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INTRODUCTION

Funds constitute prime importance in starting and operating any business


Enterprise the most significant of all financial activities is the raising and management of
funds financial decisions are those which concern the generation and flow of funds
various sources and the use of these funds. The accounting standards state that in many
countries the approach to provide a statement of changes in financial position as a part of
audited accounts is the trend in India companies are under no legal obligation to publish a
statement of changes in financial position statements along with financial statements
especially in the case of companies listed on the stock exchanges and other large
commercial industrial and business enterprise in public and private sectors.
The funds flow statement which shows the movement of funds and is the part of
financial operation of the business under taking. It indicates various means by which
funds. Where obtained during a particular period and the ways in which there funds were
employed in simple words. It is a statement of sources and application of funds.
Funds flow analysis refers to the process of determining the financial strengths and
weakness of the by establishing relationship between the items of balance sheet and profit
and loss account. Funds flow statement serves as a handy tool in financial analysis
making financial planning preparation of budget through this analysis firm group the
change in the allocation resources between the two balance sheets. The Funds flow
statement expresses the changes in working capital and assesses the impact upon liquidity
position of the undertaking with the help of this statement. The financial management can
plan the intermediate and long term financial of the concern repayment of loans,
expansions of business and distribution of resources. It is helpful in the crucial decision
making process in case of expansion. Diversification of conservation of more funds for
profitable utilization of sound projects in the sequent year. It is useful to economize
financial institution, investors and owners for analyzing performance of the firm.

NEEDS OF THE STUDY


The basic financial statements i.e. the Balance sheet, Profit and income
statement reveal the net effect of the various transaction on the operational and
Financial position of the company. But these statements do not disclose the cases for
changes in the assets and liabilities between two different points of time.
Even the profit & loss account indicates the resources provided by operations.
But there are many transactions that take place in an undertaking which do not operate
through profit & loss account. Thus another statements has to be prepared show the
change in the assets and liabilities from the end of one period of time to the end of
another period of time. That statement is called Funds flow statement.
So, I have undertaken this study to examine the changes which are occurring in the
financial operation of the organization and to the Funds management system in THE
RAMCO CEMENTS LIMITED.
OBJECTIVES OF THE STUDY
To identify the source of funds of the The Ramco Cements Limited.
To identify the application funds of the The Ramco Cements Limited.
To identify the changes in working capital.
It pinpoints the mobilization of resources and the further utilization of resources
It highlights the financing of the general expansion of the business firms
It exemplifies the utilization of debt finance in the structure of financing
It portrays the relationship between the financing, investments, liquidity and
dividend decision of the firm during the given point of time.

SCOPE OF THE STUDY


Only the FUNDS FLOW has been taking to measure the financial performance.
The study confines to the funds management at The Ramco Cements Limited,
only.
This study can not reflect the Overall Industrys funds management system.
METHODOLDY UNDER STUDY
RESEARCH:
Research is an academic activity and as such term should be used in a technical
sense. According to Clifford woody research comprises defining and redefining
problems, formulating Hypothesis or suggested solutions; collecting, organizing and
evaluating data, making deduction and reaching conclusion; and At last carefully testing
the conclusions to determine whether they fit the formulating the hypothesis.
DATA COLLECTION METHODS
PRIMARY DATA:
Primary data refers to information on that is generated to meet the specific
requirements of the investigation at hand it consist observation method; interview
method; through questionnaires; through schedules methods.
SECONDRY DATA:
The information that is collected for a purpose other than to solve the specific
problem under investigation is known as secondary data.
The data has been collected form primary as well as secondary sources. Primary
data has been collected through interaction with company managers.

LIMITATIONS
The analysis made on the basis of secondary data.
The availability of date is only is pertaining to five years.
It is a major constraint for this project.
The project duration i.e. 45 days is also a constraint to give realistic
interpretations.
This analysis has done based on the information provided by the bank. If any
mistakes published in this reports, the same information has taken into
consideration.
This project is not a basis for further research.

INDUSTRY PROFILE
HISTORY OF INDIAN CEMENT INDUSTRY

By stating production in 1914 the story of story of Indian cement is a stage of


continuous growth. Cement is derived from the Latin word cementam. Egyptians and
Romans found the process of manufacturing cement. In England during the first century
the hydraulic cement has become more versatile building material. Later on, Portland
cement was invented and the invention was usually attributed to Joseph Aspdin of
England.
India is the worlds 4th largest cement produced after China, Japan and U.S.A. The
South Industries have produced cement for the first time in 1904. The company was setup
in Chennai with the installed capacity of 30 tonnes per day. Since then the cement
industry has progressing leaps and bounds and evolved into the most basic and
progressive industry. Till 1950 1951, the capacity of production was only 3.3 million
tonnes. So far annual production and demand have been growing a pace at roughly 78
million tonnes with an installed capacity of 87 million tonnes.
In the remaining two years of 8 th plan an additional capacity of 23 million tonnes
will actually come up. India is well endowed with cement grade limestone(90 billion
tonnes) and coal(190 billion tonnes). During the nineties it had a particularly impressive
expansion with growth rate of 10%.
The strength and vitality of Indian Cement Industry can be gauged by the interest
shown and support gives by World Bank considering the excellent performance of the
industry in utilizing the loans and achieving the objectives and targets. The World Bank is
examining the feasibility of providing a third line of credit for further upgrading the

industry in varying areas, which will make it global. With liberalization policies of Indian
Government.
The industry is posed for a high growth rates in nineties and the installed capacity
is expected to cross 100 million tonnes and production 90 million tonnes by 2003 AD.
The industry has fabulous scope for exporting its product to countries like the U.S.A.,
U.K, Bangladesh, Nepal and other several countries. But there are not enough wagons to
transport cement for shipment.
Cement The product:
The natural cement is obtained by burning and crushing the stones containing
clayey, carbonate of lime and stone amount of carbonate of magnesia. The natural cement
is brown in color and its best variety is known as ROMAN CEMENT. It sets very
quickly after addition of water. It was in the eighteenth century that the most important
advances in the development of cement were which finally led to the invention of
Portland cement.
In 1756, John Smeaton showed that hydraulic lime which can resist the action of
water can be obtained nit only from hard lime stone but from a limestone which contain
substantial proportion of clayey. In 1796, Joseph Parker found that modules of
argillaceous limestone made excellent hydraulic cement when burned in the usual
manner. After burning the product was reduced to a powder, this started the natural
cement industry.
The artificial cement is obtained by burning at a very high temperature a mixture
of calcareous and argillaceous material. The mixture of ingredients should be intimate
and they should be in correct proportion. The calcined product is known as clinker. A
small quantity of gypsum is added to clinker and it is then pulverized into very fine
powder, which is known as cement.

The common variety of artificial cement is known as normal setting cement or


ordinary cement. A mason Joseph Aspdn of Leeds of England invented this cement in
1824. He took out a patent for this cement called it PORTLAND CEMENT because it
had resemblance in its color after setting to a variety of sandstone, which is found a
abundance in Portland England.
The manufacture of Portland cement was started in England around 1825. Belgium
and Germany started the same 1855. America started the same in 1872 and India started
in 1904. The first cement factory installed in Tamilnadu in 1904 by South India limited
and then onwards a number of factories manufacturing cement were started. At present
there are more than 150 factories producing different types of cements.
Composition of Cement:
The ordinary cement contains two basic ingredients, namely, argillaceous and
calcareous. In argillaceous materials the clayey predominates and in calcareous materials
the calcium carbonate predominates. A good chemical analysis of ordinary cement along
with desired range of ingredients.
Ingredients
Lime(CaO)

Percent
62

Range
62-67

Silica(SiO2)

22

17-25

Alumina(Al2O3)

3-8

Calcium sulphate (CaSO4)

3-4

Iron Oxide (Fe2O3)

3-4

Magnesia(MgO)

1-3

Sulphur (S)

1-3

Alkalies

0.2-1

Industry Structure and Development:


With a capacity of 115 million tonnes of large cement plants, Indian Cement
industry is the fourth largest in the world. However per captia consumption in our country
is still at only 100Kgs of developed countries and offers significant potential for growth
of cement consumption as well as addition to cement capacity. The recent economic
policy announcement by the government in respect of housing, roads, power etc., will
increase cement consumption.
Opportunity and threats:
In view of low per captia consumption in India, there is a considerable scope for
growth in cement consumption and creation of new capacities in coming years.
The cement industry does not appear to have adequately exploited cement
consumption in rural segment where damaged where damaged growth is possible.
Landed cost of cement (with import duty)continues to be higher than home market
prices but with reduced import duty, increasing imports, may pose a serious threat to the
domestic cement industry.
Outlook
The recent change in the budget 2003- 2004 relating to fiscal incentives for
individual housing and reduction in borrowing cost for this purpose and with the
government reaffirmation to accelerate the reform process, infrastructure development
should logically get priority leading to increase in demand of cement in coming years.
The addition capacity of cement in the pipeline is limited and therefore the demand and
supply situations is expected to be more favorable and cement prices are likely to firm up.

