), (b) money claims (e.g.,
receivables stock ) and (c) tangible and intangible items that can be sold or
used in business to generate earning. Tangible items that include land,
building, plant, equipment or stocks of materials and finished goods and all
such other items do not have any physical existence, but they have value to a
firm. They include patents, copyrights, trade name or goodwill.
Assets are classified as: (1) current assets and (2) fixed (long
term) assets.
Current assets sometimes called liquid assets are those of a firm
which are either held in the form of cash with in the accounting period are of
one-year duration. Current assets include cash, tradable (marketable)
securities, and debtors (accounts receivables) and stock of raw material,
work-in process and finished goods.
Fixed assets are long-term in nature; they are held for periods longer
than the accounting period. They include tangible fixed assets like land,
building, machinery, equipment, furniture etc. Intangible fixed assets
represent the firm’s rights and include patents, copyrights franchises,
trademarks, trade names and goodwill.
Firm’s obligations are called liabilities. Liabilities represent debts
payable in future by the firm to its lenders and creditors. They represent
economic obligations to pay cash or pay cash or to provide goods services in
some future period. Examples of liabilities are creditors, bills payable,
wages, salaries payable, taxes payable, bonds, debentures, borrowings from
banks and financial institutions, public deposits etc…
Liabilities are of two types: (1) current liabilities; and (2) long-term
(fixed)
Liabilities. Current liabilities are debts payable within an accounting period.
Current assets are converted into cash to pay current liabilities. Long-term
liabilities are the obligations or debts payable in a period of time greater than
the accounting period. Long-term liabilities include debentures, bonds, and
secured long-term loans from financial institutions.
The financial interest of the owner’s are called owner’s equity or
simply
Equity. The owner’s interest is residual in nature, reflecting the excess of the
firm’s assets over its liabilities. As liabilities are the claims of outside
parties, equity represents owner’s equity has two parts (a) paid-up share
capital and (b) reserves and surplus. Paid-up share capital is the amount of
funds directly contributed by the shareholders through purchase of shares.
Reserves and surplus or obtained earning are undistributed profits. Paid up
share capital and reserves and surplus together are called net worth.
PROFITS AND LOSS ACCOUNTS
Balance sheet is considered as a very significant statement by bankers
and other lender because it indicates the firm’s financial solvency and
liquidity, as measured by its resources and obligations. However, creditors,
particularly bankers and financial analysis in India have recently started
paying more attention to the firm’s earning capacity as a measure of its
financial strength. The earning capacity and potential of a firm are reflected
by its profit and loss account. The profit and loss account is a “score-board”
of the firm’s performance during a period of time.
Profit and loss account presents the summary of revenues, expenses,
net income or net loss of a firm. It serves as measure of firm’s profitability.
Revenues are amounts that the customers. The cost of the firm for providing
them goods and services to customers. The cost of the economic resources
used to earn revenues during a period of time is called Expenses.
Revenues and expenses are sometimes categorized as operating and
non-operating business of the firm are called operating revenues (operating
expenses). Revenues (expenses) which are incidental or indirect to the main
operations of the firm are called non-operating revenues (expenses).
MEANING OF FINANCIAL STATEMENTS
Financial statements at least refer to the two statements which are
prepared by a business concern at the end of the year. These are
1) Income statement or trading and profit and loss account which
is prepared by business concern in order to know the profit earned and
loss sustained during a specified period.
2) Position statement or Balance sheet which is prepared by a
business concern on a particular date in order to know its financial
position.
Concern on a particular dare in order to know its financial
position.
To these statements are added the statement of Retained
Earnings and some other statements such as (Funds flow statement,
Cash flow statement etc…) and schedules of fixed assets, investments,
current assets etc… to give a full the package of financial statements.
Statement of Retained Earnings (When prepared separately )
or profit and loss appropriation account shows the utilization of profits
of the company i.e., dividend declared, amount transferred to general
reserve or any other reserve as shows in this account.
Funds flow statement summarizes the changes in working
capital in a specified period and indicates the various sources and
applications of funds.
Cash flow statement gives the various items of inflow and outflow
of cash.
Various schedules of fixed assets, investments, current
assets etc, are prepared by companies to show as to how the figures
shown in the balance sheet have been arrived at.
NATURE OF FINANCIAL STATEMENTS
Financial statements are prepared for the purpose of presenting a
periodical review or report by the management and deal with the state of
investment in business and result achieved during the period under
review. They reflect a combination of recorded facts, accounting
conventions and personal judgments. From this it is clear that financial
statements are affected by three things i.e. recorded facts, accounting
conventions and personal judgments.
