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BUDGETARY CONTROL SYSTEMS
(A TECHNIQUE FOR PERFORMANCE EVALUATION)
FEBRUARY 12, 2011
PGDM (eBusiness) (2010-2012)
TO PERFORM A STUDY ON BUDGETARY CONTROL SYSTEMS TO EVALUATE PERFORMANCE
HIRAL VED JIGISHA GANDHI JUGAL SHAH NIKHITA GARODIA PAWRUSH ELAVIA VIKRANT MORE (PG10028) (PG10032) (PG10033) (PG100xx) (PG10059) (PG100xx)
A REPORT SUBMITTED TO THE UNIVERSITY/INSTITUTE IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF POST GRADUATE DIPLOMA IN MANAGEMENT FOR THE ACADEMIC YEAR 2010 TO 2012.
UNDER THE GUIDANCE OF
_________________________________ (FACULTY MANAGEMENT ACCOUNTING) MUMBAI EDUCATIONAL TRUST S INSTITUTE OF COMPUTER SCIENCE
PGDM (eBusiness) (2010-2012)
PLACE: _______________ DATE: _______________ _________________________ (SIGNATURE OF THE FACULTY) MET.CERTIFICATE This is to certify that the project titled TO PERFORM A COMPARITIVE STUDY ON BUDGETARY CONTROL SYSTEMS TO EVALUATE PERFORMANCE is based on an original study conducted by: Hiral Ved Jigisha Gandhi Jugal Shah Nikhita Garodia Pawrush Elavia Vikrant More (PG10028) (PG 10032) (PG 10033) (PG 10054) (PG 10059) (PG 10097) under my guidance and this has not formed a basis for the award of any other degree of this university / institute. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .
Vikrant More have successfully completed a study on TO PERFORM A STUDY ON BUDGETARY CONTROL SYSTEMS TO EVALUATE PERFORMANCE. Nikhita Garodia. The study conducted was satisfactory. Jigisha Gandhi. Hiral Ved.CERTIFICATE FROM THE ORGANIZATION This is to certify that Ms. and have submitted a project report on the same. ____________________________ (SIGNATURE OF THE OFFICER-IN-CHARGE) MET. Pawrush Elavia and Mr. Ms. Ms. We wish them all the best. Jugal Shah. Mr. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . Mr.
It may also be derived on basis of its function which may result in operating budgets such as a sales budget or a production budget. short term or current in nature. NFCL) is a manufacturing concern relating to the fertilizers. working capital budget and budgeted balance sheet.PREFACE Management accounting is an extension of cost accounting. It depends on cost analysis and costing techniques which are termed as financial control and accounting. to cover the limitations of financial accounting and help managers in decision making. A budget may be based on time and may be long term. its prerogative is to cope up and sustain itself in the market. budgetary control. to have effectiveness and removal of wastages from its operations and such that it runs competitively. This is achieved by effective and efficient operations by reducing the cost and by avoiding the wastages which are involved in it. Having studied about the budgeting process and various types of budgets for an organisation and different monitoring and evaluation techniques of their systems and its analysis. This study is based on a swot on the budgetary control system of Nagarjuna Fertilizers and Chemicals Limited with the objective to evaluate their performance against their respective budgetary control system. it has two plants which involves a lot of direct and indirect costs towards its operation. a master budget is prepared. A budget can be rigid/fixed. we know that budget controlling is one of the management functions in any company. or flexible in nature to adapt to the dynamic conditions of the business environment. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . On these grounds. to understand what a budgetary control system is and why it is required in companies. MET. We have chosen one of the best and popular cost control techniques. or it may be on basis of the financial function which prepares the cash budget. It involves the preparation of a budget as well as setting up of a budgetary control system for an organisation. As there is heavy competition in the market of fertilizers. how it operates and what are its advantages and disadvantages we have prepared this report. Hence.
We would like to thank Professor L. We would like to express our special gratitude to the industry persons for giving us their attention and time. MET Institute of Management.ACKNOWLEDGEMENT We would like to allow and extend our heartfelt gratitude to the people responsible for the success of this study. MET. His kind co-operation and encouragement has helped us in completion of this report such as Budgetary Control which has not only opened our minds and given us an insight into how businesses prepare their budgets when they have some basic ideas of what they want to do but also on how they prepare budgets to help themselves achieve those ideas. they check to see if they kept to their budget. for extending his support. and then once they have done whatever it is that they wanted to do. We express our thanks to Professor Vikas Naik (Program Co-ordinator). and their willingness to help us out with their abilities. N. Chopde (Management Accounting) for his guidance and supervision and providing necessary information regarding this report. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .
The major difficulty is the problem of measuring the outputs in order to set standards for budgets. y To make a prediction about capital expenditure by NFCL. y To have a comparative analysis among different fertilizer companies. to know the causes for deviations and hence to avoid leaving things to happen as they happen. The scope of this study is: y The time period considered in the study is of 2008-09 and 2009-10. y The study is confined to the manufacturing costs and details provided by NFCL. Every institute has certain peculiarities as service-oriented and not-for-profit organizations and hence implementation of budgetary control system in each institution is more difficult than in profit . After reading this presentation/report. you will be able to understand: y y y y y What is a budgetary control system? Why is it needed? How does it operate in companies? What are its advantages and limitations? What are the circumstances under which the budgetary control system has to operate in organizations? y What are the characteristics of a flexible budgetary system? y How is it used in the fertilizer industry? y How does it serve as a measure of performance? The objectives of this study are: y To evaluate the budgetary control practices followed in NFCL. to uncover deviations.EXECUTIVE SUMMARY While budget is a financial statement. to initiate corrective actions. A budgetary control system helps to measure the progress made towards goals. which provides details of the proposed revenues and their utilization for expenditure for a specific period. MET. budgetary control is the process of comparing what was planned with what has been accomplished during the period. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .oriented organizations.
CONTENTS I II III IV V VI PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMARY IMPORTANT DEFINITIONS AND CONCEPTS BUDGETARY CONTROL SYSTEM FLEXIBLE BUDGETARY CONTROL VII NAGARJUNA GROUP VIII ANALYSIS IX X XI FINDINGS SUGGESTIONS/RECOMMENDATIONS CONCLUSION XII BIBLIOGRAPHY MET. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .
Budget is a plan document and a financial statement. A budgetary system helps managers to learn from past experience. Budgeting promotes overall perspective. Managers use the budgeting process throughout the management cycle to plan. It may become the basis for long range planning. summarizing and communicating financial and non-financial information about an organization s future activities. in order to make good budgeting. It helps to have improved communication. review and report the organization s financing. which provides details of the proposed revenue and their utilization for expenditure. It means budgeting for control. cost and time. the department or unit should have clear financial responsibilities and accoun and planning should be ts highly specific and must be done well in advance. the formal organization should be clear. It is used to communicate responsibilities to individuals who are accountable for a particular segment of the organization. BUDGETARY CONTROL SYSTEM A budgetary control system reveals the extent by which actual results have varied from defined objectives. A budget under various functional units indicates the limits for expenses and results to be achieved. gathering. execute. Budgeting is a planning process in which expenditure and revenue of the organization over a specific time period are accounted for. MET. cooperation and team spirit among the employees as it brings together the activities of various divisions. BUDGET A financial statement prepared and approved prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objective. Since managers of different levels are involved in setting budgets. For example. the organization is bestowed with the collective wisdom. It facilitates centralized control with delegated responsibility.IMPORTANT DEFINITIONS AND CONCEPTS BUDGETING Budgeting is the process of identifying. investing and operating activities. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . Performance measures are carefully selected to motivate individuals or teams to achieve targeted goals. Budgeting is a good stimulant to many good management practices. It pertains especially to the planning stage to make budgets to fulfil the company s long term and short term plans and to meet success factors related to quality. For having detected the deviations from the predetermined standards. it provides a guide for corrective action and hence minimizes wastage and losses. This helps the BUDGETARY CONTROL SYSTEM of an organisation.
