Project on Paras

8/2/2019 Project on Paras

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Introduction

In this project I have done the Financial Analysis of Shree

Parasnath Re-Rolling Mills Ltd.

I have done financial analysis based on two different things:

1. Ratio Analysis:

In this I have tried to analyse the liquidity position, short-term

solvency, long-term solvency, with the help of different financial

ratios, and also to find out trends in profit and turnover over a period

of time.

2. Cash Flow Analysis:

Here I have tried to figure out the inflow of cash into the company

and outflow of cash from the company, on different activities, such as

Operating, Investing and Financing.

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Company profile:

Located in Durgapur, the Industrial hub of West Bengal, Paras Steel

is the first automatic plant in Eastern India to produce Thermex TMT

bars as well as the full range of structural steels.

It is the only plant in the region to be certified ISO: 9001 for

quality processes, ISO: 14001 for environment managementand OHSAS 18001 for health and safety standards. The

relevant BIS certifications, such as IS 1786:1985 & IS

2062:2006 have also been obtained.

The modern plant incorporates a complete Thermex treatment

system and a structural mill. The Complete range of requirements

can therefore be met under one roof.

Durgapur being one of India's premiere steel hubs, the billets is

locally procured from Steel Authority of India. Proximity to other raw

materials and markets means that Paras products are competitively

priced despite their superior quality.

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Product range:

TMT Bars 8mm to 32mm.

Angles 35mm to 200mm.

Channels 75mm to 450mm.

Beams/Joists 100mm to 350mm.

H-Beams 150mm to 203mm.

Rounds Up to 160mm.

Flats Up to 400mm.

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Paras TMT Bars:

Paras TMT is the latest generation of ribbed, high strength, thermo

mechanically treated reinforcement bars that are popular the

world over. The company has been the first in Eastern India to

introduce the state-of-art Thermex process under licence from

HSE, Germany to produce these bars in grades designated as

Paras TMT Fe 415 and Paras TMT Fe 500 with differentmechanical properties.

The Thermex TMT process features rapid cooling of heated bars

periphery. This transforms the peripheral structure to marten site,

which is then annealed through the heat available at the core. The

resultant bar structure is of tempered marten site on the outer

surface and of fine-grained ferrite-pearlite at the core, imparting

high strength, toughness and ductility.

Thermo-mechanically treated (TMT) reinforcement bars are today

essential for any serious construction. For load bearing

applications they have completely replaced CTD and plain bars on

account of their remarkable weight to strength ratio.

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Paras Structurals:

Structural steel is steel construction materials, a profile, formed with

a specific shape or cross section and certain standards of chemical

composition and strength. Structural steel shape, size, composition,

strength, storage, etc, is regulated in most industrialized countries.

Structural Steels shape structure on mathematical geometry and

solely depend on 90o.

The structural mill produces a variety of hot rolled products such as

angles, channels and beams and joists, as well as flats and rounds of

various dimensions. The versatile range includes a cross section of

special contours for bridges, buildings, transmission towers, industrial

structures as well as for automobile and shipping industries. An

online straightening machine ensures accuracy of angles, which is

particularly important for transmission towers.

The strength and quality consistency make Paras structural products

a favorite among leading engineering and construction companies. All

raw materials are sourced fromSAIL.

Each batch is subjected to stringent tests. Samples from every castare sent for chemical analysis, tensile and bend tests. Where

required, impact and spectromax testing are also undertaken. Finally,

piece-by-piece inspection ensures that only flawless pieces are

dispatched. When its Paras, you are sure.

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Why Paras

Most of the secondary producers of India are having the

infrastructure of producing either TMT or Structurals that too with

limitations but PARAS is the company who is having the

infrastructure of producing both TMT and Structurals and without

limitations.

Strength:

Paras Steels are available in PARAS TMT Fe: 415/500, Paras

Structurals Fe: 410/440/490/540 grades which are much stronger

than ordinary steels and give a 20% stronger concrete structure with

a same quantity of steel.

Thermal Stability:

Paras Steels have high thermal stability unlike other ordinary steel. It

can be used even at high temperature till 6000c without any loss in

strength.

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Bend Properties:

Paras Steels possesses excellent bend ability due to the unique

feature of uniform elongation.

Weld Properties:

Paras Steels have very good weld ability. They do not suffer from loss

of strength at the weld joints.

Corrosion Resistance:

Paras Steels shows virtually no rusting even after a long time due to

the absences of any residual stress.

Earthquake Proof:

Paras Steels can be used in Earthquake zones as its guarantee better

elongation.

Coastal Steel:

Paras Steels are rolled from IS 2830 Billets all procured from SAIL to

produce CRS Steels, which provides better stability, and function in

coastal region.

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Fatigue Resistance:

Paras Steels have high fatigue resistance on dynamic loading on

account of the high strength of the surface layer.

Fire Resistance:

Paras Steels have higher thermal stability which making it safer in

Fire Hazards.

Quality Assurance:

Paras Steels uses the in house state of the art laboratory with

modern and advanced machineries such as SPECTROMAX, UPM, and

IMPACT.

Savings:

Paras Steels, extra strength means more savings too. It saves steel

up to 20%.

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Distributor & Retail Network:

In India:

1. West Bengal

2. Orissa

3. Tamil Nadu

4. Nagaland

5. Tripura

6. Manipur

7. Meghalaya

8. Rajasthan

9. Delhi

10. Karnataka

11. Assam

12. Andhra Pradesh

13. Mizoram

14. Arunachal Pradesh

15. Bihar

16. Punjab

17. Haryana

18. Kochi

19. Kerela

20. Gujarat

21. Madhya Pradesh

22. Andaman & Nicobar

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Outside India:

1. Bhutan

2. Nepal

Major Clients:

Government & Semi-Government Department:

1. Central Public Works Department (all over India)

2. Eastern Railways

3. Military Engineering Services (through contractors)

4. West Bengal Power Development Corp Limited

5. West Bengal State Electricity Board

6. Damoder Valley Corporation (through contractors)

7. BSNL

8. NHPC9. APCPDCL

10. APNPDCL

11. Central Cold Field Ltd

Approvals from Major Civil Contractor & Consultants:

1. L&T Limited

2. Bengal Ambuja Housing Development Ltd.

3. Maytas Infra Limited.

4. Simplex Infrastructure Ltd.

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5. Shapoorji Pallonji & Co. Ltd.