IMPORTANCE OF FINANCIAL STATEMENTS
The information given in the financial statement is very
useful to a number of parties as given below:
1. OWNERS: Owners provide funds for the operation of business and
they want to know whether their funds are being properly utilized or
not. The financial statement prepared from time to time to satisfy their
curiosity.
2. CREDITORS: Creditors (i.e. suppliers of goods and services on
credit, bankers and other lenders of money) want to know the financial
position of a concern before giving loans or granting credit. The
financial statements help them in judging such positions.
3. INVESTORS: Prospective investors, who want to invest money in
a firm, would like to make an analysis of the financial statements of
that firm to know how safe proposed investment would be.
4. EMPLOYEES: Employees are interested in the financial position
of a concern they serve, particularly when payment of bonus depends
upon the size of the profit earned. They would like to know that the
bonus being paid to them is correct; so they became interested in the
preparation of correct profit and loss account.
5. GOVERNMENT: Central and State Governments are interest in
the financial statements because they reflect the earnings for a
particular period for purpose of taxation. Moreover, these financial
statements are used for compiling statistics concerning business which
in turn, help in compiling national accounts.
6. RESEARCH SCHOLARS: The financial statements being a
mirror of the financial position of a financial position of a firm are of
immense value to the research scholars who wants to make a study into
financial operations of a particular firm.
7. CONSUMERS: Consumers are interested in the establishment of
good accounting control so that cost of production may be reduced with
the resultant of the prices of goods they buy.
8. MANAGERS: Management is the art of getting things done
through others. This requires that the subordinates are doing work
properly. Financial statements are an aid in this respect because they
serve manager in appraising the performance of the subordinates by
comparing the actual results with the standards established and
identifying the deviations, if any and taking remedial measures to
remove deviations.
MEANING OG ANALYSIS OF FINANCIAL STATEMENTS
Analysis is the process of critically examining in details accounting
information given in the financial statements. For the purpose of analysis,
individual items are studied their interrelationship with other related figures
established, the data is sometimes rearranged to have better understanding
of the information with the help different techniques or tools for the
purpose. In the words of MYNR, “financial statement analysis is largely a
study of relationship among the various financial factors in a business as
disclosed by a single set of statements and a study of the trend of these
factors as shown in a series of statements”.
MEANING OF INTERPRETATION
Analysis and interpretation are closely related. Interpretation is not
possible without analysis and with interpretation analysis has no value.
In the words KENNDY AND MEMULLAR,“The analysis and
interpretation of financial statements data so that a forecast may be made of
the prospects for future earning, ability to pay interest and debt maturities
(both current and long-term) and profitability of a sound dividend policy”.
TYPES OF FINANCIAL STATEMENT ANALYSIS
Different types of financial statements analysis can be made on
the basis of
1. The nature of the analysis and the material used by him.
2. The objectives of the analysis.
3. The Modus operandi of the analysis.
These are discussed one by one.
ON THE BASIS OF NATURE OF THE ANALYST AND THE
MATERIAL USED BY HIM:
EXTERNAL ANALYSIS: It is made by those persons who are not
connected with the enterprise. They do not have access to the
enterprise. They do not have access to the detailed record of the
company and have to depend mostly on published statements. Such
type of analysis is made by investors, credit agencies, governmental
agencies and research scholars.
INTERNAL ANALYSIS: The internal analysis is made by those
persons who have access to the books of accounts. They are members
of the organization. Analysis of financial statements or other
financial data for managerial purpose is the internal type of analysis.
The internal analysis can give more reliable result than the external
analysis.
ON THE BASIS OF OBJECTIVE OF THE ANALYSIS:
On the basis the analysis can be long-term and short-term analysis.
LONG-TERM ANALYSIS: This analysis is made in order to study
the long-term earning capacity of a business concern. The purpose of
making such type of analysis is to know whether in the long-run the
concern will be able to earn a minimum amount which will be
sufficient to maintain a reasonable rate of return on the investment so
as to provide the funds required for modernization, growth and
development of the business and to meet its costs of capital.
SHORT-TERM ANALYSIS: This is made to determine the short –
term solvency, stability and liquidity as well as earning capacity of
the business. The purpose of this analysis is to know whether in the
short –run a business concern will have adequate funds readily
available to meet its
Short-term requirements and sufficient borrowing capacity to meet
contingencies in the near future.
ON THE BASIS OF MODUS OPERANDI OF ANALYSIS:
On this basis, the analysis may be horizontal and vertical analysis.
