ACKNOWLEDGEMENT

I would like to thank each and every employee who has directly or indirectly
helped me in carrying out this project.
I profusely and sincerely express my whole hearted gratitude to my internal
guide Mrs.A.ROOPA, Assistant Professor, Department of Management Studies, for her
support, co-operation and encouragement for the successful completion of the project work.
I take this opportunity to express my hurtful thanks to my external guide
Mr.V.Ramesh Kumar (F&A) for his guidance and suggestions during the progress of my
project.
I would like to thank our ever-inspiring Head of the Department, Mr.V.SAI
PRASANTH, Department of Management Studies, who has very enthusiastic in responding
to every request in spite of his busy and hectic schedule of administration and teaching.
I express my sincere and whole hearted gratitude to Dr C.P.VN.J MOHAN
RAO, Principal, Avanthi Institute of Engineering and Technology, Visakhapatnam for his
extensive support for carrying out this project work.
I am thankful to the VISAKHAPATNAM STEEL PLANT, for giving me an
opportunity to undertake my project work.
Finally I would like to thank other faculty members for their extended co-
operation and suggestions which have helped a lot.

DOGGA GOVINDAMMA
(14811E0020)

1
 CONTENTS
Page no.

CHAPTER-I INTRODUCTION 7-12

 Need for the study
 Objectives of the study
 Scope of the study
 Methodology of the study
 Limitations of the study

CHAPTER-II INDISTRIAL PROFILE 13-25

 Global Scenario
 Present Scenario of Indian Steel Industry
 Production
 Background
CHAPTER-III COMPANY PROFILE 26-39
 Introduction
 Vision
 Mission
 Objectives

CHAPTER-IV THEORETICAL REVIEW OF

CASH FLOW AND FUNDS FLOW 40-69

CHAPTER-V FINANCIAL STATEMENT ANALYSIS

IN RINL (VSP) 70-105

CHAPTER-VI SUMMARY, FINDINGS SUGGESTIONS, CONCLUSION

ABBREVATIONS& BIBLOGRAPHY 106-111

2
 INTRODUCTION

Finance is the modern business world is regarded as life and blood of business enterprise.
Finance function as become so important that it has given birth to financial management as a
separate subject. So this subject is acquiring a universal applicability.

Financial management is that managerial activity which is concerned with the planning
and controlling of the firm’s financial resources. As a separate activity or discipline is of recent
origin it was a branch of economics till 1890. Still today it has no unique body of knowledge of
its own, and it draws heavily on economics for its theoretical concepts.

The subjects of financial management are of immense interest to both academicians and
practicing managers. It is of great interest to academicians because the subject is still certain
areas where controversies exist for which no unanimous solutions has been reaching is yet.
Practicing managers are interested in this subject because among the most crucial decisions of
the firms are those which relate to finance and un understandings of theory of financial
management provides them with conceptual and analytical insight to make decisions skillfully.

DEFINITIONS:

1) “Financial management is an area of financial division making, harmonizing individual

motives and enterprise goals”.

-WESTON AND BRIGHSM

2) “Financial management is the application of the planning and control functions of the finance
function”.

-HOWARD AND UPON

3
 NEED FOR THE STUDY:
 Financial performance Contain a lot of information regarding fund flows , and
financial statements and the future prospective of the business concern.
 The financial statements are used to assess tax liabiailty of business
enterprises.
 The government studies economic situation of the country from these
statements. These performance enables the government to find out whether
business is following various rules and regulations .
 The Trade Creditors are to be paid in a short period. They Creditors will be
interest in current insolvency of the concerns .
 NEED FOR THE STUDY:Financial statement analysis is an important tool for
measuring the financial performance of any company.
 The main aspect of financial management is working capital management
and it should be done on day-to-day basis.
 Hence the company permits me to do in the area of finance. This study helps
to review the financial performance of the company.

4
 SCOPE OF THE STUDY
Financial analysis depends primarily on financial statements to
diagnose financial performance. there are three principle reasons.

 As longer as the accounts bases remain more or less the some overtime,
meaningful mitered is can be drawn by examining trends in raw data and financial ratios.

 Since similar basis characterize various firms in the same industries, incur firm
comparisons are useful.

 Experience seems to suggest the financial analysis works one is accounting basis
and more adjustments for the same.
 The following points explain the nature of the financial statement analysis in steel
industries. The records are maintained on the boards of actual costs data.
 Certain neither accounts nor conversions are followed while preprimary

financial statement.

 Still personal judgment of the accountant phrases on important part.

5
 OBJECTIVES OF THE STUDY
The Study is based upon the part of Financial Performance that is been taken into
consideration i.e. Financial Statements and Analysis. The Study predominantly aims at the
turn around period (2009-14).

 To know the current position of various assets, liabilities and results of operation
activities

 To find out Financial Strengths and weaknesses of the firm

 To know the Liquidity Position of a firm

 To know the causes of changes in the Cash Position

 To find out important tools of Short-term, Long-term Financial Planning

 To know the ability of the firm to meet its current obligations

 To know the overall operation efficiency and performance of the firm

 To find out foremost important Financial Decisions

 To know the detailed information about comparative and common size balance
sheet.

6
 METHODOLOGY

The information for the study has been obtained from two sources namely:

 Primary Data

 Secondary Data

1. Primary Data:

It is the information collects directly without any reference. In tills study it was
mainly interviews with concerned officers and staff, either individually or collectively, sum
of the information has been verified or supplemented with Personal observations.

The data includes.

1. Having a discussion with finance manager.

2. Guidelines are taken from Asst. General Manager (F&A).

2. Secondary Data:

This is taken from the annual reports, websites, company journals, magazines and
other sources of information of steel plant.

7
8
 LIMITATIONS OF THE STUDY

 The period of study that is 5 weeks was not enough to go in the detailed aspects of the
study.

 The study is carried bearing on the information and documents provided by the
organization and based on the interaction with the various employees of the respective
departments.

 Most of the matters related to budgets were confidential so it not possible together
much information

 A cash flow statement reveals the inflow and outflow of cash but the exclusion of
near cash items from obscures the true reporting of the firm’s liquidity position.

 Working capital being a wider concept of funds flow statement presents a more
complete picture than cash flow statement.

9
Chapter -2

Industry profile

10
 PROFILE OF INDIAN STEEL INDUSTRY

INTRODUCTION

India’s Steel Industry is more than a century old. Before the economic reforms of the
early 1990s the Indian steel industry was a predominantly regulated one with the public
sector dominating the industry.

Tata Steel was the only major private sector company involved the production of steel
in India. Sail and Tata Steel have traditionally been the major steel producers of India. In
1992, the liberalization of the India economy led tothe opening up of various industries
including the steel industry. This led to the increase in the number of producers, increased
investments in the steel industry and increased production capacity. Since 1990, more than Rs
19,000 cores (US$ 4470.58 million) has been invested in the steel industry of India.

India’s steel industry went through a rough phase between 1997 and 2001 when the
overall global steel was facing a downturn and recovered after 2002. The major factors that
led to the revival of the steel industry in India after 2002 was the rise in global demand for
steel and the domestic economic growth in India ,India has now emerged as the eighth largest
producer of steel in the world with a production capacity of 35million tones. Almost all
varieties of steel are now produced in India. India has also emerged as a net exporter of steel
which shows that Indian steel is being increasingly accepted in the global market.

The growth of the steel industry in India is also dependent, to a large extent, on the
level of consumption of steel in the domestic market. Steel consumption is significant in
housing and infrastructure. In recent years the surge in housing industry of India has led to
increase in the domestic demand for steel.