A budgetary control system provides an incentive to executives when the standards are set at a reasonable level. y MET. it may treat symptoms rather than the basic problems. raw materials. co -ordination. It provides information about the objectives and policies of the organisation. This can be seen in setting standards. Limiting factors (also known as key factors) include cash.(BENEFITS AND APPLICABILITY) y y y y A budgetary control system acts as a base for co -ordination and integration of various activities. land and the equipment of the organization. crating cost consciousness among the executives. y y y y y y y y y y (LIMITATIONS) y y y Budgetary control system in service-oriented and not-for-profit organizations may lead to unhealthy emphasis on easily observable factors ignoring more important areas like services. It results in co-ordination and co-operation between the various members of the organisation in their activities. It aims at maximisation of profits through effective utilisation of resources. It ensures availability of working capital whenever required and acts as a powerful tool of accounting responsibility. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . calling for an arbitrary cut in expenses. and facilitates effective delegation of authority. control and communication among the members of the organisation. Budget and budgetary control systems tend to create interna conflicts and pressures among l different departments or units. It facilitates bank credit. and helps management in taking corrective action. Reports of budgetary control do not and should not be expected to reveal the real cause of any difficulty. It measures the actual performance of the company and compares it against the budgeted figures. Budgeting for control develops the habit of thinking and analysis among employees. It is a conscious effort. Budgetary control system may open up the way for dictatorial behaviour on the part of the top management. Another limitation of budgetary control system is that by involving itself in a number game. etc. skilled labour. A budgetary control system is a democratic way of managing and controlling the monetary movement within and outside the organization. thereby establishing itself as a base for internal check. A successful budgetary control system is one that provides effective planning. A very important applicability of a budgetary control system is that is measures the efficiency of the company in terms of the contribution of the limiting factors that bound the activity of an entity. It reveals the weak points and deficiencies.
Budgets are mostly inflexible and rigid and do not respond to internal or external environmental changes. time consuming and unduly expensive and require additional efforts. Inefficient employees may feel suspicious of budgetary control system that it is used to evaluate the results or consider it as a way of implementing cost reduction programmes and hence fail to cooperate wholeheartedly. costs and manpower to perform. Budget standards may not be revised as frequently as required. An amount once spent becomes a floor for future budgets. The actual expenditures may not differ much from budgeted expenditure but the department would have performed little constructive work. MET. not all expenditures can be controlled by way of a budget. As such budgets may not help in solving day-to-day problems of supervisors but help to analyze the past performance and projecting the possible future. the organization might go through the process of budgetary control without giving any real thought as to how the operations might be improved. In such situation a good manager is discouraged from taking initiative and undertaking new activities for which provision has not been made in the budget and a bad manager can hide his inefficiency behind the budget. Furthermore. A budgetary control system may sometimes become very cumbersome. Sometimes the budgetary control system may turn out to be ineffective if Budgetary Control System estimates turnout to be grossly inaccurate. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . they have a way of growing from precedent. Budgetary control system tries tying everything to Rupees and ignores thequality of services and hence poses serious problems to service -oriented and not-for-profit institutions like libraries and information centres.y y y y y y In case of line item type budget. Lastly. The process may become routine with complacency of paper work and little notice or action taken.
like any other enterprise. It is a useful tool for planning and controlling costs. MET. The budget is increasingly being used as a control device in both profit oriented as well as service oriented and not-for-profit organizations. budgets should not be rigid.A manager s actual performance or achievement can be compared wit what should have been h achieved in the conditions prevailing and not with what should have been achieved under different circumstances. Analysis of performance provides feedback for more realistic plans of cost in the future. is a dynamic entity required to adjust to changing environmental factors and e conomic forces. the flexible budgetary control is introduced in business. etc. flexible budgeting serves as a dynamic tool of controlling overheads. Flexible budgetary control may be less relevant to information centres which do not earn substantial revenue from their services. To mitigate the situation. but responsive to political and economic changes as well as changes in needs of the customers. As actual conditions may not match with the conditions assumed while preparing a budget. after all. the flexible budget is one of the best control devices available to management. They should be sufficiently flexible to meet rapid shifts in the needs. It facilitates comparison of actual performance with the budget at any level of activity. The budgets are. It has a crucial impact on the managements methods of controlling the overall performance of the organisation. Such uncontrolled variances can occur due to vari ations in prices. Flexible budget is a marginal approach to allocating resources and incorporates all the disadvantages and difficulties associated with marginal analysis. there could be differences between actual costs and budgeted costs. This type of budget provides costs budgeted at different levels of activity. then to that extent he should be relieved from the responsibility. extremely useful for getting behind the causes for variances. Therefore. It provides adjusted budget allowances for comparison purposes.FLEXIBLE BUDGETARY CONTROL Flexible budgeting as introduced to overcome the drawbacks of fixed budgeting. volume. estimates based on the result of intelligent judgments and hence are alterable. One of the basic principles of budgetary control is to fix responsibility to the manager for costs over which he has control. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . In other words. Such a self-adjusting budget is known as the flexible budget. As such the budget of a limited company should be self-adjusting to reflect the new conditions of operations. It enables assessment of what any individual cost should have been at the actual level of activity attained. Nevertheless. If the variance in costs is due to factors on which he has no control. An organization. It facilitates development of departmental overhead costs budgets for profit plan. It is an effective tool provided it does not attempt to measure radical chang from es normal operating levels. It is not a passive approach to budgeting and it justifies change provided the relationship of expenses is maintained rather than force a change in the composition of capital and labour to achieve a more efficient product curve (or level of production). Flexible budgeting is thus. This type of budget is necessary for control.