6. Geo Foundation & Structures India Ltd.

7. Oriental Structures Ltd.

8. Gyatri Project Ltd.

Major Industry Houses during Commissioning:

1. Tata Ryerson Ltd.

2. Tata Motors

3. Bhusan Steels and Power Ltd.

4. B.M.A. Stainless Steel Ltd.

5. Paharpur Cooling Towers Limited

6. E.M.C. Limited

7. Rashmi Metaliks Pvt. Ltd.

8. Emami Papers Mills Pvt. Ltd.

9. Adhunik Group of Companies

Real Estate Developers:

1. Parsvnath Developers Limited, New Delhi

2. Bengal Ambuja Housing Development Ltd., Kolkata

3. Sherwood Projects

4. Unitech Limited

5. Bengal Shelter Housing Development Ltd.

6. Prestige Estate Projects Pvt. Ltd., Bangalore

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7. Ideal Real Estate Pvt. Ltd.

8. Purvankara Projects, Bangalore

9. GEO Foundation Pvt. Ltd., Kochi

10. DLF Ltd.

Certifications:

Life would be substantially more difficult without standards. In order

to provide cost effective quality products to its customers, the

company has acquired a number of national and international

standard quality certificates and license.

The list of certificates and license acquired by the company are as

follows:

ISO 9001-2000

ISO 14001- 2004

OHSAS 180001

ISI 1786:1985 for TMT

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ISO 2062:1999

HDS Bars Thermex

Companys Vision:

Over the years, Paras has developed an enviable roster of customers

in India, as well as a growing export market in Nepal, Bhutan, etc.

We are enlisted with numerous Government departments and

multinational companies, who recognize the quality of our steel.

Noteworthy approvals include Power Grid Corporation for MS angles

and Military Engineering Services (MES) for TMT and Structural

sections. Many prestigious buildings have been made with our steel.

The 21st century has marked good times for the Indian steel

industry. Both domestic and international demand has been robust.

For producers like Paras, the boom in the infrastructure sector has

fuelled demand from the construction industry. Almost all steel

companies have done well and we are no exception.

Good times, however, do not last forever. In our quarter century of

industry experience we have seen the ferrous cycle rise, fall and rise

again. We have learnt that what survive is quality -- and the trust of

customers.

In the last few years we have consistently invested in building a

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modern plant and implementing quality systems and processes.

Today we use the best steel as raw material, process it with the best

equipment, and follow best practices to assure quality products.

Balance Sheet:

Particulars: 2007 2006 2005

Sources of fundsShare Holders Fund

Equity share capital 156,900,000.00 156,900,000.00 94,900,000.00

Share application money 40,000,000.00 22,601,000.00

Reserves & surplus 106,441,191.36 103,752,206.18 10,097,852.10

Loan fundsSecured loans 180,510,567.92 124,281,261.33 103,179,015.10

Unsecured loans 57,586,000.00 4,160,000.00 11,239,000.00

Deferred Tax Liability 12,783,300.00 14,616,000.00 6,188,100.00

Total 554,221,059.28 426,310,467.51 225,603,967.20

Applications of fundsFixed Assets

Gross Block 252,626,004.13 250,280,895.13 109,041,230.41

Less: Depreciation (73,812,652.14) (46,726,224.83) (22,068,253.32)

Net Block 178,813,351.99 203,554,670.30 86,972,977.09

Capital Work in Progress 94,699,988.84 1,830,927.00 97,863,224.75

Investments 110,000.00

Current Assets

Inventories 205,775,114.29 140,767,614.50 41,098,724.98Sundry Debtors 30,447,580.83 51,355,943.19 51,517,882.37

Cash & Bank Balances 86,336,292.70 43,557,252.84 24,303,031.44

Loans & Advances 113,974,611.00 102,172,285.88 62,774,984.46

Less: Current Liabilities & Provisions (155,950,780.37) (116,958,026.20) (138,971,557.89)

Miscellaneous expenses not written

off 14,900.00 29,800.00 44,700.00

Total 554,221,059.28 426,310,467.51 225,603,967.20

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Profit & Loss Account:

Particulars: 2007 2006 2005

Income:

Turnover 2,055,825,916.00 1,467,903,562.38 1,303,957,650.00

Acretion to stock 50,098,123.40 23,398,801.50 2,096,847.00

Total 2,105,924,039.40 1,491,302,363.88 1,306,054,497.00

Expenditure:

Material Costs 1,822,727,122.72 1,248,201,421.41 1,185,470,846.47

Manufacturing Expenses 158,488,729.37 149,416,629.37 67,018,603.23

Personnel Expenses 24,257,078.00 10,838,925.00 4,634,486.00Administrative & SellingExpenses 27,965,844.08 18,386,744.25 15,364,777.01

Finance Charges 14,350,857.05 12,334,031.26 6,780,585.51

Depreciation 27,421,494.00 24,787,435.51 12,237,405.42

Preliminary Expense written off 14,900.00 14,900.00 14,900.00

Net Profit during the year 30,698,014.18 27,322,277.08 14,442,893.36

Less: Previous Year Adjustment 1,108,944.00

Less:Provision for Taxes 10,150,283.00 2,299,170.00 1,132,503.00

Income Tax 225,986.00 189,835.00

Fringe Benefit Tax 1,832,700.00 8,247,900.00 5,013,200.00

Deferred Tax 2,666,516.00

Tax on Dividend

Net Profit After Tax 18,378,985.18 16,405,354.08 8,297,190.36

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Financial Analysis:

Financial analysis refers to an assessment of the viability, stability

and profitability of a business, sub-business or project.

By linking business decisions to financial results this tool helps to

analyse business performance under different business scenarios. It

will help you conduct "what-if" and "goal-seek" analysis as you

develop your sales plan or operations budgets. Financial analysis can

reveal much about a company and its operations

Objectives:

The primary objective of financial analysis is to forecast and/or

determine the actual financial status and performance. This is to

enable the firm to combine that information with all other pertinent

data (technical, economic, social, etc.) to assess the feasibility,

viability, and potential economic benefits, of a proposed or continuing

lending operation.

A secondary objective is the provision of Technical Assistance to a

borrower and to enable them to make similar assessments for the

project.

A tertiary objective is to encourage borrowers and to make any

necessary changes to their institutional and financial management

systems to facilitate the generation of appropriate data to support

good financial analysis.

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Helpful in answering questions like:

Which bills are due this week and for what amounts?

Are there any customers with payment problems; if so, who needs

to be notified?

What are the values of assets and liabilities on a given date?

What is the value of assets, liabilities, and owners equity on a

given date?

What is the breakdown of expenses by business units?

Which business units are hitting their targets?

What are the revenue trends by business units?

What are the trends in revenue, by revenue types?

What is the forecasted revenue? Has this forecast changed?

Why has revenue forecasts changed?

What is the actual amount of profit margin by business unit orregion? What are the associated trends?

What is the breakdown of costs by vendors, and what are the

associated trends?

What is the change in cash position from period to period?

