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Executive Summary
In this project, work selected. Kirloskar oil Engines limited Khadki, Pune because it
is one of the most different oil Engines Company. In this project the study of
The management is not satisfied with only total figures recorded in the financial
statements. I want to know the financial strength of the Company such the liquidity,
profitability and solvency position of the co. Treasury Management is the process of
establishing relationships between the items of the balance sheet and the profit and
loss account. The figures recorded in the financial statement are analysed, interrelated
and then they are interpreted i.e. the conclusions are drawn.
1
Chapter No. 2
PROFILE OF COMPANY
It has now been more than a century since the Kirloskar story started. We started with an aim
of becoming the pioneers in fields in which our country needed innovation. In the 100 years
and more that we have been in existence as a family and as an organisation, we've been
seminal to Indian agricultural and industrial development. We gave India its first iron plough,
pump and engine; inventions that were deviced from the need of the hour and went on to
become signs of the time. Which is why our group history can in many ways can be
2
The first Kirloskar Group Company
Kirloskar Brothers Limited (KBL) - the first Kirloskar venture at Kirloskarvadi was to
become the base for all of the Kirloskar Group’s subsequent enterprises. It began as the only
Indian company with its own standard products - the fodder cutter and the iron plough, which
KBL also manufactured groundnut shellers, sugarcane crushers and pumps, which were to
usher in a new economic order in the Indian industry. To power these machines, diesel
engines, coal gas generators and electric motors were developed at Kirloskarvadi.
In a display of great versatility, KBL then shifted its focus to fluid handling and control. As
India's largest manufacturer of pumps and valves, and also the group's flagship company,
KBL lends its strength and expertise to every new venture of the Kirloskar Group.
The intensified boycott of the British goods and the approaching World War threatened to
stop imports of machine tools into India. The Kirloskar, with characteristic foresight
began making machine tools. This paradigm shift of sorts, from farm implements to
machine tools, created a new company - The Mysore Kirloskar Limited. This company,
situated in Harihar, benefited greatly from the patronage of yet another Raja - the
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Maharaja of Mysore. In the first month of production, Mysore Kirloskar sold all of
An important change, for the country, and for one of its premier industrial houses, the
Kirloskar Group. The altered political climate of the 1940s heralded the end of the princely
patronage for enterprise. The policy shifts and changes in authority were the order of the day.
initiate a new aspect of the group's activities - diesel engines. His experience of
trying to secure the land for his factory in Pune was quite different from his
gratis. Shantanurao had to face the tangle of red tape and public resistance to acquisition of
Finally, after arguing that factories have a longer life than human beings Shantanurao
Kirloskar won a place for Kirloskar Oil Engines Ltd. (KOEL), twelve months after signing an
agreement of collaboration with Associated British Oil Engines Export Ltd. of UK.
This collaboration, incidentally, was the first of its kind between an Indian and a
foreign company, and signified a bridging of the technological gap between east and west.
4
The KOEL factory was incorporated in 1946, and soon after that gave India her first
vertical high-speed engine. Brijlal Sarda, who reported its satisfactory running for over 4
The making of the electrical motor. This was the second of Laxmanrao Kirloskar's long
cherished dreams, the first being the making of an engine. Ravi Kirloskar brought his
youngest son, this task to completion, in 1946. Way back then, the authorities whom Ravi
Kirloskar had approached for land was astonished by the request for 25 acres. Today,
Kirloskar Electric Company Limited (KECL) has four plants occupying several times that
acreage.
To meet the changing demands of a global business environment and emerging economic
trends, the Kirloskar Group has refocused and restructured its direction by concentrating on
its core segment of agriculture, water supply, power, and air conditioning. By consciously
opting out of hospitality, advertising and unreal services, the Group has channeled its
The Group aims at unlocking the strength and value in the Kirloskar brand and distribution to
enhance returns for its stakeholders. It has identified and is implementing processes that
Today, the Kirloskar Group is a conglomerate with interests across a diverse range of
industries. It is still spurred by the simple yet profound ethic born with Laxmanrao Kirloskar
5
that where there is will there are many ways.