They have the distinction of being the single largest private sector investment in Southern India. 1956 can be made use of. Furthermore. etc. An ISO 9001:2000 certified company. Their operations and offerings have been aligned into three strategic business units: y y y Straight Nutrition Business Nutrition Solutions Business Nagarjuna Management Services The company prepares its master budget along with budgets for major important functions like sales.5 billion. rates of materials are adjusted according to the prevailing rates in the market. To survive. For this purpose. these are communicated to respective heads of departments/ sections for implementation. today they have an asset base is around ` 21 billion. if the comparison of the current year actual is made with the previous year actual. K. reasons for variance are submitted to the management for taking appropriate actions. When budgets are prepared and approved. cash. For example. departmental heads. production. it is more meaningful. Their broad portfolio of products and services include: y y Nutrition solutions: Macro and Micro fertilizers and Farm Management services Micro Irrigation solutions At Nagarjuna. Similarly adjustment is made in labour cost depending on the budget period. The flagship company of the Nagarjuna Group. in addition to the comparison of actual performance of the current year with the budgets. Raju with a modest investment of US$ 23 million. labour. they offer their expertise for the management of chemical process plants. K. which include Specialist Services and Total Project Management. it is sent for the approval of Board of Directors at its head office at Mumbai. the budget is prepared by Budget Control and Cost Accounts (BCCA) department in consultation with the chief executive. MET. Commencing operations in 1985. On the similar lines. it is approved by budget committee and finally. After the initial budget preparation. Normally the standards of last year are used as the basis for budget preparation with suitable adjustment. Dearness is paid on the basis of All India Cost of Living Index. Nagarjuna Fertilizers and Chemicals Limited is a leading manufacturer and supplier of plant nutrients in India. the Profit and Loss Account and Balance Sheet as per the Companies Act. Overheads are changed on percentage basis. V. their operational profits are one of the highest in the industry. the Nagarjuna Group today is a prominent industrial house in India with an asset base of US$ 2.NAGARJUNA GROUP Founded in 1973 by Shri. grow and attain leadership position in areas of operation it is essential for them to identify and capitalize on emerging opportunities. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .
9 7.6 424. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .7 3456.0 13569.5 11375.6 637.8 57205.7 129.6 5.0 14227.1 0.5 117.0 14.5 6.0 5.0 77984.0 71545.5 7697.5 389.3 67502.0 MET.7 6595.5 16012.0 13.1 65111.0 66243.4 14992.3 6523.2 82947.0 156497.4 6341.0 3095.0 6615.WAGES AND BENEFITS PACKING MATERIALS CONSUMED DISTRIBUTION EXPENSES OTHER EXPENSES INTEREST AND FINANCIAL CHARGES BUDGET (2008-09) BUDGET (2009-10) PROJECTION (2010-11) 11.0 2712.8 5883.9 11.2 8528.0 2712.0 15551.0 900.9 281.5 3827.6 6.4 3445.4 221.8 4078.3 73816.7 27305.0 3095.9 7.6 12839.0 26781.4 11.6 11515.5 6.0 6922.1 3026.3 584.6 12916.8 12342.5 82704.0 8122.BUDGET PROJECTION FOR 2010-11 PARTICULARS INCOME CAPACITY P1 P2 PRODUCTION (UREA) PRODUCTION (MI) SALES(UREA) SALES(MI) MANUFACTURED UREA PLANT 1 SPECIFIC ENERGY VARIABLE COST FIXED COST GROUP CONCESSION PLANT 2 SPECIFIC ENERGY VARIABLE COST FIXED COST GROUP CONCESSION FREIGHT SUBSIDY SALES SUBSIDY NORMAL PRODUCTION UREA P1 P2 ADDITIONAL PRODUCTION UREA P1 P2 OTHER INCOME EXPENDITURE PURCHASES (RAW MATERIALS) POWER AND FUEL SALARIES .0 5.0 700.1 103635.5 15.7 14.4 533.0 765.0 8267.1 26769.1 586.0 480.5 375.8 6987.0 2712.4 15.5 5.4 13.7 77294.5 3520.0 3095.3 0.0 6928.0 1215.9 7.1 6398.