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Goals :

1. Profitability- its ability to earn income and sustain growth in both

short-term and long-term. A company's degree of profitability is

usually based on the income statement, which reports on the

company's results of operations;

2. Solvency- its ability to pay its obligation to creditors and other

third parties in the long-term;

3. Liquidity- its ability to maintain positive cash flow, while

satisfying immediate obligations;

4. Stability- the firm's ability to remain in business in the long run,

without having to sustain significant losses in the conduct of its

business. Assessing a company's stability requires the use of the

income statement and the balance sheet, as well as other financial

and non-financial indicators

Both 2 and 3 are based on the company'sbalance sheet, which indicates the financial condition of a business as

of a given point in time.

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http://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Balance_sheet


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Purpose of financial statements

"The objective of financial statements is to provide information about

the financial strength, performance and changes in financial position

of an enterprise that is useful to a wide range of users in making

economic decisions." Financial statements should be understandable,

relevant, reliable and comparable. Reported assets, liabilities and

equity are directly related to an organization's financial position.

Reported income and expenses are directly related to an

organization's financial performance.

Financial statements are intended to be understandable by readers

who have "a reasonable knowledge of business and economic

activities and accounting and who are willing to study the information

diligently."

Owners and managers require financial statements to make

important business decisions that affect its continued

operations. Financial analysis is then performed on these

statements to provide management with a more detailed

understanding of the figures. These statements are also used as

part of management's annual report to the stockholders.

Employees also need these reports in making collective

bargaining agreements (CBA) with the management, in the

case of labor unions or for individuals in discussing their

compensation, promotion and rankings.

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To External Users:

These are potential investors, banks, government agencies and other

parties who are outside the business but need financial information

about the business for a diverse number of reasons.

Prospective investors make use of financial statements to

assess the viability of investing in a business. Financial analyses

are often used by investors and is prepared by professionals

(financial analysts), thus providing them with the basis in

making investment decisions.

Financial institutions (banks and other lending companies) use

them to decide whether to grant a company with fresh working

capital or extend debt securities (such as a long-term bank loan

or debentures) to finance expansion and other significant

expenditures.

Government entities (tax authorities) need financial statements

to ascertain the propriety and accuracy of taxes and other

duties declared and paid by a company.

Media and the general public are also interested in financial

statements for a variety of reasons.

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Ratio analysis :

A ratio is a relationship that indicates something about a company's

activities, such as the ratio between the company's current assets

and current liabilities or between its accounts receivable and its

annual sales. The basic source for these ratios is the company's

financial statements that contain figures on assets, liabilities, profits,

and losses. Ratios are only meaningful when compared with other

financial information. Since they are most often compared with

industry data, ratios help an individual understand a company's

performance relative to that of competitors and are often used to

trace performance over time.

Financial analysis can reveal much about a company and its

operations. However, there are several points to keep in mind about

ratios.

First, a ratio is a "flag" indicating areas of strength or

weakness. One or even several ratios might be misleading, but

when combined with other knowledge of a company's

management and economic circumstances, financial analysis

can tell much about a corporation.

Second, there is no single correct value for a ratio. The

observation that the value of a particular ratio is too high, too

low, or just right depends on the perspective of the analyst and

on the company's competitive strategy. Third, financial ratios

are meaningful only when compared with some standard, such

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as an industry trend, ratio trend, a trend for the specific

company being analyzed, or a stated management objective.

Objectives of ratio analysis:

To allow comparisons to be made which assist in predicting the

future.

To investigate the reasons for the changes.

To construct a simple explanation of a complicated financial

statement by its expression in one figure.

To permit the charting of a firms history and the evaluation of

its present position.

To provide indicators of a firms past performance in terms of

its operational activity and profitability; and near-present

financial conditions.

To see what information users can get from the accounting

system output.

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Advantages of ratio analysis:

It is used as an aid to simplify the comprehension of financial

statements of an organization.

It is used as an aid to analysis and interpretation of financial

statements and acts on an index of the efficiency or otherwise

of the enterprise.

It provides data for inter-firm comparison in regard to operating

performance and financial results, which helps the managementin planning the future course of action.

It can be used for comparing the working results of the different

divisions of the same organization.

Accounting ratios based on past performance is helpful in

predicting the future performance of the different divisions and

the business as a whole .It can be used for making investing

decisions.

It can help the management in planning and forecasting and

provides clues on future problems.

Without going into much detail, the position of the business can

be ascertained at a glance.

Accounting reports can be strengthened by the use of

accounting ratio.

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Limitations of ratio analysis:

Financial statements suffer from a number of limitations. When

ratios are constructed from those financial statements, ratios

suffer from the inherent weaknesses of the accounting system

itself.

By using ratios, forecast of a future of a business may not

prove correct. This is because, ratios are all based on past

happenings and not future probabilities. They are subject to

change in future.

Accounting ratios are simply clues. They do not indicate the

cause of difference. Therefore they are not considered as basis

for immediate conclusion.

Ratios are not free from individual bias, because accounting is

man-made. Two identical business units with the same level of

operations and investments may show highly in comparable

financial results.

There is lack of proper standards for ideal ratios. There are

many rules of thumb, since it is not possible to establish well

accepted absolute standards.

While constructing ratios, arithmetic window dressing is

possible by concealing vital facts and presenting the financial

statements in such a fashion as to show the business in a better

position.

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Classification of ratio:

Ratios are classified according to the need of different interested

groups (e.g., share holders, lenders, investors, management, etc.).

This is the most common classification of ratio. According to the need

of the organization / investors, ratios can be classified differently.

Liquidity Ratios:

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Liquidly ratios measure the ability of a firm to meet its short-term

obligations .Short-term is conventionally viewed as a period up to

one year. By liquidity, we mean the amount of cash or cash

equivalents the firm has on hand and the amount of cash it can

arrange in a short period of time. Cash is the most liquid asset. It

includes currency, demands deposits with bank. Cash equivalents are

short term highly liquid investments that are readily convertible into

known amounts of cash and which are subjects to an insignificant risk

of changes in value stock and debtors are somewhat less liquid.

Liquidity is essential for smoothly conducting of business activities.

If the firm has a poor liquidity position, it may not be able to make

timely payment to the creditors and, in effect, will not be in a

position to buy goods or services in future on credit. Poor or

insufficient liquidity may result in a serious fundamental problem,

particularly in time of adversity, such as when a business unit is shut

down by strike or a steep rise in the price of a raw material.

Need for liquidity:

To invest in projects those were agreed in previous year(s).

To take advantage of investment opportunity that arises.

To meet working capital needs.