The setting up of KECL and other Kirloskar companies saw a major role being played
by Nanasaheb Gurjar, a lawyer who made industry his sole area of operation. Though the
plant to manufacture the same was set up at Pune in 1958, under the eventual management of
Shreekant Kirloskar, Shantanurao's youngest son. In collaboration with Broom and Wade of
England, Kirloskar Pneumatic Company Limited began the manufacture of air compressors
Today, its turnkey expertise is sought in almost every major industrial project in India.
Collaboration with Twin Disc Inc. of the USA has taken the company into torque invertors,
The phenomenal success of the Kirloskar name prompted entrepreneurs and businessmen of
the time to approach the group for guidance and expertise. This gave birth to the concept of
services, KCL, in its 25 years of operation, has contributed to critical areas such as defence,
irrigation, roads and environment. This paradigm shift saw the setting up of yet another
service company - Pune Industrial Hotels Limited in 1964, the Kirloskar Group's first foray
into hospitality. This company set up Hotel Blue Diamond in Pune and began to manage
Hotel Pearl in Kolhapur. The Baker's Basket confectionery chain and the Hotel and Catering
6
1. The dawn of a new millennium
To meet the changing demands of a global business environment and emerging economic
trends, the Kirloskar Group has refocused and restructured its direction by concentrating
on its core segment of agriculture, water supply, power, and air conditioning. By
consciously opting out of hospitality, advertising and unreal services, the Group has
The Group aims at unlocking the strength and value in the Kirloskar brand and
distribution to enhance returns for its stakeholders. It has identified and is implementing
processes that would bring greater customer focus and competitiveness. Today, the
still spurred by the simple yet profound ethic born with Laxmanrao Kirloskar that where
HISTORY
Kirloskar oil Engines limited was formed in 1946, by late Mr. Shantanurao Kirloskar
was founded Kirloskar oil Engines limited with the object of carrying on business of
manufacturing and selling of all type of internal combination engines. The factory is situated
on 55 acres of land in Khadki, Pune and was inaugurated on 25th April 1949.The production
British oil Engine (Export), now known as Hawker siddeley Brush International limited, for
7
Initially production was restrieted to small diesel engines having agriculture and
industrial applications. Over the period of time, the company developed medium and large
engines; The year 1954-55 was the beginning of the decade of rapid growth. The company
began exporting engines to Germany, The Middle East and The Far Eastern countries.
In 1954 the company started manufacturing bearing primarily for the captive use
with Glacier Metal Co. Ltd. To cope-up with the increased demand, The Company launched
the first phase of its expansion in 1958. In 1959-60, the company acquired Shivaji Works
Ltd.as a subsidiary.
The Company entered into technical collaboration agreement with French Company,
e-Agro French, 1961-62, for the manufacturing of light air cooled engines of modern design
in the range of 20 to60 hp: In 1970-71, The company promoted Kirloskar Kisaan Ltd., as
fully owned subsidiary. In 1979, the company got the approval for collaboration agreement
pielstick engines. The agreement is valid for 13 years from 1981.In 1983-84; the Company
manufactured the high power diesel engines in collaboration with SEMT Pielstick of France.
plant at pune and Ahmednagar. During 1990-91 Company undertook packaging of gas
turbines for industrial power generation market in 1MW to 10MW range in association with
8
In early 1993 KOEL purchased the product know how and selected manufacturing line
In late 1993 Company. Secured the ISO 9001 certificate in first go.
In 1995 - Approval from Government was received for setting up a project at Ambad,
District Nasik in Maharashtra for the manufacture of 300 units per annum of heavy duty large
diesel generating sets. In this connection, a technical collaboration agreement was entered
In 2000, KOEL has been named the country's best automotive components
2000. The Company has launched its `Gen Power 2000 Project' in Guwahati in collaboration
In 2001, Kirloskar Oil Engines has launched a new range of ready-to-use gensets.
In 2003, KOEL becomes the first company in the country to achieve compliance with
the Central Pollution control Board's mass emission and smoke norms.