1 to 102. MUMBAI 0000 0 y PGDM (eBusiness) (2010-2012) DIVISION A . Book value of plant 1 and 2 is taken under the condition of 100% capacity and these are the values taken on the basis of average of previous years. Here the growth rate is taken is 9% for both production of UREA and MI and sales on the basis of following factors such as area coverage under sown is 638. Irrigational potential has Increased 81. increased international demand for fertilizers about (11%). And fertilizer consumption compared to previous year and apart from this growth observed is (6%) and rain falls are expected according to predications.5 12229.33 lakh hector which increased a lot when compared to the previous year (10%). the expenses relating to the specific energy is increased because previously the company is used naphtha as major raw material for the production which incurs more cost than gas.9 12567. At the same time variable cost of naphtha raw MET.5 (GRAPHICAL REPRESENTATION) 1 0000 160000 140000 120000 100000 60000 40000 20000 The following assumptions are considered at the time of analysis: y y y Plant utilization up to 100%. The Company is going to use gas as raw material.08 % up to previous year and more over the govt has come with improved accelerated irrigation benefit program (alibi)-special grant extension programs for pending projects.DEPRECIATION 12567.
e. taxes. Hence considered 35% as growth rate (huge govt support this time for fertilizer industry to increase the production and productivity). In the previous budget there is decline in the growth rate of expenditure on fuel and po wer. subsidy. which is normally observed in the market every year due to various factors. it had been applied. so this time it is more than that. 4% is taken as growth rate on previous year. Hence the demand. Group concession is shown at a normal growth of previous budget.Hence in that view. banks and other institutional lenders may provide at lesser interest rate when compared to previous years and it would be very beneficial to the company in financial terms. As per the norms of the companies act and company. and maintained relating have been increased (inflation).y y y y y y y y y y y materials is reduced to larger extent.So. some nominal growth rate is applied. As earlier mentioned that the subsidy towards the agriculture and fertilizers is in this financial year is more compared to the previous year i.Hence applied better rate than that of previous years and it is about 18%. The subsidy towards agriculture and fertilizers this year is shown a good growth from previous years and is about 99456 Cr. Such that the employees. it has increased 2% on previous year s budget. But as on present conditions of market in regard of fuel and power is increasing rather than decrease . The expenditure relating to the purchase of raw materials for future may be expected to be more than previous years and apart from this supply of raw materials in regard of manufacturing is falling short that of demand . As keeping this in the mind growth relating to subsidy is observed 29% previously. expenses.In the same line.Hence they need to pay more for the suppliers to get the required things. workers and others work dedicatedly and loyally towards the organizational goal. As per that. As on the basis of increasing production of units.15% growth rate . good rain fall prediction and many other programs may lead to good growth rate when compared to the previous (8%). As keeping in the mind regarding inflation rate. The growth rate relating to the salaries. As the present market is slowly recovering. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . They have taken 10% growth rate which normally which prevails in the market rent deeds but where as in the previous year budget they have shown declined growth rate . and flow of funds in market is low so as per assumptions. MET. rates. grown sown area. And fixed cost of production is kept as same as it is observed from previous budget. market trends and other variable conditions. wages and benefits are applied as same as the previous year. depreciation % and method will be depending. support price. On basis of above things 2% growth rate is taken on previous year percentage. packaging materials required will be also be more . In the present situation.