More than 3500 different varieties of steel are available in the steel industry of India. These
can however be classified into two broad categories-

 Flat Products – Flat products include plates and hot rolled sheets such as coils and
sheets. Flat products are derived from slabs. One of the major uses of steel plates
is in ship building.

 Long Products – Long products include bars, rods, wires, ropes and piers. These
are called long products due to their shapes. Long products are made from billets

11
 and blooms. Long products are mostly used in housing and construction and also
in rail tracks.

Highlights of Present Steel Scenario:

 The world steel shows a low growth demand.

 There is a threat to steel industry from competitive products like plastics, aluminum,
etc.
 Developed countries slowly reduced the production of steel.
 Developing countries like China are planning to produce steel as much large quantity
then of present output of 80 Mt. per annum.
 India consciously and strategically decides to invest into steel production.
 Preference is given to superior quality products and high value item production.
 Customer oriented approach in view of product oriented approach

The Major Steel and Related Companies in India

 Bharat Refectories Ltd.

 Hindustan Steel works Construction Ltd
 Jinan Steel and Power Ltd
 Manganese ore(India) Ltd
 Metal scrap Trade corporation Ltd
 Metallurgical and engineering consultants India Ltd
 National Mineral Development corporation
 Sponge Iron India
 Steel Authority of India Ltd
 TATA Iron steel Company

12
 Si.No Plant Collaboration capacity of finished products
1 Rourkela steel plant West Germany

2 Bhilai steel plant Erstwhile USSR

3 Durgapur steel plant Britain

4 Bokaro Steel plant Erstwhile USSR

Si.No Plant Collaboration capacity of finished Annual

products production

1 Rourkela steel plant West Germany 7,20,000 Tones

2 Bhilai steel plant Erstwhile USSR 7,70,000 Tones

3 Durgapur steel plant Britain 8,00,000 Tones

DEVELOPMENT OF INDIAN STEEL INDUSTRY

The development of steel industry in India should be viewed in conjunction with the
type and system of government that had been ruling the country. The production of steel in
significant quantity started after 1900. The growth of steel industry can be conveniently
studied by dividing in the period into pre &post independence era (or before 1950 & after
1950). The total installed capacity for in-got steel production in during pre-independence era
was 1.5 million tones / year, which has risen to about 8 million tones of ingot by the
seventies. This is the result of the bold steps taken by the government to develop this sector.

1951-1956: First five year plan.

No new steel plant came up. The Hindustan Steel Ltd. Was born on 19 th January
1954 with the decision of setting up three plants each with one million tonne input steel per
year in at Rourkela, Bhilai and Durgapur; TISCO started its expansion programming.

1956-1961: Second five year plan.

A bold decision was taken up to increase the ingot steel output India to 6 million tonnes per
year & production at Rourkela, Bhilai and Durgapur steel plant started.

13
1961-1966: Third five year plan.
1966-1969: Recession Period.
During the third five year plan the three steel plants under HSL, TISCO & HSCO were
expanded as show, in January 1964 Bokaro steel plant came into existence.

The entire expansion program was actively executed during this period.

1969-1974: Fourth five year plan.

 Licenses were given for setting up of many Mini-Steel plants and rolling mills.

 Government of India accepted setting up two more steel plants in south. One at
Visakhapatnam (Andhra Pradesh) and Hospet (Karnataka).

 SAIL was formed during this period on 24th January, 1973. The total installed
capacity from 6 integrated plants was 106Mt.

1979: Annual Plan

The erstwhile Soviet Union agreed to help in setting up the Visakhapatnam steel plant.

1980-1985: Sixth five year plan.

 Work on Visakhapatnam steel plant was started with big bang and top priority was
accorded to start the plant.

 Scheme for modernization of Bhilai Steel Plant, Rourkela, Durgapur, TISCO were
initiated.

14
1985-1991: Seventh five year plan.

 Expansion work of Bhilai and Bokaro Steel Plants are completed

 Progress on Visakhapatnam steel plant picked up and rationalized concept has been
introduced to commission the plant with 3.0Mt, liquid steel capacity by 1990.

1991-1996: Eight five year plan.

Visakhapatnam steel plant started its production modernization of other steel plants is
also duly envisaged.

1997-2002: Ninth five year plan.

Visakhapatnam steel plant had foreseen a 7% growth during the entire plan period.

2002-2007: Tenth five year plan.

Steel industry registers the growth of 9.9% Visakhapatnam steel plant high regime
targets achieved the best of them.

2007-2014:Eleventh five year plan.

Steel industry registers the growth of Visakhapatnam steel plant high regime targets
achieved the best of them.

2014-2017: Twelfth five year plan.

The steel industry has a bright future as the union government has announced to
create infrastructure worth Rs 50 lakh crore in Visakhapatnam steel plant.

15
Size of the India’s Steel Industry

The size of India’s steel industry has increased considerably in recent years.
According to latest available estimates, India ranks eighth among the top steel producers of
the world with a production capacity of 35 million tones.

The steel industry of India has capital investments of more than Rs 1,00,000crores.
The total employment in the industry is more than two million (including direct and indirect
employment).

GLOBAL DEMAND FOR STEEL AND INDIAN STEEL INDUSTRY

The global demand for steel is at an all time high nowadays. Much of the tremendous
demand for steel around the world may be attributed to the numerous construction projects that
are going on around the world.

Global steel demand recovery continues but growth is stabilizing at a lower rate with
continued volatility and uncertainty leading to a challenging environment for steel companies.”
After growth of 6.1% in 2015 with support from government infrastructure investment,
apparent steel use in China is expected to slow to 3.0% growth in 2016 to 721.2 Mt as the
Chinese government’s efforts to rebalance the economy continues to restrain investment
activities. In 2015, steel demand growth is expected to further decelerate to 2.7%
In India, steel demand is expected to grow by 3.3% to 76.2 Mt in 2016, following 1.8%
growth in 2015, due to an improved outlook for the construction and manufacturing sectors, even
though this will be constrained by high inflation and structural problems. Despite uncertainties
relating to the impact of upcoming elections steel demand is projected to grow by 4.5% in 2015
supported by the expectation that structural reforms will be implemented.
Much of these projects are taking place in the economically developing countries of the
world like India, China and Thailand. China is the place where a lot of construction is being done
nowadays and much of the construction is for the purpose of the Olympics to be held in 2008 and
the Shanghai World Exposition of 2012.

India has a lot of iron ores. This implies that India has a ready base for producing
sufficient amount of steel and the experts are also of the opinion that the Indian steel industry

16
would continue to grow in the coming years. In the recent times the production of steel has gone
up in the country from 17 million tones in 1990 to 36 million tones in 2015.

The Indian steel industry is trying to reach the 66 million tones mark in 2015. The high
levels of production would allow the Indian steel industry to establish a stronghold on a number
of areas like housing, construction, and ground transportation. The special steel produced by the
Indian steel industry is supposed to be used in high end engineering industries like generation of
power, fertilizers and petrochemicals.

The fact that India is not a voracious consumer of steel like some of the major economies
like China and the United States of America means that India would be able to use the surplus
steel it produces for exporting to other countries so that their demands are met. This would help
the Indian steel industry to be regarded as one of the most prominent steel industries if not the
leading one.

GROWTH POTENTIAL OF INDIA’S STEEL INDUSTRY:

India has set a vision to be an economically developed nation by 2025. The steel
industry is expected to play a major role in India’s economic development in the coming
years. The steel industry of India has a very high growth potential and is expected to register
significant growth in the coming decades. India is expected to emerge as a strong force in the
global steel market in coming years.

