You are on page 1of 90

INTRODUCTION

SIGNIFICANCE OF F.M
Significance of FM Finance is one of the basic foundations of all kinds of
economic activities. Financial management is an integral part of overall management;
it is not a totally independent area, it is concerned with the acquisition, financing and
management of assets with some overall goal in mind.
Financial management is important because it has an impact on all the
activities of financial management. The basic objective of financial management to
maintains of the liquid assets and maximization of the profitability of the firm.
Efficient management of every business enterprise is closely linked with efficient
management of its finance. The basic objectives of financial management are the
maintenance of liquid assets and maximization of the profitability of the firm.
Maintenance of liquid assets means that the firm has adequate cash in hand to meet its
obligation at all times. A business firm is a profit seeking organization, profit
maximization is also well considered to be an important objective of financial
management.
Financial management is mainly concerned with the proper management of
finance function. Risk, cost and control considerations are properly balanced in a
given situation and there is optimum utilization of funds. Financial management
emerged as a distinct field of study at the turn of 20th century. Financial management
as an integral part of overall management is not a totally independent area. It draws
heavily on related disciplines and field of study, such as economics, accounting,
marketing, production and quantitative methods. It helps in profit planning, capital
spending, measuring costs, controlling inventories, accounts receivables, etc.
It is essentially helps in optimizing the output from a given input of funds. Capital
Budgeting or Investment appraisal relates to the determination of total amount of
assets to be held in the form the composition of these assets as perceived by its
investors.
(1) Long-term investment decision and
(2) Short-term investment decision.

The long-term investment decision is referred to as the capital budgeting and


the short-term investment decision. The investment appraisal is important not only
setting new units but also the expansion of present unity, replacement permanent asset
research and development project cost, reallocation of funds in existing projects. A
wide range of criteria have been suggested for choosing investment proposal. Finance
is the study of how investors allocate their assets over time under conditions of
certainty and uncertainty. A key point in finance, which affects decisions, is the time
value of money, which states that a dollar today is worth more than a dollar tomorrow.
Finance measures the risks vs. profits and gives an indication of whether the
investment is good or not. Management should be particularly interested in knowing
financial strength and weakness of the firm. Capital budgeting is the important tool in
the hand of management to detect the efficiency of the investment which the firm is
going to invest on the new projects. There are so many techniques to measure the
efficiency of the project. Capital expenditure budget or capital budgeting is a process
of making decision regarding investments in fixed assets which are not means for sale
such as land, machinery or furniture. The working "investment" refers to the
expenditure which is required to be making in connection with the acquisition and the
development of long term facilities including the fixed assets.
A project is an activity sufficiently self-contained to permit financial and
commercial analysis. In most cases projects represent expenditure of capital funds by
pre-existing which want to expand or improve their operation. In general a project is
an activity in which, we will spend money in expansion of returns in which logically
seems to lead itself planning. Financing and implementations as a unit, is a specific
activity with a specific point and a specific ending point intended to a accomplish a
specific objective of the study. The current demand for infrastructures and capital
investments is being fueled by deregulation in the FMCG (Fast Moving Consumer
Goods), telecommunication, & transportation sectors, by the globalization of product
markets and the needs from manufacturing scale, and by the privatization of
government owned entities in developed countries & developing. Understanding the
organizations financial health is a fundamental aspect of responding to todays
increasingly stringent financial reporting requirements. To avoid risks, organizations
must quickly Identify ascertain financial ratios and trends across in liabilities and
assets, Analyze and adjust planned and forecasted amounts and Act to provide
regulatory statements as needed Finance is regarded as THE LIFE BLOOD OF
2

BUSINESS. It is the backbone of every business employed in all business activities.


Financial management is that managerial activity which is concerned with the
planning and controlling the firms financial resources.
The subject of financial management is of immense importance to both
academicians and practicing managers. It is of great interest to academicians because
the subject is still developing, and there are still certain areas where controversies
exist for which no unanimous solution has been reached as yet. Practicing managers
are interested in this subject because among the most crucial decisions of the firm are
those which are related to finance, and an understanding of the theory of financial
management provides them with conceptual and analytical insights to make those
decisions skillful. The modern thinking in financial management accords a far greater
importance to management in decision-making and formulation of policies. Financial
management occupies key position in top management and plays a dynamic role in
solving complex management problems.
They are now responsible for shaping the fortune of the enterprise and are involved in
allocation of capital. i.e Scope of Finance Function: Firms create manufacturing
capacities for production of goods and some for providing service to customers. They
sell their goods or services to earn profits. They raise funds to acquire manufacturing
and other facilities. Thus, the three most important activities of a business firm are:
- Production
- Marketing
- Finance
A firm secures whatever capital it needs and employs it in activities (financial
activities) that generate returns on invested capital (production and marketing
activities).
ii. Major Areas of Finance Function :
A firm performs finance function simultaneously and continuously in the
normal course of the performance. They do not occur in sequence. Finance functions
call for skilful planning, controlling and execution of a firms activity.

1. Investment Decisions: These decisions include the allocation of capital involved


in decision making to commit funds in long-term assets which would yield
benefits in future. It is one very significant aspect in the task of measuring the
prospective profitability of new investments. Future benefits are difficult to
measure and cannot be predicted with continuity because of the uncertain future
capital budgeting which involves risk.
2. Financing Decision: Broadly a finance manager must declare when, where and
how to acquire funds to meet the firms investment needs. The finance manager
must strive to obtain the best financing mix or optimum capital structure of the
firm. The use of debt affects the return and rise of shareholders. It may increase
the return of the equity funds. A proper balance will have to be struck between risk
and return.
3. Dividend Decision: The finance manager must decide whether the firm should
distribute all profits or certain term or distribute a portion and retain the balance.
The dividend policy should be determined in terms of its impact on the market
value of the firms share. Thus shareholders are indifferent to the firms dividend
policy. The finance manager must decide the optimum dividend payout ratio.
4. Liquidity Decision: Along with terms of funds current assets should also be
managed efficiently for safeguarding the firm against the dangerous of ill liquidity
and insolvency. An investment in current assets affects the firm profitability,
liquidity and risk. In order to ensure that neither insufficient nor unnecessary
funds are invested finance manager develops some techniques of managing
current assets.
5. The Changing Role of Financial Management: Many changes in the contemporary
world, financial management has undergone significant changes over the years.
The financial management has a very limited role in business enterprise.
Financial manager is responsible only for maintaining financial records, preparing
reports of the companys status, performance and arranging funds recorded by
company so that it would meet its obligations in time. Financial manager as a
matter of fact was regarded as specialized officer in the company concerned only
with administering sources of funds. He was called upon only when the company
encountered problems regarding the financial matters to allocate the suitable
sources of funds and additional funds. The emphasis on decision-making has
continued in recent years. Capital has been in short supplies the old interest in the
4

ways of raising funds. Accelerated progress in transportation and communication


has brought the countries of the world they in turn have stimulated interest in the
international finance. Finding the firms appropriate role in the efforts they solve
these problems demanding on increasing the proportion of these items of financial
manager.
6. Significance of financial management: Financial management has a greater
importance on the present corporate world. It is a science of money, which
permits and authorizes to go further. It assists in the assessment of financial needs
of industry large or small and indicates the internal and external resources for
meeting them. It assesses the efficiency and effectiveness of the financial
institution in mobilizing individual or corporate science. It also prescribes various
means for such mobilization of savings into desirable investment channels. It
assists the management while investing the funds in profitable projects by
analyzing the viability of that project through capital budgeting techniques. It
permits the management to safeguard against the interest of shareholders by
properly utilizing the funds procured from different sources and it also regulates
and controls the funds to get maximum use.

FINANCIAL STATEMENT
Analysis

refers to the

process of critical examination of the

financial information contained in the financial statement in order to understand


and make decisions regarding the operations of the firm. The analysis is basically
study of the relationship among various financial facts and figure as given in a
set of financial statements. Complex figures as given in this statements
are dissected\broken up into simple

and

variable

elements

and significant

relationship are established between the elements of the same statements are different
financial statements.
This

process of dissection, establishing and identifying the financial

weaknesses and strengths of the firm. It is indicative of two aspects of a firm i.e. The
profitability and the financial position and it are what are known as the objectives of
the analysis.

Types of Financial Analysis

I.

on the basis

on the basis

of material

of modus

used

operandi

On the basis of material used:-According to material used,

Financial analysis can be of two types:


1. External analysis:This analysis is done by outsiders who do not have access to the detailed
internal accounting records of the business firm. These outsiders include investors,
potential investors, creditors, potential creditors, government agencies, credit agencies
and the general public.
2. Internal Analysis:The analysis conducted by persons who have access to the internal accounting
records of a business firm is known as internal analysis. Such an analysis can,
therefore, be performed by executives and employees of the organization as well as
government agencies which have statutory powers vested in them.

II. On the basis of modus operandi


According to the method of operation followed in the analysis, financial analysis can
also be of

1. Horizontal analysis:Horizontal analysis refers to the comparison of financial data of a company for
several years. The figures for this types of analysis are presented horizontally
over a number of columns. The figures of the various year are compared with
standard or base year. This type of analysis is also Dynamic analysis as it is
based on the data from year to year rather than on

2. Vertical Analysis:Vertical analysis refers to the study of relationship of the various items in the financial
statements of one accounting period. In the types of analysis is the figures from
financial statement of a year are compared with a base selected from the same years
statement. It is also known as Static analyses.

Procedure of Financial Statements Analysis


Broadly speaking there are three steps involved in the analysis of financial statements.
There are:
i)Selection,
ii)Classification,
iii)Interpretation.
The first step involves selection of information (data). The second step involved is
the methodical classification of the data and the third step includes drawing of
internees and conclusions.
The following procedure is adopted for the analysis and

Interpretation of financial statements:

The analyst should acquaint himself with the principles and postulates of accounting.

The extent of analysis should be determined so that the sphere of work may be decided.

The financial data given in the statements should be re-organized and re-arranged.

A relationship is established among financial statements with the help of tools and techniques
of analysis such as ratios, trends, common size, funds flow etc.,

The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for helping decision-taking.

NEED FOR THE STUDY


Financial analysis is of immense use to a finance manager as it helps in
carrying out planning and control functions while preparing a financial
plane for the company.
Finance manager must know the quality and impact of financial
decisions on effectiveness of the finance function, financial condition
and profitability of the firm.
The tools of the financial statement analysis serve as the guide for

management to measure and determine the effectiveness and impact of


his decisions.

OBJECTIVES OF THE SRTUDY


The following are the objectives of study.
The primary objective of financial analysis is to assist in decisionmaking.
To provide reliable financial information about economic resources and
obligations.
The present and future earning capacity or profitability of the concern.
The possibility of developments in the future by making forecasts and
preparing budgets.
The comparative study in regard to one firm with another firm or one
department with another department.
The long-term liquidity of its funds.
The financial stability of a business concern.
To study and analysis the financial performance of the company.
To offer findings, suggestions & conclusions of the study

SCOPE OF THE STUDY


Financial analysts depend primarily on financial statements to diagnose
financial performance for a paid latest five financial years. It appears that are
four principals reasons.

To assess and evaluate the earning capacity of the firm.


To find out the financial stability and soundness of the firm.
To determine the possibilities of firm for future growth based on the
financial strength/weakness.
To assess and measure the changes in evaluate fixed assets, sock of the
firm.

10

METHODOLOGY OF THE STUDY


SOURCES OF DATA
Secondary Data

SECONDARY DATA:
The information collected from
1. Annual report.
2. Executive and staff of financial accounting department.
3. Executives of other departments.

Period of the study:


A period as the study consecutive 45 days that is from 06-05-2013
To 15-06-2013. Has been conceding rod for the purpose of the study.

11

12

PRESENTATION OF THE STUDY


1. The first unit deals with the introduction to financial statement analysis.
2. The second unit deals with the objectives and methodology of the study.
3. The third unit deals with the
industry profile
company profile
4. Fourth unit deals with the analysis and interpretation of the study.
5. The fifth unit deals with
findings and suggestion
conclusion
bibliography

13

LIMITATIONS OF THE STUDY


The data used in the analysis is mostly from the published financial
statements.
Details of information behind the figure of financial statements are not
available, which are also important for analysis to improve accuracy.
The Financial statements contain historical information. This
information though useful, but the analysis needs future/standard norms
for comparison which are not available.
The financial statements are prepared on the basis of certain accounting
concepts and conventions. As per the legal implications provisions and
hence in certain cases it may not suitable for efficiency always intact.
The statements contain only information that can be measured in
monitory units for accuracy in analysis the qualitative measurements are
also needed which are not available.
The financial statements are not prepared according to the needs of the
situation or the whims of the management, and prepare only accounts to
shows from when the data is collected.

