Rajeswari Modified Data

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CONTENTS

CHAPTER I INTRODUCTION

CHAPTER II INDUSTRY PROFILE

CHAPTER III COMPANY PROFILE

CHAPTER IV THEORATICAL FRAME WORK

CHAPTER V ANALYSIS AND INTERPRETATION

CHAPTER VI SUMMARY

SUGGESTIONS

FINDINGS & CONCLUSIONS


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CHAPTER-I

Introduction

Purpose of the study

Objectives of the study

Scope of the study

Research methodology

Limitations of the study


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INTRODUCTION

Steel comprises one of the most important inputs in all sectors of the

economy. Economy of any country depends on the strong base of the

iron and steel industry. Steel is a versatile material with multitude of

useful properties making it indispensable for furthering and achieving

continuing growth of the economy-be it construction, manufacturing,

infrastructure or consumable. The level of steel consumption has long

been regarded as an index of industrialization and economic maturity

attained by country.

Keeping in view the importance of steel, the integrated steel plants with

foreign collaborations were set up in the public sector in the post

independence era.

The growth of any organization depends on the overall performance

such as production, marketing, human resource and financial

performance of the organization. The financial performance of anyorganization reflects the strengths, weakness, opportunities and threats

of the organization with respect to profits Earned, investments, sales

realization, turnover, return on investment, and net worth of capital

efficient management of financial resources and deliberate analysis

financial results are prerequisites for success of an enterprise.

In that, financial performance is one of the major and important areas offinancial management. Every organization requires study on financial


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performance about business transactions, which includes managing

current assets like cash, inventory, account receivable, loans& advances

and current liabilities like sundry creditors.

INTRODUCTION TO FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial

strength and weakness of the firm by properly establishing between the

items of the balance sheet and profit and loss account. There are

various methods or techniques used in the analysis of financialstatements such as comparative statements, trend analysis, common

size statements, schedule of changes in working capital, funds flow and

cash flow analysis, Cost Volume Profit Analysis and Ratio Anlaysis.


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NEED FOR THE STUDY

The main aim of any firm is to maximize the wealth of the profits.

Which in turn depend on successful sales activity? To generate sales,

investiment of sufficient funds in current assets is required. The need

Of current assets should be emphasized, as the sales dont cash

immediately but involved a cycle of operations, namely operating cycle.

Rashtriya Ispat Nigam limited is a multi-product steel-manufacturing

unit with varying cycle time for each product. The capital required by

each department in a large organization like RINL depends on the

product target for that year.

The study on financial performance position of which using financial

statement. It is very much essential to know the RASHTRIYA ISPAT

NIGAM LIMITED financial performance for overcome the problem of the

company. This comparative statement analysis will help us to know the

exact financial position of the VSP through the financial performance.

This company is selected as it helps us to known even the exact position

our country as steel industry is backbone of every country.

Here in this project an attempt is made by financial statements for

knowing the financial performance of the company.


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OBJECTIVES OF THE STUDY

The study is purely based on the financial performance that is been

taken into consideration i.e, Finanacial Statements and Analysis.

Expand plant capacity to 6.3 Mt. by 2011-12 with the mission to

expand further in subsequent phases as per the corporate plan.

Revamp existing Blast Furnaces to make them energy efficient to

contemporary levels and in the process increase their capacity by

1.0 Mt, thus total hot metal capacity to 7.5 Mt.

Be amongst top five lowest cost steel producers in the world.

Achieve higher levels of customer satisfaction.

Vibrant work culture in the organization.

Be proactive in conserving environment, maintaining high levels of

safety and addressing social concerns.


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SCOPE OF THE STUDY

Financial analysis depends primarily on financial statements to diagnose

financial performance there are three principle reasons.

As longer as the accounts bases remain more or less the

some overtime, meaningful mitered is can be drawn by examining

trends in raw data and financial ratios.

Since similar basis characterize various firms in the same industries,

incur firm comparisons are useful.Experience seems to suggest the financial analysis works one is

accounting basis and more adjustments for the same.

The following points explain the nature of the financial statement

analysis in steel industries. The records are maintained on the boards of

actual costs data.

Certain neither accounts nor conversions are followed while

preprimary financial statement.

Still personal judgment of the accountant phrases on important

part.


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RESEARCH METHODOLOGY

Methodology is a systematic procedure of collecting

information in order to analyze and verify a phenomenon. The data can

be collected through two principle sources.

They are as follows:-

Primary data

Secondary data

Primary data

It is the information collected directly without any

references. In this study it is gathered through interviews concerned

officers and staff either individually or collectively, sums of the

information has been verified or supplemented with personal

observation conducting personal interviews with the concerned officers

of finance department of Visakhapatnam steel plant.

Secondary data

The secondary data was collected from already published

sources such as, pamphlets of annual reports, returns and internal

records. The data collection includes:-

Collection of required data from annual records of RINL.

Reference from textbooks and journals relating to financial

performance and management.


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LIMITATIONS OF THE STUDY

The period of study that is 8 weeks as not enough to go in the

detailed aspects of the study.

The study is carried basing on the information and documents

provided by the organization and based on the Interaction with

various employees of respective departments.

Respondents may not provide accurate information due to various

reasons.

Most of the matters related to budgets were confidential so it is

not possible to gather information.

Time is a major constraint.

Budgeting process is very dynamic.

There was no scope of gathering current information as the

auditing has not been done at the time of project work


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CHAPTER - II

INTRODUCTION TO STEEL INDUSTRY IN INDIA


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STEEL INDUSTRY

Steel industry is the back bone of all industrial commercial

activities. Realizing these countries planners have been formulating and

updating annual plans for production of iron and steel. In this context a

number of steel plants were setup. The steel industry plays a vital role in

the growth of nation's economy.

Steel is such a versatile commodity that every object we see in

our day to day life has used steel either directly or indirectly in its

product To mention a few it is used for such small items as nails, pins,

needles etc., agriculture implements boilers, ship fabrication, railwaymaterials, automobile parts, etc. to have machine structure.

The great investment that has gone into the fundamental

research in iron and steel technology has helped both directly and

indirectly in many modem fields of today's science and technology. It

would have been very painful to imagine the fate of today's civilization if

steel has not been there. Steel is versatile and indispensable item. Theversatility steel has not been there. Steel is versatile and indispensable

item. The versatility steel can be traced mainly of three reasons.

It is only metallic item, which can be continently and

economically produced, in large quantities.

It has got very good strength coupled with density and

malleability.

Its properties can be changed over a wide range. It alloys

easily with many of the common element.


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INDIA'S STEEL SCENARIO

Indian steel industry has always remained isolated and protected

by government, where the steel industry was never expected to

generate profit from business, but was expected to provide employment

to the unemployed. Presently India is operating with open-hearth

furnaces. The existing equipment, energy and labor in Indian steel

industry are much low than developed countries.

Indian steel industry generates a significant amount of waste

materials, which can cause environmental problems. The four aspects of

"Waste Management"

namely- residue reprocess, recycle and recovery do not hold much

ground in the Indian steel industry. The Indian companies cannot spend

more for pollution control. The energy consumption per tone is 50-100%

higher than that of the international norms.

The Indian steel industries have developed a bit in the recent

years. The production is growing on properly. Many techniques are being

implemented in the steel industries. The country's aim is to sell quality

steel. The government is also helping the steel industries in this basis.

The apparent consumption of steel is shown below.

The development of steel industry in India should be viewed in

conjunction with the type and system of government that had been

ruling the country. The production of steel in significant quality started

after 1990. The growth of steel industry can be conveniently started by

dividing the period into pre and post independent era. In the period of

pre independence steel production was 1.5 million tones per year, which

was raised to 9.0 million tones of target by the seventies. This is the

present of the bold steps taken by the government to develop this

sector.


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WORLD'S DEMAND FOR STEEL

The total demand for steel in world is expected to grow at an annual

rate of 1.7% between 1935 and 2000 A.D. as per the study concerned by

china economists. According to their estimation total demand in advanced

industrial countries on a whole is expected to grow at 0.6% annual rate

following a 2.2% rate between 1974 to 1984. steel demand is less

developed countries on a whole is expected to grow at a 5.5% annual rate

up to 2000 following a 3.1 annual growth rate between 184-1994. Within

the controlling plant economy the Eastern Europe erstwhile USSR region

may have 0.3% annual steel demand growth. Steel demand in china. North

Korea region would grow at 4.0 annual rates up to the end of this century at

a 7.5% per annual growth during 1974-1980.

HIGHLIGHTS OF PRESENT STEEL SCENARIO

The world steel shows a low growth demand.

There is a threat to steel industry from competitive products like

plastics, aluminum, etc.

Developed countries slowly reduced the production of steel.