The two major aspects that are expected to play a significant role in the
growth of the steel industry in India are :–

 Abundant availability of iron ore in the country

 The country has well established facilities for steel production

Steel production in India has grown from 17 million tons in 1990 to 36 million tons in
2003. In India, steel demand is expected to grow by 3.3% to 76.2 Mt in 2016, following
1.8% growth in 2015

17
The major sectors where consumption of steel is expected to grow in the
coming years are :-

 Construction

 Housing

 Ground transportation

 Hi-tech engineering industries such as power generation, petrochemicals,

fertilizers

CONCLUSION ON INDIAN STEEL INDUSTRY:

The Indian steel industry is among the upcoming industries of the world. It has a
number of iron ores, which means that it has plenty of resources from which to draw its raw
material.
The rate of production of steel in India has been going up at a steady rate in the last
few years. In the recent times Orissa and Jharkhand have been identified as the potential steel
destinations of India – the ones that would provide the Indian steel industry with its necessary
raw material. There are also a number of steel companies in India like Tata and ArcelorMittal
that are either coming up or have established themselves as prominent forces in the world
steel scenario.
In the recent times a lot of foreign direct investment is being made in the Indian steel
industry. In fact the rate of investment is being made in the last few years and, to a certain
extent, this increase has been contributed to by the growth potential of the steel industry of
India that is thought of as being impressive in the international steel circle.

18
Chapter-3

Company profile

19
 PROFILE OF VISAKHAPATNAM STEEL PLANT

“Visakhapatnam Steel Plant, popularly known as vizag Steel, is one of the major steel
producers in India.” Visakhapatnam steel plant the first coast based steel plant of India is
located 16 km south west of city of destiny i.e., Visakhapatnam Bestowed with modern
technologies, VSP has an installed capacity of 7.3 million tons per annum of liquid steel and
6.773 million tones of saleable steel. At VSP there is emphasis on total automation, seamless
integration and efficient up gradations which results in wide range of long and structural
products to meet stringent demands of discerning customers with in India and abroad. VSP
products meet exacting international quality standards such as JIS, DINAND BIS, and BS
etc.
VSP has become the first integrated steel plant in the country to be certified to all the
three international standards for quality (ISO-9001) for environment management (ISO-
14001), for Occupational Health & Safety (OHSAS-18001). The certificate covers quality
system of all operational, maintenance and service units besides purchase system, training
and marketing functions spreading over 4 regional marketing offices, 24 branch offices and
stock yard located all over the country.
VSP successfully installing and operating efficiently Rs460 crores worth of pollution
control and environment control equipments and converting the barren land scape by planting
more than 3 million plants has made the steel plant, steel township and surrounding areas into
a heaven of lush greenery.

INTRODUCTION:

Steel occupies the foremost place amongst the materials in use today and pervades all walks
of life. All the key discoveries of human genius – for instance steam engine, railway means of
communication and connection, automobile, aero place and computer, are in one way or
together with steel and with its sagacious and multifarious application. Steel is a versatile
material with multitude of useful properties making it indispensable for furthering and
achieving continual growth of the economy – be it construction, manufacturing, infrastructure
or consumables. The level of steel consumption has long been regarded as an index of
industrialization and economic maturity attained by a country. Keeping in view the

20
importance of steel, the following integrated steel plants with foreign collaboration were set
up in the public sector in the post independence

Sl. No Steel plant Collaborated by

1 Durgapur steel plant Britain
2 Bhilai steel plant Erstwhile USSR
3 Bokaro steel Plant Erstwhile USSR
4 Rourkela steel plant Germany

BACKGROUND:

With a view to give impetus to industrial growth and to meet the aspirations of the people
from Andhra Pradesh, Government of India decided to establish integrated steel plant in
public sector at Visakhapatnam (AP). The announcement to this effect was made in the
parliament on 17th April, 1970 by the Prime Minister of India Smt.Indira Gandhi.
A site was selected near Balacheruvu creek near Visakhapatnam city by a committee set
up for the purpose, keeping in view the topographical features, greater availability of land and
proximity to a future port. Smt.Indira Gandhi laid the foundation stone for the plant on 20th
January 1971.
Seeds were thus sown for the construction of a modern & sophisticated steel plant having
annual capacity of 3.4 million tones of hot metal. An agreement was signed between
Government of India and the erstwhile USSR on June 12th 1979 for setting up of an integrated
steel plant to produce structural & long products on the basis of detailed project report
prepared by M/s M.N. Dustur& company. A comprehensive received DPR jointly prepared
by soviets & M/s Dustur& company was submitted in Nov’ 1980 to Government of India.
The construction of the plant started on 1st Feb 1982. Government of India on 18th Feb
1982 formed a new company called RashtriyaIspat Nigam Ltd. (RINL) and transferred the
responsibility of construction, commissioning & operating the plant at Visakhapatnam from
steel authority of
To meet growing domestic needs of steel, Government of India decide to setup an
integrated steel plant at Visakhapatnam.

21
 An agreement was signed with erstwhile USSR in 1979 for co-operation in setting up
3.4mt integrated steel plant at Visakhapatnam.
It can be seem from the above table, during the year 2002-03, the company turned around
by earned a net profit of Rs 521 cores.
In the same year, it bagged the PRIME MINISTER TROPHY for its excellent
performance in the steel industry. In September 2003, RINL became a DEBT FREE
COMPANY. In 2016 won an award for Recognition for corporate leaders & recognition by
ICAI & OVER ALL EXCELLENCE in all activities of the company

VSP Technology: State-of-the-Art:

 7meter tall coke oven batteries with coke dry quenching.

 Biggest Blast Furnaces in the country
 Bell less top charging system in blast Furnace.
 100% slag granulation at the BF cast house.
 Suppressed combustion - LD gas recovery system.
 100% continuous casting of liquid steel.
 "Tempcore" and "Stelmor" cooling process in LMMM & WRM.
 Extensive waste heat recovery systems.
 Comprehensive pollution control measures

Major Sources of Raw Materials:

Raw Material Source

Iron Ore Lumps & Fines Bailadilla, MP
BF Lime Stone Jaggayyapeta, AP
SMS Lime Stone UAE
BF Dolomite Madharam, AP
SMS Dolomite Madharam, AP
Manganese Ore Chipurupalli, AP
Boiler Coal Talcher, Orissa

22
 Coking Coal Australia
Medium Coking Coal (MCC) Gidi/Swang/Rajarappa/Kargali

Major Units:

Department Annual Capacity Units (3.0 MT Stage)

(‘000 T)

Coke Ovens 2,261 4 Batteries of 67 Ovens & 7 Mtrs. Height

Sinter Plant 5,256 2 Sinter machines of 312 Sq. Mtr. Grate area each

Blast Furnace 3,400 2 Furnaces of 3200 Cu. Mtr. Volume each

Steel Melt Shop 3,000 3 LD Convertors each of 133 Cu. Mtr. Volume and
six 4 strand bloom casters

LMMM 710 4 stand finishing Mill

WRM 850 2 x 10 stand finishing Mill

MMSM 850 6 stand finishing Mill

Main Steel Products of VSP:

Steel Products By Products

Angles Nut Coke

Billets Coke dust

23
 Channels Coal Tar

Beams Anthracenc Oil

Squares HP Naphthalene

Flats Benzene

Rounds Toluene

Re Bars Zylene

Wire rods Wash Oil

VISION, MISSION & OBJECTIVES:

VISION:

 To be a continuously growing world class company we shall

 Harness our growth potential and sustain profitable growth.