Risks and Concerns


Slow down of Indian economy or drop in growth rate of agriculture may adversely
affect the consumption. The recent increase in railway freight coupled with diesel / petrol
price like will increase the cost of production and distribution, as being bulky, cement is
freight intensive increase in Limestone royalty also adds to the cost of production, which
is considerably higher than corresponding costs of many other developing countries.
In our country there is a need to undertake a massive programme of house
construction activity into the rural and urban areas. It is impossible to construct a house
without cement and steel, in other words, cement is one of the basic construction
materials and therefore it is one of the vital elements for the economic development of
the nation.
India inspite of being the 4th biggest producer of cement in the world has still a
very low per capital consumption of cement.
Cement Companies

51 Nos

Cement plant

99Nos

Installed Capacity

64.8mt

Total Investment (approx)

Rs.10,000 Crores

Total Manpower

Over 1.25 Lakhs

Management Awards of the Government of Andhra Pradesh. Ramco is also


conscious of its social responsibilities. Its rural and community development
programmes include adoption of two nearby villages, running an Agricultural
Demonstration Farm, Model Dairy Farm etc., impressed by these activities, FAPCCI
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chose Ramco to confer the Award for Best efforts of an Industrial Unit in the year 1994
as well as in1998. Ramco also has to its credit the National Award (Shri S.R. Rangta
Award for Social Awareness) for the year 1995- 1996, for the Best Rural Development
Efforts made for Best Workers Welfare Ramco got the first Prize for Mine Environment
and pollution Control for year 1999 too, for the 3rd year in succession in July, 2001
Ramco annexed the Vana Mithra Award from the Government of Andhra Pradesh.
Quality conscious and progressive in its outlook, RAMCO CEMENT is an
OHSAS 08001 Company and also joined the select brand of ISO9001-2000 Companies.
History
The first unit was installed at Basanthnagar with a capacity of 2.5 lacks TPA
(tonnes per annum) incorporating humble supervision, preheated system, during the year
1969.
The second unit followed suit with added a capacity of 2 lack TPA in 1971.
The plant was further expanded to 9 lack by adding 2.5 lack tonnes in August,
1978, 1.13 lack tonnes in January, 1981 and .87 lack tonnes in September, 1981.
Power
A Singareni colliery makes the supply of coal for this industry and the power was
obtained form AP TRANSCO. The power demand for the factory is about 21MW. Ramco
has got 2 diesel generator sets of 4MW each installed in the year 1987.
Ramco cement now has a 15KW captive power plant to facilitate for uninterrupted
power supply for manufactured of cement.

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COMPANY PROFILE
The Ramco Cements Limited (Formerly Madras Cements Ltd): In the 1950s,
investment in Cement Industry was not attractive due to price controls and the massive
investments required. Only those entrepreneurs who were not profit-minded but cared for
the country's development came forward to invest in the Cement Industry.
When Shri. Manubai Shah, Central Minister for Industries in late fifties came to Madras
to meet the Industrialists, he called upon Shri P A C Ramasamy Raja and requested him
to start a cement factory in TN. This was readily accepted by Shri PACR and this marked
the birth of The Ramco Cements Limited (Formerly Madras Cements Ltd) in 1961.
Concern for Investors: On the night of September 3, 1962, while the whole city slept,
PAC Ramasamy Raja lay on his bed in the Madras General Hospital, seriously ill. As all
his near and dear watched with tears in their eyes, PAC Ramasamy Raja summoned his
son Ramasubrahmaneya Rajha to his bedside. "There is no more hope", he whispered,
"You should take care of everything from now. My main concern is for The Ramco
Cements Limited (Formerly Madras Cements Ltd).
I have taken a lot of money as shares from well-wishers and I have not paid them
back any dividends as yet. This has to be taken care of immediately". Those were his last
words.
PACR's Dream Come True: PACR's last wish was dutifully fulfilled by the present
Chairman Shri.P.R.Ramasubrahmaneya Rajah. Today, The Ramco Cements Limited
(Formerly Madras Cements Ltd) is not only one of the most respected cement companies
in the country but also leads in giving the best return to the investors. With a cement
capacity of 15.5 millions tons per annum, the company is the fifth largest producer of
cement in India. It is also one of the largest wind energy producers in the country with a
capacity of 159.185 MW.
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Birth of Cement Plants: The first plant of RCL at Ramasamy Raja Nagar, near
Virudhunagar in Tamil Nadu, commenced its production in 1962 with a capacity of 200
tonnes, using wet process. In 70s, the plant switched over to more efficient dry process. A
second kiln was also added to bring the total capacity to 15 lakh tons per annum.
The second venture of RCL is its Jayanthipuram plant near Vijayawada in A.P., set up in
1987. The 36.50 lakh ton per annum plant employs the latest state-of-the-art technology.
The third venture of RCL is at Alathiyur in TN. It was set up in 1997 and expanded by
addition of another line in 2001. The 30.50 lakh tons per annum plant is the most modern
plant in the country.
Ariyalur plant started operations in 2009 with a capacity of 2 MTPA. It is well-equipped
with modern quality control systems.Currently Line 2 of the plant with a capacity of
another 2 MTPA was commissioned in 2012.
Other Ventures: In 2000, RCL acquired Gokul Cements situated in Mathod in
Karnataka whose capacity is 2.90 lakh tons per annum. Being an eco-friendly company,
RCL set up the Ramco Windfarm in 1993 at Muppandal in TN. This was followed by
wind farms in Poolavadi near Coimbatore in 1995, Oothumalai in 2005 and in Mathod the combined capacity of the wind farms is about 159 MW.
In the year 1999, RCL commissioned the most sophisticated Ready Mix Concrete Plant
in Medavakkam in South Chennai. In 2002, a state-of-art Dry Mortar plant was
commissioned near Sriperumpudur, Tamilnadu which manufactures dry mortar, cement
based putty and tile fix compound.

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Management

The Ramco Cements Limited (Formerly Madras Cements Ltd) is managed by a Board of
Directors comprising of eminent personalities as its members. The Chairman of the board
is Shri P.R.Ramasubrahmaneya Rajha, under whose dynamic leadership the company has
grown into a massive organization. The company board brings together a team of
business, administrative, financial and cement technology professionals who provide
guidance and direction to the company's operations in a competitive business
environment. The Ramco Cements Limited (Formerly Madras Cements Ltd) has been a
pioneer in adopting corporate governance practices comparable to the best in the country.

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Our Founder

Birth of a Visionary : On April 24, 1894, when a son was born to Pusapati Chinniah
Raja, there was great jubilation in the family. Chinnaiah Raja believed that the child was
born with the blessings of the Lord of Rameswaram, and named the child Ramasamy
Raja. Little did anyone imagine that the infant was to one day change the face of
Rajapalayam, a panoramic town on the foothills of the Western Ghats in South Tamil
Nadu. Ramasamy Raja, known as PACR, was only 27 years old when his father died and
all the onerous responsibilities of the family were thrust upon his young shoulders.
Businessman turned into Industrialist: Ramasamy Raja was looking for something
more enterprising than the family business. He therefore became an agent for Harvey
Mills of Madurai. This move changed Ramasamy Raja's life. He realized the potential of
his own lands. Instead of sending the cotton to Madurai to be converted into yarn, he
realized that the same could be done in Rajapalayam itself. He concluded that
Rajapalayam, which was otherwise a very backward area with very little job
opportunities, would be vastly benefited by setting up a mill.

