Finance Department

A finance department is the unit of a business responsible for obtaining and

handling any monies on behalf of the organization. The department controls the
income and expenditure in addition to ensuring effective business running with
minimum disruptions.

The finance department's role goes beyond just bookkeeping. It also involves data analysis
to provide insights for decisions that impact the future. The finance department must be
in a position to scrutinize any decisions taken by the senior management, analyse its
efficiency, and assess the risks involved

Finance is one of the major pillars of any organisation and an essential ingredient to a
successful business. Nowadays, a finance department has a broad range of roles to carry
out within or outside an organization. The performance and success of any company greatly
depend on how well the finance is handled

Roles and Responsibilities of a Finance Department

The contributions of finance department to any company and how these
contributions positively affect organisational performance will greatly depend on
factors such as the extent to which the owner/ manager is involved in his company.
The roles and responsibilities of a finance department include but are not limited to:

a. Bookkeeping
This is the most basic function of the finance department. It involves the day-to-day
recording, analysis and interpretation of a company’s financial transactions. This will
include the tracking of all expenses (purchases, payments etc.) and sales of finished
products. In some startup companies, this role is often carried out by a bookkeeper
who might be replaced by more specialized payables and receivables clerks as the
company grows or expands its operations.

b. Management of company’s cash flow

It is the duty of the finance department to manage all cash flows into and out of a
company and ensure that there are enough funds available to meet the day-to-day
running of the company.  This area also encompasses the credit and collections
policies for the company’s customers, to ensure that vendors and creditors are paid
correctly and on time; and that the company is also paid correctly and as when due.

c. Budgets and forecasting

In this function, the finance department works with managers to prepare the
company’s budgets and forecasts and also give feedback with regards to the
financial standing of the company. This information can be used to fulfil the cash
needs of each department, plan company staffing levels, plan asset purchase and
expansions at minimum cost before they become necessary.  The finance
department can also use past records from respective departments to make better
budget and forecast over long-term and short-term time horizons.

d. Advising and sourcing longer-term financing

It is the duty of the finance department to advise companies on the best financing
mix that could yield the company the best profit and also help them source longer-
term financing at the lowest cost such that there is a profit level of liquidity. Some of
the many varied paths a company can source funds to finance their business as
discussed in one of our articles “10 Most Common Ways to Finance Your Business”
include bank credit or private lender debt or, share issues to private investors (where
applicable).

e. Management of Taxes
Running a company involves paying tax, and it is the duty of the finance department
to handle tax issues. This includes creating good corporate relationships with
government by remitting PAYE (Pay As You Earn) to the relevant authority, and
ensuring that implementation of tax matters are done within the framed policies.

f. Management of Company’s Investments

Apart from analyzing and selecting new investments, it is also the duty of the finance
department to manage company’s existing assets. The finance department should
be concerned with current assets apart from fixed assets. The company’s working
capital needs to be managed efficiently in such a way as to maximize profitability
relative to the amount of funds tied up since it has more implication on the firm
liquidity than its fixed asset.

g. Financial Reporting and analysis

Financial reporting and analysis is the function that takes raw accounting entries and
transforms them into meaningful, usable and comparable financial statements. The
finance department contributes to organizational growth by measuring and reporting
on regular bases, key numbers that are vital to the success of the company. This will
likely include a summary of all funding sources, expenditures and reserves available
for future use (excluding those already committed and budgeted for current period)
some non-financial information.  And are usually communicated to managers in a
logical and understandable format.

h. Assist managers in making key strategic decisions

The finance department provides company management with information necessary
to make strategic decisions such as which markets or projects to pursue, the
payback periods for large capital purchases, decision on what should be given out as
dividend out of the company’s earnings and what to plough back into the business,
the best financing mix that could yield the company the nest profit, decision on how
to allocate funds to investment etc., thus, making sure that money is being used in
the best way.