14

SIGNIFICANCE OF THE STUDY:

Studies of this type are useful to the management, owners, investors,


government, employees, suppliers and society.
Studies of this type are useful to the research scholars who conduct in
depth research.
Studies of this type are useful to the similar organization in assessing
their financial performance

15

INDUSTRY PROFILE
IN THE BEGINNING:
Tobacco is a plant that grows natively in north and South America. It is
in the same family as the potato, pepper and the poisonous nightshade on very
dead plant. The seed of a tobacco plant is very small. A 1 ounce sample
contains about 3, 00,000 seeds.
It is a believed that tobacco began growing in the America about 6,000
B.C., American Indians began using tobacco in many different ways. Such as in
religious and medicinal practices. Tobacco was believed to be a cure all and
was used to dress wounds, as well as a pain killer. Chewing tobacco was
believed to relieve the pain of a toothache.
Soon after, sailors brought tobacco back to Europe and the plant was
being grown all over Europe. The major reason for tobaccos growing
popularity in Europe was its supposed healing properties. Europeans believed
that tobacco could cure almost anything, from bad breath.
In 1571, a Spanish doctor named Nicolas Monardes wrote a book
about the history of medicinal plants of the new world. In this he claimed that
tobacco could cure 36 health problems.
In 1588, a Virginian named Thomas Harriet prompted smoking
tobacco as a viable way to get ones dose of tobacco. Unfortunately, he died
nose cancer (because it was popular them to breath the smoke out through the
nose.)
During the 1600s, tobacco was so popular that it was frequently used as
money! Tobacco was literally as good as gold! This was also a time when
some of the dangerous effects of smoking tobacco were being realized by some
individuals. In 1610 Sir Francis Bercon noted that trying to quit the bad habit
was really hard.

16

In 1632, 12 years after the mayflower arrived on Plymouth Rock, it


was illegal to smoke publicly in Massachusetts! This had more to do with
moral benefits of the day than health cancers about smoking tobacco.
In 1760, Pierre Lorillard established a company in New York City to
process tobacco, cigar and snuff. Today P.Lorillard is the oldest tobacco
company in the U.S.

THE RECENT PAST


During the 1980s there were many lawsuits failed against the tobacco
industry because of the harmful effects of its products. Smoking became
politically in correct, with more public places forbidding smoking. In 1982, the
surgeon general reported that second hand smoke may cause lung cancer.
Smoking in public areas was soon restricted, especially at the work place. In
1985, lung cancer became the No.1 killer of women, beating out breast cancer!
Phillip Morris continued to diversity into other products, buying into general
foods corporation and Kraft Inc in 1985. R Reynolds also diversified, buying
Nabisco and becoming RJR/NABISCO.
In 1987, congress banned smoking on all domestic flights lasting less
than two hours. In 1990, smoking is banned, expect to Alaska and Hawaii. In
1990, Ben & Jerrys (of ice cream fame) boy cots RJR/ NABISCO, and
dropped Oreos from its ice cream products.
During the 80s and 90s the tobacco started marketing heavily in areas
outside the U.S, especially developing countries in Asia. Marlboro is
considered the worlds No1 most valuable brand of any product with a value
over $ 30 billion! Over this period, there is a battle between coca cola and
Marlboro as the No1 brand in the world.
Tobacco industry is an agro based industry. Tobacco is cultivated mainly
in the states of Andhra Pradesh and Karnataka. Most of the tobacco used for the
manufacture of cigarettes and for exports (is produced from these two
states).Tobacco is also grown in Tamilnadu, Westbengal, Uttar Pradesh,
Gujarat, Madhyapradesh, Maharashtra and Orissa also.
17

However the tobacco grown in these states is of very less quantity and is
not used for manufacture of cigarettes and exports. Several varieties of tobacco
such as Virginia flue cured, Virginia air cured, light soil burly, sun cured
Virginia, nature, chewing tobacco, HDBRG, Wrapper tobacco, Bidi tobacco
and Hookah tobacco etc., are grown in India. Virginia flue cured is a major
variety grown in India. More than 80% of Indian tobacco crop belongs to this
variety.
The tobacco cultivation exports and some other industrial activities are
regulated by central government (Ministry of commerce) through tobacco
board. Tobacco board is headed by I.A.S officer of senior category generally
from the central government. The board consists of several Central government
officers, state government officers, political leaders, representatives of farmers
and reputed Industrialists. One of the directors of ML Group is always
representing the industrialists in the tobacco board.
Table No: 1.1
The major players in tobacco industry in India are as under
Name of the company

Occupation

% of business
in India

ITC LTD

Cigarette
manufacturing and un-

VST INDUSTRIES

manufacturing tobacco
Cigarette

LTD

manufacturing and un-

GTC INDUSTRIES

manufacturing tobacco
Cigarette
exports

LTD

manufacturing and un-

GODFREY

manufacturing tobacco
Cigarette
exports

PHILLIPS INDIA

manufacturing and un-

LTD

manufacturing tobacco
exports

18

50%

12%

6%

8%

The consumption is linked with the habits of the people; the


tobacco usage cannot be eradicated. Even in countries like USA where anti
tobacco campaign started in 1962. The production of cigarettes and
consumption of cigarettes is still progressing.
EXPORTERS:
Table No: 1.2
Name of the company

Occupation

% of business
in India

ML GROUP

Cigarette
manufacturing and

POLISETTY

un-manufacturing
Cigarette

GROUP

manufacturing and

BOMIDALA

un-manufacturing
Cigarette

GROUP

manufacturing and

MITTAPALLI

un-manufacturing
Cigarette

GROUP

manufacturing and

OTHER EXPORTES

un-manufacturing
Cigarette
manufacturing and

5%

5%

3%

3%

8%

un-manufacturing
Our ML Company has developed strong relationship with overseas
manufacturing in Europe, Russian and Middle East. Through there is very good
demand from Russian market. Our company is not exporting much because of
poor economic conditions of the country.

19

COMPANY PROFILE
ML Group was a multi-facilitated corporate leader of which the group
consists of five concerns namely.
ML Agro Products LTD

--- Tobacco threshers,


packers and exporters

K.S.Subbiah Pillai and co (India) Ltd --- Tobacco Export


M.L.Exports

--- Export house

Coramandal Agro Products and oils Ltd -- Bulk producers of oils


ML GROUP:The highly competitive tobacco market represented tremendous
growth potential to Mr.Maddi Lakshmaiah. Foreseeing the demand for quality
Indian tobacco, a long term strategy was formulated. Right from its inception,
the company adhered to international standards and made rapid into global
tobacco markets.
A sophisticated threshing plant of international standards was
commissioned in 1976 first in Andhra Pradesh. It created a revaluation in
tobacco processing and led to a huge Upsurge in demand. This led to the
commissioning of two modern plants with threshers, re-dryers And other
sophisticated equipment for the processing of quality tobacco.
ML Group has taken its credo of total quality to the furthest, whether in
the Quality of processes, products or working conditions for the vast
workforce. The foresighted Innovations of Sri Maddi Lakshmaiah have given
the group a strong edge. The personal involvement of the directors in all
aspects of the business has resulted in high quality operational parameters.

20

FIGURE.1.1.
COMPANY INTENAL EQUIPMENT
The company has earned recognition from apex institutions and is a
recognized leader in tobacco markets the world over. The quantum growth in of
ML Company spread of investment in infrastructure and diversification in to
other business.
ML Group under its umbrella the various companies has an
annual turnover of Rs 1550 million and an asset base of Rs 200 million. A real
estate development wing was set up to develop and lease commercial
properties with working environments that rival the best internationally.

FIGURE 1.2
21

MANUAL LABOUR WORIKING ON THE LINES


The information about the establishment of the group which consists of
five concerns are as follows displayed on the preceding pages. Let us have a
look on the various concerns of ML Group individually.

MADDI LAKSHMAIAH AND COMPANY LTD:ML and company limited, the fore runner of all the companies of
ML Group, the company enjoys a pre-eminent standing in the world of
tobacco, exporting to china, Russia, Western Europe, Africa and Bangladesh
among others.
Supported by a team of experts, technicians, engineers and a
skilled workforce, the company has forged a head setting standards that have
become benchmarks in the industry. Today Chilakaluripet is a well known
name in the global tobacco business in no little measure due to the Pioneering
efforts of the intrepid founder, Sri Maddi Lakshmaiah.
ML AGRO PRODUCTS LTD:
ML Agro products ltd was born of a increase in demand for
quality tobacco in both the domestic and foreign markets.. It is fully selfsufficient with modern threshers, lamina redeyes, automatic double ram press,
sophisticated quality control laboratory and mammoth warehouses.

FIGURE 1.3.COMPANY MACHINARY EQUIPMENT


22

It ranks among the largest threshing unity in the country. The company
also processes tobacco for domestic cigarette manufacturers. The company
today has a global vision.
K.S. SUBBIAH PILLAI AND COMPANY (INDIA) LTD:K.S.S.P and company limited was acquiring in 1982 with all its
assets K.S.Subbaiah pillai and company (India) limited is the groups leading
tobacco exporting unit. In a field that is extremely competitive, the excellent
performance of the company is an indicator of the trust that it enjoys across the
globe.
CORAMANDAL AGRO PRODUCTS OILS LIMITED (CAPOL):
CAPOL started in 1976, extracts and refines cotton seed oil. Today it is
a multi product Company with equipments to process all kinds of oil seeds. The
plant has a storage capacity of 2100 tonnes for different types of oil.
Extreme care is taken to ensure that at every stage in the process of
production right from selecting of the raw material to packaging the products,
only the best is passed. Minimum human intervention and rigorous application
of quality control processes to ensure that the final product conforms to all
appropriate standards. The products of the process in the form of linters, Hulls
and De-oiled cakes are in high demand in many parts of the world.
ML EXPORTS:
ML Exports is a totally export oriented unit, with clients in a
variety of markets around the world. The company enjoys a reputation for
excellent delivered schedules and transparent business practices in global
markets.
SHARE HOLDING PATTERN &MANAGEMENT OF GROUPS:
Sri Maddi Lakshmaiah and his family members are holding 100%
of shares of all the group. The group is totally managed and controlled by Sri
Maddi Lakshmaiah and his family members only.
The group has two tobacco processing plants and one solvent
extraction plant in south India. The group owns around 1 00,000 square meters
of warehousing complexes in south India.
23

IN CORPORATION:
ML Company is a limited company (M/s Maddi lakshmaiah and
company limited) which was originally incorporated on 8th day of October
1970 under the name, Maddi lakshmaiah and company private limited having
passed the necessary special resolution on the 23 rd day of March 2002, in terms
of sec 31(1)/44 of the companies act 1956 the name of the company changed to
Maddi Lakshmaiah and company limited.
NATURE OF ACTIVITY:
This factory produces good quality tobacco
The production capacity per each day is one lakh 20 tonnes.
The production capacity per year is around 15/16 million tonnes
The current assets capacity per year is around 1.5 million tonnes.
FINANCIAL STRUCTURE:
The initial investment of ML company is 10, 00,000.
THE PRODUCTS OF THE M.L.COMPANY AND THEIR MAIN USES:
The various products of the M.L. Company and their economic uses are
as follows.
1. Karnataka light soil-My sore:
This tobacco is preferred for low nicotine content, high filling capacity
and suitability to blend well any tobacco.
2. Monson burly:
Used in USA blended cigarettes.
3. Traditional burly:
Used for pipe mixtures, chewing plugs and hookah tobacco paste.
4. Kurnool and Telangana (NATU):
Primarily used for cigarette blending and for hookah tobacco paste
making.
5. Eluru (Natu tobacco):
Mainly used for cheroots, snuff pipe tobacco, cigarette blending and for
hookah paste making.
24

6. Oriental: Used for cigarette blending.


7. Century fire cured tobacco:
Used in pipe mixtures and hookah tobacco paste.
8. BIDI Tobacco:
Used in the manufacture of Bidis, a hand rolled smoking products made
by wrapping tobacco with natural bony leaves.
9. Cigar wrapper tobacco:
Mainly used for wrapping the cigars.
10. Cigar filters tobacco:
Mainly used in the manufacture of cigars and exported to some
countries for use in hookah tobacco paste.
11. Cheroot tobacco:
Used for the manufacture of cigars and hookah tobacco paste.
12. Lanka tobacco:
For the manufacture of cigars and cheroots.
13. Tamilnadu:
Chewing and cheroot.
14. Black chopadia:
Used as chewing tobacco.
15. Red chopadia:
Mostly for chewing also called all-chopadia and safna. The export
packing ranges from 250 grams- 100 grams and is available in bales of up to
100 kages.
16. Rustica tobacco:
Used as chewing tobacco, hookah tobacco, for tobacco sheet making for
kreteks in Indonesia, pipe mixers and cigarette blending to some extent.
17. Motihari:
Used in the manufacture of various tobacco products such as chewing
tobacco, Hookah paste, bidies etc.