HORIZONTAL (OR DYNAMIC) ANALYSIS: This analysis is
made to review and analyze financial statements of a number or
years and therefore based on financial data year from several years.
This is very useful for long-term trend analysis and planning. It is
also termed as dynamic analysis.
VERTICAL (OR STATIC) ANALYSIS: This analysis is made to
review and analyze the financial statement of one particular year
only. Ratio analysis of the financial year relating to a particular year
is an example of this type of analysis.
TECHINIQUES (TOOLS OR METHODS) OF ANALYSIS AND
INTERPRETATION:
The following techniques can be used in connection with
analysis and interpretation of financial statements:
1. Comparative financial statements (or Analysis).
2. Common measurement statements (or Analysis).
3. Trend percentages (or Analysis).
4. Funds flow statements (or Analysis).
5. Net working capital (or Analysis).
6. Cash flow statements.
7. Ratio Analysis.
FUNDS FLOW STATEMENTS
INTRODUCTION
The basis financial statement i.e. the balance sheet and profit & loss
account or income statements of business reveal the net effect of the various
transactions on the sssoperational and financial position of the company.
The balance sheet gives a summary of the assets and liabilities of an
undertaking at a particular point of time; it reveals status of the company.
The asset side of a balance sheet shows the deployment of resources
of an under taking while the liabilities side indicates its obligation financial
activities of a business for a period of time and financial activities if a
business but their usefulness is limited for analysis and planning purpose.
But they are many transactions that take place in an under taking and which
do not operate though profit & loss account. Another statement has to be
prepared to show the change in the assets & liabilities from the end of one
period of time to the end of another period of time. The statement is called a
statement of changes in financial position of a fund flow statement.
MEANING & CONCEPT OF FUND
The term fund has been defined in a number of ways.
IN A NARROW SENCE: It means cash only and funds flow
statement prepared on this basic is called a cash flow statement.
Such statement enumerates net effects of the various business
transactions on cash and takes into account receipts and
disbursement of cash.
IN A BORDER SENCE: The term funds refers to money values in
whatever from in may exits, here funds means all financial
resources, used in business whether in the form of men, material,
money, machinery and others.
IN A POPULOAR SENCE: The term funds means working
capital, i.e. the excess of current over current liabilities. The
working capital concept of funds has emerged due to the fact that
total resources are invested partly in fixed assets in the form of
capital and kept in form of liquid or near liquid form as working
capital.
MEANING & CONCEPT OF FLOW OF FUNDS
The term ‘FLOW’ means ‘movement’ and includes both
‘inflow’ & ‘outflow’. The term ‘FLOW OF FUNDS’ means transfer of
economic values from one asset of equity to another. FLOW OF FUNDS is
said to have taken place when any transaction makes changes in the amount
of funds available before happening of the transaction. Effect on
transaction resulted in the ‘FLOW OF FUNDS’.
According to the working capital concept of funds the term
‘FLOW OF FUNDS’ refers to the movements of funds in the working
capital, it is said to be an application or out of funds.
RULE: The flow of funds occurs when a transaction on the one hand a non-
current and on the other a current account and vice-versa.
When a change in a non-current account
E.g. Fixed assets, long term liabilities, reserve and surplus, fictitious assets
etc… is followed by a change in another non-current account, it does not
amount to “flow of funds”. This is because of the fact that in such cases
neither the working capital increases nor decreases. Similarly, when a
change in one current account results in change in another current. It does
not affect funds.
Funds move from non-current transactions or vice-versa only.
In simple language funds move when a transaction affects.
1. A current assets and fixed assets.
2. A fixed liabilities and current liabilities.
3. A current asset and a fixed asset.
4. A fixed liabilities and current liabilities.
And funds do not move when the transaction affects fixed assets and fixed
liabilities or current assets and current liabilities.
CURRENT AND NON-CURRENT ASSETS
To understand flow of funds, it is essential to classify various accounts and
balance sheet items into current and non current categories.
Current accounts can either be current assets or current liabilities.
Current assets are those assets which in the ordinary course of
business can be or will be converted into cash in a short period of
normally one accounting year.
Current liabilities which are intended to be paid in the ordinary
courses of business with in a short period of normally one accounting
year out of the current assets or the income of the business.
The following is list of current working capital accounts
List of current or working capital accounts
Current liabilities Current assets
1. Bills payable.
2. Sundry creditor’s (or) account
payable.
3. Accrued (or) outstanding
expenses.