Having read up to this point, you must have discovered that the importance of the
finance department to any company cannot be overemphasized since the financial
policy of any company to a greater extent, determines not only its existence, and
survival but also the performance and success of that company. Any company
aspires to grow and make profit should make sure the activities of the finance
department are handled by individuals who have all it takes to be in the department.
PROFIT AND LOSS ACCOUNT –

The term profit and loss (P&L) statement refers to a financial statement
that summarizes the revenues, costs, and expenses incurred during a
specified period, usually a quarter or fiscal year. These records provide
information about a company's ability or inability to generate profit by
increasing revenue, reducing costs, or both. These statements are often
presented on a cash or accrual basis

Profit And Loss account of Kabra Extrusion Technik Ltd.

  Mar'22 Mar'21 Mar'20 Mar'19 Mar'18

  12Months 12Months 12Months 12Months 12Months

INCOME:

Sales Turnover 405.90 274.24 220.19 245.14 271.47

Excise Duty .00 .00 .00 .00 3.34

NET SALES 405.90 274.24 220.19 245.14 268.13

Other Income 2.2491 2.8676 2.9436 19.9359 2.5701

TOTAL INCOME 408.15 277.11 223.13 265.08 270.70

EXPENDITURE:

Manufacturing Expenses .00 1.87 1.70 1.52 1.48

Material Consumed 273.57 176.49 134.82 149.53 167.34

Personal Expenses 37.87 27.43 32.03 34.72 34.41

Selling Expenses .00 .00 .00 .00 .00

Administrative Expenses 39.52 27.69 39.12 38.71 36.71

Expenses Capitalised .00 .00 .00 .00 .00

Provisions Made .00 .00 .00 .00 .00

TOTAL EXPENDITURE 350.95 233.49 207.67 224.48 239.94

Operating Profit 54.95 40.75 12.52 20.66 28.18

EBITDA 57.20 43.62 15.46 40.59 30.75

Depreciation 11.24 9.67 7.72 7.23 7.93

Other Write-offs .00 .00 .00 .00 .00

EBIT 45.96 33.95 7.75 33.36 22.82

Interest 2.67 2.70 1.46 2.50 1.48

EBT 43.28 31.25 6.29 30.86 21.34

Taxes 13.23 7.07 -1.18 6.39 1.23

Profit and Loss for the Year 30.06 24.19 7.47 24.47 20.12

Non Recurring Items .00 -.24 .14 -.01 -.07

Other Non Cash Adjustments .00 .00 .00 .00 .00

Other Adjustments .00 .24 -.14 .01 .07

REPORTED PAT 30.06 24.19 7.47 24.47 20.12

KEY ITEMS

Preference Dividend .00 .00 .00 .00 .00

Equity Dividend .00 .00 3.80 5.07 5.08

Equity Dividend (%) .00 .00 23.83 31.78 31.86

Shares in Issue (Lakhs) 320.83 319.02 319.02 319.02 319.02

EPS - Annualised (Rs) 9.37 7.58 2.34 7.67 6.31

BALANCE SHEET

A balance sheet is a financial statement that reports a company's assets, liabilities,
and shareholder equity. The balance sheet is one of the three core financial statements
that are used to evaluate a business. It provides a snapshot of a company's finances (what it
owns and owes) as of the date of publication

The term balance sheet refers to a financial statement that reports a company's
assets, liabilities, and shareholder equity at a specific point in time. Balance sheets
provide the basis for computing rates of return for investors and evaluating a
company's capital structure

Importance of a Balance Sheet

Regardless of the size of a company or industry in which it operates, there
are many benefits of a balance sheet,

Balance sheets determine risk. This financial statement lists everything a

company owns and all of its debt. A company will be able to quickly assess
whether it has borrowed too much money, whether the assets it owns are
not liquid enough, or whether it has enough cash on hand to meet current
demands.

Balance sheets are also used to secure capital. A company usually must
provide a balance sheet to a lender in order to secure a business loan. A
company must also usually provide a balance sheet to private investors
when attempting to secure private equity funding. In both cases, the
external party wants to assess the financial health of a company, the
creditworthiness of the business, and whether the company will be able to
repay its short-term debts.