 Deliver high quality and cost competitive products and be the first choice of
customers.

 Create an inspiring work environment to unleash the creative energy of people.

 Achieve excellence in enterprise management.

 Be a respected corporate citizen, ensure clean and green environment and develop
vibrant communities around us.

24
VISION

 To be the most efficient steel maker having the largest single location shore based
steel plant in the country.
MISSION:

To attain 20 million ton liquid steel capacity through technological up-gradation,

operational efficiency and expansion; augmentation of assured supply of raw materials to
produce steel at international standards of cost and quality; and to meet the aspirations of the
stakeholder.

OBJECTIVES:
 Achieve Gross Margin to Turnover ratio > 10%.
 Plan for finishing mill to integrate with 7.3 Mt capacity and commission the same by
2017-18.
 Achieve rated capacity of new & revamped units by 2017-18.
 Capture markets for high-end value added products by focusing on sector specific
applications and customer needs.
 Achieve leadership in Energy consumption by achieving 5.6 Gcal/tcs by 2017-18.
 Globalization of operations through acquisition of mines and setting up of marketing
network abroad.
 Diversify through operationalizing of Bhilwara Mines, setting up of Pelletization
plant, DRI-EAF unit, Wheel & Axle Plants.
 Create a high performance and safe work culture by nurturing talent and developing
leaders.
 To grow in harmony with the environment &communities around us.

CORE VALUES:

 Initiative: Have a self-propelled &proactive approach

 Decisiveness: Decide with speed & clarity.
 Ethics: Be consistent with professional & moral values
 Accountability: Take responsibility for actions.

25
  Leadership: Lead by example
 Speed: Demonstrate swiftness and efficiency in everything we do.

VSP – POLICIES:

VSP takes all necessary actions for the fulfillment of regulatory requirements. It has
dedicated departments for this purpose. Energy conservation, environmental preservation,
safety in work place, and occupational health gets highest priority in the company. Some of
the policies in this regard are reproduced below.

QUALITY POLICY:

 Supply quality goods and services to customers’ delight.

 Document, Implement, Maintain and periodically review the management systems

including the policy, Objectives and targets.

 Focus on conservation of natural resources and energy with concern for Environment.

 Comply with all relevant legal, regulatory and other requirements applicable to
products, activities and processes in respect of Quality, Safety, Occupational Health &
Environment, and also ensure the same by contractors.

 Use resources efficiently and reduce waste & prevent pollution.

 Continually improve Quality, Safety, and Occupational Health & Environment

performance.

 Encourage development and involvement of employees.

 Maintain high level of quality, Environment, occupational health and safety

consciousness amongst employees and contract workers by imparting Educational &
Training.

ENERGY POLICY:

26
  Document, implement, maintain and periodically review the energy management
system including the policy, objectives and targets.

 Make energy conservation a way of life at RINL by promoting awareness among all.

 Support the purchase of energy efficient products and services and ensure energy
performance improvement in the design of new facilities as well as up gradation of
existing facilities.

 Look for alternative sources to achieve energy security of the plant.

HR POLICY:

 Provide work environment that makes the employees committed and motivated for
maximizing productivity
 Establish systems for maintaining transparency, fairness and equality in dealing the
employees
 Empower employees for enhancing commitment, responsibility and accountability
 Encourage teamwork, creativity, innovativeness and high achievement orientation
 Provide growth and opportunities for developing skill and knowledge
 Ensure functioning of effective communication channels with employees

CUSTOMER POLICY:

 VSP will strive to meet more than the Customer needs and expectations pertaining to
Products, Quality, Value for Money and Satisfaction

 VSP greatly values its relationship with Customers and would make efforts at
strengthening these relations for mutual benefit

 VSP strive for enhancing value for the money and value the relationship with
Customers.

IT POLICY:

 Follow best practices in Process Automation & Business Processes through IT by in-
house efforts / outsourcing and collaborative efforts with other organizations / expert

27
 groups / institutions of higher learning, etc, thus ensuring the quality of product and
services at least cost
 Follow scientific and structured methodology in the software development processes
with total user-involvement, and thus delivering integrated and quality products to the
satisfaction of internal and external customers
   Install, maintain and upgrade suitable cost-effective IT hardware, software and other
IT infrastructure and ensure high levels of data and information security
 Strive to spread IT-culture amongst employees based on organizational need, role and
responsibilities of  the personnel and facilitate the objective of becoming a world-class
business organization
 Enrich the skill-set and knowledge base of all related personnel at regular intervals to
make employees knowledge-employees
 Periodically monitor the IT investments made and achievements accrued to review
their cost effectiveness

HRD GROUP – KEY INITIATIVES:

RINL believes that the employees are its assets and strives to realize their potential in
full for mutual advantage. The human resource development of the employee as a whole.
 In-house Training Programs

 Nominations to External Training Programs

 Membership with professional bodies

 Performance Appraisal for Executives

 Human Resource information system

 Organization Development & Knowledge management

 In-Plant training for management students.

28
MAN POWER: ON 01-03-2016:

Particulars Works Projects Mines Others Total

Executives 4250 421 117 1511 6299
Non Executives 11016 48 221 800 12085
Total 18384

29
 FINANCIAL PERFORMANCE (Rs.inCrs.)

Year Gross Margin Cash Profit Net Profit

2006-2007 2,633 2584 1,363

2007-2008 3,515 3,483 1,943

2008-2009 2355 2267 1336

2009-2012 1603 1525 797

2012-2013 1412 1247 658.49

2013-2014 1645 1454.87 751.46

2014-2 013 1158.75 820.63 366.45

2015-2016 1158.75 820.63 366.45

FINANCIAL PERFORMANCE (Rs. in Crs.)

4,000

3,500

3,000

2,500

2,000 Gross Margin

Cash Profit
1,500 Net Profit

1,000

500

0
2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
2007 2008 2009 2010 2011 2012 2 013 2014
30
INTERPRETATION:
Gross Margin, Cash profit and Net profit are interrelated.
 Even though the Gross Sales are in increasing trend, the profit factors are showing
downward trend due to increase in the global market trends and cost factors.
 Idle funds which were yielding very good interest incomes have been withdrawn
for the purpose of investing in the expansion jobs hence, the interest income
hasbeen reduced. This is also one of the factors for low profits. But in the long
run, the expansion activities are only desirable and will yield good returns.

31
 Production Performance (‘000 Tones):
Labor Productivity
Year Hot Liquid Saleable (Tones/man year)
Metal Steel Steel
2007-2008 3,913 3,322 3,074 389
2008-2009 3,546 3,145 2,701 359
2009-2012 3900 3399 3167 382
2012-2013 3830 3424 3077 358
2013-2014 3778 3410 2990 389
2014-2015 3998 3456 3010 359
2015-2016 5110 4660 4150 380

4500
4000
3500
3000
2500 Hot
Liquid
2000
Saleable
1500 (Tones/man year)
1000
500
0
2007- 2008- 2009- 2010- 2011- 2012-
2008 2009 2010 2011 2012 2013

32
TRAINING & DEVELOPMENT:

The needs of induction training, skill up gradation, unit training, computer related
training, refresher training, foreign training, faculty development etc, are attended by the
Training & Development Centre while management development and attitudinal
development are taken care at the Centre for HRD.
Training in certain specialized areas like safety, fire prevention, occupational health
etc. is also taken up by departments specializing in respective fields.