9
Business Location and Services
10
Organization Structure
11
Corporate Social Responsibility:
KOEL, as has been its tradition, willingly wears its social responsibility by sustaining
initiatives that support the community. Throughout the year, it organized programs to
improve the status of education and health of people living in the vicinity of its premises.
:
1. HEALTH 2. EDUCATION
Individual Sponsorship
• Health check up camp • Donation to SOFOSH and labs
• Spectacles distribution • Financial support to orphans
Women • Performance awards for school children
12
KOEL Objectives
Kagal Project should be financially viable without considering the incentive benefits.
To recover 100% Fixed Capital Investment at Kagal within shortest possible period in
terms of VAT refund (recovered on Sales and paid to GOM) from GOM. This is
critical in view of KOEL’s > 90% sales being out of Maharashtra and also because of
Any restructuring by KOEL should not be perceived as a device for solely availing
While achieving above, follow Corporate Governance guidelines and keep intact the
concern. Its existence shouldn’t end after availing of incentive from GOM.
servicing of products. Price to the ultimate customer should remain the same. Creation
13
Vision 2012
Will become a globally major player in off - highway engines & power
generation businesses by offering winning combination of quality, cost & delivery through
innovation & unmatched services. Thus, we will strive to attain amongst top ten positions
While pursuing the above, we will continue to enhance the value of engine
bearing & values business. Business for us is the best service, customer care and a lifelong
relationship.
Mission 2012
14
Increasing market share by 5% in the domestic market
Kirloskar has –got market presence in all the sectors generic to the engines. i.e. Agriculture,
15
Product Profile
1998
1. With t Baramati, undertakings of Poona Industrial Hotel Ltd.
were sold to Taj Group of Hotels.
16
Mr. Rahul C. Kirloskar, Kirloskar Pneumatic Company
limited.
Mr. Vijay Kirloskar and six companies under him separate from the
Kirloskar group of Companies.
2000
Launch of Kirloskar Green Power Ideas by KOEL at New Delhi on
26th Feb 2000.
KBL gets order to supply concrete volute pumps worth 78 Million
US Dollors to world's largest hydro-electric project : Sardar Sarovar
Narmada Valley Project·
2001
Toyota Corp. Japan forms a joint venture with Kirloskars to
manufacture multi-utility vehicle QUALIS.
Agreement to dissolve the partnership between Kirloskar Oil
Engines Limited and Briggs & Stratton Corporation, USA.
17
Kirloskar Oil Engines - Industrial Engines, Epacks and Gensets for the Agriculture, Power
Conglomerate with annual sales exceeding $1.0 billion. We are the leader of the Indian power
With annual sales exceeding $320 million, engine quantity exceeding 200,000 engines and
rapidly growing exports to European Union, North America & China, we are India's largest
manufacturer of diesel engines, both air-cooled and liquid cooled, covering a power range of
norms. Tier-III designs are in progress. These power 80 different applications in nine distinct
segments such as: agriculture, power generation, construction, material handling, earth
moving, mining, offshore, fluid handling, agro industrial and defence automotive retrofits.
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QUALITY AND PROCESS GEAR
• eBusiness Suite covering the entire demand-supply chain, including CRM module
ePacks FOR STAND-BY AND PRIME POWER FOR GENERATING SET OEMS
ePack is a sub assembly of engine complete with cooling package and alternator close
coupled and resting on a common base-frame through anti-vibration mountings. With over
45% share of the Indian power generation segment we lead the world majors such as Perkins,
Cummins, Iveco, and Caterpillar by a substantial margin. With annual volumes exceeding
55,000 gensets in the 15kVA to 300kVA range, we represent the world's largest Genset
business.
We are the first choice of global telecom OEMs and cellular service providers. A national
fleet of over 45,000 Kirloskar Green Gensets ensures India's cellular network is kept ticking
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round the clock. To just name a few cellular majors, AT&T, Airtel, Hutch, Alcatel, Idea
Cellular, BPL, RPG, Essar and ESCOTEL all count on Kirloskar reliability.