Last, balance sheets can lure and retain talent. Employees usually prefer
knowing their jobs are secure and that the company they are working for is
in good health. For public companies that must disclose their balance
sheet, this requirement gives employees a chance to review how much
cash the company has on hand, whether the company is making smart
decisions when managing debt, and whether they feel the company's
financial health is in line with what they expect from their employer.
 Kabra Extrusion Balance Sheet

Particulars Mar'22 Mar'21 Mar'20 Mar'19 Mar'18

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 16.04 15.95 15.95 15.95 15.95

Reserves & Surplus 312.94 262.46 216.86 230.78 217.82

Net Worth 328.98 278.41 232.81 246.73 233.77

Secured Loan 58.45 23.97 26.72 9.43 4.07

Unsecured Loan .00 .00 .00 .00 .00

TOTAL LIABILITIES 387.43 302.38 259.54 256.15 237.84

Assets

Gross Block 156.02 212.24 197.89 177.54 267.17

(-) Acc. Depreciation .00 72.25 63.81 57.40 158.74

Net Block 156.02 139.99 134.07 120.14 108.42

Capital Work in Progress .00 .51 7.23 .96 .00

Investments 55.58 85.73 42.88 51.69 57.05

Inventories 204.09 111.68 125.21 106.16 102.31

Sundry Debtors 55.92 21.53 16.28 35.43 44.04

Cash and Bank 32.22 8.40 6.34 2.72 1.92

Loans and Advances 63.99 31.58 38.02 26.08 25.26

Total Current Assets 356.22 173.19 185.84 170.39 173.53

Current Liabilities 173.05 92.80 106.08 81.37 94.77

Provisions 7.34 4.24 4.41 5.66 6.39

Total Current Liabilities 180.39 97.04 110.49 87.03 101.16

NET CURRENT ASSETS 175.83 76.15 75.35 83.36 72.36

Misc. Expenses .00 .00 .00 .00 .00

TOTAL ASSETS(A+B+C+D+E) 387.43 302.38 259.54 256.15 237.84

 Financial ratios
Current ratio
 The current ratio is a liquidity ratio that measures whether a firm has enough
resources to meet its short-term obligations. It compares a firm's current
assets to its current liabilities, and is expressed as follows
  Current ratio = Current Assets/Current Liabilities
current assest = 173.19 cr

current liabilities = 97.04 cr

current ratio = 1.784

Liquid ration
 Liquid Ratio may be defined as the ratio of liquid assets to liquid liabilities or
current liabilities. It is concerned with the relationship between liquid assets
and liquid or current liabilities. The other terms used for liquid ratio are ‘Quick
ratio’ and ‘Acid Test Ratio’.

Liquid ration = liquid asset/ current liability

liquid assest = 152.13 cr

current liabilities = 97.04 cr

S. RATIOS FORMULAS
No.

1 Current Ratio Current Assets/Current Liabilities

2 Quick Ratio Liquid Assets/Current Liabilities

3 Absolute Liquid Ratio Absolute Liquid Assets/Current Liabilities

Total 0.18 0.09 0.11 0.04 0.02

Debt/Equity
(X)

Profitability ratios

S. RATIOS FORMULAS
No.

1 Gross Profit Ratio Gross Profit/Net Sales X 100

2 Operating Cost Ratio Operating Cost/Net Sales X 100

3 Operating Profit Operating Profit/Net Sales X 100

 Ratio

4 Net Profit Ratio Net Profit/Net Sales X 100

5 Return on Net Profit After Interest  And Taxes/

Investment Ratio Shareholders Funds or Investments  X 100

6 Return on Capital Net Profit after Taxes/ Gross Capital

Employed Ratio Employed X 100

7 Earnings Per Share Net Profit After Tax & Preference

Ratio Dividend /No of Equity Shares

8 Dividend Pay Out Dividend Per Equity Share/Earning Per

Ratio Equity Share X 100

9 Earning Per Equity Net Profit after Tax & Preference

Share Dividend / No. of Equity Share

10 Dividend Yield Ratio Dividend Per Share/ Market Value Per

Share X 100

11 Price Earnings Ratio Market Price Per Share Equity Share/

Earning Per Share X 100
12 Net Profit to Net Net Profit after Taxes / Shareholders Net
Worth Ratio Worth X 100

