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COMPANY DETAILS
Name of industrial concern Wahid Sandhar Sugar Ltd
Date of incorporation/ Registration in the year 1993
Date of commencement of Business
Change to “joint stock co”
16 September 2000
Sector Private
Location G T Road Phagwara
Web site www.wahidsandharsugar.com
E- Mail Address [email protected]
Installed Capacity 4000 tone cane per day
Licensed Capacity 4500 tone cane per day
Installed Crushing Capacity 400 ton per day
Setup by Narang group formally
known as “Jagjit sugar ltd”
Founder of mill Dr. Gokal Chand Narang
Working capital 30 crore
Profits 75 lakhs
Registered office Wahid Sandhar Sugar Ltd
Bankers State Bank of India 765,
Hargobind nagar phg.
Auditors M/S Arora & Associates
Charted Accountants Lud.
Export Countries America, Canada, England, Pakistan
Main suppliers of raw Local farmers phg.
INTRODUCTION ABOUT WAHID SANDHAR SUGAR LTD:-
1
There are 507 sugars industries in the India, 23 in Punjab and only one in Phagwara namely Wahid
Sandhar Sugars Ltd., Phagwara is a leading company in the sugars, molasses and other by products. The
Sugar Plant originally established in 1933 by Narang Group of Industries formally known as Jagatjit
Sugar Mill Company Ltd., in the year which was later on taken over by Oswal Group in 1989. The
Oswal Group had expanded the crushing capacity of Plant for sugar cane from 1500 Ton per day to 4500
Ton per day with the latest state of art technology. The Plant was later on taken over by Wahid and
Sandhar Group in the year 2000 and commenced its operation under the Flagship of M/s Wahid Sandhar
Sugars Ltd. Since incorporation the promoters are running the business very successfully. The raw
material is sugarcane is supplied directly to the factory by local farmers.
By Product in Wahid Sandhar Sugar Ltd.
1. 4 tones of Molasses
2. 3 tones of Press & Mud
3. 0.3 tones of Furnance
4. 30-32 tones of Bag gasses
5. 1.5 KW Power
6. 30 tones of case top 6 leaves
Total sugar industries are:
In India 566
In Punjab 23
In Phagwara-first setup by Narang Group
Human Resourses:-
In season total strength of workers are 473
In off season total of workers are 349
HISTORICAL BACKGROUND OF THE COMPANY
2
Sugar industry is very well established India has been producing Gur and Khandsari since long time .but
the modern sugar industry came in to existence in 1903. When first sugar factory was installed in Bihar.
But the advert of modern sugar processing industry in India began in 1930. Thus 1930-31 there were 30
sugar mills and in 1935-36 the number of sugar mills. Increased up to 139 and during the same period
the production increased from 1.20 lakh tones to 9.34 lakh tones. After partition of the country 67% of
sugar mills came in the share of India. India is the second largest producer of sugar in the world. The
Wahid Sandhar Sugar Ltd Phg is a leading co in the sugars which is engaged in the production of sugar,
molasses and other by products. The co is really good examples of a great progress in very less time as
we can list in milestones in the following manner:-
There is only one sugar industry in Phg. that is Wahid Sandhar Sugar Ltd Which was setup by Narang
group formally known as Jagatjit sugar mill co ltd. The initial crushing capacity of company was 400
tons per day which was increased to 1000 tons per day in the 1933 by Dr. Gokal Chand Narang was the
founder member of this mill. In 1987 the Oswal group took over the management of this mill under the
chairman of Sh. Abhey Oswal and increased the capacity to 4000 tons per day in 1989. In 1989 they
setup new plant in sugar mill.
VISION OF THE WAHID SANDHAR SUGARS LTD
The main aim of Wahid Sandhar Sugars Ltd. is to serve customers satisfaction by cutting cost &
improving quality.
Need Of The Study
Wahid Sandhar ltd is a well famous company for its quality products. The companies occupies a good
position and enjoy an excellent credit worthiness and goodwill among suppliers, customers, creditors,
and bankers. It has been enjoying excellent labour management relations from last many years. It is one
of the famous and renowned company of India the company is able to enhance its installed capacity
3
from 400 tones cane per day to 4500 cane per day. The company is also well aware of its social
responsibilities.
Quality policy of Wahid Sandhar Sugars Ltd.
The main motto of the company’s quality policy is consumer’s total satisfaction. They commit
themselves to produce and deliver such material, so as to meet the consumer’s quality expectations. This
is achieved by identifying the customer’s requirement and translating them into products and continuous
up dating to reflect customers changing requirement.
Production pattern to Wahid Sandhar Sugar Ltd.:-
Main Products:-
1. Sugar 3. Molasses
2. Baggasse 4. Press Mud
Main power in Wahid Sandhar Ltd.
There are mainly three kinds of labour:-
1. Permanent seasonal:-Those who are permanent but work only in season.
2. Permanent:-These who work in season & off-season also.
3. Temporary:-These who are not permanent but work in as well as in off-season also.
4
WS
In the season, total strength of workers is 473. in off season, only 349 pays to the chose labour that work
in the season only as retaining allowance.
Trust
Mill has its own trust named Jagatjit trust. The trust has established in the year 1946. The entire
provident fund cut from the employee’s salary is deposited in this trust. Mill gives the annually record of
this provident fund to the Govt.
Logo
PHAGWARA
Wahid Sandhar Sugars Ltd. Also use a logo, Logo means a trade mark or a symbol inserted into the
firm’s letters & use for advertising purpose. The main aim of the logo of Wahid Sandhar Ltd. is given
below:-
Logo of Wahid Sandhar Ltd. shows a two member’s partnership.
They believe that every company has a different sign in the market.
Logo of Wahid Sandhar Sugars Ltd. is mainly the name of the company.
Socio – Economic Development
Sugar mill contribute to the socio-economic development state by offering. He remunerative cane
manager promoting joint action by the farmers in the management actuaries of the mills. Providing
employment to a large number of people including landless labours and farmers. Today cooperative
mills or other sugar mills directly/indirectly employment to over the 1000 employees and the wages paid
in the sugar mills are best as compare to any other state of country mobilizing rural saving for industrial
purpose. Preserving individual states of farmers while confirming the advantages of large sized industry.
5
TM
Accounts selection takes area for making invoices and receiving. The payment of all the bill of purchase
and other expenses are entered in the payment register and respective accounts heads .this selection is
responsible employees and parties dealing with Wahid Sandhar sugar ltd.
List of Directors
Promoters
The Plant was taken over by Wahid and Sandhar Group with equal contribution. S. Soukhbir Singh
Sandhar the Chairman of the Company is an NRI and experienced business man. S. Jaswinder Singh
Bains Vice chairman of the Company is an agriculturist. S. Jarnail Singh Wahid, Managing Director of
the group is a Law Graduate and heading the farmer community before the takeover. Besides this he is
now also an experienced Industrialist. The Board comprises of equal number of Directors from both the
groups. Mr. Jarnail Singh Wahid is also the Chairman of Markfed, which is the largest cooperative
society in the Asia.