Current Ratio:

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Current Ratio is the relationship between current assets and

liabilities. Current assets are cash, cash equivalent and other assets

which are expected to be realised in cash or sold or consumed within

one year. On the other hand, current liabilities are the obligations of

the business which are repayable within a relatively short period of

time, usually one year.

Current Ratio = Current assets / Current liabilities

Ideal:

Theoretically ideal ratio is 2:1. A decrease in

current ratio indicates that short-term solvency position has

deteriorated. A very high current ratio shows under investment in

fixed assets, which would adversely affect earning ability.

Findings: In 2007 current ratio 2.07:1

In 2006 current ratio 2.02:1

Comment:

The company has good current ratio, which shows that it has good

short-term solvency position, as its current assets are double of

current liabilities.

Quick Ratio:

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The quick ratio is the relationship between quick assets and current

liabilities. Quick assets are current assets less stock i.e., cash, bank,

cash equivalents, debtors and readily realizable marketable

securities. A more stringent test of short-run solvency is the quick

ratio. It is widely regarded as the most useful single test of liquidity.

Quick ratio= Quick assets / Quick liabilities

Ideal:

Set standard is 1. If Quick ratio < 1, then organization might not be

able to discharge its current liabilities in time. It would adversely

affect the goodwill of the organization.

Findings: In 2007 Quick ratio 0.8:1

In 2006 Quick ratio 0.81:1

Comment:

The ratio is less than because the company has paid huge advances

(Rs.11.37 crore) to its suppliers & others, which reduces its

obligations substantially, and balance the ratio.

Solvency Ratios:

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In a popular sense, solvency means that a business is able to pay its

liabilities as they become due. Insolvency means the business is

unable to do so. Whereas liquidity refers to the ability of a firm to

meet its short-term liabilities, solvency usually refers to the firms

ability to meet long-term liabilities. Solvency depends on the

profitability of the business. If a business is not profitable in the long-

run, it will not be able to meet its debts. Solvency ratios measure the

extent to which the firm has been financed by debt.

One of many ratios used to measure a company's ability to meet

long-term obligations. The solvency ratio measures the size of a

company's after-tax income; excluding non-cash depreciation

expenses, as compared to the firm's total debt obligations. It

provides a measurement of how likely a company will be to continue

meeting its debt obligations.

The important solvency ratios are:

Debt-Equity Ratio.

Total Assets to Debt Ratio.

Proprietory Ratio.

Debt-Equity Ratio:

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It is the ratio between the long-term debts and shareholders funds.

Long-term debts include debentures, loan from financial institutions,

etc. Shareholders funds include equity and preference share capital

plus reserves and surplus minus fictitious assets (e.g., debit balance

of the Profit and Loss Account or discount on issue of shares, etc.)

Debt Equity Ratio = Long-term Debts / Shareholders fund.

Ideal:

This ratio should generally be less than 1 since it will show that the

claims of the owners are greater than those of lenders. It is also

considered unhealthy for a business to have more debt than equity.

Findings: In 2007 Debt Equity Ratio .78:1

In 2006 Debt Equity Ratio .56:1

Comment:

This increase in ratio was due to increase in external borrowings by

Rs.10.96 crore, to increase production, to meet the increasing

product demand.

Total Assets to Debt Ratio:

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This ratio shows the relationship between total assets and long-term

debts. This ratio measures the proportion of the firms total assets

that are financed by long-term debts. Long-term debts include

debentures, bonds and loans from financial institutions.

Total asset to debt ratio= Total assets / long term-debt

Ideal:

A high ratio indicates represents a large degree of security to lenders

for extending long-term loans to firm. If the ratio is too low, it can be

concluded that the firm is using more long-term debts for financing

its total assets.

Findings: In 2007 ratio 2.33:1

In 2006 ratio 3.32:1

Comment:

The reason for sharp decline was because of external borrowing topurchase new assets to increase the scale of production.

Proprietory Ratio:

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The total assets belonging to a concern are financed by a

combination of resources provided by shareholders and creditors. The

proportion of business assets financed by the shareholders is

measured by proprietory ratio.

Proprietory ratio= Shareholders fund / Total assets.

Significance:

This ratio indicates more use of shareholders fund in acquiring total

assets of the business. It can be used to ascertain the solvency and

financial stability of the firm in the long run. If it is too high (more

than .9), it can be concluded that the firm is not willing to use more

debt capital.

Findings: In 2007 .55:1

In 2006 .66:1

Comment:

This fall in ratio shows that the company has financed its new assetsby taking loans from external sources.

Activity Ratios:

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Activity ratios are the ratios of the cash elasticity of current assets,

i.e., how quickly various current assets are converted into sales and

cash. Current assets normally comprise cash, debtors and

inventories. A firms ability to meet current liabilities largely depends

upon the rate at which cash flows into the business from current

operations. Since sales is the critical event in this regard, the rate at

which inventories are sold or debtors settle their accounts are very

crucial. Thus, it is necessary to evaluate the activity of specified

current assets like stock, debtors, and also assets.

The important activity ratios are:

. Stock Turnover Ratio

Debtors Turnover Ratio

Creditors Turnover Ratio

Working Capital Turnover Ratio

Total Assets Turnover Ratio

Stock Turnover Ratio:

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This ratio measures how quickly inventory is sold, i.e., the number of

times a businesss stock turnover during a year. This ratio is likely to

differ from one business to another.

Stock turnover ratio=Cost of Goods Sold / Average Inventory

Significance:

This indicates whether business is fast or slow moving. If there is

sign decrease in stock turnover it is considered as a bad signal. A

sharp increase in this ratio indicates stock accumulation, which is

associated with risk of obsolence.

Findings:

In 2007 ratio was 11 times.


Comment:

This decrease in stock turnover was due to stocking of more raw

materials to increase production smoothly to raise sales to Rs.205.58crores in 2007, from Rs.146.80 crores.

Debtors Turnover Ratio:

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It is the ratio between the credit sales and average (Avg) debtors

plus average bills receivable. This ratio indicates the numbers of

times per year that the average balances of debtors are collected.

DTR = Credit Sales / (Avg debtors + Avg Bills Receivable)

Significance:

A high ratio may indicate an improvement in business conditions, a

tightening of credit policy, or improved collection procedure. A low

ratio may be an indication of long credit period, or slow realization

from debtors.

Findings:

In 2007 ratio was 32.67 times.


Comment:

In spite of increase in sales by a huge amount (Rs.58.78 crores), the

company was able to improve its collection procedure and policy from

last year.

Note: According to the management 65% of sales were on credit.

Creditors Turnover Ratio:

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This is the ratio between the credit purchase and average (Avg)

creditorsplus average bills payable. This ratio indicates the number

of times per year that the average balance of creditors is paid.