25

OBJECTIVES OF THE COMPANY:

To serve the nations vital interest in the tobacco related sectors.

To earn a reasonable return on investment

To create a strong research and development in the field of


tobacco. and stimulate research and development of developing of
exports.
To maximize utilization of the existing facilities in order to

improve efficient and increased productivity.


To work towards achievement of self reliance in the field of

tobacco, threshing formulation and distribution systems.


ORGANIZATION STRUCTURE
The group has following different departments.
Personal Department:
This department deals with the masters of industrial relations,
HRD, welfare activities, Labor legislations, recruitment and issues of wages
etc. This is the main department in the organization.
Leaf Department:
This department deals with the matters of tobacco leaf. It looks
after buying of tobacco from the formers for the processing of tobacco.
Export Department:
It looks after the export matters of the organization. This
organization exports tobacco leaf to China, Bangladesh and U.K.
Production Department:
This department takes care to produce quality tobacco to customers.
Marketing Department:
This department takes care of marketing the company tobacco to
other countries such as Russian, Europe, Middle East, Bangladesh, African
countries etc.
They sell varieties of tobacco in market and maintain good relations with the
customers. This is one of the main/ important departments in this organization.
26

M.L.Group was concentrating on domestic market. It ties up with Indian


strongest cigarette manufacturing company, ITC.
MARKET EXPORTS
M.L. Company was exporting tobacco to Russia, Europe, Middle
East, Bangladesh, African countries etc. These are the various countries in
which M.L. Company is exporting their tobacco.
ESTABLISHMENT OF THE GROUP:The group is founded by Sri. Maddilakshmaiah, a mechanical
engineer after 15 years of versatile experience in tobacco industry in 1970 in
chilakaluripet, Guntur, A.P. The group has five major concerns namely:
Maddi Lakshmaiah and company limited (MLCO).
ML Agro Products (MLAP).
K.S.Subbaiah Pillai and company limited (KSSP).
ML Exports (MLE)
Coramandal Agro Products and oils limited (CAPOL).
Expecting CAPOL which is engaged in edible oils, all are engaged in tobacco
industry. ML&co and MLAP have concentrated on processing activities where
as KSSP and MLE are leading Exporters and are recognized by Government of
India as export house.
FUTURE PLANS:The company (Maddi Lakshmaiah) for an ECB fro 50 million dollars and
development of regular trade and also infrastructure projects in India.

ML Company is also working on joint venture basis with U.K.based


commodities company for supply of agro products to South Asian
countries.

The company already entered in to joint venture with an U.S. based


company by name CARGIL for their entire South Indian needs.

They have worked for joint venture arrangement with Yugoslavian


Government for their requirement for India.

27

This is for above five million dollars of investment in supply of 5000

tones every year.


The company is working with Chinese Government for long term

association in tobacco..
ACHIEVEMENTS / AWARDS:M.L.Company receive the best management award through Chief Minister

M.L.Group

(CAPOL

Chirala,

Prakasam

Dt.)

got

several

achievements and awards.


CAPOL: All Indian cotton seed crushers association, Mumbai awarded CAPOL
as III highest exporter and III highest domestic seller of cotton
seed extraction for the year 1992-1993.
CAPOL is the highest exporter and III highest domestic set of cotton
seed extraction for the year 1993-1994.
CAPOL is the III highest domestic seller of cotton seed extraction for
the year 1994-95.
CAPOL is the II highest domestic seller of cotton seed extraction for the
year 1995-96.
CAPOL is the II highest domestic seller of cotton seed extraction for the
year 1997-98
CAPOL is the III highest domestic cotton seeds in the year 1999-2000.
CAPOL is the II highest exporter of cotton linter in the year 2000-2001.
CAPOL is the III highest exporter of cotton linters and II highest

domestic seller of cotton seed extraction in the year 2001-2002..


TRACK RECORD:The company has 30 years of performances.

It never failed in meeting the scheduled repayments of loans with


the bank. Rather it postponed Most of the loans with the lenders

From the date of its incorporation 1977, tice date, UN interruptedly


running in threshing field.
28

LAND MARKS:

M.L.Company was the first Indian company entered with China to


do business.

NEGOTIATIONS:

The company is trying to develop world class information technology


buildings in Bangalore, Chennai and Hyderabad in the coming five
years time.

The company is going for sheet tobacco plant in joint venture with one
of the Indian best tobacco cigarette manufacturer.

The company is also contemplating for 100% tobacco joint venture


association with one of the best cigarette manufacturer.

The company exports with the second strongest country China, Russia
and India.

The export manager (ML Company) deals all the matters regarding the
exports departments and directly reports to the managing director.

MILE STONES OF M.L.GROUP:M.L.Group has constructed M.L.Towers at Mumbai.

M.L.Towers is a state of the art building with every conceivable


modern feature built to suit individually and companies of
international standing and repute.

ML.Towers is built with the intention of lease to corporate, it covers an


impressive built up area of 175000 square feet.

ML GROUP IN INFORMATION TECHNOLOGY:To grab the growing needs and development of IT industry in
India, the group is proposing to develop IT parks in India with the investment
of 100 crores.
The group is developing initially in Navy Mumbai around 13866 square
meters, of IT Park at millennium Business Park. This project is undertaken in
29

association with the Maharashtra. Industrial Development Corporation


(MIDC), a corporation of Maharashtra State Government.
M.L.Group has got good name in export for raw material because
of sound financial resources.
POWER GENERATION:The group has in house power generation up to 6.8ml with the
help of imported generate lets to meet the power fluctuations, power cut and
power facilities etc.
MARKETING CHANNELS:
Normally they send samples and varieties.
At the time of requirement they send samples through couriers.
Participating in exhibitions every year M.L.company was taking
participation in 56years.
The people who have connection in tobacco may visit tobacco
stalls usually, even from Europe, Russia and china.
People like manufacturers, dealers, bankers, merchants of
tobacco may visit the tobacco exhibitions.
ANOTHER MODE:The other mode of marketing) is through business delegations of
tobacco board of central Government, ministry of commerce,
government of India, Guntur. The tobacco board usually,
Regularize of crop.
Register of foreigners
Fix the crop size
1. The board explores marketing possibilities with the helps of exporters.
2. Another type of business mode is tobacco trade delegations from
different countries (usually every year 5-6 delegations may take place)

30

3. The tobacco delegators meet exporters and inspect all the tobacco
varieties in the Company and they take what they want.
4. They get the business through reputation.
5. Customers usually approach them because of the goodwill of the
company.
MODE OF PAYMENT:Exporters normally receive payment from their buyers through

LCs (letters of credit).


Some time through advance payment in terms of D.A & D.F.

Document again payment

Document against acceptance

After customers checkers in the Madras port it may send to

Abroad.
Shipment of tobacco is through Chennai port only.

CREDIT:

Some parties asks / needs some time for payment with in certain
period from the date of bill of payment (up to 180 days).

In India, there is a rule that on credit basis, the payment must be done
with in 180 days from the date.

MARKET RANGE:M.L. company was marketing 7-10 millions kilos of tobacco every
year. But the market range is not fixed. The market range depends on supplies
and demand forces.

When there is demand, the company produces more.

In the tobacco field, the marketing range may be flexible based on


internationally supply and demand.

Through tobacco (leaf) is not a finished product, marketing is flexible.

FINANCE DEPARTMENT:31

The department deals with,


Cash payments will be checked by cashiers.
Cash bills and credit bills may get from threshing factory engineering
department.

32

REVIEW OF LITERATVRE
MEANING OF FINANCIAL STATEMENTS:A financial statement is a collection of data organized according
logical and consistent accounting procedures. Its purpose is to convey an
understanding of some financial aspects of a business firm. It may show a
position at a moment in time, as in the case of an income statement, thus the
term financial statements generally refers to the two statements: (I) the position
statement or the balance sheet, and (ii) the income statement or the profit and
loss account. These statements are used to convey to management and other
interested outsiders the profitability and financial position to a firm
Financial statements are the outcome of summarizing process of
accounting. In the words of John N. Her, the financial statements provide a
summary of the accounts of a business enterprise, the balance sheet reflecting
the asset, liabilities and capital as on a certain date and the income statement
showing the results of operations during a certain period. Financial statements
are prepared as an end result of financial accounting and are the major sources
of financial information of an enterprise Smith and Ashburn define financial
statements as. The product of financial accounting in asset of financial
statements prepared by the accountant of a business enterprise that purport to
reveal the financial position of the enterprise, the result of its recent activities,
and an analysis of what has been done with earnings.
Financial statements are also called financial reports. In the words of
Anthony, financial statements, essentially, are interim reports, presented
annually and reflect a division of the life of an enterprise onto more or less
arbitrary accounting period- more frequently a year.

Objectives of Financial Statements:Financial statements are the sources of information on the basis of which
conclusions are drawn about the profitability and financial position of a
concern. they are the major means employed by firms to present their financial
situation of owners, creditors and the general public, the primary objective of
33

financial statements is to assist in decision making,. The accounting principles


board of America (APB) sates the following objectives of financial statements.
1. To provide reliable financial information about economic resources and
obligations of a business firm.
2. To provide other needed information about changes in such economic
resources and obligations.
3. To provide reliable information about changes in net resources (resources
less obligations) arising out of business activities.
4. To provide financial information that assists in estimating the earning
potentials of business.
5. To disclose, to the extent possible, other information related to the
financial statements that is relevant to the needs of the users of these
statements.

Types of Financial Statements:Financial statements primarily comprise two basic statements: (1) the position
statement or the balance sheet and (2) the income statement or the profit and
loss account. However, (Generally Accepted Accounting Principles (GAAP)
specifies that a complete set of financial statements must include:
(1). A Balance Sheet.
(2). an Income Statement (Profit and Loss Account).
(3). A Statement of Changes in Financial Position.

1. Balance Sheet:The America institute of certified public accountants defines balance


sheet as. A tabular statement of summary of balances (debits and credits)
carried forward after an actual and constructive closing of books of account and
kept according to principles of accounting. The purpose of the balance sheet is
to show the resources that the company has, i.e. its assets, and from where
those resources come from i.e., its liabilities and investments by owners and
outsiders.

34

The balance sheet is one of the important statements depicting the


financial strength of the concern. It shows on the one hand the properties that it
utilizes and on other hand the sources of those properties. The balance sheet
shows all the assets owned by the concern and all the liabilities and claims it
owes to owners and outsiders.

2. Income Statement (or) Profit and Loss Account:Income statement is prepared to determine the operational position of
the concern. It is a statement of revenues earned and the expenses incurred for
earning that revenue, if there is excess of revenues over expenditures it will
show a profit and if the expenditures are more than the income then there will
be a loss. The income statement is prepared for a particular period, generally a
year. When income statement is prepared for the year ending, then all revenues
and expenditures falling due in that year will be taken into account irrespective
of their receipt or payment.
The income statement may be prepared in the form of a manufacturing
account to find out the cost of production, in the form of trading account to
determine gross profit or gross loss. In the form of a profit and loss account
determine net profit or net loss, a statement of retained earnings may also be
prepared to show the distribution of profits.

3. Statement of Changes in Owners Equity (Retained Equity):The term owners equity refers to the claims of the owners of the
business shareholders against the assets or the firm. It consists of two elements
(1) paid-up share capital, I.e. the initial amount of funds invested by the
shareholders and (2) retained earnings/reserves and surplus representing
undistributed profits. The statement of changes in owners equity simply shows
the beginning balance of each owners equity account the reasons for increases
and decreases in each, and its ending balance. However in most cases, the only
owners equity account that changes significantly is retained earnings and
hence the statement of changes in owners equity becomes merely a statement
of retained earnings.

35

A statement of retained earnings is also known as profit and loss


Appropriation Account or income Disposal Statement. As the name suggests it
shows appropriations of earnings. The previous years balance is first brought
toward. The net profit during the current year is added to this balance. On the
debt side, appropriations like interim dividends paid. Proposed dividend in
preference and equity share capital, amounts transferred to debenture
redemption fund, capital redemption funds. General reserves etc are shown.
The balance in tills account will show this amount of profit retained in hand
and carried forward. The appropriations cannot lie more than the profits so this
account will not have a debit balance. There cannot be appropriations without
profits.