3 117.3 6600.0 204334.0 8122.0 12916.0 VARIANCE 2009-10 167132.0 1199. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .0 16932.4 14992.9 1504.3 ACTUALS 2009-10 237191.4 4015.5 133.9 1081.9 -2927.7 12567.0 12096.5 -1667.VARIANCE ANALYSIS PARTICULARS NET SALES OTHER INCOME EXPENDITURE FINANCE CHARGES DEPRECIATION PBT BUDGET 2008-09 65100.5 6940.2 70058.0 5028.7 480.6 12015.2 4013.7 2251.0 C IN LAKHS VARIANCE BUDGET 2008-09 2009-10 1090.7 ACTUALS 2008-09 66190.9 1984.5 196211.6 1304.0 8267.9 2776.5 -552.7 (GRAPHICAL REPRESENTATION) (2008-09) 2000 1500 1000 500 0 -500 -1000 -1500 -2000 -2500 -3000 -3500 Net sales Other income 1 Total expenditure Interest and Financing charges Depreciation PBT (GRAPHICAL REPRESENTATION) (2009-10) MET.3 12229.4 16296.
8267.. It had little variance when compared to the budget 2009-10.e.4 and having a variance about -1666. 2009-10.09 lakh because the forecast regarding the weather is being favourable towards farmers. DEPRECIATION MET.33 and 1199 lakh respectively.37 lakh among budgeted amounts and actual which explains that the company is unable to meet their expenditure according to planned budget. Once again there exists a broad variance of 196211.. INTEREST CHARGES Amounts scattered in interest and financing charges of budgets 2008-09 and 2009-10 are somewhat low than the actual of that particular year and comparative variances of other heads such as total expenditure. 167132.22 lakh.e.1984.91 lakh w hich is almost having a variance of 1090..e.e.250000 200000 Other income Interest an Financing charges De reciation PBT 50000 0 ANALYSIS NET SALES The amount appearing in budget 2008-09 is 65100. sales etc. which had huge variance i. By this we say that they need to improve their standards regarding the budget. OTHER INCOME The amount which the company has taken as other income for both the budgets is 480 and 117. This shows that company s effectiveness and efficiency in investing and other related activities.38 lakh in budget and where the actual is 6600.5 lakh which are very low when compared to the actual generated i. EXPENDITURE When coming to expenditure it had been observed that the budgeted amount for year 2008-09 is more than the actual generated i.98 lakh in the next budget i. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A ¤ 100000 £ 150000 Total e £ ¢¡ en iture .69 lakh and in actual is 66190.
0 111. COMPARITIVE STATEMENT FOR 2009-10 PARTICULARS INCOME SALES TURN OVER EXCISE DUTY NET SALES OTHER INCOME STOCK ADJUSTMENTS TOTAL INCOME EXPENDITURE RAW MATERIALS POWERFUL COST EMPLOYEE COST MANUFACTURING EXPENSES SELLING AND ADMIN EXPENSES MISCELLANEOUS EXPENSES TOTAL EXPENSES OPERATING PROFIT PBDIT INTEREST PBDT DEPRECIATION OTHER WRITTEN OFF PROFIT BEFORE TAX EXTRA ORDINARY ITEMS PBT(POST EXTRA-ORD ITEMS) TAX ALL FIGURES ARE IN C NFCL BHARATH CHAMBAL DEEPAK MFCL CORMONANDEL 2193.6 1052.71 lakh of the actual values of 2009-10.68 lakh of actual and under casting of 2776.3 1625.2 71.1 32.1 44.In budget 2008-09 the amount allocated towards depreciation is more of 552 lakh than of actual and in later budget i.6 40.1 481.1 267.7 0.1 1.8 0.4 -1.2 845.3 0.8 269.0 0.5 79.3 66.3 18.0 58.3 -1.2 17.2 16.2 122.0 151..6 255.5 -3.0 4.0 44.8 102.0 151.0 -4.1 101.1 184.9 1.3 14.2 0.1 1627.1 303. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .7 90.5 52.0 1057.2 212.7 15.1 555.0 180.8 72.1 1.1 0.7 56.9 0.6 314.5 51.9 10.4 120.5 560.0 1341.3 -5.4 28.e.8 18.8 436.9 64.0 2265.4 2176.3 66. 2009-10 it is more of 133.5 1531.0 333.9 0.3 74.5 0.9 8.5 MET.4 13.9 -0.0 311.8 240.3 0.1 2731.6 0.3 3844.3 457.7 1991.3 2728.0 259.4 -3.7 2818.4 163.2 97.94 lakh forecasted than of actual of that particular year.2 44.7 2.4 74.6 1621.7 0.2 0.2 0.6 20.3 3799.7 -71.6 57.6 -29.7 3755.6 0.0 -27.5 1.5 274.5 2728.0 2193.7 30.2 30.1 2.2 332.9 17.0 1130.3 -8.7 453.4 0. PROFIT BEFORE TAX Figures in the budget 2008-09 relating to the PBT are over casted of 2927.9 11142.6 0.2 0.3 699.1 -0.9 3297.0 3.8 20.0 -8.2 89.7 385.8 -4.2 0.3 -3.6 93.0 196.9 -65.6 59.3 15.3 1130.5 -0.