An active population of over 2 million engines amply demonstrates product reliability and
uses. These are available from 50Hz to 60Hz, with multiple voltage options, 1-Ø and 3-Ø,
stationary or towable, open-skid to silent to super silent and manually operated to auto mains
failure to web-enabled.
• Sectors: agriculture, construction and earthmoving, power, oil and gas and transport
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• Applications: gensets, agri tractors, backhoes, loaders, excavators, forklifts, pavers,
TO 120HP
• Sectors: agriculture, construction and earthmoving, oil and gas, power, utilities and
transport
21
In order to familiarize yourself with our product offerings and explore a sustainable business
partnering in mutual interest, visit the website below or call Rajiv Bandivadekar, General
22
Chapter No.3
Objectives of Study
Company.
23
Chapter No.4
Methodology of Research
data collection starts after the objective of the study and the Research Design has been
The study is mainly based on secondary data for the purpose of this study, secondary
data has been collected from annual reports and relevant records of the Kirloskar oil
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Chapter No. 5
Conceptual Study
Treasury Management
& planning the future cash flows (of course supported with solid basis...) It involves
ensuring that proper funds are available with the company at the time of outflow
required & also that funds are not kept unutilized for a good long time...this requires
investing/disinvesting funds in opened ended mutual fund schemes (if we are not
Treasury management means "To plan, organize and control cash and
borrowings so as to optimize interest and currency flows, and minimize the cost of
confidence in the firm" or in other words "the corporate handling of all financial
matters, the generation of external and internal funds for business, the management of
currencies and cash flows, and the complex strategies, policies, and procedures of
corporate finance" The Treasury Management Policy applies to the treasury functions
of all public sector agencies, incorporating both General Government agencies and
businesses, given the extent of their treasury functions. The objective of the policy is
to provide an overarching framework for managing the risks associated with treasury
25
functions. the scope of Treasury management includes the management of cash flows,
• Working Capital
• Import Procedure
• Export Procedure
• Risk Management
• Financial statement
• Capital Markets
One of the most important area in the day to day management of the firm is the
of finance that covers all the current accounts of firm. Working capital management
is concerned with current assets and current liabilities and their relationship to the rest
of the firm.
26
Working capital is calculated as:
cash, receivables and inventory) and current liabilities (payables, credit lines, notes).
It measures how many liquid assets are available for a business to use for growth
opportunities. A lack of working capital can really hold a business back from reaching
their full potential. There are many different ways can help to obtain working capital
Cash Flow
Cash flow is a term that refers to the amount of cash being received and spent
2 to determine problems with liquidity . Being profitable does not necessarily mean
being liquid. A company can fail because of a shortage of cash, even while Profitable
3 to generate project rate of returns. The time of cash flows into and out of projects
are used as inputs to financial models such as internal rate of return, and
accounting concepts do not represent economic realities. Alternately, cash flow can be
27
used to 'validate' the net income generated by accrual accounting. Cash flow as a
generic term may be used differently depending on context, and certain cash flow
definitions may be adapted by analysts and users for their own uses. Common terms
financial statement that shows a company's incoming and outgoing money (sources
and uses of cash) during a time period. The statement shows how changes in balance
sheet and income accounts affected cash and cash equivalents, and breaks the analysis
Financial Analysis
Analysis: -
Analysis is placing the collected data in some order or format so that the
data acquire meaning row data become information only when they are
Financial Analysis: -
in a financial statement will not help one unless they are put in a simplified
form.
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According to Myers “Financial Statement” analysis is largely a study of
Interpretation
Meaning: -
interpretation.
Interpretation means drawing inferences from the collected facts after the
analysis study.
3) Trend Percentage
5) CVP Analysis
6) Ratio Analysis
29
Comparative Financial Statements are those statements, which have
the income statements and Balance Sheet can be prepared in the form
The sale figure is assumed to be 100 and all figure are expressed as
3) Trend Percentage: -
percentage relationship that each item bears to the same item in the year.