4. Statement of Changes in Financial Position:The basic financial statements, I.e., the balance sheet and the profit
and loss account or income statement of a business reveal the net effect of the
various transactions on the operational and financial position of the company.
The balance sheet gives a static view of the resources of a business and the uses
to which these resources have been put at a certain point of time. The profit and
loss account in a general way. Indicates the resources provided by operations.
But there are many transactions that do not operate through profit and loss
account. Thus, for a better understanding another statement called statement of
changes in financial position has to be prepared show the changes in assets and
liabilities from the end of one period to the end of another point of time. The
objective of this statement is to showing the movement of funds (working
capital or cash) during a particular period. The statement to changes in financial
position may take any of the following two forms.
(a) Funds Flow Statement:-The funds flow statements is designed to analyze

the changes in the financial conditions of a business enterprise between two


periods. The word fund is used to denote working capital.
This statement will show the sources from which the funds are received and the
uses which these have been put. I his statement enable the management to have
an idea about the sources of funds and their uses for various purposes.
36

(b) Cash Flow Statements:-a statement of changes in the financial position


of a firm on cash basis is called cash flow statement. It summarizes the causes
of changes in has position of a lousiness enterprise between states of two
balances sheets. This statement is very much similar to the statement of
changes in working capital I.e., funds flow statement. A cash flow statement
focuses attention on cash changes only.

Characteristics of Ideal Financial Statements:The financial statements are prepared with a view to depict financial
position of the concern. A proper analysis and interpretation of these statements
enables a person to judge the profitability and financial strength of the
business. The financial statements should be prepared in such a way that they
are able to give a clear and orderly picture of the concern. The ideal financial
statements have the following characteristics.

1. Depict True Financial Position:The information contained in the financial statements should be such that a true
and correct idea is taken about the financial position of the concern. No
material information should be with held while preparing position of the
concern. No material information should be with held while preparing these
statements.

2. Effective Presentation:The financial statements should be presented in a simple and lucid way so as to
make them easily understandable. A person who is not well versed with
accounting terminology should also be able to understand the statements
without much difficulty. This characteristic will enhance the utility of these
statements.

3. Relevance: Financial statements should be relevant to the objectives of the enterprises.


This will be possible when the person preparing these statements is able to
properly utilize the accounting information. The information which is not
relevant to the statements should be avoided; otherwise it will be difficult to
make a distinction between relevant and irrelevant data.
37

4. Attractive:The financial statements should be prepared in such a way that important


information is underlined so that it attracts the eye of the reader.

5. Easiness:Financial statements should be easily prepared. The balances of different ledger


accounts should be easily taken to these statements. The calculation work
should be minimum possible while preparing these statements. The size of the
statements should not be very large. The columns to be used for gibing the
information should also be less. This will enable the saving of time in preparing
the statements.

6. Comparability:The results of financial analysis should be in a way that can be compared to


the previous years statements. The statement can also be in compared with the
figures of other concerns of the same nature. Sometimes budgeted figures are
given along with the present figures. The comparable figures will make the
statements more useful. The Indian companies Act. 1956 has made it obligatory
to give previous years figures in the balance sheet. The comparison of figures
will enable a proper assessment for the working of the concern.

7. Analytical representation:The information should be analyzed in such a way that similar date is
presented at the same place. A relationship can be established in similar type of
information. This will be helpful in analysis and interpretation.

8. Brief:If possible, the financial statements should be presented in brief. The reader
will be able to form an idea about the figures. On the other hand, it figures are
given in details then it will become difficult to judge the working of the
business.

9. Promptness:The financial statements should be prepared and presented at the earliest


possible. Immediately at the close of the financial year, statements should be
ready.
38

Limitations of Financial Statements:Though financial statements are relevant and useful for the concern,
still they do not present a final picture of the concern. The utility of these
statements is dependent upon a number of factors. The analysis and
interpretation of these statements should be done very carefully otherwise
misleading conclusions may be drawn; the financial statements suffer from the
following limitations:

1. Only interim reports:These statements don not give a final picture of the concern. The data
given in these statements is only approximate. The actual position can only be
determined when the business is sold or liquidated. However, the statements
have to be prepared for different accounting periods, generally one year, during
the life time of the concern. The costs and incomes are apportioned to different
periods with a view to determine profits etc. the allocation of expenses and
incomes will depend upon the personal judgment of the accountant. The
existence of cotangent assets and liabilities also makes the statements
imprecise. So financial statements do not give the final picture and they are the
most interim reports.

2. Do not give exact position:The financial statements are expressed in momentary values so they
appear to give final and accurate position. The value of fixed assets in the
balance sheet neither represents the value for which fixed assets can be sold nor
did the amount, which will lie, require replacing these assets. The balance sheet
is prepared on the presumption of a going concern. The concern is expected to
continue in the figure. So fixed assets are shown all cost less accumulated
depreciation. There are certain assets in the balance sheet such as preliminary
expenses, goodwill, discount on issue of shares which will realize nothing at
the time of liquidation through they are shown in the balance sheet.

3. Historical Costs:The financial statements are prepared on the basis of historical costs or
original costs. The value of assets decreases with the passage of time current
39

price changes are not taken into account. The statements are not prepared
keeping in view the present economic conditions. The balance sheet losses the
significance of being an index of current economic realities. Similarly, the
profitability shown by the income statement may not represent the earning
capacity of the concern. The increase I profits may be due to an increase in
prices or due to sonic abnormal causes and not due to increase in efficiency.
The conclusions drawn from financial statements may not give a lair picture of
the concern.

4. Impact of Non-Monetary Factors Ignored:There are certain f actors which have a bearing on the financial
position and operating results of the business but they do not become a pan of
these statement s because they cannot be measured I monetary terms. Such
factors may include the reputations of the management, credit worthiness of the
concern, sources and commitments for purchases and sales, co-operation of the
employees, etc. The financial statements only show the position of the financial
accounting for business and not the financial position.

5. No Precision:The precision of financial statement data is not possible because the


statement deal with matters which cannot be precisely stated. The data are
recorded by convention procedure is followed over the years. Various
conventions, postulates personal judgments etc, are used for developing the
data.

Financial Statements Analysis:Financial statements are prepared primarily for decision making. They
play a dominant role in setting the frame work of managerial decision. But the
information provided in the financial statements is not an end in itself as no
meaningful conclusions can be drawn from these statements alone. However,
the information provided in the financial statements is of immense use in
making decisions through analysis and interpretation of financial statements.

40

Meaning and Concept of Financial Analysis:The term financial analysis also known as analysis and interpretation
of financial statements, refers to the process of determine financial strengths
and weakness of the firm by establishing strategic relationship between the
items of the balance sheet, profit and loss account and oilier operative data.
Analyzing financial statements,
According to Metcalf and Titard. Is a process of evaluating the
relationship between component parts of financial statement to obtain a better
understanding of a firms position and performance? In the words of Myers,
Financial statement Analysis is largely a study of relationship among the
various financial factors in a business as disclosed by a single set of
statements, and study of the trend of these(actors as shown in a series of
statements.)
The purpose of financial analysis is to diagnose the information
contained in financial statements so as to judge the profitability and financial
soundness of the firm, just like a doctor examines ills patient by recording his
body temperature, blood treatment, a financial analyst analysis the financial
statements with various tools of analysis before commenting upon the financial
health or weakness of an enterprise. The analysis and interpretation of financial
statements is essential to bring out the mystery behind the figures in financial
statements. Financial statements analysis is an attempt to determine the
significance and meaning of the financial statement data so that forecast may
be made of the future earnings, ability to pay interest and debt maturities (both
current and long-term) and profitability of a sound dividend policy.

TOOLS:
comparative balance sheet
common size balance sheet
trend analysis
funds flow statement
cash flow statement
41

Methods or Devices of Financial Analysis:1. Comparative Statements:The comparative financial statements are statements of the financial
position at different periods of time. The elements of financial position are
shown in a comparative form so as to give an idea of financial position at two
or more periods. Any statements prepared in a comparative term will be
covered in comparative statements. From practical point of view, generally two
financial statements (balance sheet and income statement) are prepared in
comparative form for financial analysis purposes.
Not only the comparison of the figures of two periods but also be
relationship between balance sheet and income statement enables an in-depth
study of financial position a cooperative results. The comparative statement
may show:
I. Absolute Figures (rupee amounts)
II. Changes in absolute figures i.e., increase or decrease in absolute figures.
III. Absolute data in terms of percentages.
The analyst is able to draw useful conclusions when figures are given in a
comparative position. The figures of sales for a quarter, half-year or one year
may tell only the present position of sales efforts. When sales figures of
previous periods, are given along with the figures of current periods then the
analyst will be able to study the trends of sales over different periods of time.
Similarly, comparative figures will indicate the trend and direction of financial
and operating results.
The financial data will be comparative only when same accounting
principles are used in preparing these statements. In case of a deviation in the
use of accounting principles this fact must be mentioned at the foot of financial
statements and the analyst should be careful in using these statements. The two
comparative statements are (I) balance sheet and (ii) income statement.

42

I. Comparative income statement:The income statement gives the results of the operation of a business. The
comparative income statement gives an idea of the progress of a business over
a period of time. The changes in absolute data in money values and percentages
can be determined to analyze the profitability of the business. Like comparative
balance sheet, income statement also has four columns. First two columns give
figures of various items for two years. Third and fourth columns are used to
show increase is decrease in figures in absolute amounts and percentages
respectively.

ii. Comparative balance sheet:The comparative balance sheet analysis is the study of the trend of the same
items, group of items and computed items in two or more balance sheet of the
same business enterprise on different dates. The changes in periodic balance
sheet items reflect the conduct of a business. The changes can be observed by
comparison of the balance sheet at the beginning and at the end of a period and
these changes can help in forming an opinion about the progress of an
enterprise. The comparative balance sheet has two columns for the data of
original valance sheets. A third column is used it show increases in figures. The
fourth column may be added for giving percentages of increases or decreases.

2. Trend analysis:The financial statements may be analyzed by computing trends of


series of information; this method determines the direction upwards of
downwards and involves the computation of the percentage relationship that
each statement item bears to the same item in base year. The information for a
number of years is taken up and one year, generally the first year, is taken as a
bad year. The figures of the base year are taken as 100 and trend ratios for other
years are calculated on the bases of base year. The analyst is able to see the
trend of figures, whether upward or downward.

43

3. Common- size statement:The common size statements, balance sheet and income statement are
shown in analytical percentages. The figures are shown as percentages of total
assets, total liabilities and total sales. The total assets are taken as 100 and
different assets are expressed as a percentage of the total. Similarly various
liabilities are taken as a part of total liabilities. These statements are also known
as component percentage or 100 percent statement because every individual
item is stand as a percentage of the total 100. The short-comings in
comparative statements and tend percentages where changes in items could not
be compared with the totals have been covered up. The analyst is able to assess
the figures in relation to total values.

4. Funds flow statement:The funds flow statement is a statement is a statement which shows the
movement of funds and is a report of the financial operations of the business
under king. It indicates various means by which funds were obtained during a
particular period and the ways, in which these funds were employed, in simple
words, it is a statement of sources and applications of funds.

Meaning and concept funds:The term funds has been defined in a number of ways:

A. in a narrow sense: it means cash only and a funds flow statement


prepared on this basis is called a cash flow statement. Such a statement
enumerated net effects of the various business transactions on cash and takes
into account receipts and disbursements of cash.

B. in a broader sense: the term funds refers to money values in whatever


forms it may exist. Here funds mean all financial resources, used in business
whether in the form of men, material, money, machinery and others.

C. in a popular sense: the term funds means working capital i.e., the
excess of current over current liabilities. The working capital concept of funds
has emerged due the tact that total resources of a business are invested partly in

44

fixed assets in the form of fixed capital and partly kept in form of liquid or near
liquid form as working capital.
The narrower concept of funds i.e., cash or working capital concept fails
to reveal the changes in the total financial resources of a business. Some
significant items, such as purchase of building in exchange of shares or
payment of bonus in the form of shares which do not directly affect cash or
working capital are not revealed from the analysis based on these concepts,
however, the concept of funds as working capital is the most popular one and in
this chapter we shall refer to funds as working capital and a funds flow
statement as a statement of sources and application of funds.