and Nagarjuna fertilizer with 303.1 1.3 -5.0 0.).0 74.0 27.0 4.4 100.0 30.97 Cr.0 8.8 ANALYSIS y The lion share in sales turnover is occupied by Coromandel fertilizers (3844.86 Cr. 239.0 -9. Bharath fertilizer with least amount of 1.2 3.32 Cr.0 0. Coromandel fertilizers (-44. towards its raw materials and power and fuel with 3rd in its position.5 0.REPORTED NET PROFIT TOTAL VALUE ADDITION PREFERENCE DIVIDEND EQUITY DIVIDEND CORPORATE DIVIDEND TAX SHARES IN ISSUE EARNINGS PER SHARE EQUITY DIVIDEND BOOK VALUE 22. and Nagarjuna fertilizer with 2265.8 1045..3 882.).7 4162.6 209.1 11.97 Cr.5 401.4 Cr.8 479.5 Cr.. whereas Coromandel has highest sales turnover is making lower than it i.8 0.0 4281. next to it is Deepak fertilizers with 32 Cr.e.3 145. later it followed by Chambal fertilizer with 2731. where as the other two companies are showing negative other income. Deepak and Bharath fertilizers respectively.0 56. Profit before tax of NFCL and Bharath is showing a negative sign and where as Coromandel fertilizer is showing is showing a good figure of 333.9 12.0 0.). Coromandel fertilizer is incurring highest employee cost of 97. Mangalore fertilizers (-2.9 18.0 0.59 Cr.09 Cr.6 0..0 20. Once again Coromandel is having highest share in total income of 3754.e.0 7.3 1399.07 Cr. The highest other income is shown by Chambal fertilizers (74. Chambal fertilizers is making higher expenses towards selling and distribution of 314.31 Cr.it is not a good sign to the company that more financial risk. and Bharath fertilizers is 0.0 49. Nagarjuna is making an expense of 1652.2 4. y y y y y y y y y MET.).73 Cr.9 5.0 79.48 Cr.29 Cr. And when coming to NFCL it is also making a higher amount of money towards selling and distribution expenses comparing to its sales turn over.0 0. NFCL is a company which is spending huge amount in the terms of interest towards their borrowing i.0 175. Mangalore. Chambal fertilizers recorded the highest operating profit of 481.2 1185.34 Cr.97 Cr. Whereas Coromandel fertilizer has a variance of 1100 Cr.09 Cr. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .6 203. Deepak fertilizers (-90.4 6.0 23.63 Cr.5 0. Some slight variations appeared from sales turnover to net sales in the following companies Bharath fertilizers (-0. followed by Chambal.8 0. when compared to the other companies. and it is higher amount when compared to other companies ..4 35. from NFCL and placing it as 1st position in expenses.).28 Cr.57 Cr.66 Cr..) and next to it is Nagarjuna fertilizers with 2193. and it is good sign to the companies. Coromandel with 436.5 650.12 Cr.162.2 0.0 4.1 0.2 40.6 0.0 15.