Developing countries like China are planning to produce steel as

much large quantity then of present output of 80 Mt. per annum.

India consciously and strategically decides to invest into steelproduction.

Preference is given to superior quality products and high value

item production.

Customer oriented approach in view of product oriented approach.

Emergence of new technology like scraps preheating.


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PRE-INDEPENDENCE

1874- James Erskin founded the Bengal iron works

1830 - Josiah, Marshall Health constructed the first manufacturing plant atplant at port Move in Madras presidency.

1899- Jamshedji Tata initiated the scheme for an integrsted steel plant.

1906- Formation of TISCO

1911- Tata iron& STEEL COMPANY STARTED PRODUCTION.

1916- TISCO was founded.

1940-45- Formation of Mysore iron & steel limited, and Bhadravati inKarnataka.


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POST-INDEPENDENCE

First five year plan: 1951-1956

No new steel plant came up. The Hindustan Steel Ltd., was born on19th January 1954 with the decision of setting up three plantseach with one million tone input steel per year in at Rourkela, Bhilaiand Durgapur, TISCO started its expansion programming.

Second five year plan: 1956-1961

A bold decision was taken up to increase the ingot steel output India

to 6 million tones per year & production at Rourkela, Bhilai andDurgapur steel plant started.

Third five year plan: 1961-1966

During the third five year plan the three steel plants under HSL,TISCO & HSCO were expand as show , in January 1964 Bokaro steelplant came into existence.

Recession period: 1966-1969

The entire expansion programme was actively executed during thisperiod.

Fourth five year plan: 1969-1974

Licenses were given for setting up of many Mini-steel plants

and rolling mills. Governments of India accepted setting up two more plants in

south. One at Visakhapatnam(Andhra Pradesh)and Hospet(Karntaka).

SAIL was formed during this period on 24th January 1973. Thetotal installed capacity from 6 integrated plants was 106Mt.

Annual plan: 1979

The erstwhile Soviet Union agreed to help in setting up theVisakhapatnam steel plant.


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Sixth five year plan: 1980-1985

Work on Visakhapatnam steel plant was started with big bang andtop priority was accorded to start the plant.

Scheme for modernization of Bhilai Steel Plant, Rourkela,Durgapur, TISCO were initiated.

Seventh five year plan: 1985-1991

Expansion work of Bhilai and Bokaro steel plants are completed.

Progress on Visakhapatnam steel plant picked up and rationalizedconcept has been introduced to commission the plant with 3.0Mt,liquid steel capacity by 1990.

Eighthfive year plan: 1991-1996

Visakhapatnam steel plant started its production modernization ofother steel plants is also duly envisaged.

Ninth five year plan: 1997-2002

Visakhapatnam steel plant had foreseen a 7% growth during theentire plan period.

Tenth five year plan: 2002-2007

Steel industry registers the growth of 9.9% Visakhapatnam steelplant high regime targets achieved the best of them.

Eleventh five year plan: 2007-2012

The eleventh plan period is going to be crucial for maintaining andalso improving the performance of the steel industry. India has thepotential to emerge as global player in steel making if its inherentadvantages of availability of quality iron ore, cheap labor, technicalmanpower and growing domestic demand are properly leverage.


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STEEL PLANTS WITH FOREIGN COLLOBORATION

S.No Plant Collaboration Capacity of

Finished Steel Products

1 Rourkela Steel Plant West Germany

2 Bhilai Steel Plant Erstwhile USSR

3 Durgapur Steel Plant Britain

4 Bokaro Steel Plant Erstwhile USSR

S.NO Plant Collaboration Capacity of Annual

Finished Steel Products Production

1 Rourkela Steel Plant West Germany 7,20,000 Tones

2 Bhilai Steel Plant Erstwhile USSR 7,70,000 Tones

3Durgapur SteelPlant

Britain 8,00,000 Tones


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Major Steel Related Companies in India

Bharat Refectories Ltd.

Hindustan steel works construction Ltd.

Jindal Steel & Power Ltd.

Kudremukh Iron Ore Company Ltd

Manganese Ore (India) Ltd.

Metal Scrap Trade Corporation Ltd.

Metallurgical Engineering Consultants India Ltd.

National MInerl Development Corporation (NMDC)

Rashtriya Ispat Nigam Ltd.

Sponge Iron India Ltd.

Steel Authority India Ltd.

Tata Iron Steel Company.


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Steel Sectors Trends

India emerged as the fifth largest crude steel producing country in the World in the year

2006 as against eighth position three years back. India is expected to become the second

largest producer of steel in the World by the year 2015.

India also maintained its lead position as the worlds largest producer of direct reduced

iron or sponge iron.

The country is likely to reach a steel production capacity of nearly 124 million tonnes

by the year 2100-2012.

194memoranda of understanding (MoUs) have been signed in various states with a total

planned capacity of around 243 million tonnes, and a total proposed investment of over

Rs. 5.15 lakh cr. Major investments plans are in state of Orissa, Jharkhand, Karnataka,

Chhattisgarh and west Bengal.


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PROBLEMS OF STEEL PLANT INDUSTRY

LACK OF RAWMATERIALS

Non-availability of good quality raw material is another problem faced

by iron and steel industry. The modem giant blast furnace needs high-grade

iron ore and good metallurgical coal.

Further the industry is unable to get good quality coke and

manganese is which the principal raw materials next to iron ore are

unfortunately most of our resources of manganese ore are of poor quality

besides the non availability of good quality raw material, regular supplies of

raw materials are very much handicapped due to the absence of good

transport facilities. Another problem faced by the steel industry related to

the difficulty in getting zinc supplies for the continuous galvanizing line.

LACK OF TECHNICAL PROBLEMS

Bhilai had to execute orders for shipment of rails to Iran. South Korea

and Malaysia.

Because of technical limitations, Rourkela plant is unable to

substitute aluminum of zinc for the production of galvanized sheet apart

from source internal technical problems; our technology in the field of steel

production is not a developed one when compared to other advanced

countries.

GOVERNMENT CONTROL AND PRICING POLICY

Since 1941, India steel and iron industry was almost completely state

regulated. Both prices and distribution of steel were under control of

government. The Govt. decided to remove statutory control over the price

and distribution of all, but a few categories with effect from 1 st march 26,

1964 the Govt. supervise the steel and iron inducted according to the


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recommendation of Raja committee. But Raj committee in fixing the steel

price didn't regulate the price of raw materials.


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CHAPTER III

PROFILE OF VISAKHAPATNAM STEEL PLANT

To meet the growing domestic needs of steel, Government of India


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decided to set up an Integrated Steel Plant at Visakhapatnam. An

agreement was signed with erstwhile USSR in 1979 for co-operation in

setting up 3.4 MT Integrated Steel Plant at Visakhapatnam. The foundation

stone for the plant was laid bv the then Prime Minister on 20th Jan, 1971.

The project was estimated to cost Rs.3897.38 Crores based on prices

as on 4th Quarter of 1981. However, on completion of construction and

commissioning of the whole plant in 1992, the cost escalated to around

8500 Crores. Unlike other Integrated Steel Plants in India, Visakhapatnam

Steel Plant is one of the most modem steel plants in the country. The plant

was dedicated to the nation on 1st August, 1992 by the then Prime Minister,

Shri P. V. Narasimha Rao.

New technology, large-scale computerization and automation etc.,

are incorporated in the Plant. To operate the plant at international levels

and attain such labour productivity, the organizational manpower has been

rationalized. The Plant has a capacity of producing 3.0 MT of liquid steel and

2.656 MT of saleable steel.

BACK GROUND

Visakhapatnam steel plant

To meet the growing domestic needs of steel, government of India

decided to set up an integrated steel plant at Visakhapatnam. An

agreement was signed with erstwhile USSR in 1979 for co-operation insetting up 3.4 Mt integrated steel plant at Visakhapatnam. The foundation

stone for the plant was laid by the then prime minister on 20th Jan '71.

The project was estimated to cost Rs. 3897.28 Crs based on prices as

on 4th quarter of 1981. However, on completion of construction and

commissioning of the whole plant in 1992, the cost escalated to around

8500 Cr. Unlike other integrated steel plants in India, Visakhapatnam Steel


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Plant is one of the most modem steel plants in the country. The plant was

dedicated to the nation on 1st August 1992 by the Prime Minister,

Sri, P.V.Narasimha Rao.

New technology, large scale computerization and automation etc.,

are incorporated in the plant. To operate the plant at international levels

and attain such labor productivity, the organizational man power has been

rationalized. The plant has a capacity of producing 3.0 Mt of liquid steel and

2.656 Mt of saleable steel.VSP is on the growth path and almost doubling

its capacity to 6.3 MT liquid steel and new units are set to come on strem

progressive from 2011-2012.