Meaning and Concept of Flow of Funds :The term flow means movement and includes both inflow and
outflow. The term Flow of funds means transfer of economic valued from
one asset of equity to another. Flow of funds is said to have taken placed when
any transaction makes changes in the amount of funds available before
happening of the transaction. If the effect of transaction results in the increase
of funds, it is called sources of funds and if it results in the decrease of funds, it
if known as application of funds, further, in case the transaction does not
change funds it is said to have not resulted in the flow of funds. According to
the working capital concept of funds, the term flow of funds refers to the
movement of funds in the working capital. If any transaction results in the
increase in working capital, it is said to be a source or inflow of funds and if it
results in the decrease if working capital, it is said to be an application or outflow of funds.

Rule:The flow of funds occurs when a transaction changes on the one hand
a non current account and on the other current account and vice-versa.
When a change in a non current account e.g., fixed assets, long term liabilities
reserves and surplus fictitious assets etc, is followed by a change in another
non-current account, it does not amount to flow of funds.

45

This is because of the fact that in such cases neither the working capital
increases nor decreases. Similarly, when a change in one current account results
in a change in anther current account it does not affect funds. Funds move from
noncurrent to current transactions or vice-versa only.
In simple language funds move when a transaction affects (i) a current
assets and a fixed assets or (ii) a fixed and a current liability or (iii) a current
asset and a fixed liability of (iv) a fixed liability and current liability, and funds
so not move when the transaction affects fixed assets and fixed liability or
current assets and current liability.

Comparison between Funds Flow and Cash Flow Statement:The term funds has a variety of meanings. In a narrow sense it means
cash and the statement of changes in the financial position prepared on cash
basis is called a cash flow statement. In the most popular sense, the term
funds refers to working capital and a statement of changes in the financial
position prepared on tills basis is called a funds flow statement. A cash flow
statement is much similar to a funds flow statement as both are prepared to
summaries the causes of changes in the financial position of a business.
However, following are the main differences between funds and a cash flow
statement.
1. Funds flow statement is based on a wider concept of funds I.e., working
capital while cash flow statement is based in the narrower concept of funds,
i.e., cash only, which is only one element of working capital, the other being
debtors stock, temporary investment, bills receivable etc.
2. Funds flow statement is based on accrual basis of accounting while cash
flow statements are based on cash basis of accounting. In cash flow statement
while calculating operating profits, adjustments for prepaid and outstanding
expenses and income are made to convert the data from accrual basis to cash
basis, but no such adjustments are required to be made while preparing a funds
flow statements.

46

3. Funds flow statement does not reveal changes in current assets and current
liabilities, rather these appear separately in a schedule of changes in working
capital. No such schedule of change in working capital is prepared for a cash
flow statement and changes in all assets and liabilities fixed as well as current,
are summarized in the cash flow statement.
4. Cash flow statement is prepared by taking the opening balance of cash,
adding to this all the inflow of cash and deducting the outflows of cash from
the total. The balance, i.e., opening balance of cash and inflows of cash minus
outflows of cash, is reconciled with closing balance of cash. No such opening
or closing balance appears in a funds flow statement. The net difference
between sources and applications of funds does not represent cash rather it
reveals the net increase or decrease in working capital.

2. Funds flow statement is useful in planning intermediate and long-term


financing while as cash flow statement is more useful for short-term
analysis and cash planning of the business.

Ratio Analysis:One of the techniques of analysis of financial statements is to calculate


ratios. Ratio is the numerical or an arithmetical relationship between two
figures. It is expressed when one figure is divided by another. If 4000 is divided
by 10,000 the ration can be expressed as 4 or 2:5 or 40%.
Absolute figures are valuable but they standing alone convey no
meaning unless compared with another. Accounting ration inter-relationships,
which exist among various accounting data? When relationships among various
accounting data supplied by financial statements are worked out, they are
known as accounting ratios.

Accounting ratios can be expressed in various ways such as:


i. A pure ratio say ratio of current assets to current liabilities is 2:I or
ii. A rate say current assets are two times of current liabilities or
iii. A percentage say current assets are 200% of current liabilities.
Each method of expression has distinct advantage over the other. The analyst
will select that mode which wills best-suit his convenience and purpose.
47

Classification of Ratios:1. Profitability Ratios


2. Turnover Ratios
3. Financial Ratios
4. Leverage Ratios
1. Profitability Ratios:-

Profitability Ratios are of outmost importance for a concern; these


ratios are calculated to enlighten the end results of business activities, which is
the sole criterion of the overall efficiency of a business concern.

2. Turnover (Performance or Activity) Ratios:These ratios are very important for a concern to judge how well
facilities at the disposal of the concern are being used or to ratios are usually
calculated on the basis of sales or cost of sales and are expressed in integers
rather than as percentage. Such ratios should be calculated separately for each
type of asset. Higher the turnover ratio, the profitability and use of capital or
resources will be. The following are the important turnover ratios usually
calculated by a concern.

3. Financial Ratios:These ratios are calculated to judge the financial position of the
concern from long-term as well as short-term solvency point of view. The
following are the ratios, which are calculated in the respect.

4. Leverage Ratios:Leverage Ratios to an increased means of accomplishing some


purpose. In financial management it refers to employment of funds to
accelerate rate of return to owners. It may be favorable or unfavorable. An
unfavorable leverage exists if the rate of return remains to however. It can be
used as a tool of financial planning by the finance manager.

48

DATA ANALYSIS AND INTERPRETATION


1. Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2009.
As on
31-03-2009 Rs.
Sources of Funds
Shareholders funds:
Capital
Reserves & Surplus
Loan Funds:
Secured Loans
Unsecured Loans
Current Liabilities and Provisions:
Current Liabilities
Provisions
Other Liabilities:
Deferred Tax Liability
Total Funds
Application of Funds
Fixed Assets:
Gross Block
Less-Depreciation
Net Block
Capital Work-in-Progress
Investments
Current Assets, Loans & Advances:
Inventories
Sundry Debtors
Cash & Bank Balances
Other Current Assets
Loans & Advances
Total Funds

4,44,10,500
57,75,59,443
8,04,83,854
1,34,34,346
5,05,89,753
13,42,33,742
6,13,60,000
96,20,71,638
63,50,42,114
31,05,89,757
32,44,52,357
4,34,14,090
21,23,600
15,61,79,205
10,99,21,593
1,51,09,765
1,10,282
31,07,60,746
96,20,71,638

2. Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2010.


As on
31-03-2010 Rs.
Sources of Funds
Shareholders funds:
Capital
Reserves & Surplus
Loan Funds:
Secured Loans
Unsecured Loans

4,44,10,500
63,72,39,115
6,57,69,244
1,33,23,947
49

Current Liabilities and Provisions:


Current Liabilities
Provisions
Other Liabilities:
Deferred Tax Liability
Total Funds
Application of Funds
Fixed Assets:
Gross Block
Less-Depreciation
Net Block
Capital Work-in-Progress
Investments
Current Assets, Loans & Advances:
Inventories
Sundry Debtors
Cash & Bank Balances
Other Current Assets
Loans & Advances
Total Funds

3,64,27,045
17,44,11,546
6,13,60,000
103,29,41,397
74,42,78,393
36,54,01,716
37,88,76,677
1,68,71,220
21,23,500
18,88,86,937
11,37,30,833
74,00,120
1,17,320
32,49,24,790
103,29,41,397

3. Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2011.


As on
31-03-2011 Rs.
Sources of Funds
Shareholders funds:
Capital
Reserves & Surplus
Loan Funds:
Secured Loans
Unsecured Loans
Current Liabilities and Provisions:
Current Liabilities
Provisions
Other Liabilities:
Deferred Tax Liability
Total Funds
Application of Funds
Fixed Assets:
Gross Block
Less-Depreciation
Net Block
Capital Work-in-Progress
Investments
Current Assets, Loans & Advances:
50

4,44,10,500
71,78,63,339
20,72,957
1,48,16,364
5,29,90,750
11,77,05,280
5,41,70,942
100,40,30,132
76,67,50,485
39,74,15,418
36,93,35,067
81,00,280
21,33,500

Inventories
Sundry Debtors
Cash & Bank Balances
Other Current Assets
Loans & Advances
Total Funds

13,14,05,030
13,61,88,751
4,37,80,275
3,07,761
31,27,79,468
100,40,30,132

4. Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2012.


As on
31-03-2012 Rs.
Sources of Funds
Shareholders funds:
Capital
Reserves & Surplus
Loan Funds:
Secured Loans
Unsecured Loans
Current Liabilities and Provisions:
Current Liabilities
Provisions
Other Liabilities:
Deferred Tax Liability
Total Funds
Application of Funds
Fixed Assets:
Gross Block
Less-Depreciation
Net Block
Capital Work-in-Progress
Investments
Current Assets, Loans & Advances:
Inventories
Sundry Debtors
Cash & Bank Balances
Other Current Assets
Loans & Advances
Total Funds

4,44,10,500
72,19,53,222
1,92,92,894
1,63,40,490
5,15,67,655
11,72,94,657
6,62,17,738
103,70,77,156
98,03,09,537
45,06,84,539
52,96,24,998
23,36,180
10,52,91,435
15,10,96,317
2,55,94,348
57,986
22,30,75,892
103,70,77,156

5. Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2013.


As on
51

31-03-2013 Rs.
Sources of Funds
Shareholders funds:
Capital
Reserves & Surplus
Loan Funds:
Secured Loans
Unsecured Loans
Current Liabilities and Provisions:
Current Liabilities
Provisions
Other Liabilities:
Deferred Tax Liability
Total Funds
Application of Funds
Fixed Assets:
Gross Block
Less-Depreciation
Net Block
Capital Work-in-Progress
Investments
Current Assets, Loans & Advances:
Inventories
Sundry Debtors
Cash & Bank Balances
Other Current Assets
Loans & Advances
Total Funds

4,44,10,500
74,69,40,867
1,52,87,300
1,80,73,236
8,98,41,079
11,29,88,519
9,55,01,587
112,30,43,088
98,33,03,759
50,87,12,556
47,45,91,203
12,66,944
23,36,180
13,39,45,023
15,22,91,708
12,10,34,896
13,89,848
23,61,87,286
112,30,43,088

Ten years Record of Sri Maddi Lakshmaiah:(Rs. in Lakhs)


Sources of
Funds
Equity

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
444

444

444

444

444

444

444

444

444

444

Reserves

2560

3086

3859

4746

5192

5776

6372

7179

7882 8425

Borrowings

874

563

221

1068

1606

1552

1405

711

356

3878

4093

4524

6288

7248

7772

8221

8334

8682 9202

capital

Net capital
employed
Application
of funds

52

333

Gross fixed

2467

2800

3916

5391

5170

6784

7611

(1545)

(1826)

(2033)

(2564)

(3106)

(3654) (3974)

4507 5087

1111

1255

2090

3358

3606

3678

3957

3775

5296 4759

& 2767

2838

2434

2930

3636

4094

4264

4559

3386 4443

4093

4524

6288

7242

7772

8221

8334

8682 9202

assets

Depreciation (1356)
Net

fixed

assets
Net current
assets

investments
Net assets

3878

employed

TEN YEARS HIGHLIGHTS

Equity, Reserves and Borrowings from the year 2003-13

53

7749

9803 9846

Net fixed assets and net current assets from the year 2003-13

54

1. Profit and Loss Account of Sri Maddi Lakshmaiah for the year ended 3103-2009.
Particulars

Year ended 31-03-2009


Rs.

Income
Sales
Other Income
A
Expenditure
Raw materials consumed
Payments & Benefits to Employees
Manufacturing, Selling, Administrative & Other
Expenses
Excise duty and Taxes
Interest
Depreciation
Decrease / (Increase) in stocks
B
Profit before tax (A-B)
Excess provision for depreciation made in earlier years
credited back.
Provision for diminution in value of investments
Provision for Current tax
Excess Provision for Differed tax made in earlier
years with drawn
Differed Tax
Profit after tax
Excess provision of income tax made in earlier years
Profit brought forward from previous year
Profit available for appropriations
Transfer to General Reserve
Provision for Proposal Dividend
Provision for tax on distributed profits
Balance of profit carried forward to next year
Total

55

81,51,31,218
3,39,19,679
84,90,50,897
42,00,98,028
4,55,68,437
14,87,51,964
8,30,37,346
82,47,122
5,63,12,170
(4,22,00,381)
71,98,14,684
12,92,36,213
5,34,615
(5,13,40,000)
49,40,000
8,33,70,828
8,33,70,828
4,43,95,083
12,77,65,911
6,00,00,000
2,22,02,875
28,44,743
4,27,18,293
12,77,65,911

2. Profit and Loss Account of Sri Maddi Lakshmaiah for the year ended
31-03-2010.
Particulars

Year ended 31-03-2010


Rs.