Competent and Qualified Staff
S. Soukhbir Singh
Sandhar
(Chairman)
S. Jaswinder Singh
Bains
(Vice-Chairman)
S Jarnail Singh
Wahid
( Managing Director)
S Sandeep Singh
Wahid
( Director)
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The Company has very competent and qualified staff. All the functions like procurement, production,
marketing, Sales, Finance, Technical, and Personnel are handled and headed by the professionals.
Beside above the management has also hired the good professionals from outside on regular basis to use
their expertise in the relevant fields.
Co-generation
Wahid Sandhar Sugar is a leading organization in the North India. This mill has
developed its strength in power generation and raw sugar processing in addition to
the production of white sugar in this mill from decade. We have capability to
generate 12 MW with single turbine and export power to grid up to 8MW.
Moreover, we have taken initiative to use biomass as fuel, which has given direct boost to the farmer’s
economy. Farmers have started to supply fuel to this mill rather than to burn in their field, which
ultimately has increased their revenue.
Contribution towards Society
1. Two schools are opened by Wahid Sandhar Ltd.
2. A Club is also opened by Wahid Sandhar Ltd. Is known as “Dev Club”.
3. A sewing Centre has been also opened by Wahid Sandhar Ltd.
Departmental Heads
Name Designation
Mr. Kulwant Singh Chief Executive
Mr. Vaneet Nanda Finance Controller
K.A. Gaur General Manager Cane
B.S Garewal G.M.(Tech.)
Mr. R.P. Dubey General Manager (Production )
Mr. Rajesh Sharma Assist General Manager Commercial
Mr. Umesh Sharma Assist General Manager Purchase
Mr. Parvinder Singh Assist General Manager(E.D.P )
Mr. S.K. Dubey Dy. Manager Lab
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Mr. J.S. Gill Chief Engineer
Mrs. Nisha Manager A/cs
Mr. Tirlok Singh Cash Officer
S. Charanjit Singh Wahid G.M. Cane (Senior Chief Cane Mgr)
Mr.S.K. Chawala Assist Data Officer
Mr. Lajpat Roy Assist Security Officer
WHY I SELECT WAHID SANDHAR SUGAR LTD.
WAHID SANDHAR LTD IS REPUTED CONCERN AND LEADING COMPANY IN SUGAR
INDUSTRIES:-
It is situated outside the city Phagwara so there is no such Problem which causes pollution.
The way of working and taking with staff members is very well means its sound relation with its
employees & others.
Good management of staff members.
The good and quality of the sugar manufacturing in factory.
The waste products of the factory are carefully disposed off.
The workers are given facility in this factory
Awareness of social responsibility
The Wahid Sandhar sugar ltd Phagwara is was established sugar mill in the state.
The main reason for choosing due to its reputation.
There are 493 sugar industries in India in which 23 in Punjab and only one sugar industry in
Phagwara.
ORGANIZATIONAL STRUCTURE
8
Board of Directors
Chairman Managing Director
Director Director Director Director (finance) Production Marketing Personnel or Vice – President
Treasurer Controller
Cash Credit Portfolio AuditingManager Manager Manager
Financial Cost Planning and Tax Accounting Accounting Budgeting Manager Manager Manager Manager
STRUCTURE OF ACCOUNTS DEPARTMENTS
9
Accounts selection takes area for making invoices and receiving. The payment, all the bills of purchase
& other expenses are entered in the payment registrar and respective accounts heads. This selection is
responsible employees and parties dealing with Wahid Sandhar Sugar Ltd.
10
Finance Controller
Accounts Officer
Assistance Accountant Officer
Accountant
Assistant Accountant
Financial SWOT analysis:-
Strengths
Good reputation among customers.
Effective inventory control.
Adequate production facilities.
Sound and suitable management practices.
Good industrial relations.
All departments perform their work in right time.
Staff involved in management is efficiently performing their all work in effective manner.
There are good relationship between management and workers.
Company working capital position is sound as its current assets are sufficient enough to meet its
current liabilities.
Weakness
Increase in cost of raw material due to inflation in economy.
Indirect expenses of company increases at rapid rate.
Sales of company decreases as compare to last year which is mainly due to unavailability as raw-
material.
A profit of a company has decreased due to decrease in cost.
No better system of recruitment and selection.
Opportunities
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To control its operating expenses and cost of goods sold.
To expand its export market.
To improve its net profitability condition.
Start more labour welfare schemes for benefit for labour.
To develop the manpower and try to utilize their full capacity.
Threats
More cost in production process.
New competitive technology.
Reduction of the concession.
Increased trade barriers.
SOURCES OF FINANCE
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Sources of finance
A limiting factor in the provision of finance for successful business is that fearful word RISK which is
uppermost in every lender/s mind. The extent to which the budding entrepreneur can illustrate to
his financial backer that the risk e lement can be contro l led through careful p lanning
and implementa t ion of common sense management procedures, will largely determine
the success with which the finance tap can be opened to the benefit of the entrepreneur and the finacier. To
achieve this, small businessmen must not only have an understanding of how to reach the sources of finance
available to them, but must also know how to capitalize on the use of these sources in order to reduce the risk factor.
This Problem Solver will give you some reasonable pointers in this regard. Fundamental to
the approach will be the fact that the development of small businesses should be based on
sound business principles and disciplines, thereby assisting in the efficiency and
profitability of their activities.
Obtaining funds – the correct approach
When you go to an outfitter to buy a suit, you make sure that it is neither too large nor too small but
rather that it fits you perfectly. In the same way, the “financial suit” of your business should
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fit perfectly or it will cause problems. Whenever possible, long-term assets should be financed by long-
term sources of finance. Short-term assets, such as stock and debtors, should be financed by short-term
sources of money, e.g. overdrafts. A business can be throttled by having to repay short-term liabilities
quickly from the sale of long-term assets which you may not wish to dispose of. Let us look at certain
fundamental questions which you should answer in your own mind regarding the obtaining of finance:
Where and when should you look for money for your business?
Is debt good or bad or both?
When you need a loan what should you know before you ask for it?
If you were to survey business concerning their major problems, the lack of money would be near the
top of many lists. Even a profitable business can run into financial difficulties because debts are repaid
by cash f low and not by prof i t s , an important d is t inc t ion which of ten escapes many
entrepreneurs. Money therefore can be the foundation of the success of a business. It can also lead to problems
or failure. Although insufficient funds can close a business, misuse or poor management of money can
also contribute to problems. For instance, you may burden yourself with the wrong kind
of money or get too much or too little. Another essential factor is to acquire your money at the right time
– neither too early nor too late. In a nutshell, to manage the finances of your business successfully you need
to do the following:
Recognize when you need funds.
Identify the various sources of funds.
Effectively manage your funds to take full advantage of the least expensive sources.
Diagnosis Of Your Needs
The best financing package for your business requires careful planning. An effective plan is based on
these questions:
Why do you need money?
How are you going to use your money?
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How much money do you need?
How much can you afford to pay for your funds?
How and when will you pay the money back?
These questions should be asked before you need money. By planning ahead you will not have tomake a
last minute rush to get money. Last minute money tends to be more expensive!
Understanding Your Financial Needs
There are several different ways to solve any financial problem that your business
encounters. Running to the bank for a loan may be neither the easiest nor the best solution to your
problem. In order to develop the best financial plan to help you to succeed, you need to know two
things. Firstly, what sources are available for the money that you need? Secondly, what is the best or the
most appropriate source? There are three general categories of funding sources for your business. These
are:
Internal Sources
Equity.