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VISION

To be a continuously growing world-class company.We shall:

Harness our growth potential and sustain profitable growth.

Deliver high quality and cost competitive products and be the firstchoice of customers.

To create an inspiring work environment to unleash the creativeenergy of people.

Achieve excellence in enterprise management.

Be a respected corporate citizen, ensure clean and greenenvironment and develop vibrant communities around.

MISSION

To attain 16 million tones liquid steel capacity through technological

up gradation, operational efficiency and expansion; augmentation of

assured supply of raw materials to produce steel at international standards

of cost of quality; and to meet the aspirations of the stakeholders.


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OBJECTIVES OF VSP

Expand plant capacity to 6.3 Mt by 2011-12 with the mission to

expand further in subsequent phases as per the corporate plan.

Towards growth-expand the plant capacity to 7Mt by 2011-12 and

10Mt By 2019-20.

Be amongst top five lowest cost steel producers in the world.

Achieve higher levels of customer satisfaction than competitors.

Towards employees-make RINL the employer of choice. Upgrade

the skills and efficiency of employees through training and

development and maintain high levels of motivation and

satisfaction.

Be recognized as an excellent business organization by 2011-12.

Instill right attitude amongst employees and facilitate them to

excel in their professional, personal and social life.

Be proactive in conserving environment, maintaining high levels of

safety and addressing social concerns. Towards technology up-gradation and productivity-continuously

upgrade tec1mology and practice benchmarking to achieve

international efficiency levels. Adopt latest developments in

information and communication technology.

Towards knowledge management-become a knowledge based and

a knowledge sharing company.

Towards safety, environment and society-continue efforts towardssafety of employees, conversation of environment and be a good

corporate citizen.

CORE VALUES

Commitment

Customer Satisfaction


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Continuous Improvement

Concern for Environment

Creativity and innovation

VSP Technology:State-of-the-Art

7meter tall coke oven batteries with coke dry quenching.

Biggest Blast Furnaces in the country.

Bell-less top charging system in Blast Furnace.

100% slag granulation at the BF cast house

Suppressed combustion - LD gas recovery system.

100% continuous casting of liquid steel.

Tempore" and "Stelmor" cooling process in LMMM & WRM.

Extensive waste heat recovery systems.

Comprehensive pollution control measures.

MAJOR SOURCES OF RAW MATERIAL

Iron Ore Lumps & Fines Bailadilla, M P

B F Lime Stone Jaggayyapeta, A P

SMS Lime Stone UAE

B F Dolomite Madharam, A P

SMS Dolomite Madharam, A P

Manganese Ore Chipurupalli, A P

Boiler Coal Talcher, Orissa

Coking Coal Australia


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Medium Coking Coal(MCC) Gidi/Swang/Rajarappa/Kargali

MAJOR UNITS AT VSP

DEPARTMENTS ANNUAL UNITS (3.0 MT STAGE)

Cap. ('OOOT)

Coke Ovens 2,261 4 Batteries each of 67 ovens & 7 MtsHeight

Sinter Plant 5,2562 Sinter machines of 312 Sq.Mtr.

grate area each

Blast Furance 3,400 2 Furnaces of 3200 cu m volume each

Steel Melt Shop 3,000 3 LD Converters each of 133 Cum.

Volume and six 4 strand bloom casters

LMMM 710 4 Strand Finishing Mill

WRM 850 2 x 10 Strand Finishing MillMMSM 850 6 Strand Finishing Mill

MAIN PRODUCTS OF VSP

Steel Products By Products

Angles Nut Coke

Billets Coke dust

Channels Coal Tar

Beams Anthracene Oil

Squares HP Naphthalene

Flats

Benzene

RoundsToluene


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Re Bars Zylene

Wire rods Wash oil

POLICIES & RULES OF RINL/VSP

VSP takes all necessary actions for the fulfillment of regulatory

requirements. In this regard VSP follows the following policies.

1. Quality Policy

Continuously improve the quality of all materials processes and

product services for customers.

2. Energy Policy

We, at Visakhapatnam Steel Plant, are committed to optimally

utilize various forms of energy in a cost-effective manner to effect

conservation of energy resources.

By adopting appropriate energy conservation technologies VSP.

Controls the consumption of various forms of energy.

Monitor closely and control consumption of various forms of energy

through an effective Energy Management System. Maximize the use of cheaper and easily available forms of energy.


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3. Environment Policy

Maintain high level of environmental consciousness amongst employees

and prevention of pollution by minimizing the emissions and discharge.

VSP will endeavor to adopt a customer-focused approach at all times

with transparency.

VSP will strive to meet more than the customer needs and

expectations pertaining to products, quality and value for money and

satisfaction.

VSP greatly values its relationship with customers and would make

efforts at strengthening these relations for mutual benefit.

4. OHAS Policy

VSP committed to occupational health and safety of employees and

contract workers.

5. HR Policy

VSP believe that their employees are the most important

resources, so it provides good working environment that makes the

employees committed and motivated for maximizing productivity.

Provide work environment that makes the employees committed and

motivated for maximizing productivity.

Establish systems for maintaining transparency, fairness and equality

in dealing with employees.

Empower employees for enhancing commitment, responsibility and

accountability.


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Encourage growth and opportunities for developing skill and

knowledge.

Ensure functioning of efficient communication channels with

employees.

A LAND MARK YEAR OF GROWTH:

The year 2010-2011 saw the company registering then best

ever sales turnover of Rs.11,517 cores a 3.6% growth over previous year.

The company stated a record net profit of Rs.658 crores and this is the third

consecutive year that the company has been earning net profit with this the

accumulated losses have bought down with this accumulated losses have

set up to out the Rs.906 crores and your company is all shortly also your

'MINI RATNA' by the government of India. It works under the following

slogan:

Let Excellence not only be our goal.

Let us make it our standard

ORGANISATIONAL STRUCTURE OF VISAKHAPATNAM STEEL PLANT

VISAKHAPATNAM STEEL PLANT has a well designed organizational

structure. It has centralized management structure. There is Chairman cum

Managing Director (CMD) as head, the main decisions are taken by him, in

accordance with steel industry (SAIL). These are 9 levels in organization

from E-O to E-9.


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LEVELS NAME

E-9 General Manager

E-8 Joint General Manager

E-7 Dy. Additional Chief Manager

E-6 Additional Chief Manager

E-5 Dy. Chief Manager

E-4 Manager

E-3 Deputy Manager

E-2 Assistant Manager

E-l Junior Manager

E-0 Assistant Executive

VISAKHAPATNAM STEEL PLANT has tall/vertical organization structure,

where the power & authority flows from top to bottom. It has four main

departments, they are - Finance Dept., Marketing Dept., Human Resource

dept, and Production Department.


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MAN POWER AT A GLANCE AS ON 31-03-2011

Works Projects Mines Others Total

Executives 3262 344 109 1492 5207Non 11358 51 257 956 12622

Executives

------------------Total Employees 17,829

----------------

MARKETING NETWORK OF VISAKHAPATNAM STEEL PLANT

VSP has a wide network of regional Officers and Branch Officers spread the

country for marketing of its products. There are 5 Regional Officers and 23

branch Officers. Stock Yards are attached to each of the Branches. These are

catering to the needs and expectations of the customers in various segments.

Region Location of regional Office

East Kolkata Bhubaneswar, Kolkata, PatnaNorth Delhi Agra, Chandigarh, Dehradun, Jaipur,

Kanpur, Ludhiana

West Mumbai Ahmedabad, Indore, Mumbai, Nagpur,

Pune

South Chennai Bangalore, Chennai, Kochi,

Coimbatore

Andhra Visakhapatnam Hyderabad,Visakhapatnam


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POLLUTION CONTROL AND ENVIRONMENTAL PROTECTION

Elaborate measures have been adapted to combat air and water

pollution in Visakhapatnam steel plant. In order to be eco friendly

Visakhapatnam steel plant has planted more than 3.4 million trees in area

of 35 square kilometers and incorporated various technologies at a cost of

Rs.460 crores and control measures.

ACHIEVEMENTS AND AWARDS OF VSP

The efforts of VSP have been recognized in various forms. Some of

the major awards received by VSP are in the area of energy conservation,

environment protection, safety, Quality, Quality circles, Rajbhasha, MOD,

sports related awards and a number of awards at the individual level.

Some of the important awards received by VSP are indicated below:

Best Labor Management Award from Government of AP.

SCOPE Award for best turnaround for 2001.

Environment Excellence Award from Greentech Foundation for energyconservation in 2002.

Best enterprise award from SCOPE, WIPS for 2001-02, besides.