Income
Sales
Other Income
A
Expenditure
Raw materials consumed
Payments & Benefits to Employees
Manufacturing, Selling, Administrative & Other
Expenses
Excise duty and Taxes
Interest
Depreciation
Decrease / (Increase) in stocks
B
Profit before tax (A-B)
Excess provision for depreciation made in earlier years
credited back.
Provision for diminution in value of investments
Provision for Current tax
Excess Provision for Differed tax made in earlier
years with drawn
Differed Tax
Profit after tax
Excess provision of income tax made in earlier years
Profit brought forward from previous year
Profit available for appropriations
Transfer to General Reserve
Interim Dividend paid
Provision for Proposal Dividend
Provision for tax on distributed profits
Balance of profit carried forward to next year
Total

56

91,95,39,122
3,01,62,094
94,97,01,216
44,65,02,253
5,05,88,765
17,01,11,656
8,83,89,916
54,84,181
5,74,54,866
(14,79,600)
81,70,52,037
13,26,49,179
5,40,552
(4,00,00,000)
9,31,89,731
40,61,369
9,72,51,100
4,27,18,293
13,99,69,393
6,00,00,000
1,11,01,438
2,22,02,875
42,67,115
4,23,97,965
13,99,69,393

3. Profit and Loss Account of Sri Maddi Lakshmaiah for the year ended 31-032011.
Particulars

Year ended 31-03-2011


Rs.

Income
Sales
Other Income
A
Expenditure
Raw materials consumed
Payments & Benefits to Employees
Manufacturing, Selling, Administrative & Other
Expenses
Excise duty and Taxes
Interest
Depreciation
Decrease / (Increase) in stocks
B
Profit before tax (A-B)
Excess provision for depreciation made in earlier
years credited back.
Provision for diminution in value of investments
Provision for Current tax
Excess Provision for Differed tax made in
earlier years with drawn
Differed Tax
Profit after tax
Short provision of income tax made in earlier
years
Profit brought forward from previous year
Profit available for appropriations
Transfer to General Reserve
Interim Dividend paid
Provision for Proposal Dividend
Provision for tax on distributed profits
Balance of profit carried forward to next year
Total

57

85,23,07,423
4,58,79,555
89,81,86,978
38,53,59,694
5,45,13,483
15,15,94,821
7,87,61,512
18,46,045
5,75,77,789
2,14,66,781
75,11,20,125
14,70,66,853
(4,30,00,000)
71,89,058
11,12,55,911
(2,51,493)
11,10,04,418
4,23,97,965
15,34,02,383
7,00,00,000
2,66,43,450
37,36,744
5,30,22,189
15,34,02,383

4. Profit and Loss Account of Sri Maddi Lakshmaiah for the year ended 31-032012.
Particulars

Year ended 31-03-2012


Rs.

Income
Sales
Other Income
A
Expenditure
Raw materials consumed
Payments & Benefits to Employees
Manufacturing, Selling, Administrative & Other
Expenses
Excise duty and Taxes
Interest
Depreciation
Decrease / (Increase) in stocks
B
Profit before tax (A-B)
Excess provision for depreciation made in earlier years
credited back.
Provision for Fringe Benefit Tax
Provision for Current tax
Excess Provision for Differed tax made in earlier years
with drawn
Differed Tax
Profit after tax
Short provision of income tax made in earlier years
Profit brought forward from previous year
Profit available for appropriations
Transfer to General Reserve
Interim Dividend paid
Provision for Proposal Dividend
Provision for tax on distributed profits
Balance of profit carried forward to next year
Total

58

73,02,58,571
2,43,85,694
75,46,44,265
38,47,96,214
6,01,93,946
20,62,05,009
8,88,237
4,32,266
5,61,49,511
(15,42,897)
70,71,22,288
4,75,21,976
(8,25,000)
(40,00,000)
(1,20,46,796)
3,06,50,180
(12,43,470)
2,94,06,710
5,30,22,190
8,24,28,900
29,40,671
2,22,02,875
31,13,953
5,41,71,401
8,24,28,900

5. Profit and Loss Account of Sri Maddi Lakshmaiah for the year ended 31-032013.
Particulars

Year ended 31-03-2013


Rs.

Income
Sales
Other Income

84,55,85,494
1,56,16,829

A
Expenditure
Raw materials consumed
Payments & Benefits to Employees
Manufacturing, Selling, Administrative & Other
Expenses
Excise duty and Taxes
Interest
Depreciation
Decrease / (Increase) in stocks
B
Profit before tax (A-B)
Excess provision for depreciation made in earlier
years credited back.
Provision for Fringe Benefit Tax
Provision for Current tax
Excess Provision for Differed tax made in
earlier years with drawn
Differed Tax
Profit after tax
Short provision of income tax made in earlier
years
Profit brought forward from previous year
Profit available for appropriations
Transfer to General Reserve
Interim Dividend paid
Provision for Proposal Dividend
Provision for tax on distributed profits
Balance of profit carried forward to next year
Total

59

45,85,20,169
6,59,86,411
20,61,95,711
9,85,295
4,98,180
5,89,13,261
1,66,35,401
77,44,63,626
8,67,38,697
(2,00,000)
(98,00,000)
56,85,598
(2,92,83,849)
5,31,40,446

5,41,71,401
10,73,11,847
2,45,59,329
1,77,62,300
88,81,150
15,09,351
5,45,99,717
10,73,11,847

Ten Years Record of Sri Maddi Lakshmaiah


Particulars
Operating

2004

2005

2007

2008

2009

2010

7930

11029 11313 5942

8344

8490

9497

8982

8451

9616

1172

1267

1835

1566

2344

1938

1956

2065

1040

1461

Profit
Depreciation 188
Interest & 79

199
76

282
60

211
7

540
107

563
82

575
55

576
18

561
4

589
5

lease rentals
Profit before 905

992

1493

1348

1697

1292

1326

1471

475

867

tax
Profit

747

988

1163

1084

834

972

1110

294

556

results :
Gross

2006

(Rs.in.Lakhs)
2011
2012

2013

sales&other
income
Operating

after 625

tax
Dividend

155

200

200

222

222

222

333

266

222

266

paid
Dividend

35

45

45

50

50

50

75

60

50

60

rate (%)
Retained

476

526

766

918

862

612

599

844

41

250

earnings
Earnings per 14.07 16.83

22.26

26.19

24.41

18.77

20.99

25.00

6.62

12.53

share (Rs.)
Return on 24.72 24.87

27.99

27.03

20.77

14.80

15.63

16.28

3.53

6.27

0.05

0.20

0.28

0.11

0.08

0.01

0.04

0.04

96.90

117.55 126.93 140.03 153.50 171.66 187.48 199.68

net

worth

(%)
Debt equity 0.29

0.16

ratio
Book value 67.65 79.48
(Rs.)

TEN YEARS HIGHLIGHTS

Dividends, retained earnings from the year 2003-2013

60

The analysis and interpretation of financial statement is used to determine


the financial position and results of operations as well. A number of methods or
devices are used to study the relationship betwze the position of the enterprise. The
following methods of analysis are generally used:
1. Comparative Statements
2. Trend Analysis
3. Common sized statements
4. Funds flow statements
5. Cash flow statement
6. Cost-Volume-Profit Analysis
7. Ratio Analysis.

1. Comparative Balance Sheet of Sri Maddi Lakshmaiah as on 2007-08 to


2008-09.
2007-08

2008-09

61

Absolute

% Increase/

Increase/

(Decrease)

(Decrease)
Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
1Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans
& Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

4,44,10,500
51,92,36,233

4,44,10,500
57,75,59,443

- 5,83,23,210
10.09 %

8,06,27,468
1,36,59,868

8,04,83,854
1,34,34,346

(1,44,614)
(2,25,522)

(0.179 %)
(1.65 %)

3,36,01,687
7,96,44,522

5,05,89,753
13,42,33,742

1,69,88,066
5,45,89,220

50.55 %
68.54 %

6,63,00,000
83,74,80,278

6,13,60,000
96,20,71,638

(49,40,000)
12,45,91,360

(7.45 %)

36,06,10,383
21,23,800

36,78,66,447
21,23,600

72,56,064
(200)

2.01 %
(0.009 %)

10,07,62,693
8,54,41,343
2,04,47,689
1,95,122
26,78,99,248
83,74,80,278

15,61,79,205
10,99,21,593
1,51,09,765
1,10,282
31,37,60,746
96,20,71,638

5,54,16,512
2,44,80,250
(53,37,924)
(84,840)
4,82,61,498
12,45,91,360

54.99 %
28.65 %
(26.10 %)
(43.48 %)
15.99 %

2.Comparative Balance Sheet of Sri Maddi Lakshmaiah as on 2008-09 to2009-10.


2008-09

2009-10

Absolute

Increase/

Increase/

(Decrease)

(Decrease)

Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus

4,44,10,500

4,44,10,500

57,75,59,443

63,72,39,115

5,96,79,672

Loan Funds
Secured Loans

8,04,83,854

6,57,69,244 (1,47,14,640)

(18.28 %)

Un Secured Loans

1,34,34,346

1,33,23,947

(0.82 %)

62

(1,10,399)

Current Liabilities
Current Liabilities
Provisions

5,05,89,753

3,64,27,045 (1,41,62,708)

(27.99 %)

13,42,33,742

17,44,11,546

4,01,77,804

29.93 %

6,13,60,000

6,13,60,000

96,20,71,638

103,29,41,397

7,08,69,759

36,78,66,447

39,57,47,897

2,78,81,450

21,23,600

21,33,500

(100)

Inventories

15,61,79,205

18,88,86,937

3,27,07,732

20.94 %

Sundry Debtors

10,99,21,593

11,37,30,833

38,09,240

3.46 %

1,51,09,765

74,00,120

(77,09,645)

1,10,282

1,17,320

7,038

6.38 %

Loans& Advances

31,37,60,746

32,49,24,790

1,41,64,044

4.55 %

Total Assets

96,20,71,638

103,29,41,397

7,08,69,759

Other Liabilities
Differed Tax Liability
Total Funds

Application of Funds
Net Fixed Assets
Investments
Current

7.57 %
(0.004 %)

Assets,

Loans & Advances

Cash &Bank Balances


Other current assets

(51.02 %)

3. Comparative Balance Sheet of Sri Maddi Lakshmaiah as on 2009-10 to


2010-11.
2009-10

2010-11

Absolute

% Increase/

Increase/

(Decrease)

(Decrease)
Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities

4,44,10,500
63,72,39,115

4,4,10,500
71,78,63,339

8,06,24,224

6,57,69,244
1,33,23,947

20,72,957
1,48,16,364

(6,36,96,267)
14,92,417

(96.84 %)
11.20 %

3,64,27,045
17,44,11,546

5,29,90,750
11,77,05,280

1,65,63,705
(5,67,06,266)

45.37 %
(32.51 %)

63

12.65 %

Differed Tax Liability


Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans
& Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

6,13,60,000
103,29,41,397

5,41,70,942
100,40,30,132

(71,89,058)
2,89,11,265

(11.71 %)

39,57,47,897
21,33,500

37,74,35,347
21,33,500

(1,83,12,550)
-

(4.62 %)
-

18,88,86,937
11,37,30,833
74,00,120
1,17,320
32,49,24,790
103,29,41,397

13,14,05,030
13,61,88,751
4,37,80,275
3,07,761
31,27,79,468
100,40,30,132

(5,74,81,907)
2,24,57,918
3,63,80,155
1,90,441
(1,21,45,322)
2,89,11,265

(30.43 %)
19.74 %
491.61 %
162.32 %
(3.73 %)

4. Comparative Balance Sheet of Sri Maddi Lakshmaiah as on 2010-11 to


2011-12.
2010-11

2011-12

Absolute

% Increase/

Increase/

(Decrease)

(Decrees)
Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans
& Advances
Inventories
Sundry Debtors
Cash &Bank Balances

4,4,10,500
71,78,63,339

4,44,10,500
72,19,53,222

40,89,883

20,72,957
1,48,16,364

1,92,92,894
1,63,40,490

1,72,19,937
15,54,126

830.69 %
10.28 %

5,29,90,750
11,77,05,280

5,15,67,655
11,72,94,657

(14,23,095)
(4,10,623)

(2.68 %)
(0.34 %)

5,41,70,942
100,40,30,132

6,62,17,738
103,70,77,156

1,20,46,796
3,30,47,024

22.73 %

37,74,35,347
21,33,500

52,96,24,998
23,36,180

15,21,89,651
2,02,680

40.32 %
9.49 %

13,14,05,030
13,61,88,751
4,37,80,275

10,52,91,434
15,10,96,317
2,55,94,348

(2,61,13,596)
1,49,07,560
(1,81,85,927)