Debt.
The first place that you should look is inside your business. Internal sources may be the cheapes tand
easiest to tap. If your internal sources are not adequate you will need to look at external
sources. As stated there are two external sources of funds; the equity of the business and debt. Each of
these sources should, inter alia, be considered under the following headings:
Cost– How will the source of funds affect your cash flow/profit?
Risk- Will the source expose your business to danger?
Flexibility –Will the source limit your ability to seek additional funds or use of funds?
Control –Could you lose control of your business or have to share the decision-
making because of the source you use?
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Availability –When can you acquire the funds?
Internal Sources Of Funds
There are three sources of funding within your business – profits, customers and suppliers.
Profi ts
Profit management and distribution is the first internal funding source. When a business makes profit,
the owners have two choices. They can either take the money out of the business or leave it in the
business. Money taken out reduces the capital or equity of the business. However, if the
owner chooses to leave the profits in the business, the capital increases and can be used to finance the
expansion of the business. Even more important, in inflationary times, these retained profits can be used
to offset the increased replacement costs of both current and fixed assets. Profits are like the interest
on a savings account. If you take the interest out of your savings account every year, the
balance of the account will grow only if you add more money. However, if you leave the interest in the
account, then it starts to compound and your account balance grows faster. As an internal source of
finance, assets and liability management must also be carefully watched. If an item is stock is a slow
mover, you may wish to sell it at a discount and stop ordering it. You might also consider
selling some of your fixed assets in favor of a less costly alternative in order to generate cash. For
example, it might be cheaper to reimburse your employees for the use of their personal cars rather than
buy or lease vehicles for the business. For an example of liability management see details under the heading
“Suppliers Credit”.
Customers
You can raise money from your customers by expediting your collections from them. If you can get
money moving into your business faster, you will have more available for your needs. For instance, if
your customers pay you quickly, you will have the cash necessary to take advantage of cash or quantity
discounts. These discounts can reduce the cost of your merchandise and thereby increase your profits.
You can increase customer collections in two ways. Firstly, you can encourage partial payments on long
term projects where appropriate. Secondly, you can put an aggressive credit collection policy into
effec t . This should reduce the number of bad debts tha t you might acquire as wel l
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as encourage your customers to pay their debts quickly. Both of these methods will increase your cash
flow.
Suppliers’ credit
This is an excellent source of low –or no-cost money. Suppliers may be willing to extend interest-free
credit on purchases of goods or services to well established customers. This means that you may be
able to order, obtain delivery, and sell an item before you have to pay for it. This is the same
as an interest free loan. To keep this source available to you, however, it is essential that you build and safeguard your
relationships with your suppliers carefully.
Summary
The risk involved in using internal sources is normally very low. However, you must be alert to dosome
dangers. For example, you need to be careful that you do not alienate your customers withan overly
aggressive credit policy. Also, you should not convert to cash those that are productiveand necessary for
the effective operation of your business. Your stock has to be broad enough to satisfy normal customer
demand. Internal sources thus give maximum flexibility, as long as theyare used carefully.Finally, it
should be noted that the availability of internal funds depends on circumstances and youmay need to
supplement with external funds. However, the firm that makes full use of its internalfunds by carefully
managing all of its assets and controlling its costs will find that it is much more attractive to external
sources of funds. This should make it easier to raise money when it is needed.
External Sources Of Funds
Equity
Equity i s one of the two external funding sources avai lable to you. Equi ty funds
are thosegenerated by the invested capital of a firm. The best source of start-up funds is equity and if
you donot have the funds available personally, you should look to other sources such as
partners, co-members in a close corporation, or co-shareholders in a private company. Of course, if
you want to“go it alone” or cannot find willing investors, you may need to resort to borrowing
(debt).Remember, however, that you will encourage financial backing from outsiders if you show that
17
youare making an adequate financial contribution yourself. One of the causes of applications
for finance being rejected is the failure by the owners of the business to make an adequate
personalcapital contribution. Your potential financial backer may regard this as lack of commitment.
Borrowing (debt)
The prospects of a small business depend almost entirely on the ability, energy and character of
theperson in charge. Whoever supplies the business with debt finance is in fact risking his capital on the
accuracy of his judgment of the personal capacity of the owner of the business. Thus, however good the small
business manager may be, only those who have had the opportunity to become closely acquainted with
him are likely to have the necessary confidence to entrust him with their money. The amount of cash
required by you is likely to be raised in direct proportion to your financier’s willingness to
invest based on his assessment of your training, experience, expertise, etc. Every financier will have
his own individual approach to the client, but if one takes the average bank manager as an
example, one thing is certain: the banker regards his relationship with his client as partnership and,
like all good partners, he is trying to be as difficult as possible or to make the maximum
amount of money out of his customer. The banker knows that success is dependent upon the success of his
client and the building of along term relationship between the bank and the client and the building of a
long term relationship between the bank and the client. With this in mind, the relationship with your
banker should be one of complete honesty. Always keep your bank manager informed – if things are
going wrong, tell him; if things are going right, also tell him! In this way both parties will be better
equipped to make progress into the future.
SHORT TERM SOURCES OF DEBT FINANCE
The most common forms are:
Bank overdraft
This is probably the most available and appropriate source of short-term borrowings. Subsequently to
negotiation, the bank allows the borrower to overdraw his account up to a specified limit, which is
reviewed on a regular basis, normally annually. This gives the entrepreneur the flexibility of altering his
financing requirements from day to day according to his cash flow. With overdrafts, interest is calculated on the
18
daily outstanding balance. This means that no interests paid on any unutilized portion of the facility.
Interest rates charged fluctuate with the prime rate and this facility is generally used for financing
increases in working capital. However, it is also useful when bridging finance is required where a
gap exists between a long-term debt and the long-term source of finance becoming available. It is
important to realize that bank overdrafts are repayable on demand.
Factoring
Factoring is a term referring to the raising of funds by the sale or assignment of book debts to a third
person i.e. a factor. The sale is normally with recourse to the “seller” for uncollectable debts. It may
include all or some of the debts sold. The system may require the debtor to pay direct to the factor or via
the original creditor as an agent for the factor, and completes the transaction as agent of the factor.
This latter method has the advantage of maintaining the confidentiality of the arrangement
between the seller and the factoring house. Factoring is a very convenient method of financing shortages in
working capital and is frequently an attractive proposition to a new business faced with a substantial
growth in sales which need to be financed. However, one needs to ensure that gross income margins
generated by these sales can satisfactory absorb the costs of the factoring procedure. An additional
advantage of factoring accrues to the seller by the possible savings in staff and paperwork
associated with maintaining accounts and monitoring debtors. Furthermore, cash is received
immediately and the seller is not obliged to include a discount for prompt payment. Most banks have
factoring divisions.
Shippers finance
A shipper (or customer) is a financial institution which provides finance and a host of other services to its
clients. Today, the functions of the confirming houses take the following basic forms:
Providing working capital: The confirmer provides facilities to clients, to create
additional working capital and enable the client to finance his stock and receivables.
Sophisticated forms of finance are provided which can briefly be summarized into three broad
categories:
An overseas purchase facility.
19
A local purchase facility.