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Selfless Service to People: He carried out his responsibilities very efficiently and soon
the people of Rajapalayam put him on a pedestal and respected him for his selfless
service to the people. He was Chairman of Rajapalayam Municipality from 1941 to 1947.
It was he who made Rajapalayam what it is today. Ramasamy Raja wanted to try his hand
at business. He started off with a chain of provision shops and hardware shops. Along
with his nephew, he started a transport corporation with five buses.
Birth of the first Ramco Venture: He visited Britain and other European countries to
see first hand the working of the mills. There, he had the chance to meet many business
magnates. He returned to India full of ideas. After returning to Rajapalayam, he put his
plans into action. To start the yarn mill, he found that he needed Rs.5 lakhs, which in
1936 was a huge sum. It was considered a Herculean task to raise such a big capital. But
the determined Raja was not deterred. He decided to make the people "Shareholders".
Rajapalayam Mills Ltd: Thanks to his illustrious background and his own reputation, he
got the required capital ready, in next to no time. On September 05, 1938, the then State
Minister for Labour, V.V.Giri, inaugurated the mill and Rajapalayam Mills Ltd
commenced operations. There was no looking back for Ramasamy Raja after this. The
Mill was a grand success. He followed this up with other successful ventures. He started
The Ramaraju Surgical Cotton Mills Ltd along with his son-in-law Rama Raju.
The Ramco Cements Limited (Formerly Madras Cements Ltd): At that time, Cement
was not considered as a favorable venture due to price controls. Shri. Manubai Shah,
Central Minister for Industries, called upon Ramasamy Raja and appealed to him to start
a cement factory. This was how The Ramco Cements Limited (Formerly Madras Cements
Ltd) came into being in 1961. Ramasamy Raja needed Rs.1 crore as capital. The State
Government for the first time in the history of India invested Rs.10 lakhs, an indication of
the total trust and implicit faith the Government had in him.
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Concern for Shareholders and Workers: Ramasamy Raja had the well-being of the
people upper-most in his mind. He was very particular that the funds of his shareholders
be utilized usefully. He showed high concern for his workers. The famous trade unionist
G Ramanujam once said, "In the case of Ramasamy Raja's companies, the workers are
always thinking of the growth of the company, the Raja always has the well being of the
workers and their families uppermost in his mind."
Service to humanity: For Ramasamy Raja, religion and charity were part and parcel of
his life. He realized that it was only education which could erase poverty and the pitiable
condition of the people. He formed a trust and started various schools, colleges and
polytechnics which today educate over 7000 students. He also started hospitals for the
benefit of the people.
Realizing the dream of PACR: The Ramco Empire continued to expand under the
leadership of PACR's son, the present Group Chairman, Shri P R Ramasubrahmaneya
Rajha, who is fulfilling the vision of PACR. Crossing the frontiers of Rajapalayam in
PACR's time, the Ramco Group assumed national prominence. With the young guard
now involved in the Group's activities, the process of globalization is on and the Group is
taking the big leap onto the international horizon.
Ramco Concrete
Ramco Concrete - For Structural Concrete Applications:
High performance Concrete based on customers requirements is made in the RMC unit.
Concrete with various permutations based on concrete grades, workability and site
conditions are available.

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Winner of the Four Leaves Award


The Ramco Cements Limited (Formerly Madras Cements Ltd) is the only Company in
the Indian Cement Industry to win the Four Leaves Award (instituted by Centre for
Science & Environment) http://www.cseindia.org/node/282 for taking steps to protect the
environment by ensuring dust free and clean factory premises.
Winner of the Cleaner Production Measures Award
Andhra Pradesh Pollution Control Board and Environment & Forest Dept, Government
of AP, presented the Award to The Ramco Cements Limited (Formerly Madras Cements
Ltd), Jayanthipuram Unit in recognition of practicing Cleaner Production Measures, on
the eve of World Environment Day celebrated at Hyderabad on 05-06-12.
Winner of CII Environmental Best Practices Award
Alathiyur Unit bagged the CII Environmental Best Practices Award 2012. The Award
being presented by Mr.L.S.Ganapati, Chairman, CII Environmental Best Practices Award
Committee, 2012.
Cement:
Ramco is a PPC grade cement manufactured as per IS 1489 (Part 1):1991.
Ramco is produced either by grinding together Portland Cement clinker and pozzolona
with addition of gypsum or calcium sulphate, or by intimately and uniformly blending
Portland Cement and fine Pozzolona.
Ramco World over is preferred due to its ability to produce a durable concrete where the
life of a concrete structure is given more importance.
Ramco produces less heat of hydration and offers greater resistance to the attack of
aggressive waters than normal Portland Cement. Moreover, it reduces the leaching of
calcium hydroxide liberated during the setting and hydration of cement.

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Ramco Cement 43 Grade (OPC 43):


Ramco Cement OPC 43 confirms to IS 8112. The grade is based on the 28-day
compressive strength of the cement mortar (tested as per IS 4031), which in this case is
not less than 43 MPa.
Ramco Cement 53 grade (OPC 53):
Ramco Cement OPC 53 confirms to IS 12269. The grade is based on the 28-day
compressive strength of the cement mortar (tested as per IS 4031), which in this case is
not less than 53 MPa.
Ramco Sulphate Resisting Cement (SRC):
Ramco SRC is manufactured as per IS 12330. This cement is used in marine conditions
where soil or water contains excess sulphates. However SRC is weak in resisting chloride
attack.
Hence, wherever chlorides are present in combination with sulphates, it is advisable to
consider the usage of Ramco after a detailed examination. The C 3A phase of SRC is
maintained at lower values <5%.
Sleeper Grade Cement (53 S):
This cement finds its application in the manufacture of precast products and railway
sleepers 53 S Cement is manufactured as per IS 12269 where apart from all requirements
of 53 Grade, specific requirements in terms of C3A and C3S need to be adhered to. C3A is
limited to 10% and C3S is limited to 45%.

Ramco Super Fast:


Ramco Super Fast is a Rapid Hardening Portland Cement manufactured as per IS
8041:1990. It is a special cement that has been customized for manufacturing hollow
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blocks, solid blocks, paving blocks, fly ash bricks and other precast items. To ensure the
productivity and quality of precast blocks, a separate line meant for manufacturing the
specialized cement has been installed at our plants.

This Plant has introduced various technological initiatives:


For Quality Control & Assurance the Plant has state of the art facilities like
Optima Blending Control System, Online Cross Belt Analyzer (Gama Matrix), Xray Analyzer, X-ray Defractometer, Alpine Particle Size Analyzer etc.
The Plant is equipped with SF Cooler, Vertical Pregrinding mill with 3 way
separator, Ramco Fuzzy Logic System, Rotoscale for Kiln feed weighing system.
Pollution control in the Plant is handled with Bag House, with facilities for
monitoring online ambient air quality. The Plant also has a mobile vacuum cleaner
and a mobile road sweeper.
The plant also has a slag mill for the manufacture of Portland Slag Cement.
The captive mines of the Plant have won several awards in Mines Environmental
and Mineral Conservation Week.
Jayanthipuram Plant successfully implemented the Integrated Management
System - IMS, which includes ISO 9001:2008 Quality Management System, ISO
14001:2004 Environmental Management System and IS 18001:2007 Occupational
Health and Safety Management System.
Jayanthipuram Plant has earned laurels for its outstanding efforts towards
maintaining a pollution-free environment.