Fund Flow analysis has become an important tool in the analysis kit of
30
have been behind the balance sheet changes it will help him in making
6) Ratio Analysis: -
a) External Analysis
b) Internal Analysis
a) Horizontal Analysis
b) Vertical Analysis
31
According to this basis financial analysis can be of two types
a) External Analysis: -
This analysis in done by those who are outside for the business means
b) Internal Analysis:-
a) Horizontal Analysis: -
figures for two or more year and the changes are shown.
b) Vertical Analysis: -
32
is useful in comparing in the same group or divisions or depts.
Import Procedure:
months according to Annual Operating Plan based on which import purchases are
33
2. Selection and Registration of the supplier:
planning to procure material from the supplier not registered in the system then it
Purchase order will not be created unless the vendor is registered in the
system.
department.
The procedure for generating P.O. is same as for the indigenous purchases.
• For the import purchases planned purchase orders are prepared. In planned
that lead time then approval for the extended period is required to be taken
34
• The rates of customs duty including the concessional if any available against
Figures in the red box are punched manually in case there is any concession is
available.
As per RBI rules it is necessary to get Order acceptance from the vendor for
informs finance department and issues the internal memo as regards arrangements
for payments
1 Remittance by way of advance – Advances are given in case of imports are for
the value in foreign currency up to 10000. There is no hard & fast rule for
department.
35
2. Opening of L/Cs – For high value items & capital good L/Cs are opened.
The finance department at the earliest stage i.e. at the time of payment of advance, or
consignment numbers are not system generated. Payments made for imports and
Follow up for delivery is made with the supplier by the purchase department.
Airway bill or bill of lading is received from the supplier after dispatching the
consignment. These bills are sent to ATC for preparation of Bill of Entry.
mentioned. Purchase department enters these details in the system and after
36
When payment of customs duty is made customs department issue Bill of
entry in triplicate
goods
the Customs for the month is considered. Actual rate of exchange may
declared by customs.
entry (GL code 350618). When actually goods are received the person
purchases.
The process of loading duties is built in the system except for the
37
8. Receipt of material:
purchased.
When the goods are actually received a gate entry is made. ATC Bill comes
along with the material. At the time when material comes in a pre-numbered
sticker is stuck on the ATC Bill. This no is used for reference to give
acknowledgement to the transporters against material received. The ATC bill has
an ATC job No. Which is used as control No. i.e. this no. is informed by the
In case of imports Delivery Challan doesn’t come along with the material. It
is prepared at purchase department on the basis of P.O. and invoice of the supplier
quantity received is punched into the system. P.O. release No. Is mentioned in the
Delivery Challan.
towards the original purchase order. There can be various PO release numbers
38
against single PO. P.O. release shows the actual quantity received against
specific P.O.
After creating GRR all the documents except customs document i.e. B.O.E.
report is generated.
Person receiving the material sends PO, Bill of entry, ATC Bill, and Delivery
Challan along with GRR issuance request to central receipt department. On the
At the time of preparing GRR, first PO is called and following other details
are filled in
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Invoice No.
Date of invoice
Sticker No.
Supplier’s name
Receiver’s name
BOE No.
Octroi No.
Value of CVD
Once all the above information is filled and the GRR is saved
GRR is reopened in case of there is any mistake in the original GRR. If the
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automatically generates debit note. Due care is taken so that system do not
generate debit note i.e. it is ensured that default flag for generating debit note
is deactivated. When the quantity recorded is shorter than actual receipt or the
entire GRR is wrong then the original GRR is cancelled and new GRR is
created.
When the value of CVD is entered in the GRR it automatically goes to Auto
Claim Cenvat Report. For accounting and controls for CVD refer system audit
as per Bill of Entry. Duty as per system generated BOE and customs BOE should
and customs BOE it will be manually corrected as per customs BOE at Central
Receipt Department.
Duties are loaded through apply function at the time of creating GRR. Once
the BOE is applied it is not possible to go back and make changes in the BOE.