The discounting of customers’ bills.
Providing services: The confirmer attends to the physical handling of the goods and
the documentation relative thereto, and provides specialized services in order to
expedite receipt and reduce the cost of imports into South Africa.
Providing backing, assistance and financial expertise: The confirmer backs and assists the client
with the technical and credit expertise that the confirming house’s management
possesses, thereby increasing profitability and thus helping companies to grow from small to
large organizations.
MEDIUM TERM SOURCES OF DEBT FINANCE
In financial language, ‘medium-term’ can be thought of as constituting a broad and ill-defined border between short-
term and long-term. As a result, this type of finance has a variety of applications such as financing
additional working capital, acquisition of fixed assets, etc.
Medium-term loans
A common form of finance is the “medium-term loan” which normally provides finance for up to five
years and in accordance with a strict set of conditions outlined in a term loan letter of offer by the
financial institution and accepted by the client. Generally the lender will require security for the loan and
seek to entrench the safety of the loan by imposing certain restrictions on the borrower, such as
maximum permissible equity to debt and working capital ratios, and limitations on the sale or
pledge of assets and payment of dividends. Term loans are normally tailored to meet the particular cash
flow requirements of a business. They are used for the finance of both current assets and fixed assets.
Installment sale
Previously known as Hire Purchase, the most common application is to finance the acquisition
of vehicles or equipment. In terms of the regulations in the Credit Agreements Act, a deposit
is normally required and, depending on the acquisition, the period for payment is fixed. The goods
purchased are registered in the owner’s name and are always taken as prime security for the debt.
Leasing
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Leasing is a method of reducing capital funding requirements. Instead of acquiring finance
to purchase fixed assets, the process is cut short by obtaining the use but not ownership of
the required assets in return for a periodic lease payment. Leasing, based on the principle that income is
earned from the use of an asset, not the ownership, provides the following advantages: Cash resources may
be released for more profitable trading and for the provision of working capital. Maintenance costs are
reduced to a minimum by immediate replacement with new equipment at the end of the lease period. Plant
and equipment are financed over a period directly related to their productive capacity and
useful life. Budgeting is simplified, as the monthly cash flows are known, as is the date when the
equipment must be replaced. Rental payments are deducted in full for tax purposes. These
payments are a charge against profits before tax, whereas Installment sale payments are paid out of
income after tax.
LONG TERM SOURCES OF DEBT FINANCE
Long-term debt finance
Into this category fall building societies and insurance companies. Insurance company
policyholders can, under certain conditions, borrow money against the surrender value of their policies
and this may be one way of raising capital for the new venture of your choice. Building societies, on the
other hand, may be open to entertaining your proposal for long-term loan against the security of your
private residence. These funds could then be injected into your business.
Participation bonds
Bond finance for up to 20 years can be arranged for the erection of commercial/industrial property or
against commercial/industrial premises owned by you. No capital (i.e. interest only) is repaid for the first
five years. Thereafter the loan is repaid in annual instalments. For bond purposes the value of the
property is based on its revenue-producing potential and not on the replacement or intrinsicvalue of the
property.The long-term sources of finances can be raised from the following sources:
Share capital or Equity Share.
Preference shares.
21
Retained earnings.
Debentures/Bonds of different types.
Loans from financial institutions.
Loan from State Financial Corporation.
Loans from commercial banks.
Venture capital funding.
Asset securitisation.
International
RESEARCH METHODOLOGY
Research simply means ‘search for knowledge’. According to Rodman and Mory, research is
‘systemized effort to gain new knowledge’. Some people consider research as a movement from known
to unknown; it is actually a voyage of discovery. According to Clifford Woody, research includes
defining and redefining problem, formulating hypothesis or the suggested solutions, collecting
organizing and evaluating data, reaching conclusions and at last carefully testing the conclusions to
determine whether they fit to the formulated hypothesis or not.
Research methodology has many dimensions, it includes not only the research methods but also consists
the logic behind the methods used in the context of the study and explains why only a particular method
22
of technique had been used so that search lend themselves to proper evaluation. Thus in a way it is a
written game plan for concluding research. The term research refers to search of something new that can
solve a problem. Research must have a specific objective which is called research problem. On the basis
of the problem, researcher sets hypothesis. The goal of the research process is to produce new
knowledge, which takes three main forms:
Exploratory research:- which structures and identifies new problems
Constructive research:- which develops solutions to a problem
Empirical research:- which tests the feasibility of a solution using empirical evidence
Casual research:- which is related to day to day problems or for casual problem.
RESEARCH DESIGN:-
The research design used here is Exploratory Research Design .I has to study the Fund flow
statement .So I need to enquire about financial activities and funds involved in them. So availability of
fund flows is collected by people related with company financial sector and based on the reports I have
to explore the factors that really help me in analysis of fund flow statement. Since the major emphasis
was on the discovery of ideas and insights into the facts, the research design most appropriate must be
flexible enough to permit the consideration of many different aspects of a phenomenon.
The methods used in context of this research design are:
(1) The survey of concerning literature
(2) Experience Survey.
The important features of this research design are listed as follows:
The sampling design used is Non-Probability Sampling design and it is flexible in nature.
There is a no pre-planned design for the analysis.
There is structured instrument for the collection of the data i.e. company fund flow statement
23
DRAFTING QUESTIONNAIRE:-
The questionnaire is considered as the most important thing in a survey operation. Hence it should be
carefully constructed. Structured questionnaire consist of only fixed alternative questions. Such type of
questionnaire is inexpensive to analysis and easy to administer. All questions are closed ended.
SAMPLING DESIGN:-
Sampling Unit
It defines the unit of target population that will be sampled i.e. it answers who is to be surveyed.
Sampling unit in my study will be individual employees of Wahid Sandhar Sugar Ltd. who are indulging
in making financial activities.
Sampling Techniques
This refers to the procedure by which the respondents should be chosen. In this study, Non Probability
sampling of the following type is used:-
Convenience sampling
Sample Size:
It indicates the number of people to be surveyed. Through large sample give more reliable results than
small samples but due to constraints of time and money the sample size was restricted to few
respondents.
Area of Study
Though other methods are important, but this method is given prime significance in modern research
because of its extensive use to study the relationship of different factors, attitudes and practices of
society and to explore the problems that cannot be treated by experiment methods.
SOURCES OF DATA COLLECTION:
The data can be collected from secondary sources. The basic premises of my study are supplemented
with the secondary data.
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1. Primary Data:-
The primary data are those, which are collected afresh and for the first time and thus happen to be
original in character. The primary data were collected through well-designed and structured
questionnaires based on the objectives.
Personal Investigation
Observation Method
Information from correspondents
Information from superiors of the organization
2. Secondary Data:-
The secondary data are those, which have already been collected by someone else and passed through
statistical process. The secondary data required of the research was collected through various
newspapers, and Internet etc.
Unpublished Sources such as Company Internal reports prepare by them given to their analyst &
trainees for investigation.
Websites like Indonesian official site, some other sites are also searched to find data.