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Jayanthipuram Plant was also the first in the cement industry to install the online
Continuous Ambient Air Quality Monitoring Station (CAAQM) and to
interlink/upload the online data with the Andhra Pradesh Pollution Control Board
(APPCB) website.

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FUNDS FLOW STATEMENT


INTRODUCTION
The basis for financial planning, analysis and decision-making is the financial
information. Financial information is needed to project, compare and evaluate the firms
earning ability. It is also required to aid in economic decision-making investment and
financial decision-making. The financial information of an enterprise is contained in the
financial statements or accounting reports. Three basic financial statements of great
significance to owners, management and investors are balance sheet, profit and loss
account and cash flow statement.
BALANCE SHEET
Balance sheet is the most significant financial statement. It indicates the financial
condition or the state of affairs of a business at a particular moment of time. More
specially, balance sheet contains information about resources and obligations of a
business entity and about its owners interest in the business at a particular point of time.
Thus, the balance sheet communicates information about assets, liabilities and owners
equity for a business firm as on a specific date. It provides a snapshot of the financial
position of the firm at the close of the firms accounting period.
Assets are valuable economic resources owned by the firm. They embody future
benefits and are measured in monetary terms. Assets represent: (a) stored purchasing
power (e.g., cash), (b) money claims (e.g., receivables stock ) and (c) tangible and
intangible items that can be sold or used in business to generate earning. Tangible items
that include land, building, plant, equipment or stocks of materials and finished goods
and all such other items do not have any physical existence, but they have value to a firm.
They include patents, copyrights, trade name or goodwill.

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Assets are classified as: (1) current assets and (2) fixed (long term) assets.
Current assets sometimes called liquid assets are those of a firm which are either
held in the form of cash within the accounting period are of one-year duration. Current
assets include cash, tradable (marketable) securities, and debtors (accounts receivables)
and stock of raw material, work-in process and finished goods.
Fixed assets are long-term in nature; they are held for periods longer than the
accounting period. They include tangible fixed assets like land, building, machinery,
equipment, furniture etc. Intangible fixed assets represent the firms rights and include
patents, copyrights franchises, trademarks, trade names and goodwill.
Firms obligations are called liabilities. Liabilities represent debts payable in
future by the firm to its lenders and creditors. They represent economic obligations to
pay cash or pay cash or to provide goods services in some future period. Examples of
liabilities are creditors, bills payable, wages, salaries payable, taxes payable, bonds,
debentures, borrowings from banks and financial institutions, public deposits etc
Liabilities are of two types: (1) current liabilities; and (2) long-term (fixed)
Liabilities. Current liabilities are debts payable within an accounting period. Current
assets are converted into cash to pay current liabilities. Long-term liabilities are the
obligations or debts payable in a period of time greater than the accounting period. Longterm liabilities include debentures, bonds, and secured long-term loans from financial
institutions. The financial interest of the owners are called owners equity or simply
Equity. The owners interest is residual in nature, reflecting the excess of the firms
assets over its liabilities. As liabilities are the claims of outside parties, equity represents
owners equity has two parts (a) paid-up share capital and (b) reserves and surplus. Paidup share capital is the amount of funds directly contributed by the shareholders through
purchase of shares. Reserves and surplus or obtained earning are undistributed profits.
Paid up share capital and reserves and surplus together are called net worth.

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PROFITS AND LOSS ACCOUNTS


Balance sheet is considered as a very significant statement by bankers and other
lender because it indicates the firms financial solvency and liquidity, as measured by its
resources and obligations. However, creditors, particularly bankers and financial analysis
in India have recently started paying more attention to the firms earning capacity as a
measure of its financial strength. The earning capacity and potential of a firm are
reflected by its profit and loss account. The profit and loss account is a score-board of
the firms performance during a period of time.
Profit and loss account presents the summary of revenues, expenses, net income
or net loss of a firm. It serves as measure of firms profitability. Revenues are amounts
that the customers. The cost of the firm for providing them goods and services to
customers. The cost of the economic resources used to earn revenues during a period of
time is called Expenses.
Revenues and expenses are sometimes categorized as operating and non-operating
business of the firm are called operating revenues (operating expenses).

Revenues

(expenses) which are incidental or indirect to the main operations of the firm are called
non-operating revenues (expenses).
MEANING OF FINANCIAL STATEMENTS
Financial statements at least refer to the two statements which are
prepared by a business concern at the end of the year. These are
1. Income statement or trading and profit and loss account which is prepared by
business concern in order to know the profit earned and loss sustained during a
specified period.
2. Position statement or Balance sheet which is prepared by a business concern on a
particular date in order to know its financial position. Concern on a particular dare
in order to know its financial position.
23

To these statements are added the statement of Retained Earnings and some other
statements such as (Funds flow statement, Cash flow statement etc) and schedules of
fixed assets, investments, current assets etc to give a full the package of financial
statements.
Statement of Retained Earnings (When prepared separately ) or profit and loss
appropriation account shows the utilization of profits of the company i.e., dividend
declared, amount transferred to general reserve or any other reserve as shows in this
account.
Funds flow statement summarizes the changes in working capital in a specified
period and indicates the various sources and applications of funds. Cash flow statement
gives the various items of inflow and outflow of cash. Various schedules of fixed assets,
investments, current assets etc, are prepared by companies to show as to how the figures
shown in the balance sheet have been arrived at.
NATURE OF FINANCIAL STATEMENTS
Financial statements are prepared for the purpose of presenting a periodical review
or report by the management and deal with the state of investment in business and result
achieved during the period under review. They reflect a combination of recorded facts,
accounting conventions and personal judgments. From this it is clear that financial
statements are affected by three things i.e. recorded facts, accounting conventions and
personal judgments.
IMPORTANCE OF FINANCIAL STATEMENTS
The information given in the financial statement is very useful to a number of
parties as given below:
1. OWNERS: Owners provide funds for the operation of business and they want to
know whether their funds are being properly utilized or not.
statement prepared from time to time to satisfy their curiosity.
24

The financial

2. CREDITORS: Creditors (i.e. suppliers of goods and services on credit, bankers


and other lenders of money) want to know the financial position of a concern
before giving loans or granting credit. The financial statements help them in
judging such positions.
3. INVESTORS: Prospective investors, who want to invest money in a firm, would
like to make an analysis of the financial statements of that firm to know how safe
proposed investment would be.
4. EMPLOYEES: Employees are interested in the financial position of a concern
they serve, particularly when payment of bonus depends upon the size of the
profit earned. They would like to know that the bonus being paid to them is
correct; so they became interested in the preparation of correct profit and loss
account.
5. GOVERNMENT: Central and State Governments are interest in the financial
statements because they reflect the earnings for a particular period for purpose of
taxation. Moreover, these financial statements are used for compiling statistics
concerning business which in turn, help in compiling national accounts.
6. RESEARCH SCHOLARS:

The financial statements being a mirror of the

financial position of a financial position of a firm are of immense value to the


research scholars who wants to make a study into financial operations of a
particular firm.
7. CONSUMERS:

Consumers are interested in the establishment of good

accounting control so that cost of production may be reduced with the resultant of
the prices of goods they buy.
8. MANAGERS: Management is the art of getting things done through others. This
requires that the subordinates are doing work properly. Financial statements are an
aid in this respect because they serve manager in appraising the performance of the
25

subordinates by comparing the actual results with the standards established and
identifying the deviations, if any and taking remedial measures to remove
deviations.
MEANING OG ANALYSIS OF FINANCIAL STATEMENTS
Analysis is the process of critically examining in details accounting information
given in the financial statements. For the purpose of analysis, individual items are
studied their interrelationship with other related figures established, the data is sometimes
rearranged to have better understanding of the information with the help different
techniques or tools for the purpose. In the words of MYNR, 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 a study of the trend of these factors as shown
in a series of statements.
MEANING OF INTERPRETATION
Analysis and interpretation are closely related.