(19.87 %)
10.9 %
(41.53 %)

64

0.56 %

Other current assets


Loans& Advances
Total Assets

3,07,761
31,27,79,468
100,40,30,132

57,986
22,30,75,892
103,70,77,156

(2,49,775)
(8,97,03,576)
3,30,47,024

(81.15 %)
(82.67 %)

5. Comparative Balance Sheet of Sri Maddi Lakshmaiah as on 2011-12 to


2012-13.
2011-12

2012-13

Absolute

% Increase/

Increase/

(Decrease)

(Decrees)
Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans
& Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

4,44,10,500
72,19,53,222

4,44,10,500
74,69,40,867

4,44,10,500
2,49,87,645

3.46%

1,92,92,894
1,63,40,490

1,52,87,300
1,80,73,236

(40,05,594)
17,32,746

(20.76%)
10.60%

5,15,67,655
11,72,94,657

8,98,41,079
11,29,88,519

3,82,73,424
(43,06,138)

74.21%
(3.67%)

6,62,17,738
103,70,77,156

9,55,01,587
112,30,43,088

2,92,83,849
8,59,65,932

44.22%

52,96,24,998
23,36,180

47,58,58,147
23,36,180

(5,37,66,851)

10,52,91,434
15,10,96,317
2,55,94,348
57,986
22,30,75,892
103,70,77,156

13,39,45,023
15,22,95,708
12,10,34,896
13,89,848
23,61,87,286
112,30,43,088

2,86,53,589
27.21%
11,95,391
0.79%
9,54,40,548
372.89%
13,31,862 2296.86%
1,31,11,394
5.87%
8,59,65,932

1. Common Size Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2009.


65

(10.15%)

2008-09

Percentage in
Liabilities/Assets

66

Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans & Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

4,44,10,500
57,75,59,443

4.61 %
60.03 %

8,04,83,854
1,34,34,346

8.36 %
1.39 %

5,05,89,753
13,42,33,742

5.29 %
13.95 %

6,13,60,000
96,20,71,638

6.37 %
100.00 %

36,78,66,447
21,23,600

38.23 %
0.22 %

15,61,79,205
10,99,21,593
1,51,09,765
1,10,282
31,37,60,746
96,20,71,638

16.23 %
11.44 %
1.57 %
0.01 %
32.30 %
100.00 %

2. Common Size Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2010.


2009-10

Percentage in
Liabilities/Assets

Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
67

4,44,10,500
63,72,39,115

4.29 %
61.69 %

6,57,69,244
1,33,23,947

6.36 %
1.28 %

3,64,27,045
17,44,11,546

3.56 %
16.88 %

Differed Tax Liability


Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans &
Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

6,13,60,000
103,29,41,397

5.94 %
100.00 %

39,57,47,897
21,33,500

38.31 %
0.20 %

18,88,86,937
11,37,30,833
74,00,120
1,17,320
32,49,24,790
103,29,41,397

18.28 %
11.01 %
0.71 %
0.01 %
31.48 %
100.00 %

3. Common Size Balance Sheet of Sri Maddi Lakshmaiah as on 31-03-2011.


2010-11

Percentage in
Liabilities/Assets

Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans &

4,4,10,500
71,78,63,339

4.42 %
71.49 %

20,72,957
1,48,16,364

0.20 %
1.47 %

5,29,90,750
11,77,05,280

5.27 %
11.72 %

5,41,70,942
100,40,30,132

5.39 %
100.00 %

37,74,35,347
21,33,500

37.59 %
0.21 %

13,14,05,030
13,61,88,751
4,37,80,275
3,07,761

13.08 %
13.56 %
4.36 %
0.03 %

Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
68

Loans& Advances
Total Assets

31,27,79,468
100,40,30,132

31.17 %
100.00 %

4. Common Size Balance Sheet of Sri Maddi Lakshmaiah as 31-03-2012.


2011-12

Percentage in
Liabilities/Assets

Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans &
Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

4,44,10,500
72,19,53,222

4.28 %
69.61 %

1,92,92,894
1,63,40,490

1.86 %
1.57 %

5,15,67,655
11,72,94,657

4.97 %
11.31 %

6,62,17,738
103,70,77,156

6.38 %
100.00 %

52,96,24,998
23,36,180

51.06 %
0.22 %

10,52,91,434
15,10,96,317
2,55,94,348
57,986
22,30,75,892
103,70,77,156

10.15 %
14.56 %
2.46 %
0.005 %
21.51 %
100.00 %

5. Common Size Balance Sheet of Sri Maddi Lakshmaiah as 31-03-2013.


69

2012-13

Percentage in
Liabilities/Assets

Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans &
Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

4,44,10,500
74,69,40,867

3.95%
66.52%

1,52,87,300
80,73,236

1.37%
1.60%

8,98,41,079
11,29,88,519

8.00%
10.06%

9,55,01,587
112,30,43,088

8.51%
100%

47,45,91,203
23,36,180

42.37%
0.20%

13,39,45,023
15,22,95,708
12,10,34,896
13,89,848
23,61,87,286
112,30,43,088

11.93%
13.56%
10.78%
0.12%
21.03%
100%

I. LIQUIDITY RATIOS:It is extremely essential for a firm to be able to meet its obligations as
they become due. Liquidity ratios measure the ability of the firm to meet its
current obligations (liabilities). In fact, analysis of liquidity needs the
preparation of cash budgets and cash and fund flow statements.

70

The most common ratios, which indicate the extent of liquidity or lack
of it, are: (i) current ratio and (ii) quick ratio. Other ratios include cash
ratio, interval measure and net working capital ratio.

(i) Current Ratio:The current ratio is a measure of the firms short-term solvency. It

indicates the availability of current assets in rupees for every one rupee of
current liability.

Current ratio is calculated by dividing current assets by current liabilities:


Current ratio = Current asset
Current Liabilities

Current Assets include cash and those assets that can be converted into cash
with in one year, such as marketable securities, debtors, inventories and prepaid
expenses are also included in current assets.

Current Liabilities include creditors, bills payable, accrued expenses, shortterm bank Loan, income,-tax, liability and long term debt maturing in the
current year.

TABLE 1:
Year

Current Assets

Current Liabilities

Ratio

(A)

(B)

(C)=A/B

2008-09

{15,61,79,205+10,9921,593+1,51,09,76+

{5,05,89,753+13,42,33,742+2,37,8

2.84

2009-10

1,10,282+31,07,60,746}=59,20,81,591
{18,88,86,937+11,37,30,833+74,00,120+

2,854} = 20,86,06,349
{3,64,27,045+17,44,11,546+2,37,3

2.71

1,17,320+32,49,24,790}= 63,50,60,000

6,244} =23,45,74,835

71

2010-11

{13,14,05,030+13,61,88,751+4,37,80,275

{13,14,05,030+13,61,88,751+4,37,

3.61

+3,07,761+31,27,79,68}= 62,44,61,285

80,275+3,07,761+31,27,79,68}=

2011-12

{10,52,91,434+15,10,96,317+2,55,94,348

62,44,61,285
{5,15,67,655+11,72,94,657+1,92,9

2.68

2012-13

+57,986+22,30,75,892}= 50,51,15,977
{13,39,45,023+15,22,91,708+12,10,34,89

2,894} =18,81,55,206
{8,98,41,079+11,29,88,519+1,52,8

2.95

6+13,89,848+

7,300}=21,18,16,898

23,61,87,286}=64,48,48,761

GRAPHICAL REPRESENTATION 1:

Interpretation:As a conventional rule, a current ratio of 2 to 1 or more is considered


satisfactory. It is a good sign on the part of the company that it has a good
current ratio. The liquidity position of the Sri Maddi Lakshmaiah is very good.
But it is suggested that the company need not maintain that many number of
liquid assets. But these recourses can be used for investment proposal so that
the profitability level of the company increase

72

2.Quick Ratio:Quick ratio, s also called acid-test ratio, establishes a relationship between

Quick, or Liquid, assets and Current liabilities. An asset is liquid if it in can be


converted into cash immediately or reasonably soon without a loss of value.
Quick ratio =

Current assets Inventories(Quick Assets)


Current Liabilities

Cash is the most liquid asset. Other assets are debtors and bills receivables and
marketable securities (temporary quoted investments). Inventories are
considered to be less liquid. Hence for the purpose of quick ratio inventories
are not considered as a quick asset.

TABLE 2:
Year

2008-09

2009-10

(Current Assets - Inventories)

Current Liabilities

RATIO

= Quick Assets

(B)

(C)=A/B

(A)
{59,20,81,591 15,61,79,205}

{5,05,89,753+13,42,33,742+2 2.08

= 43,59,02,386

,37,82,854}

= 20,86,06,349
{ 63,50,60,000 18,88,86,937} {3,64,27,045+17,44,11,546+2 1.90
= 44,61,73,063

,37,36,244} = 23,45,74,835
73

2010-11

{62,44,61,285-13,14,05,030}

{5,29,90,750+11,77,05,280+2 2.85

2011-12

=49,30,56,255
{50,51,15,979 10,52,91,434}

0,72,957}=17,27,68,987
{5,15,67,655+11,72,94,657+1 2.13

2012-13

= 39,98,2,545
{64,48,48,761-13,39,45,023}

,92,92,894}= 18,81,55,206
{8,98,41,079+11,29,88,519+1 2.34

=51,09,03,738

,52,87,300}=21,18,16,898

GRAPHICAL REPERSENTATAION 2:

Interpretation:The normal of this ratio is 1: 1 is considered to represent a satisfactory


current financial position. The quick ratio of Sri Maddi Lakshmaiah very good.
The company maintain liquid in very high level. This indicates the position of
the company performance.

II. LEVERAGE RATIOS:The short-term creditors, like bankers and suppliers of raw material, are more
concerned with the firms current debt-paying ability. On the other hand, longterm creditors, like debenture holders, financial institutions etc. To judge the
74

long-term financial position of the firm, financial leverage, or capital


structure ratios are calculated.
These ratios indicate mix of funds provided by owners and lenders. As a
general rule, there should be an appropriate mix of debt and owners equity in
financing the firms assets.

1.Debt Ratio:The firm may be interested in knowing the proportion of the interestbearing debt (also called funded debt) in the capital structure. It may, therefore,
compute debt ratio.

Debt Ratio =

Total Debt (TD)


Net Assets(NA)

TABLE 3:
Year

Total Debt

Net Assets

RATIO

(Secured + Unsecured Loans)

(Net Fixed Assets +

(C)=A/B

(A)

Net Current Assets)

2008-09

{8,04,83,854 + 1,34,34,346}

(B)
{36,78,66,447 + 40,72,58,096}

0.12

2009-10

= 9,39,18,200
{6,57,69,244 + 1,33,23,947}

= 77,51,24,543
{39,57,47,897 + 42,42,21,409}

0.09

2010-11

= 7,90,93,171
{20,72,957 + 1,48,16,364}

= 81,99,69,306
{37,74,35,347 + 45,37,65,255}

0.02

2011-12

= 1,68,89,321
{1,92,92,894+1,63,40,490}

= 83,12,00,602
{52,96,24,998+33,62,53,667}

0.04

=3,56,33,384

=86,58,78,665
75

2012-13

{1,52,87,300+1,80,73,236}

{47,45,91,203+44,20,19,163}

=3,33,60,536

=91,66,10,366

0.036

GRAPHICAL REPRESENTATION 3:

Interpretation:This ratio expresses the relationship between total debt and net assets. The firm
i.e., it measures the share of the net assets financed by outside funds. But as we
know that the cost of debt is par less the cost of equity it is advisable that debt
capital of the company could be raised to a greater extent. So in this regard it is
suggested to raise the total debt.