STEPS OF METHODOLOGY
25
ORGANISATI-ON OF DATA
PRESENTATIO-N OF DATA
ANALYSIS OF DATA
INTERPRETAT-ION OF DATA
COLLECTION OF DATA
OBJECTIVE OF THE STUDY:
As a trainee I joined the Wahid Sandhar Sugar Ltd. I choose the topic of “Analysis of Fund Flow
Statement” for the preparation and submission of report required for the partial fulfillment of Bachelor
of Business Administration. An Objective of the study refers to the various purposes of conducting the
study in particular aspect. It reflects certain targets that we want to achieve through our study.
Whenever a study a conducted, it is done on the basis of certain objectives kept in mind. A successful
completion of a project is based on the objective of the study. The various objective of this Research
Project are as follows:
1. To know the changes in Working Capital during the last few years in the company and the
reason for the changes in Working Capital.
26
2. To know the various sources from which the funds are raised and the application of those funds
in the company.
3. To know the Financial and Working Capital position of the company.
4. To know the present operating efficiency and suggest suitable recommendations.
5. To give necessary suggestions that can be made by making a thorough study on the financing
and flow of funds on Wahid & Sandhar Sugar Ltd.
6. To know whether the concern is able to keep a balance between profitability and liquidity.
7. To provide reliable information about the resources of the business firm.
8. To know whether the main objective i.e. profitability is being fulfilled or not.
9. To know about the creation and distribution of added value of the firm.
10. To know the operational efficiency of the concern as a whole and of its various parts of
departments.
11. To judge the solvency position.
12. To judge the liquidity position.
13. To judge the profitability position.
SCOPE OF THE STUDY
This study is going to help, in identifying the causes of satisfaction or dissatisfaction regarding company
financial activities. This study also describes certain factors that explain measures that how we can make
financial system more effective. It is helpful in doing short term planning as it provides information
regarding the sources and utilization of cash during a period, so it became easier for management to
assess whether it will have adequate cash to meet day to day expenses and pay creditors in time. It is
also useful in preparing cash budget for the future period as it informs the management about surplus or
deficit periods of cash. So it is helpful in planning the investment of surplus cash in short term
27
investments and to plan short term credit in advance for deficit periods. This study is also helpful in
knowing trends and speed at which the current assets and current liabilities are being paid. It also reveals
how the companies take help of fund flow statement to ascertain the position of funds generated from
operating activities which can be used for payment of dividend.
Long term financing:
Long term borrowings (institutional loans, debentures, bonds etc.)
Issuance of equity and preference shares.
Short term financing such as bank borrowings.
In the following paragraphs we explain the measurement of funds from operations, since it usually
involves an adjustment.
Funds from operations:
The major sources of working capital is the firm’s net profit from operations the ultimate success of a
company depends upon it ability to earn profits. However, the profit and loss account contains certain
items which do not affect working capital. Therefore in determining the amount of working capital from
operations, the figure of the net profit, as shown in the profit and loss account should be adjusted. The
expense items which do not involve working capital should be added to net profit. Let us take example
of deprecation to illustrate the point.
Deprecation: the most common example of the expense which does not affect working capital is
deprecation. All expense reduces owners’ equity, so does deprecation. While most of other expenses
also reduces current assets (cash) or create current liability it reduces non-current assets without
affecting cash. Because the combination of accounts influenced by it is only non-current it does not
working capital. It should, therefore be added to net profit if it is not added to net profit the amount of
working capital generated from operations would be understated. Some logic applies to amortized
expenses such a goodwill written off.
Gain or loss from sale of non-current assets the net profit figure should also be adjusted for any gain or
loss from the sale of non-current assets. The loss should be added to subtracted from the net profit this is
28
done because the sale of non-current assts. The loss should be added to, while the gain should be
subtracted from the net profit. This is done because the sale of non-current assets is listed separately as a
source of working capital. The total inflow of cash on the sale of non-current assets as shown as a
sources of working capital if the gain or loss is not adjusted is the net profit, this will amount to double
counting as the cash realization from the sale of the non-current assets include gain or loss.
Firms also meet their working capital requirements by raising funds externally. They can issue shares or
borrow from capital markets on short or long term basis.
Uses of working capital:-
The typical uses of working capital are as follows:
adjusted net loss from operations
purchase of non-current assts
Purchase of long term investments like shares, bonds/debentures etc.
Purchase of tangible fixed assets like land building, plant, machinery, equipment etc.
Purchase of intangible fixed assets like goodwill, patents, copyright etc.
repayment of long term debt (debentures or bounds)
redemption of redeemable preference shares
Payment of cash dividend.
Adjust net loss
The loss from operations consumes the firm’s capital. Loss arise when expense. That involves
application of working capital, exceed revenues that generate working capital, as with net profit, the
expense and revenue items revolving no working capital should be adjusted to net loss (shown with
negative sign) will reduce its magnitude. The gain or loss on the sale of non-current assets should also
be adjusted to net loss.
A firm applies its working capital funds for acquiring non-current assets such as land and building, plant
and machinery, or equipments. Working capital will also be applied when the firm retires its borrowing
and redeemable preference shares, i.e. preference shares on payable on maturity. A profitable firm
usually rays cash dividend to its equity and preference of shareholders.
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Objectives/ Advantages/ Purpose of preparing Income Statement:-
1. To ascertain the earnings capacity or profitability.
2. To know the solvency of an organization.
3. To make a comparative study with other firms.
4. To ascertain the financial strength.
5. To know the capability of payment of interest and dividend.
6. To know the trend of an organization, i.e., sales, profit, cost of production etc.
7. To provide useful information to the management.
Limitations of Income Statement:-
1. Lack of qualitative analysis.
2. Difficulty in forecasting or historical in nature.
3. Difference in accounting policies.
4. Ignore changes in price level or ignore inflation.
5. Window dressing. i.e., just to show but actually different.
Sources of Funds:-
The following are the sources from which funds generally flow (come), into the business:
1. Funds From Operations or Trading Profits.-
Trading profits or the profits from operations of the business are the most important and major source of
funds. Sales are the main sources of inflows of funds into the business as they increase current assets
(cash, debtors or bills receivables) but at the same time funds flow out of business for expenses and cost
30
of goods sold. Thus, the net effect of operations will be a source of funds if inflow from sales exceeds
the outflow for expenses and cost of goods sold and vice- versa.
The examples of such items on the debit side of a profit and loss accounts are: amortization of fictitious
and intangible assets such as goodwill, preliminary expenses and discount on the issue of shares and
debentures written off: Appropriation of retained earnings, such as transfers to reserves etc. depreciation
and depletion : loss on sale of fixed assets: payment of dividend , etc. The non-fund items are those
which may be operational expenses but they do not affect funds of the business, e.g., for depreciation
charged to profit and loss account, funds really do not move out of business. Non- operating items are
those which although may result in the outflow of funds but are not related to the trading operations of
the business, such as loss on sale of machinery or payment of dividends. The methods of calculating
funds from operations have been discussed in the following pages. Basically there are two methods of
calculating funds from operations:
(a). the first method is to prepare the profit and loss account afresh by taking into considerations only
fund and operational items which involve funds and are related to the normal operations of the business.
The balancing figure in this case will be either funds generated from operations or funds lost in
operations depending upon whether the income or credit side of profit and loss account exceeds the
expenses or debit side of profit and loss account or vice- versa.