4. Dividends payable.
5. Bank over drafts.
6. Short term loans advances & deposits.
7. Provision against current assets.
8. Provision for taxation, if it does not amount to Appropriation of profit.
9. Proposed dividend (may be a current (or)non current Liabilities).
1. Cash in hand.
2. Cash at bank.
3. Bills Receivable.
4. Short tern (or) Account
Receivable.
5. Short term loans & Advances.
6. Temporary (or) Marketable investment.
7. Inventories or stock such as a) Raw material. b) Working process c) Stores and pares. d) Finished goods.
8. Prepaid expenses.
9. Accord income.
Procedure for knowing a transaction resulting in the flow of funds
Analysis the transaction and find out the two accounts in valued
Makin journal entry of the transaction
Determine whether the account in valued in the transaction are current
or non-current
If the both account in valued are non current i.e. either permanent
assets or permanent liabilities, it does not result in the flow of funds.
If both the account invalid are non-current.
If he accounts in valued are such that one is a current account while the
other is a non-current account i.e. current assets and permanent and
fixed assets or current liabilities and fixed assets or current liability and
permanent liability & fixed assets or current liability & permanent
liability then it result in the flow of funds.
DIAGRAMS DEPICTING FLOW OF FUNDS
Flow of Funds
No Yes
↓ ↓
When Both current
(or) Non current a/c
Are in valued
When One current and other non
current A/c isin valued
FLOW OF FUNDS
Current Assets No Current Liabilities
Yes
Yes Yes
Current Assets Current Assets
No
FUNDS FLOW statement, Income statement & Balance sheet
Funds flow statement is not a substitute an income, i.e. a profit and
loss account and balance sheet. The profit and loss account is a document
which indicates the extent of success achieved b y a business in earning
profits. It reports the result of business activities and indicates the reasons for
the profitability of a business. It does not reveal the inflow and outflow of
funds in business during a particular period.
Hence funds flow statement is not competitor to financial
statements. The funds statement provides additional information as regards
changes in working capital, derived from financial statements at two point of
time. It is a tool of management for financial analysis and helps in making
decisions
Difference between funds flow statement and income statement
Funds flow statement Income statement
1. It highlights the changes in the
financial position of a business and
indicates the various mean by which
funds were obtained during a
particular period and the ways to be
which these funds were employed.
2. It is complementary to income
statement income statement helps the
preparation of funds flow statement.
3. While preparing funds flow
statement both capital and revenue
items are considered.
4. There is no prescribed format for
preparing a funds flow statement.
1. It does not reveal the inflow and
outflows of fund but depicts the
items of expenses and incomes
arrive at the figure of profit or loss.
2. Income statement is not prepared
from funds flow statement.
3. Only revenue items are considered.
4. It is preparing in prescribed format.
Difference between funds flow statement and balance sheet
Funds flow statement Balance sheet
1. It is a statement of changes in
financial position and hence is
dynamic nature.
2. It shows the sources and use of
funds in a particular period of
time.
3. It is a total of management for
financial analysis and helps in
decisions.
4. Usually, schedule of changes in
working capital has to be
prepared before preparing
funds flow statement.
1. It is a statement of financial
position on particular data and
hence is static in nature.
2. It depicts the assets and
liabilities at particular point of
time.
3. It is not of much help to
management in making
decisions.
4. No such of changes in
working capital is required.
Rather profit & loss account is
prepared.
of significant and importance of funds flow statement
A funds flow statement is an essential tool for the financial
tool for the financial analysis and is of primary importance to the financial
management. Now a days it is being widely used by the financial analysis,
credit granting institution and financial manages. The basic purpose of funds
flow statement is to reveal the changes in the working capital on the two
balance sheets data.
It also describes the sources from which additional working
capital has been financed and the uses to which working capital has been
applied. Such a statement is particularly useful in assessing the growth of the
firm. It resulting financial needs and in determining the best way of financial
these needs. These significance or importance of funds flow statement can be
well followed one can plan the intermediate and long term financing of the
firm.
USES OF FUNDS FLOW STATEMENT
1. Helps in analysis of financial statement.
2. Throes light or preplanning questions.
3. Helps in formulation of dividend policy.
4. Helps in the proper allocation of resources.
5. Acts as a future guide.
6. Helps appraising the use of working capital.
7. Helps knowing the credit worthless.
LIMITATIONS OF FUNDS FLOW STATEMENT
The funds flow statement has a number of users; however, it has
creation limitations also, which are listed below.
1. It should be remembered that a funds flow statement is not a substitute
of an income statement or a balance sheet. It provides only some
additional information as regards changes in working capital.