41
12. ATC bills are received consignment wise. But entry for it is passed once
Every evening GRRs generated during the day are converted in the Evaluated
Receipt Settlement (ERS) by the system and shown in the payables module. ERS is
the system-generated invoice for imports. All the accounting entries are processed in
except,
If some items from the lot are to be rejected then these are scrapped
42
Import Procedure
Selection of
the supplier
Yes
Is supplier
registered in the
system?
No
43
Get the order confirmation
Advance is remitted by TT or
LC is dispatched to supplier.
Receipt of airway
bill or bill of lading
Preparation of GRR.
Loading of duties
Discrepancy is
declared if any.
End
45
Exports
The Company traditionally exports engines; pump sets and generating sets mainly to
Africa, Middle East and Asian region. At present, the Company exports to 65
countries and predominantly to Middle East Asia, South and East Africa and the
Indian Sub-continent. The company’s major focus in future (in addition to existing
export markets) will be the countries in South East Asia, West Africa and Europe. The
retail customers. This has increased the demand on quality levels, on time delivery
predominantly to Middle East Asia, South and East Africa and the Indian sub-
continent. The company’s major focus in future (in addition to existing export
markets) will be the countries in South East Asia, West Africa and Europe. The
46
retail customers. This has increased the demand on quality levels, on time delivery
KOEL has targeted exports to contribute 50% to the Company’s total sales, in the long
term.
Export Procedure
1) Order acceptance
2) Declaration
3) Custom clearance
4) Loading
5) Realisation of invoice
Johannesburg and the other one is in U.A.E. from where the orders are secured for the
company and the Company can also receive orders through mail. The customer gives
47
After getting the order, the Production Card and Order acceptance
is generated by the system, both of which contain separate serial number. The
done within the lead-time, which may differ item wise. On Order Acceptance, all the
terms and conditions of export are mentioned on the basis of which the commercial
invoice is prepared.
2) Declaration: -
clearing agent of the company. The clearing agent sends the Shipping bill on the basis
of pre shipment invoice along with SDF declaration (Now a days, the shipping bill
and SDF are prepared in same form) to the custom authority for clearance. There are
different types of shipping bills depending upon the type of order and the type of
benefit, which is going to be availed .The pre shipment invoice is prepared just for
containers, then the container is packed in Pune only, otherwise the goods are sent to
The Custom authorities delegate their authority for clearance to the excise
department. When the goods are packed in container in Pune, then only the Excise
department checks the goods and seals the container and gives the Declaration to
Custom department that they have checked the goods. (They put the remark on
3) Custom Clearance: -
48
When the goods go to Mumbai with shipping bill for custom
clearance and for packing the goods in container, then the Mumbai Custom
department verifies the certificate of origin, whether the goods are liable for Duty,
provision for duty, etc and check the goods on sample basis and after satisfaction, they
put a stamp on shipping bill. This is called Lets Export Certificate. Now, after this,
4) Loading on ship: -
After custom clearance for shipping the goods on vessel, the goods
are required to be present within the prescribed area (known as quay) before the cut
off time prescribed as per the port authority for that vessel, if the goods are not
present at Quay before prescribed time then the goods would not be allowed to go by
the same vessel for which permission has been obtained. The export certificate would
have to be amended by the port authority. On the dock the shipping line agent will
verify the goods and after that it is loaded into the container that may contain goods
from different exporters and issue a “Bill Of Lading” this is the time when the
1. FOB
2. CIF
3. CFR / C&F
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In case of FOB and C&F, insurance is the responsibility of importer, that is risk is
transferred as and when the goods are loaded on ship. But in case of CIF, the
insurance is our responsibility i.e. the insurance is from warehouse of exporter to the
warehouse of importer.
5) Realisation of invoice: -
After the goods are loaded on ship, the clearing agent sends the
shipping bill along with SDF declaration, bill of lading, insurance and freight
certificate, his bill for expenses, after that the company prepares a commercial
invoice, which is sent along with other documents to the companies’ banker.