Best enterprise award from SCOPE, surpassing MOU targets for 2003-

2004

National award for excellence in water management by CII in

2005,2004

Organizational Excellence award for efficient suggestion scheme

operation given by INSSAN in 2006.

Best Company to work award for inspiring trust among people,

instilling pride in them, creating an environment with in the work

place etc in 2009.


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A number of awards at local regional and national level competitionsin the area of quality circles and suggestion schemes etc.

Total quality, latest technology, sophisticated equipment, up to dateknowledge, high skills, cost consciousness, production with less costand customer satisfaction have become the hallmark of VSP.

FINANCING AND ACCOUNTING WING

In RINL main function of the finance and Accounts Department

is to look after the treasury management and to render service in financial

aspects for effectively conducting the business of the company. The finance

Department has many sub sections. It has about 275 employees consisting

of about 260 executives and 15 non executives. The entire department is

headed by the general manager. Finance and Accounting Department of

RINL is divided into several sections for administrative control and

assignment of responsibilities and fixing of accountability etc. To name a

few are:

The following are the sections of finance and Account department in

RINL.

1. Raw material Accounts

2. Stores Accounting

3. Sales Accounts

4. Pay and PF Accounts

5. Works accounts section

6. Operational Bills Accounts

7. General Accounts Section

8. Cash Section

9. Loans and Advances

10. Corporate Accounts

11. Internal Audit Section

12. Budget Section

13. Costing Section


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14. Project Accounts

15. Concurrence Sections

CAPITAL COST

Approved Cost Rs.8692 Crores (Base June 05)

Debt component Rs.4346 Crores

FE component Rs.1477 Crores

Pay back period 5 years 2 months

IRR 23%

Project cost (net of caveat) Rs.7998 Crores

SOURCES OF FUNDS

VSP raise its working capital from of 10 Bankers. The followingare the 10 banks. Where funds for finance are raised.

1. State Bank of India

2. Canara Bank

3. UCO Bank

4. Bank of Baroda

5. Andhra Bank

6. State Bank of Hyderabad

7. Allahabad Bank.

8. HSBC

9. Industrial Development Bank of India (IDBI)

10. Indian Overseas Bank (IOB)


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THE COMPANY PAYS:

1. Excise duty - 2 Crores/day

2. Sales Tax - 12 Crores/month

3. Custom duty - 12 Crores/month

4. Employee salary - 35 Crores/month

5. Iron ore - 15 Crores/month

6. Railway freight - 50 Crores/month

7. Ocean Freight - 15 Crores/month

8. Coal blast - 70 Crores/month

BOARD OF DIRECTORS

CHAIRMAN/MANAGING DIRECTOR

DIRECTOR (PERSONNEL)

DIRECTOR(FINANCE)

DIRECTOR (COMMERCIAL)

DIRECTOR (OPERATIONS)

DIRECTORS (PROJECTS)

COMPANY SECRETARY

Sri A.P.CHOUDHARY

Sri Y. R.REDDY

Sri P.MADHUSUDAN

Sri T.K.CHAND

Sri UMESH CHANDRA

Sri N.S.RAO

Sri P.MOHAN RAO


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Expansion plan

Product Capacity (MT)Present

Capacity (MT)Future

Additional

Facilities

Envisaged

Hot Metal 4.00 6.50 New BF with 3800CuM Capacity

Charge Sinter 5.26 8.50 New Sinter Plant

of 400 Sq.M. area

Liquid Steel 3.70 6.30 SMS-2 with Two

150 CuM

Converters, Two 6

Std Billet Casters

& One 6 std Round

Caster

Saleable Steel 3.34 5.72 -

Wire Rod 1.05 1.65 New WRM of 600000T/ Annum

Bars& Structural 1.95 3.40 New SBM of

750000T/ Annum

New SM of

700000T/ Annum

Seamless Pipes - 0.30 Seamless Tube

Plant of 300000T/

Annum

Special Bars

(Plains)

16mm 40mm -


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The company started its commercial production in

1990-91

And its financial results

FYGross

Sales

Operatin

g

Profit

Interes

tDepreciation

Net

Profit

90-91 245 -88 192 197 -47891-92 772 -101 437 449 -98792-93 1185 -31 198 340 -56893-94 1751 114 346 340 -57394-95 2209 416 366 415 -36495-96 3039 633 407 430 -20496-97 3135 606 430 422 -24697-98 3071 460 198 439 -17798-99 2761 15 361 111 -45799-00 2973 252 382 432 -56200-01 3436 504 351 445 -29101-02 4081 690 290 475 -7502-03 5058 1162 187 455 521

03-04 6169 2053 49 457 154704-05 8181 3271 11 1006 225405-06 8482 2336 31 416 189006-07 9151 2219 48 315 1363

07-08 10433 2994 31 471 194208-09 10411 2027 88 240 133509-1010-11

It can be seen from the above table, during the year 2002-03, the companyturned around by earning a net profit of Rs.521 Crores. In the same year, it bagged the PRIME

MINISTER TROPHY for its excellent performance in the Steel Industry. In October 2003,

RINL became a DEBT FREE COMPANY.


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GROWTH OF INCOME

3616

4234

5226

6378

84688938

9812

11337 11387

0

2000

4000

6000

8000

10000

12000

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

RsCrs

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GROWTH OF NET WORTH

3004

1994

40973891

3529 3316

2585

41973752

31982839 2744

3286

4852

6878

8149

9523

11481

12420

0

2000

4000

6000

8000

10000

12000

14000

1990

-199

1

1991

-199

2

1992

-199

3

1993

-199

4

1994

-199

5

1995

-199

6

1996

-199

7

1997

-199

8

1998

-199

9

1999

-200

0

2000

-200

1

2001

-200

2

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

2006

-200

7

2007

-200

8

2008

-200

9

RsCrs

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BREAK UP OF INCOME 2008-09

91%

7% 2% Sale of Iron & Steel & ByeProducts Rs. 10411 Crs

Interest Earned Rs. 787 Crs

Other Revenue Rs. 189 Crs

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PERFORMANCE OF RINL AT A GLANCE

PRODUCTION PERFORMANCE

Achieving new targets year after year in production has

become a part of the work culture

year Hot metal Liquid steel Saleable

steel

Labour

productivity

(tones/man

year)2006-2007 4046 3606 3290 413

2007-2008 3913 3322 3074 389

2008-2009 3546 3145 2701 359

2009-2010 3900 3399 3167 382

2010-2011 3830 3424 3077 358

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0

500

1000

1500

2000

2500

3000

3500

4000

4500

2000-20

01

2001-20

02

2002-20

03

2003-20

04

2004-20

05

2005-20

06

2006-20

07

2007-20

08

2008-20

09

Hot metal

Liquid Steel

Salable Steel

COMMERCIAL PERFORMANCE:

The commercial performance of VSP for the past four years is as follows

(In

crores)

YEAR

SALES

TURNOVER

DOMESTIC

SALES EXPORTS

2006-2007 9131 8487 424

2007-2008 10433 9878 555

2008-2009 10411 10332 782009-2010 10635 10284 351

2010-2011 11517 11095 422

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0

2000

4000

6000

8000

10000

12000

2000

-200

1

2001

-200

2

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

2006

-200

7

2007

-200

8

2008

-200

9

SALES

DOMESTIC

EXPORTS

FINANCIAL PERFORMANCE:

VSP had to bear the burnt of huge project cost right from the day

of its inception. This has affected the companys balance sheet due to

very high interest burden. The company, in spite of making operating

profit every year had to report net loss during all financial years. This on

the other hand had resulted in making VSP to take great care in

planning the financial resources.

The financial performance of VSP for the past five years is as follows:

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YEAR

GROSS

MARGIN

CASH

PROFIT

NET

PROFIT2006-2007 2633 2584 13632007-2008 3515 3483 1943

2008-2009 2356 2267 13362009-2010 1603 1525 7972010-2011 1412 1247 658

0

500

1000

1500

2000

2500

3000

3500

4000

2000-

2001

2001-

2002

2002-

2003

2003-

2004

2004-

2005

2005-

2006

2006-

2007

2007-

2008

2008-

2009

GROSS MARGIN

CASH PROFIT

NET PROFIT

FINANCIAL HIGHLIGHT

2006-07 2007-08 2008-09A OPERATING RESULTS (Rs

Crs)

Turn Over 9151 10433 10411Gross Income 9812 11337 11387

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Gross Expenditure 7540 8310Gross Profit 2271 3027Profit Before Tax 2222 2995 2027Net Profit After Tax 1363 1943 1336

B YEAR END FINANCIALPOSITION (Rs Crs)

Share Capital 7827 7827 7827Reserves and Surplus 1711 3654 4593Capital Employed 9427 9935Net Worth 9523 11481 12420Gross Block 8876 8901 9006Depreciation 7085 7516 7750Net Block 1790 1385 1256Inventory 1203 1761 3215

C PROFITABILITY AND OTER

RATIO

(i) Percentage Of 24.80 29.00Gross Profit to Sales 14.90 18.60Net Profit to Sales 23.80 26.40Net Profit to Net Worth 14.30 16.90Net Profit to Capital Employed 14.50 19.60Gross Profit to Share Capital 29.00 38.70Inventory Sales 13.10 16.90Sales To Capital Employed 97.10 105.00

(ii) Ratio OfCurrent Assets to Current Liabilities 3.70 3.60Quick Assets to Current Liabilities 3.30 3.10

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FINANCIAL STATEMENTS

INTRODUCTION:

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Accounting process involved recording, classifying and

summarizing various business transactions. The aim of maintaining

various records is to determine profitability of the enterprise from

operation of the business and also to find out is financial position.