CTR = Credit Purchase / (Avg Creditors + Avg Bills Payable)

Significance:

A high creditor turnover ratio may indicate strict credit terms granted

by suppliers. A low ratio may indicate liberal credit terms allowed by

suppliers.

Findings:



Comment:

This increase in ratio was due to more purchases of materials which

were required for increasing production, rather than tightening of

credit policy by suppliers.

Note: According to the management 50% of purchases were on credit.

Working Capital Turnover Ratio:

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This ratio indicates the number of times the working capital (current

assets current liabilities), has been turned over or utilized during

the period. This is the ratio between turnover (sales) and working

capital. It shows the extent to which a business is using its working

capital to generate sales.

Working Capital Turnover Ratio = Net Sales / working capital

Significance:

A high ratio indicates efficient use of working capital in generating

sales. On the other hand, a low ratio is a indication of inefficiency of

working capital management.

Findings:



Comment:

In spite of increase in production the company is able to maintain astable ratio which is a good signal.

Assets Turnover Ratio:

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This ratio intends to reflect the intensity with which assets are

employed. The ratio focuses on the use of assets made by a company

and it is considered to be a prime determinant of the level of future

income inflows.

Total Assets turn over ratio = Net Sales / Total Assets

Significance:

A high assets turnover ratio indicates that the assets are being

utilised efficiently. A low ratio indicates that that the assets are not

being efficiently employed.

Findings:



Comment:

This ratio has increased quite considerably which reflects that the

assets were used more efficiently with increase in production.

Profitability Ratios:

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The key interest of the owners of a business, e.g., the equity

shareholders in the case of a company is the profitability. Profitability

means the returns achieved through the efforts of the management

on the funds invested by the owners of a business. The amount of

profits earned by a business has little significance unless it is related

to its source.

Profitability is the capacity of an enterprise to make profits as

measured by accounting ratios relating profits to sales or to

investment. It is the net result of a large number of policies and

decisions. Profitability ratios measure managements overall

efficiency as shown by the returns generated on sales and

investments.

The important profitability ratios are:

Gross Profit Ratio.

Net Profit Ratio.

Return on Capital Employed.

Return on Net worth.

Operating Ratio.

Gross Profit Ratio:

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This is the ratio between gross profit and net sales. The gross profit

is the difference between Net sales and Cost of goods sold (i.e., the

direct cost of sales). Net sales mean total sales less returns. This

ratio is expressed as a percentage of sales.

Gross Profit Ratio = (Gross Profit / Net Sales) * 100

Significance:

The more the gross profit earned the better. The gross profit of the

company must cover its operating and other expenses. It measures

the efficiency of production, purchase and pricing as well.

Findings:

In 2007 Gross Profit was 11.14%.

In 2006 Gross Profit was 14.97%.

Comment:

This decline is Gross Profit was due a considerable rise in the world

price of direct inputs like oil, coal, iron ore, and other raw materials

and price of products were not raised to capture the market.

Net Profit Ratio:

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This is the ratio between net profit and net sales. Net profit is excess

of Total sales of a give accounting period over total expense of that

period.

Net Profit Ratio = (Net Profit / Net Sales) * 100

Significance:

A good net profit margin indicates managements ability to operate

with sufficient success not only to cove cost of production, expenses

including depreciation, but also to leave a margin of reasonable

compensation for owners- who have provided funds at a risk.

Findings:

In 2007 Net Profit was 0.9%.

In 2006 Net Profit was 1.12%.

Comment:

This fall in net profit was because of decline gross profit ratio,

increase in tax burden of borrowed capital by Rs.78.51lacs, and

increase in personnel, administrative & selling expense by Rs.2.3

crores.

Profit Over the Years:

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In 2004 Profit was Rs.18lacs.

In 2005 Profit grew up to Rs.82.97lacs.

In 2006 galloped at Rs.1.64 crores.

In 2007 it finally reached to Rs.1.83 crores.

1000

5000

9000

13000

17000

21000

Profit

Thousands

2004 2005 2006 2007

Year

Profit Over The Years

Sales Over The Years:

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In 2004 Sales was Rs. 33.9 crores.

In 2005 Sales became Rs. 130.4 crores.

In 2006 it grew up to Rs. 146.8 crores.

In 2007 it reached to Rs. 205.82 crores.

Sales

0

500000

1000000

1500000

2000000

2500000

2004 2005 2006 2007

Thousands

year

sales

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Return on Capital E mployed:

It is the relationship between Earning Before Interest and Tax (EBIT)and Capital Employed. The shareholders and long-term fund

providers are very concerned about the rate of return on capital

employed. It measures how well the firm is using all of its assets-

both those provided by its owner and those provided by its lenders.

Capital employed includes shareholders funds and long-term loan.

ROCE = (EBIT / Capital Employed) * 100

Significance:

The higher ratio shows the firms ability to use available resources to

generate income.

Findings: In 2007 ratio was 5.7%.

In 2006 ratio was 7.4%

Comment:

Due to rise in administrative & other expenses by Rs.2.3crores, and

depreciation by Rs.26.34lacs, the EBIT fell, and increase in capital

employed by Rs.12.97crores lowered the return.

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Return on Net Worth:

It is the ratio of net Profit After Tax (PAT) to net worth. It measures

the rate of return on the resources provided by the shareholders. Net

worth includes share capital and reserve and surplus (after adjusting

fictitious assets).

Return on Networth = (Profit After Tax / Networth) * 100

Significance:

This ratio measures the amount of earnings for each rupee that

shareholders have invested in the company. A company can increase

the return of equity shareholders through the favourable use of

debts.

Findings: In 2007 Return on Net worth was 7%.

In 2006 Return on Net worth was 6.3%

Comment:

Increase in net profit after tax was more than last year by Rs.19 lacs,

because of increase in reserves by Rs.26.88lacs, which helped to

increase production to provide more return on net worth to equity

shareholders.

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Operating Ratio:

This is the ratio between Cost of Good Sold (COGS) plus operating

expenses and net sales. It measures the proportion of operating

expenses per rupee of sales. It is expressed as a percentage of sales.

Operating Ratio= (COGS + operating expenses) / Net Sales*100

Significance:

A high ratio indicates a small surplus available to the business and a

lower profitability and sometimes becomes a burden because of high

fixed overheads.

Findings: In 2007 Operating Ratio was 98%.

In 2006 Operating Ratio was 97.1%.

Comment:

The operating expenses increased by Rs.60.66 crores, where as salesonly increased by Rs.58.8 crores. This resulted an increase in

operating ratio over the period.