PRODUCTION FACILITIES:

The production facilities in the RINL are most modern amongst the steel industry in
the country. The know-how and the technology have been acquired from different parts of
the world from the reputed/established manufacturers.
Some of the production facilities in RINL are:
 7 meter coke ovens of RINL are the tallest so far built in the country.
 Base Mix Yard for sinter plant introduced for the first time in the country helps in
excellent blending of the faced material to sinter machine and production of consistent
good quality sinter.
 3200 cubic meter two blast furnaces i.e., Godavari and Krishna with bell less top
charging equipment and 100% cast house slag granulation, the biggest to be setup in
the country have done away either the conventional bell charging system.
 100% continuous costing of liquid steel into blooms resulted in lowest losses and
better quality of blooms.
 RINL has sophisticated and latest features of automation of large polling mills
consisting of

 Light and Medium Merchant Mill (LMMM) which include billet and
bar mill
 Wire Road Mill (WRM)

33
  Medium Merchant and Structure Mill (MMSM)
 The operations of blast furnace, steel melting shop and rolling mills have been
entirely computerized to ensure consistent quality and efficient performance.

MARKETING NETWORK:

VSP has a wide network of Regional Offices and Branch Offices spread across the
country for marketing of its products. There are 5 Regional Offices and 23 Branch Offices.
Stock Yards are attached to each of the Branches. These are catering to the needs and
expectations of the customers in various segments. The details of Regional Offices and
Branch Offices are brought out below:

Region Location of Regional Office Branches

East Kolkata Bhubaneswar, Kolkata, Patna
North Delhi Agra, Chandigarh, Dehradun, Delhi,
Faridabad, Ghaziabad, Jaipur, Kanpur,
Ludhiana
West Mumbai Ahmedabad, Indore, Mumbai, Nagpur,
Pune
South Chennai Bangalore, Chennai, Kochi,
Coimbatore
Andhra Visakhapatnam Hyderabad, Visakhapatnam

Pollution Control Measures adopted in VSP:

Generally, integrated steel plant is seen as a major contributor to environmental

pollution as it discharges volumes of waste products. Elaborate measures have been adopted
to combat air and water pollution in VSP has planted more than 3.4 million trees over an area
of 35 Sq. Kms. And incorporated various technologies at a cost of Rs.460 Crores towards
pollution control measures.

Sources of Funds:

34
 VSP raise its working capital from of 10 Bankers. The following are the 10 banks. 
Where funds for finance are raised.

 State Bank of India (SBI)

 Canara Bank

 UCO Bank

 Bank of Baroda

 Andhra Bank

 State Bank of Hyderabad

 Allahabad Bank.

 HSBC

 Industrial Development Bank of India (IDBI)

 Indian Overseas Bank (IOB)

 Royal Bank of Scotland

 Deutsche Bank

 EXIM Bank

 Vijaya Bank

35
 ACHIEVEMENTS & AWARDS:
The efforts of VSP have been recognized in various fora. Some of the major awards
received by VSP are in the area of energy conservation, environment protection, safety,
quality, Quality Circles, Rajbhasha, MOU, sports related awards and a number of awards at
the individual level.

Some of the important awards received by VSP are indicated below:

Award Purpose Year
Excellence Award by Institute of For excellent performance in Steel
2016
Economic Studies industry

Corporate Vigilance Excellence Outstanding initiatives in vigilance

2016
Award 2015-16 arena

Hindi Award - HINDI

For implementation of the Official
SALAHKAR SAMITI Of 2016
language of Hindi.
Ministry Of Steel

"ICON OF THE YEAR AWARD

2016" TO SRI P Recognition by ICAI 2016
MADHUSUDAN, CMD- RINL
"GREATEST CORPORATE
LEADERS OF INDIA AWARD"
 Recognition for Corporate Leaders 2016
TO SRI P MADHUSUDAN,
CMD- RINL

Significant Achievement in CII

Overall Excellence in all activities of
EXIM Bank Award for Business 2015
the company
Excellence 2015

Vishwakarma Awards – Innovative suggestions for higher

VishwakarmaRashtriyaPuraskar) efficiency, productivity & process 2015
for 12 employees improvements

36
First prize of prestigious Indira For effective implementation of
2015
Gandhi Rajbhasha Shield Official Language

Award for Second best House For excellence in House Magazine in

2015
Magazine in Hindi 'Sugandh' Hindi 'Sugandh

Cost Management Excellence

Award by Institute of Cost For excellence in Cost Management 2015
Accountants of India , New Delhi

National Vigilance Excellence . For eminent professionals in the

Award by Vigilance Study Circle field of Vigilance 2015

ICC Corporate Governance and For performance on Sustainability

Sustainability Vision Award 2015
CII-ITC Sustainability Award –
2014 - ‘Strong commitment’
Awards at ICQCC’12, Malaysia -3
star (Top Most Category) for 3 QC
Teams
Vishwakarma Awards –
VishwakarmaRashtriyaPuraskar
(VRP) for 17 employees
Awards at INSSAN -2014 - 1st
place in the ‘Excellence in
Suggestion Scheme’ & 3 Merit
prizes
QCFI Award-2014 - Best Public
Sector Organization
National Vigilance Excellence
Award by Vigilance Study Circle
(VSC)
and Corporate Governance 2015
For performance on Sustainability
2015
For implementation of QC projects
2014
Innovative suggestions for higher
efficiency, productivity & process 2014
improvements
For implementation of Suggestions
2014
For promoting Quality Concepts
2014
For eminent professionals in the field
of Vigilance 2014
For excellence in IT & Special

37
 CIO-100 Award Award under the category 2014
‘Networking Pioneer’

SWOT ANALYSIS:

STRENGTHS:

 High commitment to achieve capacity levels.

 Areas of excellence.
 Economics of sales.
 High expansion potential.
 Strong commitment to conserve environment.

WEAKNESS:

 High Capital related charges.

 Low return product mix.
 Productivity below international standards.
 Lack of producitivity

OPPORTUNITIES:

 Share based.
 Sizeable export markets.
 Access to import sources.
 Proximity to southern markets.
 Increasing domestic demand due to thrust on infrastructure development

THREATS:
38
  Rising input cost.
 Increasing competition.
 Sensitive to exchange rate variation.
 Possibility of import duties declining further.

A Land Mark Year of Growth

The year 2005-2006 saw the company registering then best ever sales turnover of Rs.8482
crores a 3.6% growth over previous year. The company stated a record net profit of
Rs.1252.37 crores and this is the third consecutive year that the company has been earning
net profit with this the accumulated losses have bought down with this accumulated losses
have set up to out the Rs.906 crores and your company is all shortly also your “NAVA
RATNA” in the year 2012 by the government of India. It works under the follow

“LET EXCELLENCE NOT ONLY BE OUR GOAL.

LET US MAKE IT OUR STANDARD”

Board of Directors

Chairman cum Managing Director Sri P Madhusudan

Director (Personnel) Sri GBS Prasad
Director (Finance) Sri TVS Krishna Kumar
Director (Commercial) Sri TK Chand
Director(Operations) Sri DN Rao
Director (Projects) Sri PC Mahapathra
Chief Vigilance Officer Sri B. Siddhartha Kumar, IFS
Registered Office Main Administrative Building
Visakhapatnam Steel Plant
Visakhapatnam 530031

39
 CHAPTER-IV
THEORATICAL FRAMEWORK OF THE STUDY

40
 FINANCIAL STATEMENT ANALYSIS

INTRODUCTION

Financial statements are prepared primarily for decision making. They play a
dominate role in setting the frame work of managerial decisions.
Financial analysis is the process of identifying the financial strength and weakness of the firm
by properly establishing between the items of the balance sheet and profit and loss account.
There are various methods or techniques used in analysis financial statements such as
comparative statements, trend analysis, common size statements, schedule of changes in
working capital, funds flow and cash flow analysis – Cost Volume Profit Analysis and Ratio
Analysis.