2. It can not reveal continuous changes.
3. It is not an original statement but simply is arrangement of data given
in the financial statement.
4. It is essentially historical in nature and relevant for financial
management in that the working capital.
PROCEDURE FOR PREPARING A FUNDS FLOW STATEMENT
Funds flow statement is method by which we study changes in the
financial position of a business. Enterprise between beginning and ending
financial statement dates. Hence the funds flow statement is prepared by
comparing two balance sheets and with the help of such other information
derived from the accounts as may be needed. Broadly speaking the
preparation of a funds flow statement consists of two parts.
1. Statement of schedule of changes in working capital.
2. Statement of sources and application of funds.
1. Statement of schedule of changes in working capital
Working capital means the excess of current assets over current liabilities.
Statement of changes in working capital is prepared to show the changes
in the working capital between the two balance sheet dates. This
statement is prepared with the help of current assets & current liabilities
derived from the 2 balances.
Working capital = current assets – current liabilities
Statement of schedule of changes in working capital
Particulars Previous year
Current year Effect on working capital
Current assets:
Cash in handCash at bankBills receivableSundry debtorsTemporary InvestmentStockPrepaid expensesAccrued incomes
xxxxxxxxxxxxXxxXxxXxxXxxXxx
XxxXxxXxxXxxXxxXxxXxxXxxXxx
Increase Decrease
Total current assets
Current liabilities:Bills payableSundry creditorsOutstanding expensesBank overdraftShort advantages Dividend payableProvision for taxation
Total current liabilitiesWorking capital (CA-CL)Net increase (or)
Xxx Xxx
XxxXxxXxx
XxxXxxXxxXxx
XxxxxxXxx
XxxxxxxxxXxx
Xxx Xxx
Xxx
Xxx
Xxx
Xxx
decrease in working capital.
Statement of sources and application of funds
Funds flow statement is a statement which indicates various
sources from which funds (working capital) have been obtained during a
certain period and the users or applications to which these funds have been
put during the period. Generally this statement prepared two formats.
a. Report form
b. T form or an account form or self balancing type.
Specification of reports form of funds flow statement
particulars Rs
Source of fundsFunds from operation.Issue of share capital.Raising of long term loans.Receipts from partly paid shares, called up.Sales of non current assets.Non trading receipts, such as dividends received.Sales of investment(long term)Decrease in working capital (as per schedule of change in working capital). Total:
Application (or) uses of fundsFunds lost in operation. Redemption of debentures.Repayment of long term loans.Purchase of long term investment.Purchase of non current assets.Non trading payments.Payment of dividends.Payment of tax.Increase in working capital. Total:
XxxXxxXxxXxxXxxXxxXxxXxxXxx
XxxXxxXxxXxxXxxXxxXxxXxxXxxxxx
T’ forms an account form or self balancing type funds flow statements
Sources Rs Applications Rs
Funds from operation
Issue of Share Capital
Issue of debentures.
Raising of long term loans.
Receipts from partly paid
hares.
Sales of non current
(fixed) assets.
Non trading receipts such
as dividends.
Sales of long term
investments
Net decrease in working
capital
Total
Xxx
xxx
xxx
Xxx
Xxx
xxx
Xxx
Xxx
xxx
Funds in Operation.
Redemption of preference
share capital
Redemption of debentures.
Repayment of long term
loans
Purchase of non current
(fixed) assets.
Purchase of long term
investment.
Non trading Payment
Payment of dividends
Payment of tax
Net increasing in working
capital.
Total
Xxx
xxx
xxx
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx xxx
NOTE:- Payment of dividend and tax will appear as an application of funds
only when these items are appropriations of profit and not current liabilities.
STATEMENT OF CHANGING WORKING CAPITAL FOR THE YEAR
PARTICULARS YEAR
2
YEAR2 INCREA
SE
DECREAS
E
CURRENT ASSETS
Inventories
Sunday Debtors
Cash & Bank balance
Others Current Assets
(A)
Current Liabilities:-
Current Liabilities
Provisions
Total Current Liabilities
(T.S)
Working Capital =
(A+B)
Decrease / Increase in
working Capital
xxx
xxx
xxx
xxx
xxx
xxx
xxx
(+-
xxx
xxx
Xxx
xxx
xxx
Xxx
Xxx
xxx
xxx
(+-
xxx
xxsx
xxx
xxx
xxx
STATEMENT SOWING SOURCES AND APPLICSATION OF FUNDS:-
Sources of funds
Amount Application of funds Amount
Issue of shares
Issue of Debentures
Long term
Borrowings
Sales of Fixed
Assets
Operating profit
Decrease in
working Capital
TOTAL
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Preferences of Shares
Redemption of Debentures
Payment of other Long Term
Loans
Purchase of Fixed Assets
Payment of Fixed Assets
Increase in working Capital
TOTAL
xxx
xxx
xxx
xxx
xxx
xxx
xxx
DATA ANALYSIS
&
INTERPRETATION
STATEMENT OF CHANGING IN WORKING CAPITAL FOR THE
YEAR 2005-2006 OF KESORAM CEMENTS LTD.