Gearing Ratio:

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Long-term capital of a business is provided by different group of

investors (e.g., shareholders, debenture holders, etc.). Gearing is a

method of comparing how much of the long-term capital of a

business is provided by equity (equity shares + reserve and surplus

fictitious assets) and how much is provided by fixed charge capital

investors who are entitled to interest or dividend before equity

shareholders can have a dividend for themselves. The gearing ratio is

a measure of financial risk.

Gearing ratio is important when a company wants to raise additional

loan capital. If it is a high geared company, then the would-be

lenders might take the view that equity shareholders should provide

a fair proportion of the total capital for the business and at present

they are not doing so. The would be lenders might be worried that

profits are not sufficient to meet the future payment of interest.

Gearing is the most crucial factor, which must be taken into account

while preparing the financial plan of a company. Capital gearing is

the process that determines the proportion in the various accounts of

securities, which are being issued.

In simple words, a company that has raises funds mostly by equity

share is low geared while a company which has secured substantial

proportion of its long term funds by the issue of preference shares,

bonds, and debentures is highly geared.

Capital Gearing Ratio:

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An investment ratio that compares the borrowing made by the

company, with the finance contributed by the shareholders. A

company with high gearing is more vulnerable to downturns in the

business cycle because the company must continue to service its

debt regardless of how bad sales are.

Capital Turnover Ratio= (Fixed Charge Capital / Equity)*100

Ideal:

A business is low-geared if it is less than 50, neutrally geared if equal

to 50 and, high-geared if it is more than 50.

Findings: In 2007 Ratio was 77%.

In 2006 Ratio was 45%.

Comment:

As a result of increase external borrowings by Rs.10.96 crores, the

business became high-geared in 2007 from low-geared in 2006.

Capital Borrowings:

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In 2004 Secured & Unsecured loans were Rs.7.83 crores.

In 2005 company took further loan of Rs. 3.6 crores.

In 2006 the loan amount reached to Rs.12.85 crores.

In 2007 company took loan of Rs.10.96 crores, and the total loan

amount reached at Rs.23.8 crores.

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Capital borrowings

0

50000

100000

150000

200000

250000

300000

2004 2005 2006 2007

Thousands

year

borrowings

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Ear ning Per Share:

Earnings Per Share (EPS) serves as an indicator of a company'sprofitability. It measures the after-tax earnings generated for each

share of common stock. EPS does not apply to preference

shareholders as they receive dividends before any dividends are

made to common shareholders.

EPS = Net Income After Tax / Number of Equity Shares

Significance:

This is important only for equity shareholders, as it shows them their

income per share at the end of period.

Findings: In 2007 earning per share was Rs.1.71.

In 2006 earning per share was Rs.1.05.

Comment:

Though there was fall in net profit margin, the earning per share

raised by Rs.0.66. This shows that the equity holders will be more

satisfied than last year.

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Analysis of Ratios:

With the help of ratio analysis, we have come to know about the

financial position off the company, the Liquidity status, Short-term

solvency, and Long term solvency position by the help of ratios like

Current ratio, Liquidity ratio, and Debt-equity ratio and others.

Though there is variation in some ratios of present year from the

ideal ones, and last year, because the company started to produce in

very large quantity to meet its growing product demand.

On the other hand, the price of the inputs i.e., iron ore, coal, furnace

oil, which forms a major part in production of goods has gone very

high in the world market, which increases the cost of production.

To finance its production the company took loans of Rs.10.96 crores,

from external sources for which it has to pay annual interest of about

Rs.1.29 crores, which reduces the profit by a considerable amount.

But the company has been able to increase its turnover by Rs.59

crores. And profit by just Rs.19 lacs, because the company didnt

want to raise the price of its product to capture the market, hence it

reduced the profit margin, but it can be raised in coming years.

If the company go on increasing its production, and look into relatedfinancial policies, it can come off with a Great Future.

Cash Flow Analysis:

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Cash Flow Analysis is the study of the cycle of your business' cash

inflows and outflows, with the purpose of maintaining an adequate

cash flow for your business, and to provide the basis for cash flow

management.

. "Cash flow measures real money flowing into, or out of, a

company's bank account,"

Cash flow analysis involves examining the components of your

business that affect cash flow, such as accounts receivable,

inventory, accounts payable, and credit terms. By performing a cash

flow analysis on these separate components, you'll be able to more

easily identify cash flow problems and find ways to improve your

cash flow.

Cash flow analysis is a method of analyzing the financing, investing,

and operating activities of a company. The primary goal of cash flow

analysis is to identify, in a timely manner, cash flow problems as wellas cash flow opportunities

A quick and easy way to perform a cash flow analysis is to compare

the total unpaid purchases to the total sales due at the end of each

month. If the total unpaid purchases are greater than the total sales

due, you'll need to spend more cash than you receive in the next

month, indicating a potential cash flow problem.

It is done with the help ofCash Flow Statement.

Cash Flow Statement:

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A cash flow statement is a financial statement that shows a

company's incoming and outgoing money (sources and uses of cash)

during a time period (often annually or quarterly). The statement

shows how changes in balance sheet and income accounts affected

cash and cash equivalents, and breaks the analysis down according

to operating, investing, and financing activities. As an analytical

tool the statement of cash flows is useful in determining the short-

term viability of a company, particularly its ability to pay bills

Purpose:

The cash flow statement is intended to

1.provide information on a firm's liquidity and solvency and its

ability to change cash flows in future circumstances

2.provide additional information for evaluating changes in assets,

liabilities and equity

3.improve the comparability of different firms' operating

performance by eliminating the effects of different accounting

methods

4.indicate the amount, timing and probability of future cash flows

Objective:

Information about the cash flows of an enterprise is useful in

providing users of financial statements with a basis to assess the

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ability of the enterprise to generate cash and cash equivalents and

the needs of the enterprise to utilise those cash flows. The economic

decisions that are taken by users require an evaluation of the ability

of an enterprise to generate cash and cash equivalents and the

timing and certainty of their generation.

The Statement deals with the provision of information about the

historical changes in cash and cash equivalents of an enterprise by

means of a cash flow statement which classifies cash flows during the

period from operating, investing and financing activities.

Scope:[

1. An enterprise should prepare a cash flow statement and should

present it for each period for which financial statements are

presented.

2. Users of an enterprise's financial statements are interested in how

the enterprise generates and uses cash and cash equivalents. This is

the case regardless of the nature of the enterprise's activities and

irrespective of whether cash can be viewed as the product of the

enterprise, as may be the case with a financial enterprise. Enterprises

need cash for essentially the same reasons, however different their

principal revenue-producing activities might be. They need cash to

conduct their operations, to pay their obligations, and to provide

returns to their investors.