MEANING & CONCEPT OF FINANCIAL STATEMENT ANALYSIS

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 facets as shown in a series of statement. The purpose of financial analysis is to diagnose
the information contained in financial statements so as to judge the profitability and financial
soundness of the firm.

 The term financial statement analysis includes both analysis and interpretation.

 The term analysis is used to mean the simplification of financial data by methodical
classification of the data give in the financial statement

41
TYPES OF FINANCIAL ANALYSIS
Financial analysis can be classified in to different categories depending up on:
A. On the basis of material used.
B. On the basis of modules used.

A] ON THE BASIS OF MATERIALS USED:

According to the basis, financial analysis can be of two types.
1. External Analysis:
This analysis is done by those who are outsiders for the business. These persons
mainly depend up on the published financial statements. Their analysis serves only a limited
purpose.

42
 2. Internal Analysis:
This analysis is done by persons who have access to the books of account and at other
information related to the business.Such as analysis can be done by executives and employees
of the organization. The analysis is done depending up on the objective to be achieved
through this analysis.

B]ON THE BASIS OF MODULES USED:

According to this financial analysis can also be of two types:

1. Horizontal analysis

2. Vertical analysis.

1. Horizontal analysis:
In case of this type of analysis, financial statements for a number of years are
reviewed and analyzed. The current year’s figures are compared with the standard or base
year. The analysis statement usually contains figures for two or more year and the change are
shown regarding each item from the base year usually in the form of percentage. Since this
type of analysis is based on the data from year to year rather than on date, it is also termed as
“Dynamic Analysis”.

2. Vertical analysis:
In case of this type of analysis a study is made of the quantitative relationship of
various items in the financial statement on a particular date. Since this analysis depends on
the data for one period, this is not very conducive to a proper analysis of the company’s
financial position. It is also called ‘static analysis as it is frequently used for referring to ratio
developed on one date or for one accounting period.

43
LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS:

The following are the impartment limitations of financial analysis.

1. It is only a study of internal reports.

2. Financial analysis is based upon only monetary information and non-monetary factors
are ignored.

3. It does not consider changes in price levels.

4. As the financial statements are prepared on the basis of a going concern it does not
give exact position thus accounting concepts and contentions cause a serious limitation
to financial analysis.

5. Changes in accounting procedure by a firm may often make financial analysis

misleading.

6. Analysis is only means and not an end in itself. The analyst has to make interpretation
and draw has own conclusion. Different people may interpret the same analysis in
different ways.

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS:-

There are three steps involved in the analysis of financial statements.

1. Selection.

2. Classification.

3. Interpretation.

1. Selection:-Involves selection of information relevant to the purpose of analysis of

financial statements.
2. Classification:-The 2nd step involved is the methodical classification of the data and
the third step includes drawing of interpretation and conclusion.

44
 3. Interpretation:-The final step involves the interpretation of the data and it gives the
final conclusion for the respective statements in a given period when compared to past
or previous years data.

METHODS OR DEVICES OR TECHNIQUES OF FINANCIAL

ANALYSIS

The analysis and interpretation of financial statements is used to determine the

financial position and results of operations well.
1. Comparative Financial statements
2. Common size financial statements
3. Cash flows
4. Funds flows

I) COMPARATIVE FINANCIAL STATEMENTS:

The statements which have been designed in a way so as to provide time perspective to the
consideration of various elements of financial position embodied in such statements with
figures for two or more period side by side to facilitate comparison. Both the income
statement and balance sheet can be prepared in the form of comparative financial statements.
The comparative financial statements contain the following items.
i. Absolute figures as given in the final accounts.
ii. Absolute figures expressed in terms of percentages.
iii. Increase or decrease in absolute figures in terms of money value.
iv. Increase or decrease in terms of percentages.
v. Comparison expressed in ratios.
vi. Percentages of totals.

Comparative Financial Statements includes the following two statements i.e.

 Comparative Balance sheet, and

 Comparative Income statements.

45
Comparative Balance sheet:
The balance sheet prepared on a particular date reveals the financial position of the
concern on the date. To study the trends of business over a period of time; comparative
balance sheet reveals the cause for changes in the financial position on account of various
transactions. The comparative study throws light on financial policies adopted by
management.
The comparative balance sheet consists of two columns for the original data. A third
column used to show increase or decrease in various items. A fourth column containing the
percentage of share of each variable out of the total value.

GUIDELINES FOR INTERPRETATION OF BALANCE SHEET:

The short term financial position can be studied by comparing the working capital of
both years.

1. To study the liquidity position, changes in liquid assets must be ascertained and if
there is any increase in liquid assets, we must understand that there is an
improvement in the liquidity position of the concern and vice versa.

2. A high increase in sundry debtors and bills receivable means an increase in risk in
collecting the amount of dues.

3. A high increase in closing stock may mean decrease in the demand.

4. Long term financial position of the business concern can be analyzed by studying
the changes in fixed assets, long term liabilities and capital.

5. Fixed assets must be compared with long term loans and capital. If the increase in
fixed assets is more than the increase in long term loans and capital, it means fixed
assets are financed from the working capital which is not good in the long term.

46
Comparative Income statements:

The income statement (Profit &Loss A/c) gives the results of the operations during a
definite period. It reveals the profit carried or loss incurred by the concern. The comparative
study of income statement for more than 1 year may enable us to know the program of the
concern. First two columns give figures of various items for two years. The third and fourth
column show increase or decrease in absolute figures and in percentage respectively.

1. In first step, find out the changes in absolute figures i.e., increase or decrease should
be calculated.
2. Share of each variable out of the total income or expenditure is calculated.

II) COMMON SIZE FINANCIAL STATEMENTS:

The common size statements i.e. balance sheet and income statement are shown in
analytical percentages. The figures are shown as percentages of total assets, total liabilities
and sales. The total assets are taken as 100 and different assets are expressed as percentage of
the total. Similarly various liabilities are shown as a percentage of total liabilities.
These statements are also known as component parentage or 100% statements because
every individual item is stated as a percentage of the total 100.The short-comings in
comparative statements and trend percentages where changes in item could not be compared
with the total have been covered up. The common size statements may be prepared in the
following way.

i. The totals of assets or liabilities are taken as 100.

ii. The individual assets are expressed as a percentage of total assets i.e., 100 and
individual liabilities are also expressed as a percentage of total liabilities i.e., 100.
Common Size Financial Statements also includes the following four statements i.e.

 Common Size Balance sheet, and

 Common Size Income statements.
 Cash flows.
 Funds flow.

47
Common Size Balance Sheet:
Statement in which balance sheet items are expressed as the ratio of each asset to total
assets and the ratio of each liability is expressed as a ratio of total liabilities is called common
size balance sheet. The common size balance sheet is a horizontal analysis. The comparison
of figures in different periods is not useful becomes total figure may be affected by a number
of factors. It is not possible to establish standard norms for various assets. The trends of
year to year may not give proper results.