Companies banker sends the invoice to the bank on which the L/C is opened. That
bank intimates the foreign bank. The foreign bank then intimates the importer to pay
money due within the credit period given by exporter and collects the Bill of lading.
After collecting the Bill of lading, the importer goes to the shipping agent and on
delivery of Bill of lading, collects the goods and pays the freight according to the
terms (e.g. for FOB the importer pays freight to the agent and collects the goods and
in other cases, the importer just produces the Bill of lading and collects the goods).
1. On advance payment-
50
In this case, the entire payment is collected in advance.
2. On L/C-
L/C can be discounted before the due date from
3. Non L/C –
In non-L/C, there is open credit available to the importer. If
the due date otherwise the importer will pay on the due date. On this
insurance, clearing agent commission and bank commission. For clearing and
forwarding expenses, there is an agreement with the clearing agents. For export of
engines and their spare parts, the agreement is with ATC clearing and for bearing and
Valve, some other agents are there. According to the agreement, agents charge to the
company and send their bill along with Bill of lading. All clearing and forwarding
expenses are booked at individual A/C of agents. For bank commission, postage &
handling charges and for other charges, the bank gives direct debit to companies
51
account and sends a debit advice. For realisation of Invoice, Company sent two sets of
commercial invoice. The Bank charges first time to the company for postage and
handling charged at very beginning i.e. when bank receives the invoice, and at the
time of realisation of invoice bank again charges the company for postage & handling.
In case of L/C, bank charges realisation claim in addition to the expenses at the
second time.
can avail benefits. Some of the schemes are DEPB, DUTY DRAWBACK, and
EXPORT LICENCE etc. The company has to satisfy the conditions under these
schemes in order to avail the benefits of the same. In case of DEPB benefit, at the
time of realisation, bank gives BRC i.e. Bank Realisation Certificate that is to be
produced to DGFT, against which company gets the Import license which can be sold
or can be utilized for further import. The amount for which the company is going to
get DEPB benefit is transferred in the Accrued income A/C at the every month end. In
the case of Duty Drawback, custom department automatically credits the exporter’s
account. Hence the export procedure is complete after the benefits have been claimed.
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Chapter No. 6
Data Analysis
Net Profit
Net Profit Ratio = X 100
Sales
Signification: -
53
This ratio helps in determining the efficiency with which affairs of the
business are being managed An increase in the ratio over the pervious period
the profit ratio is constant This ratio is an effective tool to check the
profitability of business.
Sales
Fixed Assets Turnover Ratio =
Net Fixed Assets
= No. Of times
Significance: -
The ratio measures the efficiency in the utilization of fixed assets. This
ratio indicates whether the fixed assets are being fully utilized. Normally a
4) Current Ratio: -
Current Assets
Current Liabilities
54
Current Ratio =
current assets should be at least twice the current liabilities and therefore, this ratio is
Significance: -
This ratio indicates the solvency of the business i.e. ability to meet the liabilities of
the bank as and when they fall due. The current assets are the sources from which the
Net Profit
Net Profit Ratio = X 100
Sales
Net Profit
1,784,090 1,189,516
55
2006 – 2007 2007-2008
1,189,516
1,784,090
X 100 X 100
20,694,761 23,723,049
8.6 7.89
Interpretation: -
Company percentage of profit in 2006– 2007 is 7.52%, 2007– 2008 is 9.05% and
generally standard of this ratio is 15 to 20% but, this Company’s profit level are
changing year after year the net profit for these years are sufficient to pay dividend at
reasonable & satisfactory rates on share capital. In 2007 – 2008 the net profit as well
as 2006– 2007 are mostly increase because the company’s profit on sale are increase
2) Current Ratio: -
Current Assets
Current Ratio =
Current Liabilities
Current Assets
6615365 7455319
56
6615365 7455319
4,738,704 5,574,962
1.33
1.39
Interpretation: -
Current ratio measures the inter-relation between the current assets & current
liabilities.