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Benefits of Cash Flow Information:

1. A cash flow statement, when used in conjunction with the other

financial statements, provides information that enables users to

evaluate the changes in net assets of an enterprise, its financial

structure (including its liquidity and solvency) and its ability to affect

the amounts and timing of cash flows in order to adapt to changing

circumstances and opportunities. Cash flow information is useful in

assessing the ability of the enterprise to generate cash and cash

equivalents and enables users to develop models to assess and

compare the present value of the future cash flows of different

enterprises. It also enhances the comparability of the reporting of

operating performance by different enterprises because it eliminates

the effects of using different accounting treatments for the same

transactions and events.

2. Historical cash flow information is often used as an indicator of the

amount, timing and certainty of future cash flows. It is also useful in

checking the accuracy of past assessments of future cash flows and

in examining the relationship between profitability and net cash flow

and the impact of changing prices.

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Who Should Prepare:

The cash flow statement shall be prepared in accordance with the

Accounting Standard on Cash Flow Statement - (AS-3) issued by the

Institute of Chartered Accountants of India.

AS-3 is mandatory for the following enterprises in respect of

accounting periods commencing on or after April 1, 2004.

1. Enterprises whose equity or debt securities are listed on a

recognised stock exchange in India or outside, and enterprises that

are in process of issuing equity or debt securities that will be so listed

as evidenced by the Board of Directors resolution in this regard.

2. Banks including co-operative banks.

3. Financial institutions.

4. Enterprises carrying on insurance business.

5. All other commercial, industrial and business enterprises whose

turnover (i.e., excluding other income) for the immediately preceding

accounting period on the basis of audited financial statements

exceeds Rs.50 crores or which have borrowings including public

deposits exceeding Rs.10crores at any time during the accounting

period.

6. Holding and subsidiary enterprises of any of the above at any time

during the accounting period.

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Definitions of Important Terms:

Cash comprises cash on hand and demand deposits with

banks.

Cash equivalents are short term, highly liquid investments

that are readily convertible into known amounts of cash and

which are subject to an insignificant risk of changes in value.

Cash flows are inflows and outflows of cash and cash

equivalents.

Operating activities are the principal revenue-producing

activities of the enterprise and other activities that are not

investing or financing activities.

Investing activities are the acquisition and disposal of long-

term assets and other investments not included in cash

equivalents.

Financing activities are activities that result in changes in the

size and composition of the owners capital (including

preference share capital in the case of a company) and

borrowings of the enterprise.

Cash and Cash Equivalents

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1. Cash equivalents are held for the purpose of meeting short-term

cash commitments rather than for investment or other purposes. For

an investment to qualify as a cash equivalent, it must be readily

convertible to a known amount of cash and be subject to an

insignificant risk of changes in value. Therefore, an investment

normally qualifies as a cash equivalent only when it has a short

maturity of, say, three months or less from the date of acquisition.

Investments in shares are excluded from cash equivalents unless

they are, in substance, cash equivalents; for example, preferenceshares of a company acquired shortly before their specified

redemption date (provided there is only an insignificant risk of failure

of the company to repay the amount at maturity).

2. Cash flows exclude movements between items that constitute cash

or cash equivalents because these components are part of the cash

management of an enterprise rather than part of its operating,

investing and financing activities. Cash management includes the

investment of excess cash in cash equivalents.

Operating Activities:

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1. The amount of cash flows arising from operating activities is a key

indicator of the extent to which the operations of the enterprise have

generated sufficient cash flows to maintain the operating capability of

the enterprise, pay dividends, repay loans and make new

investments without recourse to external sources of financing.

Information about the specific components of historical operating

cash flows is useful, in conjunction with other information, in

forecasting future operating cash flows.

2. Cash flows from operating activities are primarily derived from the

principal revenue-producing activities of the enterprise. Therefore,

they generally result from the transactions and other events that

enter into the determination of net profit or loss. Examples of cash

flows from operating activities are:

Cash receipts from the sale of goods and the rendering of

services;

Cash receipts from royalties, fees, commissions and other

revenue;

Cash payments to suppliers for goods and services;

Cash payments to and on behalf of employees;

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Cash receipts and cash payments of an insurance enterprise for

premiums and claims, annuities and other policy benefits;

Cash payments or refunds of income taxes unless they can be

specifically identified with financing and investing activities; and

3. Some transactions, such as the sale of an item of plant, may give

rise to a gain or loss which is included in the determination of net

profit or loss. However, the cash flows relating to such transactions

are cash flows from investing activities.

4. An enterprise may hold securities and loans for dealing or trading

purposes, in which case they are similar to inventory acquired

specifically for resale. Therefore, cash flows arising from the purchase

and sale of dealing or trading securities are classified as operating

activities. Similarly, cash advances and loans made by financial

enterprises are usually classified as operating activities since they

relate to the main revenue-producing activity of that enterprise.

Investing Activities:

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The separate disclosure of cash flows arising from investing activities

is important because the cash flows represent the extent to which

expenditures have been made for resources intended to generate

future income and cash flows. Examples of cash flows arising from

investing activities are:

Cash payments to acquire fixed assets (including intangibles). These

payments include those relating to capitalised research and

development costs and self-constructed fixed assets;

Cash receipts from disposal of fixed assets (including intangibles);

Cash payments to acquire shares, warrants or debt instruments of

other enterprises and interests in joint ventures (other than

payments for those instruments considered to be cash equivalents

and those held for dealing or trading purposes);

Cash receipts from disposal of shares, warrants or debt instruments

of other enterprises and interests in joint ventures (other than

receipts from those instruments considered to be cash equivalents

and those held for dealing or trading purposes);

Cash advances and loans made to third parties (other than advances

and loans made by a financial enterprise);[

Cash receipts from the repayment of advances and loans made to

third parties (other than advances and loans of a financial

enterprise);

Financing Activities:

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The separate disclosure of cash flows arising from financing activities

is important because it is useful in predicting claims on future cash

flows by providers of funds (both capital and borrowings) to the

enterprise. Examples of cash flows arising from financing activities

are:

Cash proceeds from issuing shares or other similar instruments;

Cash proceeds from issuing debentures, loans, notes, bonds, and

other short or long-term borrowings; and

Cash repayments of amounts borrowed.

Payment of dividend.

Payment of interest.

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Inflow of cash:

Cash flows into the business from different activities, when receipts

are more than payments, receipt from sale of property and securities,

from issue of shares and bonds, i.e., Operating, Investing, and

Financing Activities, there is a quick look at it.