Common Size Income Statement:

The items in income statement can be shown as percentages of sales to show the
relation of each item to sales. A significant relationship can be established between items of
income statement and volume of sales. The increase in sales will certainly increases selling
expression and volume of sales. The increase in sales will certainly increases selling
expresses and not administrative or financial expenses. In case the volume of sale increases
to a considerable extent, administrative and financial expenses may go up. In case the sales
are declining, the selling expenses should be reduced at once. So, a relationship is
established between sales and other in income statement and this relationship is helpful in
evaluating operational activities of the enterprises

Meaning of Cash Flow Nature:

Cash plays very important role in the entire economic life of a business. A firm needs cash to
make payments to its suppliers, to insure day-go-day expenses and to pay salaries, wages,
interest and dividends etc. In fact, what blood is to a human body, cash is to a business
enterprise. It is very essential for a business to maintain an adequate balance at cash. But
many a times, a concern operates profitability and yet it becomes very difficult to pay taxes
and dividends this movement of cash is of vital importance to the management.

“A statement of changes in the Financial Position of firm on cash basis is called a cash flow
statement”.
A cash flow statement summarizes the causes of changes in cash position of a business
enterprise between dates of two balance sheets. This statement is very much similar to the
statement of changes in Financial Position Prepared on working capital basis

48
Management of Cash:
Sydney Robbins describes “Cash – what a strange commodity. A business wants to get hold
of it in the shortest possible time but to keep the least possible quantity on hand Increased
sophistication in the handling of cash has enabled companies to cut down on the balances
needed to sustain any given level of operations”.
Cash in a firm may be compared to the blood of the human body. Excess cash should be
avoided and cash should not be kept idle. It should be utilized in an optimum manner, which
results in profits and solvency as well as matching of inflow and outflow of funds. As in case
of inventory, a finance manager has to follow five R’s of money as follows:
Right quality for liquidity
Right quality of money
Right time for solvency
Right source
Right cost of capital

Effective Cash Management:

The following are raw strategies for effective Cash Management

1. Cash Planning the requirement of cash has to be planned carefully, for this purpose two
kinds of cash forecast – short term and long-term are required estimating the cash inflow
as well as cash outflow (i.e., cash budget).
2. Managing the cash flows. Both the cash inflow and cash outflow are to be managed
carefully in such a way as to improve the cash inflow and delay the cash outflow.
3. Productive utilization of excess funds. If the excess is permanent, it may be utilized for
expansion or for repayment of long-term loans, which will reduce the burden of Interest.
But if the excess is temporary, it may be invested in short-term deposits for 15 days or
more or in marketable securities even if it is for 15 days. It carries an interest rate of 3%
per annum. It may be noted that current accounts will not fetch any interest.
4. Optimum cash level. The cost of excess cash and dangers of cash deficiency are to be
considered while working out the optimum cash level.

49
Cash Budget:
As very transaction of the business is effected eventually by cash, the cash budget is often the
last and the most difficult subsidiary budget to be prepared. The cash budget is a forecast of
expected cash receipts and payments for a future period. Cash forecasting is the estimating of
cash receipts and payments for a future period BEFORE any necessary adjustments have
been made cash Budgeting is the estimating of cash receipts and payments for a future period
AFTER due consideration has been given to expected conditions and the overall budget plan.
Seasonal factors must be taken into account and in practice cash budget is prepared on a
monthly basis. The most important points are that the viability of other budgets is tested in
terms of cash availability. If the sufficient funds are not available, either the policy must be
changed or fresh capital raised.
The cash budget consists of three parts i.e.
(i) Estimates of cash receipt;
(ii)Estimates of cash disbursement; and
(iii)Cash balance each month of budget period.
Cash budget is also called as cash flow statement which indicates the expected cash inflow
and cash outflow. It does not include deprecation and other non-cash expenses. Non actual
items are included in the cash budget it is generally prepared for one year in respect of
running business or even for new business. Then it is divided into monthly cash budget.
The main Functions of cash budget are:
1. To ensure that sufficient cash is available when required.
2. To reveal any expected shortage of cash-long-term or short term.
3. To reveal any expected surplus of cash long-term or short term.
4. To preserver liquidity.
5. To reveal the seasonal requirements such as payment of Income Tax as the end of
June.
6. To assist in sound investment policy, both on a long-term and a short-term basis.
7. To indicate the availability of cash discounts.
8. To indicate the availability of funds for replacement of assets, additions to assets,
expansion schemes, new schemes and modification of existing plant etc.

There are three methods of preparing cash budget:

50
 1) Receipts and payments method
Cash is generated from cash sales, collection from debtors, capital receipts and other income
like rent, dividends and interest earnings on investments. Collection from debtors is
dependent upon the credit sales and credit period extended to the customers. Cash payments
include the payments to suppliers for salaries and wages, overheads, capital expenditure,
investments, repayment of loans, hire purchase installments etc. Payment to suppliers is
dependent upon credit purchases and credit period extended by suppliers. Similarly salaries
and wages will be payable on the last day of the month or on the first day of the following
month. Payments for overheads and other liabilities are estimated as per the due dates taking
the credit period into account. Then the monthly balances will be arrived, minimum cash
balance is to be kept in a business for all times. Action will be taken for surplus or shortage of
cash as follows:

SURPLUS/ SHORTAGE ACTION

1. Shortage of cash-long-term
2. Shortage of cash-short-term
3. Surplus of cash-long-term
4. Surplus of cash-short-term
Obtain long term loans
Obtain overdraft on short-term basis
Repayment of loans or investment on long-
term basis.
Invest in short-term deposits fetching 3%
to 9% interest p.a.

Managing the cash flow:

Cash flow includes both inflow and outflow. A firm has to maintain an optimum cash
balances for meeting the day-to-day operating expenses and for precautionary purposes in
order to maintain the liquidity and solvency. A good bank relationship has to be maintained.
Cash inflow may be improved by increasing the cash sales, speedy and decentralized
collections from the customers. In this connection lock-box system can be operated. Under
this system, the company rents lock-box from post officers and the customers are requested to
main cheques to the local box. The company’s bank branch collects all such cheques.
Deposits then in the bank and remit the funds on the same day by telegraphic transfer to the
company’s account at Head Office.
Similarly cash outflow also should be controlled by delaying the disbursements to the
suppliers and other creditors. If the salary are monthly payments.

51
Finally a finance manager may use the float very continuously as it is a very risky one. There
will be a gap between the issue of a cheque by the firm and collection of cheques by the
customer. During the period of gap, the bank balance will be higher and cash book balance
will be lower. These funds can be utilized carefully and very cautiously by monitoring the
position at bank daily. But it is a risky game then cash book may show even negative balance.
Similarly cheques deposited by the firm will take time or realization. All these points should
be taken care for while using the float. Excess funds should be utilized for productive
purposes as already discussed above. Liquidity is the life blood ofcompany liquidity maybe
defined as the ability of a company to realize value in money in time and with certainly.
M.H.B. Add EI-Mortal suggests a comprehensive test of liquidity with the help of the
following three ratios.

Liquid assets to current assets (LA/CA)

Working capital to current assets
Stock to current assets.
Finally the objects should be to keep the cash available in the right amount and at the right
time to meet the financial obligations as the minimum cost.

Optimum Cash Level:

If the firm maintains lower cash balance, its liquidity position is affected. For urgent
payments it has to sell some marketable securities incurring penal interest and transaction
costs. But the profitability will be higher by utilizing the released funds if the firm maintains
the higher cash balance its liquidity will improve but profitability will decline by lasting the
interest on it, which involves an opportunity cost. Thus the optimum cash balance is to be
arrived by matching the transaction costs and opportunity costs Similar to EOQ formula,
optimum cash balance is the amount of cash balance at which the sum of both the transaction
costs and opportunity costs will be minimum.

52
Uses and significance of cash flow statement:
Cash flow statement is of vital importance to the financial management. It is an essential
tool of financial analysis for short-term planning.