EFFECT ON WORKING
PARTICULARS 2005 2006 CAPITALINCREASE DECREASE
A) Current Assets:-
a) Inventoriesb) Sundry Debtors c) Cash and Bank
Balanced) Loans and
Advancese) Other current assets
Total current Assets:
B) Current Liabilities & Provisions:-
a) Current Liabilities b) Other current
LiabilitiesTotal current Liabilities
NETWORKINGCAPITAL (A-B)
Net increase in Working Capital
136013824 4097718 898720 262000 242665
93957410 153226 388272
26537258 384172
23917258 141507
28689754 31982
420564143944492510448
6269147
143872927 121420338
36577367 48460
7887613 16478
36625827 7904091
107247100
6269147
113516247
11351627 11356247 52780501 52780501
FUNDS FLOW STATEMENT FOR YEAR 2005-06 OF
KESORAM CEMENTS LTD
Source of
funds
Amount
(Rs)
Application of funds Amount
Sale of factory 2707908 Purchase of furniture 166750
buildings
Sale of other fixed
assets
Increase in
Reserves & Surplus
Increase in secure
loans
Funds from
operation
Total →
3815939
3655878
6914784
122302
17216811
& fixtures
Purchase other fixed
assets
Decrease in un secured
loans
increase in working
capital
Total →
1140902
964002
6269147
17216811
INTERPRETATION:-
The above calculation that in 2005-2006 total current assets
amount to Rs. 14,38,72,927 has been decreased to Rs. 12,14,20,338. The
decrease in current assets amount Rs. 2, 24,52,589.
Cash and bank balance has lower i.e. from (8,98,720 to
3,88,272) Rs. 610448 loans and advances also increase from 26,20,000 to
2,65,37,258 i.e., Rs 2,39,17,258.
At the same time the current liabilities also decreased from
Rs. 36625827 to Rs. 7904091 i.e. Rs. 28721736.
The net working capital increase during the study period
amount to Rs 62699147. so this is a healthy sign that the company able to
manage current assets and liabilities.
STATEMENT OF CHANGING IN WORKING CAPITAL FOR THE YEAR 2006-2007 OF KESORAM CEMENTS LTD
PARTICULARS 2006 2007 EFFECT ON
WORKING
CAPITAL
Current Assets:
a) Sundry Debtors
b) Cash and Bank Balances
c) Loans and Advances
d) Other current assets
Total current Assets (A):
Current Liabilities &
Provisions:
a) Current Liabilities
b) Other current liabilities
Total Current Liabilities (B)
NETWORKING CAPITAL
(A-B)
Net increase in Working
Capital
Total
153226
288272
26537258
94441582
63467
1470425
38838127
148979468
Increase Decrease
1182153
12300869
54537886
89759
20794430
5461223
416755496
121420338 189351487
623100
1668991
27029530
7130214
7904091 34159744
113516247
41675496
155191743
15519174 155191743 68020908 68020908
FUNDS FLOW STATEMENTS FOR YEAR 2006-07 OF KESORAM CEMENTS LTD
Sources of funds Amount Application of funds Amount
(Rs) (Rs)
Sales of factory
buildings
Increase in un
secured loans
Increase in Reserves
& Surplus
Increase in secure
loans
Funds from
operations
2583834
12796060
7439073
36777251
122300
Purchase of Land
Purchase of Plant and
Machinery
Increase in working
capital
6621525
11421497
41675496
Total→ 59718518 Total→ 59718518
INTERPRETATION:-
The above calculation that in 2006-2007 total current assets amount to
Rs. 12,14,20,338 has been decreased to Rs. 18,93,51,487. The increased in
current assets amount Rs. 6,79,31,149.
Cash and bank balance has higher i.e. from ( 288272 to 1470425)
Rs. 1182143 loans and advances also increased from 26537258 to 3583127
i.e.Rs 12300869.
At the same time the current liabilities also decreased from Rs.