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Outflow of Cash:

The cash flows out of the business when expenditures are more than

receipts, when a property is acquired or purchased, when debs are

paid, and while paying dividend. These are categorized as Operating,

Investing, and Financing Activities

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Cash Flow Statement :

Particulars 2007 2006Cash Flow From Operating Activity:

Net Profit before taxation & Finance Charges 45,048,871.23 39,656,308.34

Adjustment For Non-Cash Expenses

Depreciation 27,421,494.00 24,787,435.51

Loss on Sale of Fixed Assets 249,136.31 16,629.00

Preliminary Expense Written off 14,900.00 14,900.00

Adjustment for Change in Net Current Assets

(Increase) / Decrease in Inventories (6,500,749,979.00) (99,668,889.52)

(Increase) / Decrease in Debtors 20,908,362.36 161,939.18

(Increase) / Decrease in Loans & Advances (11,715,381.12) (39,342,086.42)

Increase / (Decrease) in current Liabilities 38,992,754.17 (22,013,531.69

Less: Tax Paid (13,042,785.00) (2,489,023.00)

Cash Flow From Operating Activity 42,869,852.16 98,876,318.60

Cash Flow From Investing Activity:

Purchase of Fixed Assets (96,348,373.84) (45,484,459.97)

Sale of Fixed Assets 550,000.00 131,000.00

Capital Subsidy Received 9,249,000.00

Investment in Shares (110,000.00)

Increase in Non Current Assets (86,944.00) (55,215.00)

Cash Flow From Investing Activity (95,995,317.84) (36,159,674.97)

Cash Flow From Financing Activity:

Payment of Interest (14,350,857.05) (12,334,031.26)

Prior Period Adjustment (1,108,944.00)

Dividend (15,690,000.00)

Increase in Share Capital 17,399,000.00 152,601,000.00

Increase / (Decrease) in Term Loan 50,755,143.77 (3,798,750.87)

Increase / (Decrease) in Unsecured loan 53,426,000.00 (7,079,000.00)

Increase in Cash Credit Balance 5,474,162.82 24,900,997.00

Cash Flow From Financing Activity 95,904,505.54 154,290,214.97

Cash Flow Generated During The Year 42,779,039.86 19,254,221.40

Opening balance of Cash and Cash Equivalent 43,557,252.84 24,303,031.44

Closing balance of Cash and Cash Equivalent 86,336,292.70 43,557,252.84

Note: Figures in brackets represent out-flow of cash.

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Cash flow from Operating Activities:

In 2004 cash flow from operating activities was negative by Rs.11.5

lacs as there was increase in inventories, debtors, and advances to

creditors.

In 2005 it became positive to Rs.3.63 crores as level of stock of

inventories was reduced, to control outflow of cash.

In 2006 again there were huge stockings of inventories, and advance

to suppliers, to increase production in coming year, made operatingcash flow negative to Rs.9.89 crores.

In 2007 the cash flow from operating activities reached Rs.4.29

crores.

Note: All figures in the above paragraph are rounded off to nearest thousand.

67

Cash Flow Op erating acti

428698.5

-988763.1

362818.2

-11546.2

-1200000

-1000000

-800000

-600000

-400000

-200000

0

200000

400000

600000

2004 2005 2006 2007

Hundreds

year

cashflow


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Cash flow from Investing Activities:

In 2004 the company made investment of Rs.1.91 crores.

In 2005 it further purchased Fixed Assets, which increased its

investment to Rs.10.14 crores, by issue of shares, and taking Term

Loans.

In 2006 it restricted its investment to Rs.3.62 crores.

In 2007 it further purchased Fixes Assets, by taking Term Loans

which raised its investment to Rs.9.6 crores.

Note: All Figure in this chart represent out flow of cash. All figures in the above paragraphare rounded off to nearest thousand.

68

Cash Flow Inve sting acti

959953.1

361596.7

1014599.3

191244.6

0

200000

400000

600000

800000

1000000

1200000

2004 2005 2006 2007

Hund

reds

ye a

cashflow


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Cash flow from Financing Activities:

In 2004 cash in-flow from financing activities was Rs.2.2 crores.

In 2005 it reached to Rs.7.44 crores.

In 2006 company raised additional capital, which raised its inflow to

Rs.15.43 crores.

In 2007 as dividends were declared it reduced the inflow of financing

activity to Rs.9.6 crores.

Note: All Figure in this chart represent in-flow of cash. All figures in the above paragraphare rounded off to nearest thousand.

69

Cash Flow from financing activ

959045.0

1542902.1

743653.1

220508.6

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2004 2005 2006 2007

Hundreds

year

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Net Cash Flow Generated:

In 2004 net Cash In-flow was Rs.17.71 lacs.

In 2005 in reached to Rs.91.87 lacs.

In 2006 in spite of huge Operating deficit of Rs.9.89 crores, it showed

a positive balance of Rs.1.93 crores.

In 2007 net cash In-flow reached to Rs 4.28 crores.

Note: All figures in this chart represent net in-flow of cash. All figures in the above paragraphare rounded off to nearest thousand.

70

Net Cash Flow Generated.

427790.39

192542.21

91872.0417717.77

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

2004 2005 2006 2007

Hundreds

year

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Analysis of Flow of Cash:

As there is constant increase in scale of production, the cash flow

from operating activity is changing from one year to another. As

more stock is accumulated for increasing production, more advance

in made to suppliers; the more negative is the cash flow from

operating activities in that year but it became positive in the next

year.

The company is constantly making investment in fixed assets to

increase output, investment in shares of other companies, and other

activities. It is a good sign of future growth.

The company is able to finance it operations by getting finance form

various financial institutions, by way of subsidy from government,

and by issuing shares of the company. The company is able to

arrange finance from different sources as and when required at good

terms.

There in constantly an upward trend in the net cash flow over the

years, in spite of huge negative flow in operating activities in some of

the years. It indicates than the company is able to cope up with

different situations in a good manner in the proper span of time.

This shows its ability to grow fruitfully in the coming future with

proper decisions at the required time.

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Conclusion:

Financial reports contain a lot of information. The main objective of

financial analysis is to sort through that information to find useful and

relevant data in analyzing a business. Some ratios help analyze the

cooperatives financial performance and cash flow analysis.

Managers and creditors should find these findings helpful in

appraising the financial strength of the cooperative.

There is a lot to be said for valuing a company, it is no easy task. I

hope that I have helped to shed some light on this topic

After doing the Ratio and Cash-flow Analysis of the company I came

to the conclusion that, since the company is still in its growing stage

so there was many ups and downs in the ratios and flow of cash.

The reason of variation in some ratios from their normal set standardis also same. We have seen in spite of deficit in operating cash flow,

the company is able keep a growing trend to its net in-flow of cash

which in of good sign. The financial managers have made good

decisions as and when required to maintain a proper balance in

different financial matters.

If this increasing profit and cash in-flow trends continue over timethen the company can fulfill its vision well ahead of time.

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