Interpretation is not possible

without analysis and with interpretation analysis has no value. In the words KENNDY
AND MEMULLAR, The analysis and interpretation of financial statements data so that
a forecast may be made of the prospects for future earning, ability to pay interest and debt
maturities (both current and long-term) and profitability of a sound dividend policy.
TYPES OF FINANCIAL STATEMENT ANALYSIS
Different types of financial statements analysis can be made on the basis of
1. The nature of the analysis and the material used by him.
2. The objectives of the analysis.
3. The Modus operandi of the analysis.
These are discussed one by one.

26

ON THE BASIS OF NATURE OF THE ANALYST AND THE MATERIAL USED BY


HIM:

EXTERNAL ANALYSIS: It is made by those persons who are not connected


with the enterprise. They do not have access to the enterprise. They do not have
access to the detailed record of the company and have to depend mostly on
published statements.

Such type of analysis is made by investors, credit

agencies, governmental agencies and research scholars.


INTERNAL ANALYSIS: The internal analysis is made by those persons who
have access to the books of accounts. They are members of the organization.
Analysis of financial statements or other financial data for managerial purpose is
the internal type of analysis. The internal analysis can give more reliable result
than the external analysis.
ON THE BASIS OF OBJECTIVE OF THE ANALYSIS:
On the basis the analysis can be long-term and short-term analysis.
LONG-TERM ANALYSIS: This analysis is made in order to study the longterm earning capacity of a business concern. The purpose of making such type
of analysis is to know whether in the long-run the concern will be able to earn a
minimum amount which will be sufficient to maintain a reasonable rate of
return on the investment so as to provide the funds required for modernization,
growth and development of the business and to meet its costs of capital.
SHORT-TERM ANALYSIS: This is made to determine the short term
solvency, stability and liquidity as well as earning capacity of the business. The
purpose of this analysis is to know whether in the short run a business concern
will have adequate funds readily available to meet its

27

Short-term requirements and sufficient borrowing capacity to meet contingencies


in the near future.
ON THE BASIS OF MODUS OPERANDI OF ANALYSIS:
On this basis, the analysis may be horizontal and vertical analysis.
HORIZONTAL (OR DYNAMIC) ANALYSIS: This analysis is made to
review and analyze financial statements of a number or years and therefore
based on financial data year from several years. This is very useful for longterm trend analysis and planning. It is also termed as dynamic analysis.
VERTICAL (OR STATIC) ANALYSIS: This analysis is made to review and
analyze the financial statement of one particular year only. Ratio analysis of the
financial year relating to a particular year is an example of this type of analysis.
TECHINIQUES (TOOLS OR METHODS) OF ANALYSIS AND INTERPRETATION:

The following techniques can be used in connection with analysis and


interpretation of financial statements:
1. Comparative financial statements (or Analysis).
2. Common measurement statements (or Analysis).
3. Trend percentages (or Analysis).
4. Funds flow statements (or Analysis).
5. Net working capital (or Analysis).
6. Cash flow statements.
7. Ratio Analysis.

FUNDS FLOW STATEMENTS INTRODUCTION


The basis financial statement i.e. the balance sheet and profit & loss account or
income statements of business reveal the net effect of the various transactions on the
operational and financial position of the company. The balance sheet gives a summary
28

of the assets and liabilities of an undertaking at a particular point of time; it reveals


status of the company.
The asset side of a balance sheet shows the deployment of resources of an under
taking while the liabilities side indicates its obligation financial activities of a business
for a period of time and financial activities if a business but their usefulness is limited
for analysis and planning purpose. But they are many transactions that take place in an
under taking and which do not operate though profit & loss account. Another statement
has to be prepared to show the change in the assets & liabilities from the end of one
period of time to the end of another period of time. The statement is called a statement
of changes in financial position of a fund flow statement.
MEANING & CONCEPT OF FUND
The term fund has been defined in a number of ways.
IN A NARROW SENCE: It means cash only and funds flow statement
prepared on this basic is called a cash flow statement.

Such statement

enumerates net effects of the various business transactions on cash and takes
into account receipts and disbursement of cash.
IN A BORDER SENCE: The term funds refers to money values in whatever
form in may exits, here funds means all financial resources, used in business
whether in the form of men, material, money, machinery and others.
IN A POPULOAR SENCE: The term funds means working capital, i.e. the
excess of current over current liabilities. The working capital concept of funds
has emerged due to the fact that total resources are invested partly in fixed
assets in the form of capital and kept in form of liquid or near liquid form as
working capital.

29

MEANING & CONCEPT OF FLOW OF FUNDS


The term FLOW means movement and includes both inflow & outflow.
The term FLOW OF FUNDS means transfer of economic values from one asset of
equity to another. FLOW OF FUNDS is said to have taken place when any transaction
makes changes in the amount of funds available before happening of the transaction.
Effect on transaction resulted in the FLOW OF FUNDS.
According to the working capital concept of funds the term FLOW OF FUNDS
refers to the movements of funds in the working capital, it is said to be an application or
out of funds.
RULE: The flow of funds occurs when a transaction on the one hand a non-current and
on the other a current account and vice-versa.
When a change in a non-current account
E.g. Fixed assets, long term liabilities, reserve and surplus, fictitious assets etc is
followed by a change in another non-current account, it does not amount to flow of
funds. 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 change in
another current. It does not affect funds.
Funds move from non-current transactions or vice-versa only. In simple language
funds move when a transaction affects.
1. A current assets and fixed assets.
2. A fixed liabilities and current liabilities.
3. A current asset and a fixed asset.
4. A fixed liabilities and current liabilities.
30

And funds do not move when the transaction affects fixed assets and fixed liabilities or
current assets and current liabilities.
CURRENT AND NON-CURRENT ASSETS
To understand flow of funds, it is essential to classify various accounts and balance
sheet items into current and noncurrent categories.
Current accounts can either be current assets or current liabilities. Current assets
are those assets which in the ordinary course of business can be or will be
converted into cash in a short period of normally one accounting year.
Current liabilities which are intended to be paid in the ordinary courses of
business with in a short period of normally one accounting year out of the current
assets or the income of the business.
The following is list of current working capital accounts
List of current or working capital accounts
Current liabilities
Current assets
1. Bills payable.
1. Cash in hand.
2. Sundry creditors (or) account
2. Cash at bank.
payable.
3. Accrued (or) outstanding expenses.
3. Bills Receivable.
4. Dividends payable.
4. Short tern (or) Account Receivable.
5. Bank over drafts.
5. Short term loans & Advances.
6. Short term loans advances &
6. Temporary
(or)
Marketable
deposits.
investment.
7. Provision against current assets.
7. Inventories or stock such as
a) Raw material.
b) Working process
8. Provision for taxation, if it does not
c) Stores and pares.
amount to Appropriation of profit.
d) Finished goods.
9. Proposed dividend (may be a current
31

8. Prepaid expenses.

(or) non current Liability).


9. Accord income.

Procedure for knowing a transaction resulting in the flow of funds


Analysis the transaction and find out the two accounts in valued

Makin journal entry of the transaction

Determine whether the account in valued in the transaction are current or noncurrent
If the both account in valued are non current i.e. either permanent assets or
permanent liabilities, it does not result in the flow of funds.
If both the account invalid are non-current.
If he accounts in valued are such that one is a current account while the other is a
non-current account i.e. current assets and permanent and fixed assets or current
liabilities and fixed assets or current liability and permanent liability & fixed
assets or current liability & permanent liability then it result in the flow of funds.
DIAGRAMS DEPICTING FLOW OF FUNDS
32

Flow of Funds

No
When
(or)

Yes
Both
Non

current

current

When One current

a/c

and

other non current A/c isin

Are in valued

valued

FLOW OF FUNDS

Current
Current Assets

No

Liabilities

Yes
Yes

Yes

Current Assets

Current Assets
No

FUNDS FLOW statement, Income statement & Balance sheet


Funds flow statement is not a substitute an income, i.e. a profit and loss account
and balance sheet. The profit and loss account is a document which indicates the extent
of success achieved b y a business in earning profits. It reports the result of business
activities and indicates the reasons for the profitability of a business. It does not reveal
the inflow and outflow of funds in business during a particular period.
33

Hence funds flow statement is not competitor to financial statements. The funds
statement provides additional information as regards changes in working capital, derived
from financial statements at two point of time. It is a tool of management for financial
analysis and helps in making decisions

Difference between funds flow statement and income statement


Funds flow statement
1. It highlights the changes in the

1.