6235100 to 27029530 i.e. Rs. 20794430.
The net working capital increased during the study period
amount to Rs. 416755496. So this is a healthy sign that the company able to
manage current assets and liabilities
STATEMENT OF CHANGING IN WORKING CAPITAL FOR THE
YEAR 2007-2008 OF KESORAM CEMENTS LTD.
PARTICULARS 2007 2008
EFFECT ON working
Capital
INCREASE DECREASE
Current Assets:
a) Inventories
b) Sundry Debtors
c) Cash and Bank Balances
d) Loans and Advances
e) Other current assets
Total current Assets (A)
Current Liabilities & Provisions:
a) Current Liabilities
b) Other current liabilities
Total Current Liabilities (B)
744879734
63467
1470425
38838127
74489734
60982074
6510948
14121860
59992347
60982074
6447481
1261435
939801
13507660
21154220
13507660
365467
11112150
189351487 202589303
27029530
7130214
30094997
18242364
34159744 48337361
NETWORKING CAPITAL(A-
B)
155191743 15425942
939801
155191 155191743 19098916 19098916
FUNDS FLOW STATEMENT FOR YEAR 2007-2008 OF
KESORAM CEMENTS LTD.
Source of funds Amount (Rs)
Application of funds
Amount (Rs)
Sales of factory buildings and other fixed assets
Decrease in working capital
Increase in Reserves & Surplus
Increase in un secured loans
Funds from operations
2733270
939801
23468817
12545805
122300
Purchased of Furniture & Fixtures
Purchase of plant &Machinery
Purchase of computers
Purchase of other fixed assets
Decrease in secured loans
82932
13860146
284216
1348674
2423425
Total 39809993 Total 39809993
INTERPRETATION:-
The above calculation that in 2007-2008 total current assets amount to
Rs. 189351487 has been increased to Rs. 202589303. The increased in
current assets amount Rs. 13237816.
Cash and bank balance has shown higher i.e. from ( 147425-
14121860) Rs. 12651435 loans and advances also increased from 38838127
to 59992347 i.e. Rs. 21154550.
At the same time the current liabilities also increased from Rs.
34159799 to 4833736 i.e. 14177617.
The net working capital decreased during the study period amount to
Rs. 939801. so this is a healthy sigh that the company able to manage current
assets and liabilities.
STATEMENT OF CHANGING IN WOKRING CAPITAL FOR THE
YEAR 2008-2009 OF KESORAM CEMENTS LTD.
Particulars
2008 2009 Effect on working capital
Increase Decrease
Current Assets:-
Inventories
Sundry Debtors
Cash & Advantages
Loans & Advantages
Other current Assets
Total current Assets (A)
Current liabilities &
Provisions:-
Current liabilities
Other current liabilities
Total current liabilities (B)
Working Capital (A-B)
Decrease in working
capital
10957032
0
6802874
14121860
59992347
4123820
150355335
2374408
1456882
32256108
8658335
43785015
45344515
4428466
12664978
27736239
28876021
19411221
32775006
4881795
193783874
59813506
5897969
37656801 65711475
15695442
0
28876021
128078399
Total 18583044
1
185830441 73705704 73705704
FUNDS FLOW STATEMENT FOR YEAR 2008-2009 OF
KESORAM CEMENTS LTD.
Particulars Rs Particulars Rs
Source of funds
Share holder funds
Reserve & surplus
Unsecured loans
Secured loans
Differed tax liability
Preliminary
Expenses
80000
12761
142757
0
60098
34093
1223
Application of
funds
Purchase of fixed
assets
168399
Total 168399 Total 168399
INTERPETATION:-
The above calculation that in 200682009 total current assets amount to
Rs 1946111221 has been decreased Rs 193789874. The decreased in current
assets Rs 821347.
Cash & Bank balance has shown lower i.e. from (14121860 to
1456882) Rs 12664978 loans and Advances also decreased fro 59992347 to
32256108 i.e. 2854674.
At the same time the current liabilities also decreased from Rs.
37656801 i.e. 28054674.
The net working capital decreased during the study period amount to
Rs 28876021. The decline in net working capital resulted from decrease
sundry debtors. Cash & Bank balances loans & Advances.
STATEMENT OF CHANGING IN WORKING CAPITAL FOR
THE YEAR 2009-2010 OF “KESORAM CEMENTS LTD.