(b). the second method ( which is generally used) is to proceed from the figure of net profit or net loss
as arrived at from the profit and loss account already prepared. Funds from operations by this method
can be calculated as under:
1. Issue of Share Capital:- If during the year there is any increase in the share capital, whether
preference or equity, it means capital has been raised during the year. Issue of shares is a source of funds
as it constitutes inflow of funds. Even the calls received from partly paid shares constitutes as inflow of
funds. It should also be remembered that it is the net proceeds from the issue of share capital which
amounts to a source of funds and hence in case shares are issued at premium, even the amount of
premium collected shall become a source of funds. The same is true when shares are issued at discount:
it will not be the nominal value of shares but the actual realization after deducting discount that shall
amount to inflow of funds. But sometimes shares are issued otherwise than in cash; the following rules
must be followed:
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Issue of shares or making of partly paid shares as fully paid out of accumulated profits in the form of
bonus shares is not a source of funds.
Issue of shares for considerations other than current assets such as against purchase of land, machines,
etc. does not amount to inflow of funds.
Conversion of debentures or loans into shares also does not amount to inflow of funds.
In all the above three cases mentioned, both the amounts involved are non-current and don not involve
any current assets or funds.
2. Issue of debentures and raising of loans, etc.: Issue of debentures or rising of loans (long term),
whether secured or unsecured results in the flow of funds into the business. The inflow of funds is the
actual proceeds from the issue of such debentures or rising of loans, i.e., including the amount of
premium or excluding discount, if any. However, loans raised for considerations other than a current
asset, such as for purchase of building, will not constitute inflow of funds because in that case the
accounts involved are only fixed or non-current.
3. Sale of fixed (non-current) assets and long term or trade investments: When any fixed or non-
current asset like land, building, plant and machinery, furniture, long term investments, etc. are sold it
generates funds and becomes a source of funds. However, it must be remembered that if one fixed asset
is exchanged for another fixed asset, it does not constitute an inflow of funds because no current assets
are involved.
4. Non-Trading Receipts: Any non-trading receipts like dividend received, refund of tax, rent received,
etc. also increases funds and is treated as a source of funds because such an income is not included in the
funds from operations.
5. Decrease in Working Capital:- If the working capital decreases during the current period as
compared to the previous period, it means that there has been a release of funds from working capital
and it constitutes a source of funds.
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Applications or Uses of Funds:-
Funds lost in operations:- Sometimes the result of trading in a certain year is a loss and some funds
are lost during that period in trading operations, such as loss of funds in trading amounts to an outflow
of funds and are treated as an application of funds.
Redemption of preference share capital:- If during the year any preference shares are redeemed, it
will result in the outflow of funds, and is taken as an application of funds. When the shares are redeemed
at premium or discount, it is the net amount paid (including premium or excluding discount, as the case
may be.). However, if shares are redeemed in exchanges of some other type of shares or debentures, it
does not constitute an outflow of funds as no current account in that case.
Repayment of loans or redemption of debentures, etc.:- In the same way as redemption of
preference share capital, redemption of debentures or repayments of loans also constitute an application
of funds.
Purchase of any non-current or fixed asset:- When any fixed or non-current asset like land, building,
plant and machinery, furniture, long term investments, etc. are purchased, funds outflow from the
business. However, if fixed assets are purchased for a consideration of issue of shares or debentures or if
some fixed asset is exchanged for another, it does not involve any funds and hence not an application of
funds.
Payments of Dividends and tax:- Payments of dividends and tax are also applications of funds. It is
the actual payment of dividend (may be interim dividend) and tax which should be taken as an outflow
of funds and not the mere declaration of dividend or creating of a provision for taxation.
Any other non-trading payment:- Any payment or expense not related to the trading operations of the
business amounts to outflow of funds and is taken as an application of funds. The examples could be
drawings in case of sole trader or partnership firms, loss of cash, etc.
Digging out Hidden Information:- While preparing a funds flow statement, one has to analyse the
given balance sheets. Items relating to current accounts, i.e., current assets and current liabilities have to
be shown in the schedule of changes in working capital. But the non-current assets and non-current
liabilities have to be further analyzed to find out the hidden information in regard to sale or purchase of
33
non- current assets, issue or redemption of share capital, raising or repayment of long-term loans,
transfers to reserves and provisions etc.
The hidden information can be digged out either by preparing working notes in the statement form or
preparing concerned accounts of non-current assets and non-current liabilities.
Investments:- The treatment of investments while preparing funds flow statement depends upon their
nature, i.e., whether they are current assets or fixed (long term) or non- current assets. If the investments
represent surplus funds temporarily invested in marketable or short-term securities, they are to be treated
as current assets. But if investments are long-term, permanent or trade investments, these should be
treated as fixed assets.
(a) Temporary Investments:-
When the surplus funds are temporarily invested in marketable securities, they are treated as current
assets and hence shown in the schedule of changes in working capital. Temporary investments do not
require any further treatment while preparing fund flow statement like all other current assets.
(b) Long-term, Permanent or Non- Current Investments :-
If the investments are of non-current nature, there should not be shown in the schedule of changes in
working capital because they are not current assets. However, in this case, an investment account should
be prepared as it is prepared in the books of accounts to find out the cost of investments purchased or
sold during the year and the profit or loss on sale of such investments, if any. Sometimes, the
investments are purchased-cum-dividend and the pre-acquisition dividend received is credited to the
investments accounts. If there is a loss on sale of such investments and it has been debited to P/L A/c, it
should be added back while finding funds from operations or shown on the debit side of adjusted profit
and loss account (depending upon which method is followed) for the reason that such loss is not an
operating loss. However, for the same reason, if a profit on sale of such investments has been credited to
profit and loss account, it should be deducted while funds from operations or shown on the credit side of
adjusted profit and loss account, as the case may be.
The purchase of non-current or trade investments s an application of funds while the proceeds realized
from the sale of such investments are a source of funds.
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1. Provision for Taxation :- There are two ways of dealing with provisions for taxation:
As a current liability
As an appropriation of profit
(i) As a current liability.
Provision for taxation may be treated as a current liability as it, generally, represents an immediate
obligation of the company pay tax to the government. When it is treated as a current liability, provision
for taxation will appear in the schedule of changes in working capital like all other current liabilities and
no further treatment is required while preparing the funds flow statement. In the case, there is no need to
prepare the provision for taxation account and the payment of tax made during the year shall not be
shown as an application of funds because in that case both the account involved for the payment of tax
shall be current accounts, e.g. the entry of tax paid during the shall be:
Provision for taxation A/c dr. (Already taken as current liability)
To cash A/c (current assets)
It is clear from the above entry that only the current account are involved and there is no movement of
funds (working capital).\
(ii) As an appropriation of profits.
When the provision for taxation is treated as an appropriation of profit and not as current liabilities, than
it shall not appear in the schedule of changes in working capital. Provision for taxation made during the
year than shall be the appropriation of profits made during the year and will have to be added back while
finding funds from operations being a non-fund item. If an adjusted profit and loss account is prepared,
provision for taxation made during the year shall appear on the debit side for the same reasons.
Moreover, the taxes paid during the shall be an application of funds (not been a current liability) and
will have to be shown in the funds flow statement and application side.
A provision for taxation account may have also prepared in case of hidden information, i.e. when the
provision for taxation made during the year or the tax paid during the year are not given.