Income statement
It does not reveal the inflow and

financial position of a business and

outflows of fund but depicts the items

indicates the various mean by which

of expenses and incomes arrive at the

funds were obtained during a particular

figure of profit or loss.

period and the ways to be which these


funds were employed.
2. It

is

complementary

to

income

statement income statement helps the

2. Income statement is not prepared

preparation of funds flow statement.

from funds flow statement.

3. While preparing funds flow statement


both capital and revenue items are
considered.

3. Only revenue items are considered.

4. There is no prescribed format for


preparing a funds flow statement.
4. It is preparing in prescribed format.

34

Difference between funds flow statement and balance sheet


Funds flow statement
1. It is a statement of changes in

Balance sheet
1. It is a statement of financial position

financial position and hence is

on particular data and hence is static

dynamic nature.

in nature.

2. It shows the sources and use of


funds in a particular period of time.

2. It depicts the assets and liabilities at


particular point of time.

3. It is a total of management for

3. It is not of much help to

financial analysis and helps in

management in making

decisions.

decisions.

4. Usually, schedule of changes in


working capital has to be prepared
before

preparing

funds

flow

4. No such of changes in
working capital is required. Rather
profit & loss account is prepared.

statement.
Significant and importance of funds flow statement
A funds flow statement is an essential tool for the financial tool for the financial
analysis and is of primary importance to the financial management. Now a days it is
being widely used by the financial analysis, credit granting institution and financial
manages. The basic purpose of funds flow statement is to reveal the changes in the
working capital on the two balance sheets data.

35

It also describes the sources from which additional working capital has been
financed and the uses to which working capital has been applied. Such a statement is
particularly useful in assessing the growth of the firm. It resulting financial needs and in
determining the best way of financial these needs. These significance or importance of
funds flow statement can be well followed one can plan the intermediate and long term
financing of the firm.
USES OF FUNDS FLOW STATEMENT
Helps in analysis of financial statement.
Throes light or preplanning questions.
Helps in formulation of dividend policy.
Helps in the proper allocation of resources.
Acts as a future guide.
Helps appraising the use of working capital.
Helps knowing the credit worthless.
LIMITATIONS OF FUNDS FLOW STATEMENT
The funds flow statement has a number of users; however, it has creation
limitations also, which are listed below.
1. It should be remembered that a funds flow statement is not a substitute of an
income statement or a balance sheet. It provides only some additional information
as regards changes in working capital.
2. It can not reveal continuous changes.
3. It is not an original statement but simply is arrangement of data given in the
financial statement.

36

4. It is essentially historical in nature and relevant for financial management in that


the working capital.

PROCEDURE FOR PREPARING A FUNDS FLOW STATEMENT


Funds flow statement is method by which we study changes in the financial
position of a business. Enterprise between beginning and ending financial statement
dates. Hence the funds flow statement is prepared by comparing two balance sheets and
with the help of such other information derived from the accounts as may be needed.
Broadly speaking the preparation of a funds flow statement consists of two parts.
1. Statement of schedule of changes in working capital.
2. Statement of sources and application of funds.
1. Statement of schedule of changes in working capital
Working capital means the excess of current assets over current liabilities.
Statement of changes in working capital is prepared to show the changes in the working
capital between the two balance sheet dates. This statement is prepared with the help of
current assets & current liabilities derived from the 2 balances.
Working capital = current assets current liabilities

37

Statement of schedule of changes in working capital


Particulars

Previous
year

Current
year

Current assets:
Cash in hand
Cash at bank
Bills receivable
Sundry debtors
Temporary
Investment
Stock
Prepaid expenses
Accrued incomes

xxx
xxx
xxx
xxx
Xxx
Xxx
Xxx
Xxx
Xxx

Xxx
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx

Total current assets

Xxx

Xxx

Xxx
Xxx
Xxx

Xxx
xxx
Xxx

Xxx
Xxx

Xxx
xxx

Current liabilities:
Bills payable
Sundry creditors
Outstanding expenses
Bank overdraft
Short advantages

38

Effect on working capital


Increase

Decrease

Xxx

xxxx

Dividend payable
Provision for taxation

Xxx
Xxx

xxx
Xxx

Total current liabilities

Xxx

Xxx

Working capital (CA-CL)


Xxx
Net increase (or) decrease
in working capital.
Xxx

Xxx
Xxx

Statement of sources and application of funds


Funds flow statement is a statement which indicates various sources from
which funds (working capital) have been obtained during a certain period and the
users or applications to which these funds have been put during the period. Generally
this statement prepared two formats.
a. Report form
b. T form or an account form or self balancing type.
Specification of reports form of funds flow statement
particulars

Rs

39

Source of funds
Funds from operation.
Xxx
Issue of share capital.
Xxx
Raising of long term loans.
Xxx
Receipts from partly paid shares, called up.
Xxx
Sales of non current assets.
Xxx
Non trading receipts, such as dividends received.
Xxx
Sales of investment(long term)
Xxx
Decrease in working capital (as per schedule of change Xxx
in working capital).
Xxx
Total:
Application (or) uses of funds
Xxx
Funds lost in operation.
Xxx
Redemption of debentures.
Xxx
Repayment of long term loans.
Xxx
Purchase of long term investment.
Xxx
Purchase of non current assets.
Xxx
Non trading payments.
Xxx
Payment of dividends.
Xxx
Payment of tax.
Xxx
Increase in working capital.
xxx
Total:
Forms an account form or self balancing type funds flow statements

40

Sources
Rs
Funds from operation Issue of Xxx

Applications
Rs
Funds in Operation. Redemption Xxx

Share Capital

xxx

of preference share capital

Issue of debentures.

xxx

Redemption

of

xxx

debentures.

Raising of long term loans. Xxx

Repayment of long term loans

Receipts

Purchase of non current (fixed) Xxx

from

partly

paid Xxx

hares.

assets.

Sales of non current (fixed) xxx

Purchase

assets.

investment.

Non trading receipts such as Xxx

Non trading Payment

dividends.

Payment of dividends

Sales of long term investments Xxx

Payment of tax

Net decrease

Net

in working

capital

xxx

of

increasing

long

xxx

term Xxx
Xxx
Xxx

in

working Xxx

capital.

Xxx
Total

Xxx

Total
Xxx
xxx
NOTE:- Payment of dividend and tax will appear as an application of funds only when
these items are appropriations of profit and not current liabilities.

STATEMENT OF CHANGING WORKING CAPITAL FOR THE YEAR


PARTICULARS
CURRENT ASSETS

YEAR1 YEAR2

41

INCREASE DECREASE

Inventories

xxx

Xxx

xxx

Sunday Debtors

xxx

xxx

xxx

Cash & Bank balance

xxx

xxx

Others Current Assets (A)

xxx

Xxx

xxx

Xxx

xxx

xxx

xxx

xxx

in (+-

(+-

xxx

xxx

xxx

xxsx

Current Liabilities:Current Liabilities


Provisions
Total

Current

Liabilities

(T.S)
Working Capital = (A+B)
Decrease

Increase

working Capital

xxx

STATEMENT SOWING SOURCES AND APPLICSATION OF FUNDS:Amount

Application of funds
42

Amount

Sources of funds
Issue of shares

xxx

Preferences of Shares

xxx

Issue of Debentures

xxx

Redemption of Debentures

xxx

Long

term xxx

Borrowings

Payment of other Long Term


Loans

xxx

Purchase of Fixed Assets


Sales of Fixed Assets

xxx

xxx
Payment of Fixed Assets

Operating profit

xxx
xxx

Increase in working Capital

Decrease in working
Capital

xxx
xxx
TOTAL

TOTAL
xxx

xxx

DATA ANALYSIS & INTERPRETATION


STATEMENT OF CHANGING IN WORKING CAPITAL FOR
43

THE YEAR 2010-2011 OF THE RAMCO CEMENTS LIMITED.