Particulars 2009 2010 EFFECT ON working Capital Increase Decrease
Current Assets:- Inventories Sundry DebtorsCash & Advantages Loans & AdvantagesOther current Assets
Total current Assets (A)
Current liabilities & Provisions:-
Current liabilitiesOther current liabilities
Total current liabilities (B)
Working Capital (A-B)
Decrease in working capital
150355335 1546938 1456882 32256108 9485805
190669403 2133751 25737490 35980085119585076
40314068586813242806083723977110099271
86923432
195101068
60140091 5897968
374105885
149330012 8789433
66038008 158119445
129063008
86923432
215986440
Total 215986440 215986440 172086122 172086122
FUNDS FLOW STATEMENT FOR YEAR 2009-2010 OF
KESORAM CEMENTS LTD.
Particulars Amount (Rs) Particulars Amount (Rs)
Sources of
FUNDS
Secured loans
Unsecured loans
955799.5
418527.6
Application of
FUNDS
Reserve & Surplus
Differed tax
liability
Purchase of fixes
assets
Miscellaneous
Expenditure
Net current Asset
7056.19
346.8
1275569.3
2606
88407.9
Total 1374327.1 Total 1374327.1
INTERPETATION:-
The total current assets value for the year 2008-2009 is 195101068. It
increased to 37410585 for the year ending 2009-2010.
Cash & Bank balance showed an increase of 24280608. Which is
derived from a sea change in company’s cash balances? The cash & Bank
balance for the year 2009-2010 are 1456882 and 25733490 respectively.
At the same time the current liabilities also increased from Rs
6603860 to 158119445 i.e. Rs 92081385.
The net working capital increased during the study period amount
to Rs. 86923432. So this is a healthy sighs that the company able to manage
good liquidity.
FINDINGS
1. In the year 2005-2006 the total source of funds is Rs. 1,70,94,509. The main
source of the fund is secured loans amounted to Rs 6914784. Total
applications of funds for the year 2005-2006 are Rs 17216811. The main
application component is purchase of other fixed assets Rs 1140902.
2. In the year 2006-2007 the total source of funds is Rs 59596218. The main
source of fund is secured loans amounted to Rs 36777252. Total
applications of funds for the year 2006-2007 are Rs 59718518. The main
application component is purchase of plant and machinery Rs 11421497.
3. In the year 2007-2008 the total source of funds is Rs 39687693. The main
source of funds is Reserves & Surplus amounted Rs 23468817. Total
applications of funds for the year 2007-2008 are Rs 3980993. The main
application component is secured loans Rs 242324025.
4. In the year 2008-2009 the total source of fund is Rs 94926638. The main
source of the fund is unsecured loans amounted to Rs 1427570. Total
applications of funds for the year 2008-2009 are 168399000. The main
application component is purchase of fixed assets Rs 168399000.
5. The year 2009-2010 the total source of fund are Rs 13743271. The main
source of the fund is secured loans amounted to Rs 955799.5. Total
applications of funds for the year 2009-2010 are 1374327.1. The main
application component is purchase of fixed assets Rs 1275569.3.
CONCLUSION
1. The company always maintains sound level of funds.
2. Company maintains adequate level of working capital during the study
period except the year 2007-08, 2008-09.
3. The company paid the amount of unsecured loans.
4. For meeting working capital requirement the company has cash credit
arrangement from various banks.
5. Depreciation calculates from beginning of the month for all the assets.
6. Investment is carried at market value with out providing any provision.
7. The company maintained their fixed assets at book value and providing
depreciation where is necessary.
8. The company has taken loans from Government of India.
9. The company maintains their reserves and surplus consistently.
SUGGESTION
There is lot of pretension consistence demand the cement industry as a
cement producer the company can able to source, their funds throw more
share holders funds.
Company is maintaining in inventories a part of current assets for the entire
study period. At shows that excessive inventory level are not good for any
organization and any company. Si the company has to concentrate much
more on inventory maintains.
The company has to main super quick assets in order to maintain sound
liquidity.
During study period there are negative working capital levels for the
company so the company must maintained enough current assets the keep
working capital, figure positively.
A company has to recollect their our standing amount from the debtor’s
regularly.
The company has to maintain same funds long-term investment.
The company has to monitory from liability position, in regular intervals.
The company must be conscious about their working capital position.
BIBILIOGRAPHY
Author Name of the book Edition
RK Sharma shashi K Gupth Management of accounting 8th edition
Dr.S.N.Maheshwari Financial management 6th edition
I.M pandey Financial management 9th edition
SOURCES:
Company reports.
Memorandum of association and Articles of association.
Web site of a company www.kesoram.com
Web site for cement industry www.kesoram