Financial statements are in term reports, presented annually and reflect

a division of the life of an enterprise in to more or less arbitrary

accounting period more frequently a year. The financial statement is an

organized collection of data according to logical and consistent

accounting procedures its purpose is to convey of a business firm.

DEFINATIONS:

According to John N.Myer The financial statements

provide a summary of the accounts of a business enterprise, the balance

sheet reflecting the assets, liabilities, and capital as on a certain date

and the income statement showing the results of operations during a

certain period.

The term financial statement generally refers to following basic

statements:

1. The income Statement.

2. The Balance Sheet.

3. A Statement of Retained earring.

4. A Statement of Changes in financial position.

FINANCIAL

STATEMENT

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Income Statement

The income statement (also termed as profit and loss

account) is generally considered to be the most useful of all financial

statements. It explains what has happened to a balance sheet dates.

The nature of the income which is the focus of the income statement

can be well understood if a business is taken as an organization that

uses inputs to produce output.

Balance Sheet

It is a statement of financial position of a business at a

specified moment of time. It represents all assets owned by the

business at a particular moment of time and the claims of the owners

and outsiders against those assets at that time. The important

distinction between as income statement is for a period while balance

INCOME

STATEMENT

BALANCE

SHEET

STATEMENT

OF

RETAINED

STATEMENT

OF

CHANGES IN

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sheet is on a particular date.

Statement of Retained Earnings

The term retained earnings means the accumulated excess

earnings over losses and dividends. The balance shown by the income

statement is transferred to the balance sheet through this statement

after making necessary appropriations. It is fundamentally a display of

things that have caused the beginning of the period retained earnings

balance to be changed in to the one shows in the end-or-the-period

balance sheet.

Statement of changes in financial position

The balance sheet shows the financial condition of the

business at a particular moment of time while the income statement

discloses the results of operations of business over a period of time for a

better understanding of the affairs of the business, it is essential to

identify the movement of working capital or cash in the statement of

changes in financial position.

Nature of Financial Statements

The financial statements are prepared on the basis of

recorded facts. The recorded facts are those which can be expressed in

monetary terms. The statements are prepared for a particular period,

generally one year. The transactions are recorded in a chronological

order as and when the events happen. The financial statements by

nature are summaries of the items recorded in the business and there

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statements are prepared periodically generally for the accounting

period.

The following points explain the nature of financial

statements

1. Recorded Facts

The term Recorded facts; refers to the data taken out from

the accounting records. The records are maintained on the basis of

actual cost data. The figures of various accounts such as cash in hand,

cash at bank, bills receivables, Sundry debtors, fixed assets are taken as

per the figure recorded in the accounting books. As the recorded facts

are not based on replacement costs the financial statements do not

show current financial condition of the concern.

2. Accounting Conversions

Certain accounting converters are followed while preparing

financial statements. The conversion of valuating inventory at cost or

market price, whichever is lower, is followed. The valuing of assets at

cost less depreciation principle for balance sheet purposes statements

comparable, simple and realistic.

3. Postulates

The accountants make certain assumption while making

accounting records. One of these assumptions is that the enterprise is

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treated as a going concern. The other alternative to this postulate is

that the concern is to be liquidated the concern. So the assets are

shows on a going concern basis. An other important assumption is to

presume that the value of money will remain in the same in different

periods.

4. Personal Judgments

Even though certain standard accounting conversions are

followed in preparing financial statement but still personal judgment of

the accountant plays on important part.

Characteristics of financial statement

The financial statements are prepared with a view to depict

financial position of a concern. The financial statements should be

prepared in such a way that they are able to give a clear and orderly

picture of the concern. The ideal financial statement has the followingcharacteristics.

1. Depict true financial position

The information contained in the financial statements should

be such that a true and correct idea is taken about the financial position

of the concern.

2. Attractive

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The financial statements should be prepared in such a way

that important information is underlined so that it attracts the eye of the

reader.

3. Comparability

The results of financial analysis should be comparable. The

financial statements should be presented in such a way that they can be

compared to the previous years statements. Previous years figures in

the balance sheet.

4.Brief

If possible, the financial statements must be prepared in

brief. The reader will be able to form as idea about the figures.

Importance of financial statements

Financial statements contain a lot of useful and valuable

information regarding profitability financial position and future

prospective of business concern. The utility of financial statement to

different parties may be summarized as follows:

1. Management

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The financial statements are useful for assessing the

efficiency of$different cost centers. The management is able to decide

the course of action to be adopted in future.

2. Creditors

The trade creditors are to be paid in a short period. The CRS will

be interested in current solvency of the concerns. The calculations of

current ratio and liquid ratio will enable the creditors to assess the

current financial position of the concerns in relation to their debts.

3. Investors

The investors include both short-term and long term investors.

They are interested in the security of the principal amounts of loan and

regular payments by the concern. The investors will not only analyse

the parent financial position but will also study the future prospectus

and expansion plans of the concern.

4. Government

The financial statements are used assess tax liability of

business enterprises. The Government studies economic situation of the

country from these statements. These statements enable the

government to find out whether business is following various rules and

regulations or not.

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5. Trade Associations

These associations provide service and protection to the

members. They may analyse the financial statements for the purpose of

providing facilities to these members. They may develop standard

ratios and design uniform system of accounts.

6. Stock Exchange

The stock exchange deal in purchase and sale of securities

of different companies. The financial statements enable the stockbroker to judge the financial position of different concerns. The fixation

of prices for securities etc. is also based on the statements.

LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are relevant and useful for theconcern, still they do not present a final picture of the concern,

otherwise misleading conclusions may be drawn. The financial

statements suffer from following limitation:

1. Ignoring of non-monetary aspects

These statements are prepared with the help of accountinginformation which mainly consider monetary aspects only. The value of

business depends both on qualitative and quantitative factors.

2. Historical cost

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The statements are prepared on the basis of historical cost.

The value of fixed assets are at there original cost less depreciation.

The balance sheet value are not shown the value of assets may be sold

more over they do not reflect the market value which is as important

factor in determining the solvency of an enterprise.

3. Personal Judgment

In preparing financial statements certain items are left to

the personal Judgment of the accountant. If any accountant is not

following accounting principles correctly his judgment will give wrong

picture.

4. Conversion of Conservation

Due to conversion of conservation the income statement

may not disclose true income of the business. This is due to ignorance

of probable incomes and accounting probable losses.

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial

strength and weakness of the firm by properly establishing between the

items of the balance sheet and profit and loss account. There are

various methods or techniques used in analysis financial statements

such as comparative statements, trend analysis, common size

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statements, schedule of changes in working capital, funds flow and

cash flow analysis Cost Volume Profit Analysis and Ratio Analysis.

Meaning and concept of financial analysis

The terms financial analysis also known as analysis and

interpretation of financial statements refers to the process of

determining financial strength and weaknesses of the firm by

establishing strategic relationship between the items of the balance

sheet, profit and loss account and other operative data.

Types of financial analysis

Financial analysis can be classified in to different categories

depending up on:

A. On the basis of material used.

B. On the basis of modules operandi

Types of

Financial

Analysis

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[A] In the basis of material used

According to the basis, financial analysis can be of two types.

External Analysis

This analysis is done by those who are outsiders for the

business. These persons mainly depend up on the published financial

statements. Their analysis serves only a limited purpose.

Internal Analysis

On the basis

of material

Used

On the basis

of modulesOperandi

VerticalHorizontal

External

Internal

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This analysis is done by persons who have access to the

books of account and at other information related to the business. Such

as analysis can be done by executives and employees of the

organization. The analysis is done depending up on the objective to be

achieved through this analysis.