(According to Economic Survey 2009-2010) Expenditure relating to the raw material is showing fast growth rate for NFCL. 14. y y MET. it may act as good sign for NFCL as it is fewer amounts.32 and NFCL is standing in third position.e. In budget 2008-09 the amount allocated towards depreciation is more of 552 lakh than of actual and in the later budget 2009-10 it is more of 133. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . This shows that company is going for more debts from outside than what it expected. Amounts scattered in interest and financing charges of budgets 2007-08 and 2008-09 are somewhat lower than actual of that particular year.y Earnings per Share available to the investors are higher in Coromandel fertilizers i.99 Cr.94 lakh forecasted than of actual of that particular year. 1673. 2009 and 2010. (According to Economic Survey 2009-2010) The subsidy and govt support towards the agriculture and fertilizers industry is showing good growth rate. suppliers etc. As production of fertilizers is showing a growth.68 Cr.99 when we make comparisons with others and where BHARATH FERTILIZERS ARE showing a negative value. packing materials required is also more Variance in the net sales of NFCL is showing low when compared to other fertilizer companies for two financial year s i.59 Cr. Highest possessing of assets is NFCL among all the fertilizer companies compared.53 Cr.. Investments made by the NFCL is huge and which played a vital role in carrying good name and fame in the mind of investor. Chambal fertilizer is making higher expenses towards selling and distribution is standing first with 314.e. e th Where NFCL is standing at 4 position with very less amount i. FINDINGS y y y y y y More demand for urea and it s by products.e.e. where other companies showing below 1000 Cr.e. y Coromandel fertilizer is occupying lion share in sales turn over and next to it is Nagarjuna fertilizer with 2193. y y y y Earnings per share available to investor/s are higher in Coromandel f rtilizers i. Net worth of the NFCL is showing a good figure i.14.
employing various budgetary control techniques are Accounting Techniques like Standard Costing (Overhead and Sales Variance). y y y MET. With the help of proper maintenance of budget and budgetary control.SUGGESTIONS/RECOMMENDATIONS A budget is treated as an important tool by organization in the management of its financial resources. But it is not possible in the NFCL because it does not have proper structure and pattern of organization. NFCL is required to maintain a systematic way of recording budgets. y Budgetary control avails huge benefits if it properly applied. The following are the things which help in increase effectiveness of budgetary control. e They can estimate the budgets logically basing not only on the past estimated/actual figures but also the considerations affecting the future profits of the concern. cost centres and improves responsibility and accountability of employees towards their work. keep spending within bounds and better use of its funds. Further. They must be flexible enough for making monthly or quarterly budgets and for facing any future consequenc s. Zero Base Budgeting etc. as knowledge also lies in the lines of authority and it is possible to get full advantage only the structure is proper. NFCL needed to divide the organization into sub units. Marginal Costing. profit. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . Such that decision centres and profit centres which will be also used as investment. Business Forecasting. can allocate funds for appropriate purpose.
to initiate corrective actions. it has given many subsidies by the government in regard to provide the fertilizers at lower price to farmers. A budgetary control system helps to measure the progress made towards goals. which shows the soundness of the company. the budgetary control is the process of comparing what was planned with what has been accomplished during the period. NFCL is one of the leading manufacturers of fertilizer.CONCLUSION While budget is a financial statement. The major difficulty is the problem of measuring the outputs in order to set standards for budgets. NFCL is also incurring less amount of s expenditure towards its distribution channel and it has huge assets in its hand. NFCL has a huge capacity to produ ce UREA and MI in their respected plants when compared to other fertilizer companies such as Deepak. Expenditure relating to the raw materials is showing the faster growth in NFCL and along with they are also going for more borrowings from outside then what they have expected. MET. Apart from this company are also possessing huge investments and returns on it when compared to all other companies (as per the study).oriented organizations. Chambal fertilizers. to know the causes for deviations and hence to avoid leaving things to happen as they happen. Information centres have certain peculiarities as service-oriented and not-for-profit organizations and hence implementation of budgetary control system in each institution is more difficult than in profit . which provides details of the proposed revenues and their utilization for expenditure for a specific period. to uncover deviations. Bharath. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A .
R.com www.com Budgeting. Thomson Learning.com www.com www.allbusiness. Bagavathi.askme.com www.fao.BIBLIOGRAPHY www.google.N.S.centage. V.laynetworks.com www. 2004 MET. Pillai and V. MUMBAI PGDM (eBusiness) (2010-2012) DIVISION A . Bombay Cost and Management Cost Accounting Cost and Management Accounting P.findarticles. Rathnam Maheshwari.org www.
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