Working Capital Ratios

S. RATIOS FORMULAS
No.

1 Inventory Ratio Net Sales / Inventory

2 Debtors Turnover Total Sales /  Account Receivables

Ratio

3 Debt Collection Receivables  x Months or days in a year /

Ratio Net Credit Sales for the year
 4 Creditors Turnover Net Credit Purchases / Average Accounts
Ratio Payable

5 Average Payment Average Trade Creditors / Net Credit

Period Purchases X 100

6 Working Capital Net Sales / Working Capital

Turnover Ratio

7 Fixed Assets Cost of goods Sold / Total Fixed Assets

Turnover Ratio

8 Capital Turnover Cost of Sales / Capital Employed

Ratio

Capital structure ratios

S. RATIOS FORMULAS
No.

1 Debt Equity Ratio Total Long Term Debts / Shareholders Fund

 2 Proprietary Ratio Shareholders Fund/ Total Assets

Kabra Extrusion Technik Ltd. Financial ratios for thr year 2019 ,2020 ,
2021, 2022.

MARCH 2019 MARCH 2020 MARCH 2021 MARCH 2022

Debtor Days 53 27 29 50
Inventory Days 259 339 231 272
Days Payable 93 121 88 136
Cash 219 244 172 186
Conversion
Cycle
Working Capital 112 99 78 145
Days
ROCE% 13% 3% 12% 12%

MORE RATIOS

PROFITA
BILITY
RATIOS
PBDIT 14.09 15.90 7.02 16.55 11.47
Margin (%)
PBIT 11.32 12.38 3.51 13.60 8.51
Margin (%)
PBT Margin 10.66 11.39 2.85 12.58 7.95
(%)
Net Profit 7.40 8.81 3.39 9.98 7.50
Margin (%)
Return on 9.13 8.68 3.20 9.91 8.60
Networth /
Equity (%)
Return on 13.01 11.51 3.10 13.37 8.49
Capital
Employed
(%)
Return on 5.29 6.05 2.01 7.13 5.93
Assets (%)
Total 0.18 0.09 0.11 0.04 0.02
Debt/Equity
(X)
Asset 71.48 0.71 59.50 71.43 79.09
Turnover
Ratio (%)
LIQUIDIT
Y RATIOS
Current 1.70 1.93 1.62 1.88 1.75
Ratio (X)
Quick Ratio 0.75 0.87 0.58 0.75 0.75
(X)
Inventory 1.99 1.21 1.76 2.31 2.62
Turnover
Ratio (X)
Dividend 0.00 0.00 64.05 26.07 31.71
Payout
Ratio (NP)
(%)
Dividend 0.00 0.00 31.50 20.12 22.74
Payout
Ratio (CP)
(%)
Earnings 0.00 0.00 35.95 73.93 68.29
Retention
Ratio (%)
Cash 0.00 0.00 68.50 79.88 77.26
Earnings
Retention
Ratio (%)
VALUATI
ON
RATIOS
Enterprise 1,719.08 588.54 157.89 279.00 381.15
Value (Cr.)
EV/Net 4.24 2.15 0.72 1.14 1.42
Operating
Revenue
(X)
EV/ 30.05 13.49 10.21 6.87 12.39
EBITDA
(X)
MarketCap/ 4.17 2.09 0.62 1.11 1.41
Net
Operating
Revenue
(X)
Retention 0.00 0.00 35.94 73.92 68.28
Ratios (%)
Price/BV 5.15 2.06 0.59 1.10 1.62
(X)
Price/Net 4.17 2.09 0.62 1.11 1.41
Operating
Revenue
Earnings 0.02 0.04 0.05 0.09 0.05
Yield

Interpretitions