PARTICULARS

2010

2011

EFFECT ON WORKING
CAPITAL
INCREASE DECREASE

A) Current Assets:a) Inventories


b) Sundry Debtors
c) Cash
and
Bank
Balance
d) Loans and Advances
e) Other current assets
Total current Assets:
B) Current Liabilities &
Provisions:a) Current Liabilities
b) Other
current
Liabilities
Total current Liabilities
NETWORKING
CAPITAL (A-B)

13,60,13,82
4
40,97,718
8,98,720
2,62,000
2,42,665
14,38,72,92
7

9,39,57,410
153226
388272
2,65,37,258
3,84,172

4,20,56,414
39,44,492
5,10,448
2,39,17,258
1,41,507

12,14,20,338

3,65,77,367
48,460

2,86,89,754
78,87,613 31,982
16,478

3,66,25,827

79,04,091

10,72,47,10
0

11,35,16,247

62,69,147
Net increase in Working
Capital

62,69,147
1,13,51,627

1,13,56,247

5,27,80,501

5,27,80,501

FUNDS FLOW STATEMENT FOR YEAR 2010-11 OF THE RAMCO CEMENTS


LIMITED
44

Source of funds

Amount

Application of funds

Amount

(Rs)
Sale

of

factory

27,07,908 Purchase of furniture &

buildings

1,66,750

fixtures
Purchase

Sale of other fixed


assets

other

fixed

assets

11,40,902

38,15,939
Decrease in un secured

36,55,878

Surplus

increase
Increase

9,64,002

loans

Increase in Reserves &

in

working

capital

secure

loans

in

62,69,147

69,14,784

Funds from operation


1,22,302
Total

Total
1,72,16,811

1,72,16,811

INTERPRETATION:-

45

The above calculation that in 2010-2011 total current assets amount to Rs.
14,38,72,927 has been decreased to Rs. 12,14,20,338. The decrease in current
assets amount Rs. 2, 24, 52,589.
Cash and bank balance has lower i.e. from (8,98,720 to 3,88,272) Rs. 6,10,448
loans and advances also increase from 26,20,000 to 2,65,37,258 i.e., Rs
2,39,17,258.
At the same time the current liabilities also decreased from Rs. 3,66,25,827 to Rs.
79,04,091 i.e. Rs. 2,87,21,736.
The net working capital increase during the study period amount to Rs
6,26,99,147. So this is a healthy sign that the company able to manage current
assets and liabilities.

STATEMENT OF CHANGING IN WORKING CAPITAL FOR


46

THE YEAR 2011-2012 OF THE RAMCO CEMENTS LIMITED


PARTICULARS

Current Assets:
a) Sundry Debtors
b) Cash and Bank Balances
c) Loans and Advances
d) Other current assets
Total current Assets(A):
Current
Liabilities
&
Provisions:
a) Current Liabilities
b) Other current liabilities
Total Current Liabilities (B)

NETWORKING CAPITAL (AB)

2011

2012

EFFECT ON WORKING
CAPITAL
Increase

1,53,226
2,88,272
2,65,37,258
9,44,41,582

63,467
14,70,425
3,88,38,127
14,89,79,468

12,14,20,338

18,93,51,487

6,23,100
16,68,991

2,70,29,530
71,30,214

79,04,091

3,41,59,744

11,35,16,247

15,51,91,743

Decrease
89,759

11,82,153
1,23,00,869
54,53,788

2,07,94,430
54,61,223

41,67,55,496

4,16,75,496
Net increase
Capital
Total

in

Working

155191743

155191743

6,80,20,908

FUNDS FLOW STATEMENTS FOR YEAR 2011-12 OF

47

6,80,20,908

THE RAMCO CEMENTS LIMITED


Sources of funds
Sales of factory

Amount (Rs) Application of funds


25,83,834 Purchase of Land

Amount (Rs)
66,21,525

buildings
Increase in un secured

1,27,96,060 Purchase of Plant and

loans

1,14,21,497

Machinery

Increase in Reserves &

74,39,073

Surplus

Increase

in

working

4,16,75,496

capital
3,67,77,251

Increase in secure loans


1,22,300
Funds from operations
Total

5,97,18,518

Total

INTERPRETATION:-

48

5,97,18,518

The

above calculation that in 2011-2012 total current assets amount to Rs.

12,14,20,338 has been decreased to Rs. 18,93,51,487. The increased in current


assets amount Rs. 6, 79, 31,149.
Cash and bank balance has higher i.e. from (288272 to 1470425) Rs. 1182143
loans and advances also increased from 26537258 to 3583127 i.e. 12300869.
At the same time the current liabilities also decreased from Rs. 6235100 to
27029530 i.e. Rs. 20794430.
The net working capital increased during the study period amount to Rs.
416755496. So this is a healthy sign that the company able to manage current
assets and liabilities

STATEMENT OF CHANGING IN WORKING CAPITAL FOR


49

THE YEAR 2012-2013 OF THE RAMCO CEMENTS LIMITED.


EFFECT ON working
PARTICULARS

2012

2013

Capital
INCREASE DECREASE

Current Assets:
a) Inventories

74,48,79,734

6,09,82,074

63,467

65,10,948

64,47,481

14,70,425

1,41,21,860

12,61,435

d) Loans and Advances

3,88,38,127

5,99,92,347

2,11,54,220

e) Other current assets

7,44,89,734
18,93,51,487

6,09,82,074
20,25,89,303

1,35,07,660

2,70,29,530

3,00,94,997

71,30,214
3,41,59,744

1,82,42,364
4,83,37,361

Total Current Liabilities (B)


NETWORKING CAPITAL(A- 15,51,91,743

1,54,25,942

b) Sundry Debtors
c) Cash and Bank Balances

Total current Assets (A)

1,35,07,660

Current Liabilities &


Provisions:
a) Current Liabilities
b) Other current liabilities

3,65,467
1,11,12,150

B)
9,39,801
9,39,801
Total

15,51,91,743

15,51,91,743

1,90,98,916

FUNDS FLOW STATEMENT FOR YEAR 2012-2013 OF


THE RAMCO CEMENTS LIMITED.
Source of funds

Amount (Rs) Application of funds


50

Amount (Rs)

1,90,98,916

Sales
of
buildings

factory

27,33,270 Purchased
of
Furniture & Fixtures

82,932

and other fixed assets

Decrease
capital

in

working

Increase in Reserves &


Surplus

Increase in un secured
loans

Purchase of
&Machinery
9,39,801

1,38,60,146

Purchase
2,34,68,817 computers

1,25,45,805

Funds from operations

Purchase of
fixed assets

of
2,84,216

other
13,48,674

Decrease in secured
loans
1,22,300

Total

plant

24,23,425

3,98,09,993 Total

3,98,09,993

INTERPRETATION:The above calculation that in 2012-2013 total current assets amount to Rs.
189351487 has been increased to Rs. 202589303. The increased in current assets amount
Rs. 13237816.
51

Cash and bank balance has shown higher i.e. from (147425-14121860) Rs.
2651435 loans and advances also increased from 38838127 to 59992347 i.e. Rs.
21154550.
At the same time the current liabilities also increased from Rs. 34159799 to
4833736 i.e. 14177617.
The net working capital decreased during the study period amount to Rs. 939801.
so this is a healthy sigh that the company able to manage current assets and liabilities.