2.DEBT-EQUITY RATIO:The relationship describing the lenders contribution for each rupee of the
owners contribution is called Debt-Equity ratio. Debt-equity (DE) ratio is
directly computed by dividing total debt by net worth:
76

Debt-Equity ratio =

Total Debt (TD)


Net Worth (NW)

TABLE 4:
Year

Total Debt

Net Worth

Ratio

(Secured Unsecured Loans)

(Share Capital + Reserves

(C) = A/B

(A)

and Surplus)

2008-09

{8,04,83,854 + 1,34,34,346}

(B)
{4,44,10,500 + 57,75,59,443}

0.151

2009-10

= 9,39,18,200
{6,57,69,244 + 1,33,23,947}

= 62,19,69,943
{4,44,10,500 + 63,72,39,115}

0.116

2010-11

= 7,90,93,171
{20,72,957 + 1,48,16,364}

= 68,16,49,615
{4,44,10,500 + 71,78,63,339}

0.022

2011-12

= 1,68,89,321
{1,92,92,894 + 1,63,40,490}

= 76,22,73,839
{4,44,10,500 + 72,19,53,222}

0.046

2012-13

= 3,56,33,384
{1,52,87,300+1,80,73,236}

= 76,63,63,722
{4,44,10,500+74,69,40,867}

0.042

=3,33,60,536

=79,13,51,367

GRAPHICAL REPRESENTATION 4:

Interpretation:77

This ratio expresses the relationship between borrowed capital and


owners capital. The above data of Sri Maddi Lakshmaiah shows that the debt
equity ratio will be decreased slowly by the year to year from 2009-10 to 201011 but, in the current year 2012-13 was begins to increase the debt-equity ratio.

III. Activity Ratios:Activity ratios are employed to evaluate the efficiency with which the
firm manages and utilizes its assets. These ratios are also called turnover
ratios because they indicate the speed with which assets are being converted or
turned over into sales.
Activity ratios, thus, involve a relationship between sales and assets. A
proper balance between sales and assets generally reflects that assets are
managed well. Several activity ratios can be calculated to judge the
effectiveness of asset utilization.
1. Inventory Turnover Ratio:-

78

Inventory turnover indicates the efficiency of the firm in producing and


selling its product. It is calculated by dividing the cost of goods sold by the
average inventory:

Inventory turnover = Cost of Goods Sold


Average Inventory

Cost of Goods sold consists of raw material consumed, manufacturing


expenses and all direct expenses which relate to manufacturing process plus
Adding opening Work-in-process, Deduct closing Work-in-process. And adding
Opening stock of Finished Goods, Deduct closing Stock of Finished Goods can
obtained Cost of Goods sold.

Average Inventory consists of opening and closing balances of inventory.

Calculation of cost of Goods Sold


Particulars
Raw

2008-09

2009-10

2010-11

2011-12

2012-13

42,00,98,028

44,65,02,253

38,53,59,694

38,47,96,214

45,85,20,169

11,38,40,385

13,13,63,668

11,52,15,081

16,83,16,983

16,37,17,339

Expenses
Wages
&

4,55,68,437

5,05,88,765

5,45,13,483

6,01,93,946

6,59,86,411

Salaries
Total
Opening

57,95,06,850
+1,22,40,153

62,84,54,686
+2,90,12,767

55,05,88,258
+2,73,19,579

61,33,07,143
+2,22,94,789

68,82,23,919
+1,34,62,804

Material
Consumed
Mfg

Work-inProcess

79

Closing

-2,90,12,767

-2,73,19,579

-2,22,94,789

-1,34,62,804

-2,25,34,264

+2,13,06,408

+4,67,34,175

+4,99,06,963

+3,34,64,972

+4,53,45,000

-4,67,34,175

-4,99,06,963

-3,34,64,972

-4,53,45,000

-5,54,25,141

53,73,06,469

62,69,75,086

57,65,55,039

61,02,59,100

66,90,72,318

Work-inProcess
Opening
Stock

of

F.Goods
Closing
Stock

of

F.Goods
Cost
of
goods Sold

TABLE 5:
Inventory Turnover Ratio:Year
2008-09

Cost of Goods Sold


(A)
53,73,06,467

Average Inventory
(B)
{10,07,62,693+

Ratio
(C)=A/B
4.18

15,61,79,205/2}
2009-10

62,69,75,086

= 12,84,70,749
{15,61,79,205+

3.63

18,88,86,937/2}
2010-11

57,65,65,039

= 17,25,33,071
{18,88,86,937+

3.60

13,14,05,030/2}
2011-12

61,02,59,100

= 16,01,45,984
{13,14,05,030+
10,52,91,434/2}
80

5.15

2012-13

66,90,72,318

= 11,83,48,232
{10,52,91,435+13,39,45,0

5.59

23/2}=11,96,18,229

GRAPHICAL REPRESENTAION 5:

Interpretation:This ratio indicates the numbers of times inventory is replaced during


the year. The normal of this ratio may be taken as 5 to 6 times. This ratio is
81

deemed reflect efficiency of inventory management. The higher ratio, the more
efficient the management of inventory and vice versa. The above data indicates
Sri Maddi Lakshmaiah maintains on an average 4 times. Therefore the
inventory management of the company is satisfactory.

4.Trend Analysis:
In financial analysis the direction of changes over a period of years is of
crucial importance. Time series or Trend Analysis of ratios indicates the
direction of change. This kind of analysis is particularly applicable to the items
of profit and loss account.
For trend analysis, the use of index numbers is generally advocated.
Procedure followed is to assign the number 100 to items of the base year and to
calculate percentage changes in each item of other years is relation to the base
year. This procedure may be called as Trend-Percentage Method.

82

1. Trend Analysis of Sri Maddi Lakshmaiah from 2008-09 to 2009-10.


Particulars
Sources of Funds
Shareholders Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets, Loans
&Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances

2008-09

4,44,10,500
51,92,36,233

100
100

4,44,10,500
63,72,39,115

100
122.72

8,06,27,468
1,36,59,868

100
100

6,57,69,244
1,33,23,947

81.57
97.54

3,36,01,687
7,96,44,522

100
100

3,64,27,045
17,44,11,546

108.40
218.98

6,63,00,000
83,74,80,278

100
100

6,13,60,000
103,29,41,397

92.54
123.33

36,06,10,383
21,23,800

100
100

39,57,47,897
21,33,500

109.74
100.45

10,07,62,693
8,54,41,343
2,04,47,689
1,95,122
26,78,99,248

100
100
100
100
100

18,88,86,937
11,37,30,833
74,00,120
1,17,320
32,49,24,790

187.45
133.10
36.19
60.12
121.28

83

2009-10

Total Assets

83,74,80,278

100

103,29,41,397

123.33

2. Trend Analysis of Sri Maddi Lakshmaiah from 2008-09 to 2010-11.


Particulars
Sources of Funds
Shareholders
Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets,
Loans &Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

2008-09

2010-11

4,44,10,500
51,92,36,233

100
100

4,4,10,500
71,78,63,339

100
138.25

8,06,27,468
1,36,59,868

100
100

20,72,957
1,48,16,364

2.57
108.46

3,36,01,687
7,96,44,522

100
100

5,29,90,750
11,77,05,280

157.70
147.78

6,63,00,000
83,74,80,278

100
100

5,41,70,942
100,40,30,132

81.70
119.88

36,06,10,383
21,23,800

100
100

37,74,35,347
21,33,500

104.66
100.45

10,07,62,693
8,54,41,343
2,04,47,689
1,95,122
26,78,99,248
83,74,80,278

100
100
100
100
100
100

13,14,05,030
13,61,88,751
4,37,80,275
3,07,761
31,27,79,468
100,40,30,132

130.41
159.39
214.10
157.72
116.75
119.88

84

3. Trend Analysis of Sri Maddi Lakshmaiah from 2008-09 to 2011-12.


Particulars
Sources of Funds
Shareholders
Funds:
Share Capital
Reserves & Surplus
Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets,
Loans &Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

2008-09

2011-12

4,44,10,500
51,92,36,233

100
100

4,44,10,500
72,19,53,222

100
139.04

8,06,27,468
1,36,59,868

100
100

1,92,92,894
1,63,40,490

23.92
119.62

3,36,01,687
7,96,44,522

100
100

5,15,67,655
11,72,94,657

153.44
147.27

6,63,00,000
83,74,80,278

100
100

6,62,17,738
103,70,77,156

99.87
123.83

36,06,10,383
21,23,800

100
100

52,96,24,998
23,36,180

146.86
110.00

10,07,62,693
8,54,41,343
2,04,47,689
1,95,122
26,78,99,248
83,74,80,278

100
100
100
100
100
100

10,52,91,434
15,10,96,317
2,55,94,348
57,986
22,30,75,892
103,70,77,156

104.49
176.84
125.16
29.71
83.26
123.83

4. Trend Analysis of Sri Maddi Lakshmaiah from 2008-09 to 2012-13.


Particulars

2008-09

Sources of Funds
Shareholders
Funds:
Share Capital
Reserves & Surplus

4,44,10,500
51,92,36,233
85

100
100

2012-13

4,44,10,500
74,69,40,867

100
103.46

Loan Funds
Secured Loans
Un Secured Loans
Current Liabilities
Current Liabilities
Provisions
Other Liabilities
Differed Tax Liability
Total Funds
Application of Funds
Net Fixed Assets
Investments
Current Assets,
Loans &Advances
Inventories
Sundry Debtors
Cash &Bank Balances
Other current assets
Loans& Advances
Total Assets

8,06,27,468
1,36,59,868

100
100

1,52,87,300
1,80,73,236

18.96
132.31

3,36,01,687
7,96,44,522

100
100

8,98,41,079
11,29,88,519

267.37
141.87

6,63,00,000
83,74,80,278

100
100

9,55,01,587
112,30,43,088

144.04
134.09

36,06,10,383
21,23,800

100
100

47,45,91,203
23,36,180

131.96
110.00

10,07,62,693
8,54,41,343
2,04,47,689
1,95,122
26,78,99,248
83,74,80,278

100
100
100
100
100
100

13,39,45,023
15,22,95,708
12,10,34,896
13,89,848
23,61,87,286
112,30,43,088

132.94
178.24
591.93
712.29
88.16
134.09

FINDINGS
The following thongs are found out after careful analysis of the financial
statements of the company during the last 5 years.
The company in spite of its expansion programmes has not been
concentrating on the sales figures, which have been reflected in each and
every aspect of the management.
The overall pay out ratio of the company has been very less.
The capital structure of the company seems to be unlevered.
86

The performance of the company regarding its expansion programmes


has been to a desirable extent.
In spite of its expansion programmes, the company has not increased its
sales figures to the level of increase in its product range.
The company has been maintaining huge amounts in the form of liquid
assets.

The average collection period has been very high and it is increasing
year by year.

SUGGESTIONS
The performance of the company is up to the mark in each aspect. But,
it has a few more suggestions for its best performance.
Firstly, the company is suggested to the concentrate on sales, as the sales
figures seem to decline over the last three years, the increase in sales
lead to increase in Gross profit as well Net Profit figures.
The company is as well suggested to involve debt in its capital structure
as debt not only reduces the taxable portion of the income but also the
cost of using the debt is low when compared with the cost of equity.

87

It is realized that the company has been maintaining large amounts of


profit as reserves. It is not advisable to keep that much of reserves in
idle form. It is suggested to invest these reserves for productive purpose
so that the return would be enhanced.
It has also been realized that there is much deviation between Gross
Profit and Net profit of the company. This shows that the operating
expenditure is high. So, it is suggested that the company should
concentrate on reducing the operating expenditure.
The average collection period has been high and is still increasing. It is
not at all a desirable average collection period. It shows the inefficiency
on reducing the average collection period.
It is suggested t maintain the same pay out ratio as the company is
concentrating on the expansion programme.

CONCLUSION
The economic life of any organization depends on some important
financial aspects like profits, expenses, turnover etc.
A careful analysis of these areas is very much essential for the
success and survival of these organizations. For this purpose
financial statement analysis with the help of the technique like ratios,
funds flow etc. is to be carried out.
A study of this type is very much useful for any organization to keep
into the different financial aspects and to take some measures to
improve in the above areas.
88

The company under study SRI MADDI LAKSHMAIAH, being a


unit of the tobacco company as to carefully watch the trends in the
tobacco company as should come forward with innovative marketing
strategies.

BIBLIOGRAPHY
S. No
1
2

Title
Financial Management
Financial Management

Financial Management

Financial Management

Financial Management

Financial Management

Financial Management

Author
V.a. Avadhani
Fischer &
Jardan
Prasanna
Chandra
M. Ranganatha
N & r. Madhumathi

Publisher
Edition
Himalaya Publishing House
5th
Hall of India Private
8th
Limited
Tata McGraw hill
6th
Pearsons Education
(Singapore) Pte ltd.

5th

Reilly &
Brown
Punithavath
Y pandian

Thomson (south Western)

3rd

Vikas Publishing Home


Private Limited

6th

V.k. Bhalla

S. Chand & Company


Limited

8th

89

Financial Management

P. Rakshit

NEWS-PAPERS & JOURNALS VISITED:


1. BUSINESS TODAY
2. THE ECONOMIC TIMES

WEBSITES REFERED
1. www.mlgroup.com
2. www.moneycontrol.com
3. www.googlefinance.com

90

Elegant Publisher

3rd