This ratio indicates the solvency of the business current ratio in 2006–
2007is1.39 in the year 2007 – 2008 ratio 1.33 The proportion of above current ratios
indicates that the liquidity position of the company is not satisfactory. Because of
these current ratios are lower than standard these current ratios are lower due to
Net Profit
Return on Share Holder Investment = X 100
Share Holder Fund
Net Profit
1,784,090 1,189,516
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2006 – 2007 2007-2008
1,784,090 1,189,516
X 100 X100
8,513,490 9,149,913
13 %
20.9 %
Interpretation: -
In the year 2006 – 2007 are return on shareholder Investment for mostly
Outside Debts
Debt to Equity Ratio =
Shareholder Fund
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2006 – 2007 2007-2008
176,392 37,968
8,513,490 9,149,913
0.004
0.020
Interpretation: -
is because in such case the margin of safety available to creditors is less and on the
other hand low debt equity ratio will show high margin of safety.
Debt to equity ratio of 2006 – 2007 is 0.20:1; year 2007 - 2008 is 0.004:1 standard of
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3) Investment decisions can at times be based on the conditions revealed by
certain ratios.
4) They make it possible to estimate the other figure when one figure is
known.
5) Ratio analysis provides data for inter-firm or intra firm comparison cannot
Thus, the ratio analysis points out the financial condition of business
1) The benefits of a ratio analysis depend to a great extent upon the correct
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3) While comparing ratios of the two company’s, it must see both of them
follow the same accounting plans or base, otherwise the comparison has no
meaning.
study absolute figures along with ratios. Ratio analysis gives just a fraction
If there is window dressing the ratio calculated will fail to give the
Financial Statement
Introduction: -
statement outsiders can bet an idea about the performance of business unit.
Meaning: -
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Financial statement is an organized collection of data according to
1) Balance - Sheet.
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BALANCE SHEET AS AT 31 MARCH 2008
Schedule As at As at
Particular 31st March 31st March
2008 2007
1. SOURCES OF FUNDS
1. Shareholder’s funds
(a) Share capital 01 388,346 194,173
(b) Reserve and Surplus 02 8,761,567 8,513,490
9,149,913 8,513,490
2. Loan funds
3,428,915 1,063,148
12,875,028 9,741,060
2. APPLICATION OF FUNDS
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3. Current assets, loans and advances
7,455,319 6,615,365
6,452,601 5,370,163
Net Current assets
1,002,718 1,245,202
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PROFIT&LOSS A/C FOR THE YEAR ENDED 31 MARCH 08
As on As on
Particular Schedule 31st Mar 08 31st Mar 07
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Income
20,528,728 17,686,697
123,235 33,247
Less: expenses capitalised
020,405,493 17,653.450
Profit Before exceptional items & Taxation 1,874,076 2,170,829
22 - 224,191
1,874,076 2,395,020
Exceptional income
482,900 525,000
Profit Before Taxation
182,626 66,930
Provision for taxation
Current tax (including wealth Tax
Rs.2, 9000,000/-, previous year Rs. 19,034 19,000
2,200,000/-)
Deferred Tax (see note no.19) 684,560 610,930
Fringe Benefit
1,189,516 1,184,090
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2,683,886 2,942,949
Less:
Transferred to general reserve
Interim dividend 750,000 1,000,000
Tax on interim Dividend 194,173 194,173
Proposed Dividend 33,000 27,233
Tax on Proposed Dividend 194,173 194,173
33,000 33,000
1,204,346 1,448,579
Chapter No. 7
Limitation of Study
1) Treasury Management which is used by company has not been made available
for study and so that I used annual reports for the study of financial position
by accounting ratios. Balance Sheet and Profit and Loss account shown in the
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2) The time period is limited to know the entire process .we cannot draw
Chapter No 8
Finding
Recommendation
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The following are some recommendation, which will be useful for further
It is necessary to decrease the total expenses and to increase the net profit.
To be self sufficient, the company should try to increase own fund & also try
Chapter No 9
Conclusions
1) The Company’s profitability position is not much good because the company
because profitability, current, activity positions are not good for previous year.
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Chapter No 10
Bibliography
70
Chapter No 11
Annexure
Questioners
71