STATEMENT OF CHANGING IN WOKRING CAPITAL FOR


THE YEAR 2013-2014 OF THE RAMCO CEMENTS LIMITED.
Particulars

2013

2014

Effect
capital
Increase

52

on

working
Decrease

Current Assets:Inventories
Sundry Debtors
Cash & Advantages
Loans & Advantages
Other current Assets
Total current Assets (A)

10,95,70,32 15,03,55,335
0
23,74,408
68,02,874
14,56,882
14121860
3,22,56,108
5,99,92,347
86,58,335
41,23,820
1,94,11,221 19,37,83,874

4,37,85,01
5

44,28,466
1,26,64,978
2,77,36,239

4,53,44,51
5

Current liabilities &


Provisions:Current liabilities

3,27,75,006

5,98,13,506

48,81,795

58,97,969

3,76,56,801

6,57,11,475

Other current liabilities

Total current liabilities


(B)

Working Capital (A-B)

Decrease
capital

in

Total

15,69,54,42 12,80,78,399
0

2,88,76,021
2,88,76,021

working

185830441

185830441

73705704

73705704

FUNDS FLOW STATEMENT FOR YEAR 2013-2014 OF THE RAMCO CEMENTS


LIMITED.

Particulars

Rs

Particulars

53

Rs

Source of funds
Share holder funds
Reserve & surplus
Unsecured loans

Application of funds
80,000 Purchase

of

fixed

assets

1,68,399

1,68,399 Total

1,68,399

12,761
14,27,57
0

Secured loans
60,098
Differed tax liability
34,093
Preliminary Expenses
1,223
Total

INTERPETATION:-

54

The above calculation that in 2013-2014 total current assets amount to Rs


1946111221 has been decreased Rs 193789874. The decreased in current assets Rs
821347.
Cash & Bank balance has shown lower i.e. from (14121860 to 1456882) Rs
12664978 loans and Advances also decreased from 59992347 to 32256108 i.e. 2854674.
At the same time the current liabilities also decreased from Rs. 37656801 i.e.
28054674.
The net working capital decreased during the study period amount to Rs
28876021. The decline in net working capital resulted from decrease sundry debtors.
Cash & Bank balances loans & Advances.

55

STATEMENT OF CHANGING IN WORKING CAPITAL FOR THE YEAR 20142015 OF THE RAMCO CEMENTS LIMITED.
Particulars

2014

2015

EFFECT ON working
Capital
Increase

Decrease

Current Assets:Inventories

15,03,55,335

19,06,69,403

403,14,068

Sundry Debtors

15,46,938

21,33,751

5,86,813

Cash & Advantages

14,56,882

2,57,37,490

2,42,80,608

Loans & Advantages

3,22,56,108

3,59,80,085

37,23,977

Other current Assets

94,85,805

11,95,85,076

11,00,99,271

19,51,01,068

37,41,05,885

6,01,40,091

14,93,30,012

58,97,968

87,89,433

6,60,38,008

15,81,19,445

12,90,63,008

21,59,86,440

Total current Assets (A)


Current

liabilities

&

Provisions:Current liabilities
Other current liabilities
Total current liabilities
(B)
Working Capital (A-B)
Decrease

in

8,69,23,432

working

8,69,23,432

capital
Total

21,59,86,440

21,59,86,440 17,20,86,122

56

17,20,86,122

FUNDS FLOW STATEMENT FOR YEAR 2014-2015 OF THE RAMCO


CEMENTS LIMITED.

Particulars
Sources of FUNDS

Amount (Rs)

Particulars

Amount (Rs)

Application of FUNDS

Secured loans

9,55,799.5 Reserve & Surplus

Unsecured loans

4,18,527.6 Differed tax liability


Purchase of fixes assets
Miscellaneous

7,056.19
346.8
12,75,569.3
2,606

Expenditure

Total

Net current Asset


13,74,327.1
Total

INTERPETATION:
57

88,407.9
13,74,327.1

The total current assets value for the year 2014-2015 is 195101068. It increased to
37410585 for the year ending 2014-2015.
Cash & Bank balance showed an increase of 24280608. Which is derived from a
sea change in companys cash balances? The cash & Bank balance for the year 20142015are 1456882 and 25733490 respectively.
At the same time the current liabilities also increased from Rs 6603860 to
158119445 i.e. Rs 92081385.
The net working capital increased during the study period amount to Rs.
86923432. So this is a healthy sighs that the company able to manage good liquidity.

TABLE REPRESENTATION SHOWING CHANGES IN WORKING CAPITAL


58

(RUPEES IN LAKHS)
Years

Changes in working capital

2010-2011

-62,69,147

2011-2012

-4,16,75,496

2012-2013
2013-2014

+9,39,801
-2,88,76,021

2014-2015

-8,69,23,432
Chart -1

Changes in working capital


20000000
0
2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

-20000000
-40000000
-60000000
-80000000
-100000000

INTERPETATION:
The changes in working capital are increase & decrease in every year. It is continuous
increase & decrease of the working capital.

TABLE REPRESENTATION SHOWING FUNDS FLOW STATEMENT

59

(RUPEES IN LAKHS)
Year

Funds flow statement

2010-2011

1,72,16,811

2011-2012

5,97,18,518

2012-2013

3,98,09,993
1,68,399
21,13,74,327.1

2013-2014
2014-2015

Chart -2

Funds flow statement


250000000
200000000
150000000
100000000
50000000
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPETATION:
The funds flow statement is 2013 2014 between years amount was increased in yearly.
In 2014 2015 was decreased in present year i.e. Rs. 2,17,709.70 lakhs.
60

FINDINGS

1. In the year 2010-2011 the total source of funds is Rs. 1,70,94,509. The main
source of the fund is secured loans amounted to Rs 69,14,784. Total applications
of funds for the year 2010-2011 are Rs 1,72,16,811. The main application
component is purchase of other fixed assets Rs 11,40,902.
2. In the year 2011-2012 the total source of funds is Rs 5,95,96,218. The main
source of fund is secured loans amounted to Rs 3,67,77,252. Total applications of
funds for the year 2011-2012 are Rs 5,97,18,518.

The main application

component is purchase of plant and machinery Rs 1,14,21,497.


3. In the year 2012-2013 the total source of funds is Rs 3,96,87,693. The main
source of funds is Reserves & Surplus amounted Rs 2,34,68,817.
applications of funds for the year 2012-2013 are Rs 39,80,993.

Total

The main

application component is secured loans Rs 24,23,24,025.


4. In the year 2013-2014 the total source of fund is Rs 9,49,26,638. The main source
of the fund is unsecured loans amounted to Rs 14,27,570. Total applications of
funds for the year 2013-2014 are 168399000. The main application component is
purchase of fixed assets Rs 168399000.
5. The year 2014-2015 the total source of fund are Rs 1,37,43,271. The main source
of the fund is secured loans amounted to Rs 95,57,99.5. Total applications of
funds for the year 2014-2015 are 13,74,327.1. The main application component is
purchase of fixed assets Rs 12,75,569.3.
61

SUGGESTIONS

There is lot of pretension consistence demand the cement industry as a cement


producer the company can able to source, their funds throw more share holders
funds.
Company is maintaining in inventories a part of current assets for the entire study
period. At shows that excessive inventory level are not good for any organization
and any company. Si the company has to concentrate much more on inventory
maintains.
The company has to main super quick assets in order to maintain sound liquidity.
During study period there are negative working capital levels for the company so
the company must maintained enough current assets the keep working capital,
figure positively.
A company has to recollect their standing amount from the debtors regularly.
The company has to maintain same funds long-term investment.
The company has to monitory from liability position, in regular intervals.
The company must be conscious about their working capital position.

62

CONCLUSION

1. The company always maintains sound level of funds.


2. Company maintains adequate level of working capital during the study period
except the year 2011-2012, 2012-2013.
3. The company paid the amount of unsecured loans.
4. For meeting working capital requirement the company has cash credit arrangement
from various banks.
5. Depreciation calculates from beginning of the month for all the assets.
6. Investment is carried at market value without providing any provision.
7. The company maintained their fixed assets at book value and providing
depreciation where is necessary.
8. The company has taken loans from Government of India.
9. The company maintains their reserves and surplus consistently.

63

BIBILIOGRAPHY

Author

RK Sharma shashi K Gupth

Dr.S.N.Maheshwari

I.M pandey

Name of the book

Edition

Management of accounting

8th edition

Financial management

Financial management

SOURCES:
Company reports.
Web site of a company www.ramco.com

64

6th edition

9th edition