35
However the student may not that it is preferable to assume provision for taxation is the current liability
as generally it is an immediate obligation of the company to pay it and it really represents on
appropriation of profits.
2. Proposed Dividends: Proposed dividend though shown on the liability side of a balance sheet is not a
liability in real sense until it is formally declared to be paid to the shareholders in the annual general
meeting of the company. Till such declaration of the dividends, it simply represents an appropriation of
profits and is like a reserve or surplus. But generally, declarations of dividends proposed by the director
are accepted on the shareholders meeting. In the case, proposed dividend cannot be said to be an
appropriation of profits as thee become payable with in short time after they are proposed. So there are
two alternatives to deal with this item:-
(i) As a current liability:
When proposed dividends is treated as current liability it represents an obligation of the company is
payable in a short period. Hence, it is shown in the schedule of changes in working capital as a current
liability and it requires no further treatment.
(ii) As an appropriation of profits:
When proposed dividend is treated as an appropriation of profits it is not a current liability and hence
will not be shown in the schedule of changes in working capital. In the case, dividends proposed during
the year, being appropriation, are added back (or shown on the debit side of adjusted profit and loss
account) while finding funds from operations. Thus, dividends paid during the year represent an
application of funds and have to be shown on the application side of funds flow statement. In the
absence of any information, proposed dividends for the previous year may be assumed to be paid during
the year, being an appropriation, may be added while finding funds from operations.
In any case, the student may not that the treatment is proposed dividends is much similar to the
provision foe taxation.
1. Interim Dividend: The expression “interim dividend” denotes dividends paid to the members of
the company during a financial year, before the finalization of annual accounts. The dividends paid or
declared in between the two annual general meeting, i.e. interim dividend, should be added back (or
36
debited in the adjusted profit and loss account) while calculating funds from operations. However, if the
figure of profit is taken prior to the debit of interim dividends this adjustment is required. The interim
dividends is also an application of funds has to appear on the application side of funds flow statement
2. Provision against Current Assets:- Provision against current assets, such as, provision for bad
and doubtful debts, provision for loss on stock, etc. may be treated be any following of the methods:
the opening and closing balance of the current assets should be deducted from the respective opening
and closing balance of the current assets should then shown in the schedule of changes in working
capital. It does not require any further treatment in the funds flow statement.
The amount of the opening and closing balance assets may be taken as gross in the schedule of changes
in working capital, i.e. without deducting the amount of the provision. But, then, the opening and closing
balance of the provision against current assets shall has to be taken as a current liability in the schedule
of changes in working capital and it will not need any further treatment in the funds statement.
If the excess provision has been created, it may be treated as an appropriation of profit and should be
added while calculating funds flow operations. The amount o the excess the provision will not be shown
in the schedule of changes in the working capital.
Depreciation as a source of funds
Depreciation may be regarded as the capital on cost of any assets allocated over the life of the assets in
simple language; it means the gradual decrease in the value of the assets due to wear and tear, use and
passage of time. In real sense, deprecation is simply a book entry having the effect of reducing the book
value of the assets and the profit current year for the same amount, it does not affect the current asset or
current liabilities and does not result in the flow of funds or to say to mare precisely it is non-funds item
hence, although depreciation is an operating cost there is no actual out flow of cash and the sum of
amount of the depreciation charged during the year is added to back to profits while finding funds from
operations. But, then, is depreciation a source of funds?
There cannot be any definite answer “yes or no” to this question as there are differences of opinion on
this important point but it can be said with certainty that depreciation, directly at least does not amount
the to a source of funds however, under taken circumstance depreciation helps the business concern to
37
effect on saving in payment of tax and dividends and amount to withholding a part of the funds
generated through normal trading operations.
It is this in sense that depreciation can be regarded as an indirect source of funds however, it is not even
an indirect source of fund under all circumstances, say, for example, a company is running into losses
and there are no profits, then any amount of depreciation charged to profit and loss account will neither
affect tax liability nor ant payment of dividends, as there are no profits. In this case, depreciation does
not amount to withholding of funds and hence is not a source of funds at all. On the other hand, if a
concern earns sufficient profit the amount of depreciation charged to profit and loss account will affect
savings in the payment of tax as well as dividend and shall help in the generation of funds.
In case a concern earns a huge profit and excessive depreciation than permitted under the income-tax
Act is charged to profit and loss account, it shall still result in the generation of funds through savings in
the payment of dividends.
To conclude, it may be said that to the extent depreciation helps in effecting savings in the payment of
tax and dividends, it may be regarded as a source of funds.
Comprehensive funds flow statement : financial resources basis :-
The statement of funds flow can be expended also be disclose all those transactions which significantly
influence the firm’s financial position’s but do not increase or decrease or working capital.
This is significant event as it changes the company’s debt-equity position. This transaction should be
disclose in the statement similarly, the insurance of bonus shares (stock dividend) does not involve
working capital, but increase the paid up share capital.
The comprehensive statement of changes in financial position listing all changes in more useful as it
disclose more information. The truncation not affecting working capital are shown. The conversion of
debentures into equity is a sources of financial resources because shareholders equity increase.
But at the same time, it is an application of the financial resources towards the retirement of a long term
liability, i.e. debentures thus, the working capital is not changed by these transactions, but the overall
financial position is affected.
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BALANCE SHEET OF
WAHID SANDHAR SUGARS LTD. G.T. ROAD, PHAGWARA
AS ON YEAR ENDING 31ST MARCH 2009-08
31st March 31st March2009-2008 2009-2008
Liabilities Rs. Rs. Assets Rs. Rs.
Share Capital 137,500,800 137,500,800 Fixed assets 635,866,367 608,717,545Reserves 141,385,785 123,336,128 Investments 2,000,000 2,000,000
Secured loans 836,407,147 739,025,671 Inventories 474,855,660 420,732,290
Unsecured loans 66,232,382 67,732,382 Debtors 1,595,892 5,215,295
Current Liab 375,539,849 100,631,226 Cash & bank bal 184,246,764 63,400,823
Other liab. 14,837,818 13,064,212 Loans & advances 255,639,414 81,224,466
Total 1,553,903,781 1,81,290,419 1,553,903,781 1,81,290,419
Schedule of changes in Working Capital for the year ending 2009-08
Schedule of changes in Working Capital2009 2008 Effect on W.C.
Increased DecreasedRs. Rs. Rs. Rs.
Current Assets
256,908,623
88,555,917
Loans & advances 255,639,414 81,224,466 174,414,632Debtors 1,595,892 5,215,295 3,619,403Cash & bank bal. 184,246,764 63,400,823 120,845,941Inventories 474,855,660 420,732,290 53,823,370
916,037,414 570,572,874Current LiabilitiesCurrent Liabilities & provisions
357,539,849 100,631,226
Working Capital 558,497,565 469,941,648Net increase in working capital
88,555,917
558,497,565 558,497,565 349,083,943 349,083,943
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Statement of sources and Application of
Funds Flow Statement
Sources Rs. Applications Rs.Loans raised 97,381,476 paid loans 1,500,000 Funds from operations 19,823,263 paid of fixed assets 27,148,822
Net increase in working capital 88,555,917117,204,739 117,204,739
Adjusted Profit and Loss A/c for 2009-08
Rs. Rs. To provision for taxation
2,738,941 By Funds from operations(balancing figure)
19,823,263
By Balance b/d
17,084,322
19,823,263 19,823,263
Interpretation for the year ending 2008-09:-
1. The statement shows that fixed assets are increased by Rs. 27,148,822 and long term loans have
been increased by Rs. 95,881,473. it means that some of fixed assets may be financial from long term
loans as shareholders funds have been increased only by Rs. 18,049,657.