[B] On the basis of modules operandi

According to this financial analysis can also be of two types:

Horizontal Analysis

In case of this type of analysis, financial statements for a

number of years are reviewed and analysed the current years figures

are compared with the standard or base year. The analysis statement

usually contains figures for two or more year and the change are shown

regarding each item from the base year usually in the form of

percentage. Since this type of analysis based on the data from year to

year rather than on date, it is also termed as Dynamic Analysis

Vertical Analysis

In case of this type of analysis a study is made of the

quantitative relationship of various items in the financial statement on a

particular date. Since this analysis depends on the data for one period,

this is not very conductive to a proper analysis of the companys

financial position. It is also called static analyses as it is frequently

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used for referring to ratio developed on one date or for one accounting

period.

Techniques of financial analysis

A financial can adopt one or more of the following

techniques/ tools of financial analysis:

COMPARATIVE FINANCIAL STATEMENTS

The statements which have been designed in a way so as toprovide time perspective to the consideration of various elements of

financial position embodied in such statements figures for two or more

period side by side to facilitate comparison.

Both the income statement and balance sheet can be

Financial

Analysis

Techniques

Funds flowAnalysis

RatioAnalysis

TrendPercentage

ComparativeFinancial

Statements

Cash FlowAnalysis

Ratio C.V.P.Analysis

Common SizeFinancial

Statements

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prepared Ni the form of comparative financial statements.

The comparative financial statements contain the following items.

i. Absolute figures (amount in Rs. /-) as given in the final

accounts.

ii. Absolute figures expressed in terms of percentages.

iii. Increase of decrease in absolute figures in terms of money

value.

iv. Increase or decrease in terms of percentages.

v. Comparison expressed in ratios.

vi. Percentages of totals.

Comparative Income Statements

The income statement (profit & loss A/c) gives the results of

the operations during a definite period. It reveals the profit carried or

loss incurred by the cancers. The comparative study if income

statement for more than 1 year may enable us to know the program of

the concern. First two columns gibe figures of various items for two

years. The third and fourth column used to show increase or decrease in

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figures in absolute adopted in preparing comparative balance sheet.

In first step, find out the changes in absolute figures i.e., increase

or decrease should be calculated.

In second step percentage of change should be calculated with the

help of following formula.

Change in amount

Percentage of change = x 100

Base year amount

COMPARITIVE INCOME STATEMENT:

PARTICULARS PREVIOSYEAR

CURRENTYEAR

INCREASE /DECREASEAMOUNT(R

s)PERCENTAGE

Net Sales **** **** **** ****(Less): Cost of goodssold

*** *** *** ***

Gross Profit ***** ***** ***** *****(Less): Operating

Expenses:-Office &AdministrationExpenses

*** *** *** ***

Selling & DistributionExpenses

*** *** *** ***

Total OperatingExpenses

***** ***** ***** *****

(Add): OperatingIncomes

**** **** **** ****

Total OperatingIncomes

**** **** **** ****

Operating Profit ***** ***** ***** *****(Add): Non-OperatingIncomes:-Income onInvestment

*** *** *** ***

Profit on sale of *** *** *** ***

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assetsDividends received *** *** *** ***Total Non-Operating Incomes

***** ***** ***** *****

(Less): Non-Operating

Expenses:-Loss on sale of FixedAssets

**** **** **** ****

Net Profit BeforeInterest & Tax[EBIT]

***** ***** ***** *****

(Less): Interest Paid *** *** *** ***Net Profit BeforeTax

**** **** **** ****

(Less): Income TaxPaid

*** *** *** ***

Net Profit After Tax ***** ***** ***** *****

Guidelines for interpretation

The increase or decrease in sales should be compared with

increase or decrease in cost of goods sold. If increase in sales is

more than the cost of goods sold. It means that the profitability of

the concerns is increased.

The amounts of gross profit should be studied.

Operating profits should be studied. The express should be

deducted from gross profit to find out operating profit and then

operating incomes should be added.

The next step is some of the non operating expenses are to be

deducted from the operating profits and non operating incomes

should be added to get net profit

The opinion should be formed the profitability of the business

concern and it should be given at the end.

Comparative balance sheet

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The balance sheet prepared on a particular date reveals the

financial position of the concern on the date to study the trends of

business over a period of time comparative balance sheet reveals the

cause for changes in the financial position on amount of various

transactions. The comparative studies throw light on financial policies

adopted by management.

The comparative balance sheet consists of two columns for

the original data. A third column used to show increase or decrease in

various items. A south column containing the parentage of increase or

decrease may be added.

COMPARITIVE BALANCE SHEET:

PARTICULARS PREVIOUSYEAR

CURRENTYEAR

INCREASE /DECREASEAMOUNT(R

s)PERCENTAG

ASSETS:Current Assets: (C.L)Cash & Bank Balances *** *** *** ***Sundry Debtors *** *** *** ***

Bills Receivable *** *** *** ***Stock (Inventories) *** *** *** ***Prepaid Expenses *** *** *** ***Marketable Securities *** *** *** ***Temporary Investments *** *** *** ***Accured Incomes *** *** *** ***Total Current Assets ***** ***** ***** *****Investments:

Short-term loans and

advances

*** *** *** ***

Staff Advances *** *** *** ***Other Advances *** *** *** ***Fixed Assets: (F.A)

Good Will *** *** *** ***Land *** *** *** ***Buildings *** *** *** ***

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Plant & Machinery *** *** *** ***Furniture & Fittings *** *** *** ***Free Hold Property *** *** *** ***Lease Hold Property *** *** *** ***

Preliminary Expenses *** *** *** ***Patent Rights *** *** *** ***Trade Marks *** *** *** ***Other DeferredExpenses

*** *** *** ***

Total Fixed Assets ***** ***** ***** *****

TOTAL ASSETS[ C.L + F.A ]

****** ****** ****** ******

Current Liabilities:(C.L)Sundry Creditors *** *** *** ***Bills Payable *** *** *** ***Out Standing Expenses *** *** *** ***Bank Over Draft *** *** *** ***Unclaimed Dividends *** *** *** ***Propose Dividends *** *** *** ***Provision For Tax *** *** *** ***Accrued Expenses *** *** *** ***Total CurrentLiabilities

***** ***** ***** *****

Long TermLiabilities: (L.T.M)Mortigage Loan *** *** *** ***Debentures *** *** *** ***Total Long TermLiabilities

***** ***** ***** *****

Share Capital &Reserves: (CAP. &

RES.)Equity Share capital *** *** *** ***Preference ShareCapital

*** *** *** ***

Share Premium *** *** *** ***General Reserve *** *** *** ***Appropriation of Profits *** *** *** ***

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Total Capital &Reserve

***** ***** ***** *****

TOTAL LIABILITIES[C.L + L.T.M + CAP. &

RES.]

***** ***** ***** *****

Guide lines for interpretation of balance sheet:

The short term financial position can be studied y comparing

the working capital of both years.

To study the liquidity position changes in liquid assets must be

ascertain if there is any increase in liquid assets. We must

understand that is an improvement in the liquidity position of

the concern and vice versa.

A high increase in sundry debtors and bills receivable mean in

increase in risk in collecting the amount of dues.

A high increase in closing stock may mean that decrease in the

demand.

Long term financial position of the business concern car be

analysed by studying the changes in fixed assets, long term

liabilities and capital. Fixed assets must be compared with long term loans and

capital. If the increase in fixed assets is more than the increase

in long term financiers from the working capital which is not

good.

1. COMMON SIZE STATEMENTS:

The common size statements, balance sheet and income

statement are shown in analytical percentages. The figures are shown

as percentages of total assets, total liabilities and sales. The total

assets are taken as 100 and different assets are expressed as

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percentage of the total. Similarly various liabilities are taken as a part

of total liabilities. These statements are also known as component

parentage or 100% statements because every individual item is stated

as a percentage of the total 100 the short statements because every

individual item is stated as a percentage of the total 100 the short-

comings in comparative statements and trend percentages where

changes in item could not be compared with the total have been

covered up.

The common size statements may be prepared in the following

way.

The totals of assets or liabilities are taken as 100.

The individual assets are expressed as a percentage of

total assets i.e., 100 and different liabilities are

calculated in relation to that liability.

Common Size Income Statement:

The items in income statement can be shown as

percentages of sales to show the relation of each item to sales. A

significant relationship can be established between items of income

statement and volume of sales. The increase in sales will certainly

increases selling expression and volume of sales. The increase in sales

will certainly increases selling expresses and not administrative or

financial expenses. In case the volume of sale increases to a

considerable extent, administrative and financial expenses may go up.

In case the sales are declining, the selling expenses should be reduced

at once. So, a relationship is established between sales and other in

income statement and this relationship is helpful in evaluating

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operational activities of the enterprises.

Common Size Balance Sheet:

Statement in which balance sheet items are expressed as

the ratio of each asset to total assets and the ratio of each liability is

expressed as a ratio of total liabilities is called common size balance

sheet. The common size balance sheet is a horizontal analysis. The

comparison of figures in different periods is not useful becomes total

figure may be affected by a number of factors. It is not possible to

establish standard norms for varios assets. The trends of year to year

may not be studied and even they may not give proper results.

2. TREND ANALYSIS :

Trend analysis is an important and useful technique of

financial analysis. It involves computation of index numbers of the

moments of the various financial items in the financial statements for a

number of periods. It enables to know the changes in the financial

position and the operational efficiency between the period chosen.

Through trend analysis the analysis can give his opinion as

to whether favorable or unfavorable tendencies are reflected by the

accounting date.

The comparative and common size balance sheets suffer

from a major limitation i.e., absence of basic standard to indicate

whether the proportion of an item is normal or analysis values are

calculated for each item in isolation but conclusions are to be drawn by

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studying the related items also.

Trend analysis can be analysis in the following ways:

i. By calculating trend ratio (or) percentage.

ii. By plotting on graph paper (or) charge.

Trend Ratio (or) Percentage:

It involves the ascertainment of arithmetical relationship

which each item of several year to the same item of base year. Any

year maybe as the base year, it is usually the earliest year.

Procedure for Calculating Trend Ratio:

The following procedure maybe adopted for calculating trend

ratio.

i. Select any year as base year the selected year should be

normal year for the base year the trend value is taken as 100.

ii. Trend percentage of each item should be calculated with the

help of following formula.

Current year value

Trend Percentage = X 100

Base year value

3. COST-VOLUME-PROFIT ANALYSIS:

Cost Volume Profit analysis is an important tool of profit

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planning. It studies the relationship between cost, volume of

production, sales and profit. It is not strictly a technique used for

analysis of financial statements. However, it is an important tool for the

management for decision making. Since the data is provided both cost

and financial records. It tells the volume of account of variation in

output, selling price and cost, and finally, the quantity to be produced

and sold to reach the target profit level.

4. RATIO ANALYSIS:

Financial analysis depends to very large extents of the use

of ratios through there are other equality important tools of such

analysis. Thus, a direct examination of the magnitude of two released

items is some what enlightening but the comparison is greatly facilitated

by expressing the relationship as a ratio.

Ratio analysis of business enterprises enters on efforts to

derive quantitative measures or guides concerning the expected

capacity of the firm to meet its future financial obligation or

expectations present and past data are used for the purpose and what

ever extrapolations appear necessary. They are made to provide no

indication of feature performance. Alexander walt, who criticized the

bankers for its lapsided development owing to their decisions regarding

the grant of credit on current ratios a lone, made the presentation of an

elaborate system of ratio analysis in1919.

Ratio:

Ratio is an expression of the quantitative relationship that

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exists between the two numbers. The ratio is defined as the indicated

quotient of two mathematical expressions the ratio should be

determined between related accounting variables to be meaningful and

effective.

5. MEANING OF CASH FLOW NATURE:

Cash plays very important role in the entire economic life of

a business. A firm needs cash to make payments to its suppliers, to

insure day-go-day expenses and to pay salaries, wages, interest and

dividends etc. In fact, what blood is to a human body, cash is to a

business enterprise It is very essential for a business to maintain an

adequate balance at cash. But many a times, a concern operates

profitability and yet it becomes very difficult to pay taxes and dividends

this movement of cash is of vital importance to the management.

A statement of changes in the Financial Position of firm on

cash basis is called a cash flow statement.

A cash flow statement summarises the causes of changes in

cash position of a business enterprise between dates of two balance

sheets. This statement is very much similar to the statement of changes

in Financial Position Prepared on working capital basis, i.e., a funds flow

statement, except that a cash flow statement focuses attention on cash

instead of working capital. It is called a cash flow statement because it

describes the Inflow (Sources) and out flow (use) of cash.

ACCOUNTING STANDARDS (ASs):

AS 1 - Disclosure of accounting policies.

AS 2 - Valuation on Inventories

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AS 3 - Cash Flow Statements

AS 4 - Contingencies and Events Occurring After the

Balance Sheet Date.

AS 5 - Net Profit or Loss for the period, Prior Period Items

and Changes in Accounting Policies.

AS 6 - Depreciation Accounting

AS 7 - Construction Contracts (Revised 2002).

AS 8 - Accounting for Research and Development

AS 9 - Revenue Recognition

AS 10 - Accounting for Fixed Assets

AS 11 - The Effects of Changes in Foreign Exchange Rates

(Revised 2003).

AS 12 - Accounting for Government Grants

AS 13 - Accounting for Investments

AS 14 - Accounting for Amalgamations

AS 15 - Employee Benefits (Revised 2005).

Limited Revision to Accounting Standard (AS) 15, Employee

Benefits (Revised 2005).

AS 16 - Borrowing Costs.

AS 17 - Segment Reporting.

AS 18 - Related Party Disclosures

AS 19 - Leases

AS 20 - Earnings per Share

AS 21 - Consolidated Financial Statements

AS 22 - Accounting for Taxes on Income

AS 23 - Accounting for Investments in Associates in

Consolidated Financial Statements

AS 24 - Discontinuing Operations

AS 25 - Interim Financial Reporting.

AS 26 - Intangible Assets.

AS 27 - Financial Reporting of Interests in Joint Ventures.

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AS 28 - Impairment of Assets.

AS 29 -Provisions, Contingent Liabilities and Contingent

Assets.

AS 30 - Financial Instruments: Recognition and Measurement

and Limited Revisions to AS 2, AS 11 (Revised 2003), AS 21,

AS 26, AS 27, AS 28 and AS 29.

AS 31 - Financial Instruments: Presentation.

ACCOUNTING STANDARD

INTERPRETATION:

ASI 1 - Substantial Period of Time (AS 16).

ASI 2 - Accounting for Machinery Spares (AS 2, Valuation

of Inventories and AS 10, Accounting for Fixed

Assets).

Revised ASI 3 Accounting for Taxes on Incomes in the situationsOf Tax Holiday under sections 80-IA and 80-IB of

the Income-tax Act, 1961 (Re.: AS22)

ASI 4 - Losses under the head Capital Gains (Re.: AS 22).

ASI 5 - Accounting for Taxes on Income in the situation

of Tax Holiday under sections 10A and 10B of

the Income tax Act, 1961 (Re.: AS 22).

ASI 6 - Accounting for Taxes on Income in the contextof Section 115JB of the Income-tax Act, 1961

(Re.: AS22).

ASI 7 - Disclosure of deferred tax assets and deferred tax

liabilities in the balance sheet of a company

(Re.: AS 22).

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ASI 8 - Interpretation of the term Near Future.

(Re.: AS 21, AS 23 and AS 27).

ASI 9 - Virtual certainty supported by convincing evidence

(Re.: AS 22).

ASI 10 - Interpretation of paragraph 4(e) of AS 16 (Re.: AS

16).

ASI 11 - Accounting for Taxes on Income in case of an

Amalgamation (Re.: AS 22).

ASI 12 - Applicability of AS 20 (Re.: AS 20).

ASI 13 - Interpretation of Paragraphs 26 and 27 of AS 18

(Re.: AS 18).

ASI 14 - Disclosure of Revenue from Sales Transactions

(Re.: AS 9).

ASI 15 - Notes to the Consolidated Financial Statements

(Re.; AS 21).

ASI 16 - Treatment of Proposed Dividend under AS 23

(Re.: As 23).

ASI 17 - Adjustments to the Carrying Amount of

Investment arising from Changes in Equity not

included in the Statement of Profit and Loss

of the Associate

(Re.: AS 23).

ASI 18 - Consideration of Potential Equity Shares for

Determining whether An Investee is an

Associate under AS 23 (Re.: AS 23).

ASI 19 - Interpretation of the term Intermediaries

(Re.: AS 18).

Revised ASI 20 Disclosure of segment information (Re.: AS 17).

ASI 21 - Non-Executive Directors on the Board whether

an Investee is an Associate under AS 23 (Re.: AS

18).

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ASI 22 - Treatment of Interest for determining

Segment Expense (Re.: AS 17).

ASI 23 - Remuneration paid to key management personnel

whether a related party transaction (Re.:

AS 17).

ASI 24 - Definition of Control (Re.: AS 21).

ASI 25 - Exclusion of a subsidiary from

Consolidation (Re.: AS 21)

ASI 26 - Accounting for taxes on income in the

consolidated financial statements (Re.: AS

21).

ASI 27 - Applicability of AS 25 to Interim Financial Results

(Re.: AS 25).