2. The current assets have been increased by Rs. 345,464,540.
3. The current liabilities are increased by Rs. 256,908,623, as it shows that firm’s creditors and other
liabilities are increased , but in actual fig. current assets can cover current liabilities but drastic increase
in current liabilities may be dangerous for coming years.
4. Reserves & surplus in increased by 18,049,657, so the company has expansion plans..
5. The proportion of current assets in total assets is more as compare to fixed assets . current assets have
also been financed by long term funds.
6. The mill rely more on long term loans as comparison to shareholders funds for financing its
operations.
40
7. From above we can conclude that overall performance of the concern is satisfactory but liquidity
position may be danger in future.
BALANCE SHEET OF
WAHID SANDHAR SUGARS LTD. G.T. ROAD, PHAGWARA
AS ON YEAR ENDING 31 ST MARCH 2011-12
31st March 31st March2011-2012 2011-2012
Liabilities Rs. Rs. Assets Rs. Rs.Share Capital
19,75,00,800 19,75,00,800 Fixed assets 1,34,01,90,750 1,29,59,29,674
Reserves 36,00,83,375 31,87,96,141 Investments 20,49,000 20,49,000Secured loans
84,67,19,706 92,89,87,622 Inventories 49,56,06,310 58,43,76,470
Unsecured loans
5,21,77,388 5,,19,32,510 Debtors 3,44,33,545 1,31,29,220
Other liab. 73,07,204 1,28,46,005 Cash & bank bal 4,73,59,303 3,53,72,435Loans & advances
8,93,35,489 10,52,07,673
1,46,37,88,473 1,28,46,005
Schedule of changes in Working Capital for the year ending 2011-12
Schedule of changes in Working Capital2011 2012 Effect on W.C.
Increased DecreasedRs. Rs. Rs. Rs.
Current Assets Loans & advances 8,93,35,489 10,52,07,673 15872184Debtors 3,44,33,545 1,31,29,220 21304325Cash & bank bal. 4,73,59,303 3,53,72,435 11986868Inventories 49,56,06,310 58,43,76,470
Current LiabilitiesCurrent Liabilities & provisions 311311792 281676023 283144769Working CapitalNet increase in working capital
41
Statement of sources and Application of
Funds Flow Statement
Sources Rs. Applications Rs.Loans raised paid loansFunds from operations paid of fixed assets
Net increase in working capital
Adjusted Profit and Loss A/c for 2009-08
Rs. Rs. To provision for taxation
By Funds from operations(balancing figure)
By Balance b/d
Interpretation for the year ending 2011-12
1. The statement shows that fixed assets are increased by Rs. 27,148,822 and long term loans have
been increased by Rs. 95,881,473. it means that some of fixed assets may be financial from long term
loans as shareholders funds have been increased only by Rs. 18,049,657.
2. The current assets have been increased by Rs. 55478967.
3. The current liabilities are increased by Rs. 256,908,623, as it shows that firm’s creditors and other
liabilities are increased , but in actual fig. current assets can cover current liabilities but drastic increase
in current liabilities may be dangerous for coming years.
4. Reserves & surplus in increased by 18,049,657, so the company has expansion plans..
5. The proportion of current assets in total assets is more as compare to fixed assets . current assets have
also been financed by long term funds.
6. The mill rely more on long term loans as comparison to shareholders funds for financing its
operations.
7. From above we can conclude that overall performance of the concern is satisfactory but liquidity
position may be danger in future.
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FINDINGS
Increase in cost of raw material due to inflation in economy.
Indirect expenses of company increases at rapid rate.
Sales of company decreases as compare to last year which is mainly due to unavailability as raw-
material.
Profits of a company has decreased due to decrease in cost.
All departments perform their work in right time.
Staff involved in management is efficiently perform their all work in effective manner.
There are good relationship between management and workers.
Company working capital position is sound as its current assets are sufficient enough to meet its
current liabilities.
The company turned out to be a profitable venture but to increase more profitability its has to
control its COGS.
The company has good financial planning as in the modern economic world companies depends
more on outsider’s funds for financing.
Wahid Sandhar Sugar Ltd. Manufacturer’s sugar as main product and sub products like
molasses, baggasse and press mud .
The basic raw material for all types of products is cane. Cane is generally produced in state of
Utter Pradesh, Punjab, West Bengal and TamilNadu.
The company consists of good quality control lab. The awareness of the company about the
quality of its products is very good.
There is also awareness of the health and safety in the company.
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TESTING OF HYPOTHESIS
As indicated by the fund flow statement analysis of the company, the profitability of company is good,
its liquidity position is sound and overall financial position, working capital is satisfactory. So we reject
the null Hypothesis and accept the alternative Hypothesis.
SUGGESTIONS
Although I do not find myself in capacity of suggesting something extra ordinary to such well
establishing and efficiently managed company, after undergoing training for 45 days period in the
company.Yet I have tried to form opinion about the whole company. I hope my suggestions will help the
company at least to the same extent to improve its working performance.
concern should try to control its operating expenses and cost of goods sold.
concerns should expand its export market.
concerns should try to concentrate on sales promotion programs.
concerns should start more labour welfare schemes for benefit for labour.
there should be workers participation in management.
concerns should have to develop the manpower and try to utilize their full capacity.
concern should try to improve its net profitability condition.
there should be proper effective utilization of working capital in the concern.
concern should try to reduce its current. Liabilities.
there should be internal control procedure regarding purchase of raw material, stores and with
regard to sales of goods.
concern should try to adopt proper safety measure to control pollution.
there is no better system of recruitment and selection.
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LIMITATIONS OF THE STUDY
Various hindrances occurred while carrying out the research. The limitation of the study includes the
weak points that are not covered during the study.
A person can’t analyze all aspects of the study. Sometimes he forgot some factors or sometimes he is not
able to study the impact of these factors because of time constraints or limited recourses. Limitations of
the study are:-
Employees are not available as are busy in their work
Atrocious weather condition disturbing the tour plan.
There was a problem in taking appointments from the managers.
Sources were confounded some time to give proper information.
Limited time to complete my project.
All the people from whom I collected the data are not cooperative.
The office area was very congested.
Proper financial data and financial supervision did not provided to me due to shortage of time to the
trainer.
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CONCLUSION
In the end it would be desire able to have a re look at various aspects of this study discussed under
different chapters to be able to put together the important points by way of conclusion. This chapter
proposes to throw a fresh light on the major observations.
In summarized form. Financial statement analysis is a device to determine the financial strengths the and
weakness of the company by establishing strategic relationship between the items of the data
profitability conditions of the company is good but by controlling COGS fruitful results can be obtained.
Company has potential to increase the profitability through efficient management and better control.
I am very thankful to owners, officers and employees of the company who give me proper guidance of
every thing and make my study work lighter. I wish for the success the company.
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