ASI 28 - Disclosure of parents / ventures shares in post-

acquisition reserves of a subsidiary / jointly

controlled entity (Re.: AS 21 and AS 27).

ASI 29 - Turnover in case of Contractors

{Re.: AS 7 (Revised 2002)}.

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COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS2009-10 and 2010-11

PARTICULARS 2009-10Rs. Crs.

2010-11

Rs. Crs.

Increase/Decrease

Rs. Crs.

Increase/Decr

Percentag

ASSETS:

Cash & Bank Balance 5415.54 1998.89 -3416.65 -63.08

Sundry Debtors 181.18 330.61 149.43

Inventories (Stock) 2451.52 3254.71 803.19

Loans & Advances 1365.02 1965.04 600.02

Other Current Assets 137.4 75.96 61.44Miscellaneous Expenditure

Profit & Loss Account

Investments 0.25 1.60 1.35

Fixed Assets 8972.30 11066.63 2094.33

Total Assets 18523.21 19053.44 530.23

LIABILITIES

Current Liabilities 2871.95 3279.43 399.48

Provisions 1435.89 1336.06 -99.83

Secured Loans 407.28 274.89 -132.39

Unsecured Loans 825.27 861.87 36.6

Deferred Tax Liability 97.82 79.97 -17.85 -1

Reserves & Surplus 5057.68 5401.90 344.22

Share Capital 7827.32 7827.32

Total Liabilities 18523 19053.44 530.23

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2009-10Rs. Crs.

Increase/DecreaseRs. Crs.

Increase/DecreasePercentage

A SSETS:

Cash & Bank

Balance

6624.17 5415.54 -1208.63 -18.24

Sundry Debtors 191.27 181.18 -10.09 -5.27

Inventories

(Stock)

3215.28 2451.52 -763.76 -23.75

Loans &

Advances

1569.69 1365.02 -204.67 -13.03

Other Current

Assets

258.91 137.4 -121.51 -46.93

Miscellaneous

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Expenditure

Profit & Loss

Account

Investments 0.05 0.25 +0.2 +4.00

Fixed Assets 5874.11 8972.30 +3098.19 +52.74

Total Assets 17733.48 18523.21 +789.73 +4.45

LIABILITIES

Current Liabilities 2560.79 2871.95 +311.16 +12.15

Provisions 1620.53 1435.89 -184.64 -11.39

Secured Loans 907.72 407.28 -500.44 -55.13

Unsecured Loans 100.04 825.27 +725.23 +724.94

Deferred Tax

Liability

124.49 97.82 -26.67 -21.42

Reserves &

Surplus

4592.59 5057.68 +465.09 +10.12


Total Liabilities 17733.48 18523 +789.73 4.45

Interpretation

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The cash and bank balance were decreased from 6624.17 (crores) to

5415.54 (crores) i.e -1208.63(crores) (-18.24%).It Indicates that the

VSP'S liquidity position decreasing.



2008-09Rs. Crs.

Increase/DecreaseRs. Crs.

Increase/DecreasePercentage

A SSETS:

Cash & Bank

Balance

7699.11 6624.17 -1074.94 -13.96

Sundry Debtors93.41 191.27 +97.86 +104.76

Inventories

(Stock)

1761.15 3215.28 +1454.13 +82.56

Loans &

Advances

1958.49 1569.69 -388.8 -19.85

Other Current

Assets

292.43 258.91 -33.52 -11.46

Miscellaneous

ExpenditureProfit & Loss

Account

Investments 0.05 0.05

Fixed Assets 3471.87 5874.11 +2402.24 +69.19

Total Assets 15276.51 17733.48 +2456.97 +16.08

LIABILITIES


Provisions 1518.47 1620.53 +39.06 +2.46

Secured Loans 332.78 907.72 +574.94 +172.76

Unsecured Loans 107.95 100.04 -7.91 -7.32

Deferred Tax

Liability

163.12 124.49 -38.63 -23.68

Reserves & 3653.72 4592.59 +938.87 +25.69

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Surplus


Total Liabilities 15276.51 17733.48 +2456.97 +16.08

Interpretation

The cash and bank balance was decreased from 7699.11(crores) to

6624.17 ((crores) i.e -1074.94 (crores) (-13.96%). It indicates that

liquidity position of the VSP decreased

The Fixed assets were increased from 3471.67(crores) to 5874.11

(crores) i.e +2402.24 (crores) (69.19%). It indicates that the VSPs

interest on long term benefits through invest on fixed assets.

Current liabilities were increased from 1610.15 (crores) to 2560.79

(crores) i.e +950.64 (crores) (+59.04%). It indicates that the working capital

position becoming critical.

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PARTICULARS 2006-07

Rs. Crs.

2007-08

Rs. Crs.

Increase/Decrease

Rs. Crs.

Increase/Decrease

PercentageASSETS:

Cash & Bank

Balance

7194.68 7699.11 +504.43 +7.01

Sundry Debtors 216.80 93.41 -123.39 -56.91

Inventories

(Stock)

1203.24 1761.15 +557.91 +46.36

Loans &

Advances

1518.90 1958.49 +439.59 +28.94

Other Current

Assets

314.48 292.43 -22.05 -7.01

Miscellaneous

Expenditure

14.95 -14.95 -100

Profit & Loss

Account

____ _____ ______ _______

Investments 0.05 0.05 _____ ______

Fixed Assets 2387.65 3471.87 +1084.22 +45.40

Total Assets 12850.75 15276.51 +2425.76 +18.87

LIABILITIES


Provisions 1092.77 1518.47 +488.7 +44.72

Secured Loans 604.45 332.78 -271.67 -44.94

Unsecured Loans 312.51 107.95 -204.56 -65.45

Deferred Tax

Liability

291.29 163.12 -128.17 -44.00

Reserves &

Surplus

1710.88 3653.72 +1942.84 +113.55

Share Capital 7827.32 7827.32 _______ _____

Total Liabilities 12850.75 15276.51 +2425.76 +18.87

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Interpretation

The cash and bank balance was increased from 7194.68(crores) to

7699.11 (crores) i.e +504.43(crores) (+7.01%). It indicates that the

VSPs liquidity position was better than previous year.

The Investments are constant last two years and also the investments

are very low. It indicates the firms disinterest on invest on other

sectors.

The secured and unsecured loans were decreased from 2006-07 to

2007-08 i.e 476.23 (crores). It shows the VSPs financial position

becoming healthy

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COMMON SIZE BALANCE SHEET OF VSP LTD. FOR THE YEARS2006-07 to 2010-11 (Rs. Crs)

Source of funds

PARTICUALRS 31-03-11 31-03-10 31-03-09 31-03-08 31-03-07

Share Holders Fund

Share Capital 7827.32 7827.32 7827.32 7827.32 7827.32

Reserves & Surplus 5401.90 5057.68 4592.59 3653.72 1710.88

(A

)

13229.22 12886.00 12419.91 11481.04 9538.20

Loan Funds

Secured Loans 274.89 407.28 907.72 332.78 604.45

Unsecured Loans 861.87 825.27 100.04 107.95 312.51

(B) 1136.76 1232.55 1007.76 440.73 916.96

Current Liabilities

Liabilities 3271.43 2871.95 2560.79 1610.15 1011.53

Provisions 1336.06 1435.89 1620.53 1581.47 1092.77

(C) 4607.49 4307.84 4181.32 3191.62 2104.30

Deferred Tax

Liability(D) 79.97 97.82 124.49 163.12 291.29

Total (A+B+C+D) 19053.44 18523.21 17733.48 15276.51 12850.75

Application of funds

PARTICUALRS 31-03-11 31-03-10 31-03-09 31-03-08 31-03-07

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Fixed Assets

Gross Block 9794.60 9473.90 8971.80 8900.83 8875.62

Less: Deprecation 8264.71 8008.55 7749.74 7516.19 7085.16

Net Block 1529.89 1465.35 1222.06 1384.64 1790.46

Held for Disposal 0.03 0.05 0.05 0.04 0.00

Capital Work-in-prog. 9536.71 7506.90 4652.00 2087.19 597.19 11066.63 8972.30 5874.11 3471.87 2387.65

Investments (B) 0.58 0.25 0.05 0.05 0.05

Current Assets &

Advances

Inventories 3254.71 2451.52 3215.28 1761.15 1203.24

Sundry Debtors 330.61 181.18 191.27 93.41 216.80

Cash & Bank

Balances

1998.89 5415.54 6624.17 7699.11 7194.68

Other Assets 75.96 137.40 258.91 292.43 314.48

Loans & Advances 1965.04 1365.02 1569.69 1958.49 1518.90

(C

)

7625.21 9550.66 11859.32 11804.59 10448.10

Miscellaneous

Expenditure (D)

Documents

Rajeswari Modified Data