The chief advantages of cash flow statement are as follows:

1. Since a cash flow statement is based on the cash basis of accounting, it is very useful
in the evaluation of cash position of a firm.
2. A projected cash flow statement can be prepared in order to know the future cash
position of a concern so as to enable a firm to plan and coordinate its financial
operations properly.
3. By preparing this statement a firm can come to know as to how much cash will be
needed into the firm and how much cash will be needed to make various payments
and hence the firm can well plan to arrange for the future requirements of cash.
4. A comparison of the historical and projected cash flow statements can be made so as
to find the variations and the deficiency or otherwise in the performance so as to
enable the firm to Stake immediate and effective action.
5. A series of intra-firm and inter-firm cash flow statements reveal whether the firm’s
liquidity (short-term paying capacity) is improving or deteriorating over a period of
time and in comparison to other firms over a given period of time.
6. Cash flow statement helps in planning the repayment of loans, replacement of fixed
assets and other similar long-term planning of cash. It is also significant for capital
budgeting decisions.

Limitations of Cash Flow Statement:

Despite a number of uses, cash flow statements suffer from the following limitations:
1. It is difficult to precisely define the term “cash”. There are controversies over a
number of items like cheques, stamps, postal orders, etc. to be included in cash.
2. A cash flow statement reveals the inflow and outflow of cash but the exclusion of
near cash items from cash obscures the true reporting of the firm’s liquidity
position.

53
Determinants of Cash flow:

The following factors will determine the cash flow:

1. Operating decisions-operating expenses, sales revenue and net profit.

2. Capital expenditure decisions-investment decisions, expansion etc.
3. Credit policy-credit period allowed to customers and followed by suppliers.
4. Inventory decisions-inventory control and management.
5. Payment of Interest, dividends and issue of bonus shares.
6. Productive decisions.
Liquidity gaps arising out of delay in cash realization, utilization of working capital for
capital expenditure, high fixed charges obligation and finally low generation of internal
resources which may be due to lower production and sales etc.

Procedure for preparing a Cash Flow Statement:

Cash flow statement shows the impact of various transactions on cash position of firms. It is
prepared with the help of financial statements, i.e., balance sheet and profit and loss account
and some additional information. A cash flow statement starts with the opening balance of
cash and balance at bank, all the inflows of cash are added to the opening balance and the out
flows of cash are deducted from the total. The balance i.e., opening balance of cash and bank
balance plus inflows of cash minus outflows of cash is reconciled with the closing balance of
cash. The preparation of cash flow statement involves the determining of:
1. Inflow of cash
2. Out flows of cash

Sources of cash Inflows:

The main sources of Cash flows are:

1. Cash flow from operations
2. Increase in existing liabilities or creation of new liabilities.
3. Reduction in or Sale of Assets.
4. Non-trading Receipts.

54
Application of cash or cash flows:

1. Cash lost in operations.

2. Decrease in or discharge of liabilities.
3. Increase in or purchase of assets.
4. Non-trading payments.
5. Generally cash flow statement is prepared in two forms.

Report form
T form or an account form or self-Balancing types

SPECIMEN OF REPORT FORM OF CASH FLOW STATEMENT

Cash Balance in the beginning. Rs.
ADD: Cash Inflows:
Cash flow from operations xxx
Sale of Assets xxx
Issue of shares xxx
Issue of debentures xxx
Raising of loans xxx
Collection from debentures xxx
Non trading receipts such as xxx
Dividend received xxx
Income tax refunds
Less: Applications or outflow of cash:
Redemption of preference shares xxx
Redemption of debentures xxx
Repayment of loans xxx
Purchase of assets xxx
Payment of dividend xxx
Payment of taxes xxx
Cash lost in operations xxx
Cash Balance at the end: Xxx

55
 T FORM OR AN ACCOUNT FORM OF CASH FLOW STATEMENT

PARTICULARS Rs. PARTICULARS Rs.

Cash balance in the beginning xxx Out flow of cash xxx

ADD: Cash Inflows: xxx Redemption of xxx

Cash flow from operations Preference shares
Sales of assets xxx Redemption of dentures xxx
Payment of Loans
Issue of shares xxx Payment of dividends xxx
Issue of debentures Payment of tax
Raising of loans xxx Cash lost in operations xxx
Collection from debtors
Dividends received xxx xxx
Refund of tax
xxx xxx

xxx xxx

Cash balance at the end xxx

56
 FUNDS FLOW STATEMENT

INTRODUCTION

The basic financial statement i.e., the balance sheet and profit and loss account (or) income
statement of business, reveal the net effect of the various transaction on the operational and
financial position of the assets and liabilities of an undertaking at particular point of time. It
reveals the financial status of the company. The assets side of a balance sheet shows of the
deployment of resources of an undertaking while the liabilities side indicates its obligation
i.e., the manner in which these resources were obtained. The profit and loss account reflects
the results of the business operations for a period of time. It contains a summary of expenses
incurred and the revenues realized in a accounting period. Both these statement provide the
essential basic information on the financial activities of a business. The balance sheet give a
static view of the resources (liabilities) of a business and uses (assets) to which these
resources have been but at a certain point of time. It does not disclose the cause for changes
in the assets and liabilities between two different points of time. The profit and loss account,
in a general way, indicates the resources provided by operations. But there are many
transactions that take place in an undertaking and which do not operate through profit and
loss account. Thus another statement has to prepare to show the change in the assets and
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 or a funds flow statements.
of the financial operations of the business undertakings. It indicates various means by which
flow The funds statement in a statement which shows the movement of funds and is a report
funds were obtained during a particular period and the way to which these funds were
employed. In simple words It is a statement of sources and applications of funds.

57
 MEANING AND CONCEPT OF FUNDS:

The term ‘funds’ has been defined in a number of ways.

A statement of sources & applications of funds is a technical device design to analyze the
changes in the financial conditions of a business enterprise between two dates.

In a narrow sense, it means cash only and a funds flow statement prepared on this basic is
called a cash flow statement such a statement enumerates net effects of various business
transactions in cash and takes into account receipts and disbursements of cash.
a. In a broader sense the term ‘funds’ refers to money values in whatever form it may exist.
Here ‘funds’ means all financial resources used in business whether in the form of men,
material, money, machinery and other.

b. In a popular sense the term ‘funds’ means working capital i.e., the excess of current
assets over current liabilities, the working capital concept of funds has emerged due to
the fact that total resources of business are invested partly in fixed assets in the form
of fixed capital and partly kept inform of liquid or hear liquid form as working capital.

Meaning and Concept of Flow of Funds

The term ‘flow’ means movement and includes both ‘inflow’ and ‘outflow’ the term ‘flow of
funds’ means transfer of economic values from one assets 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. If the effect of transaction results in the
increase of funds, it is called a source of funds and if it results in the decrease of funds, it is
known as an application of funds. Further, in case the transaction does not change funds. It is
said to have not resulted in the flow of funds. According to the working capital concept of
funds, the term ‘flow of funds’ refers to the movement of funds in the working capital. If any
transaction results in the increase in working capital it is said to be a source or inflow of
funds and it results in decrease of working capital, it is said to be an application or outflow
funds.

58
In simple language funds move when a transaction effects.
i. A current assets and a fixed assets, or
ii. A fixed and a current liability.
iii. A current assets and a fixed liability.
iv. A fixed liability and current liability.
Funds do not move when the transaction affects fixed assets and fixed liability or current
assets and current liabilities

Kenneth Medley and Ronald Gibers define the term ‘funds’ as one used in the sense of
spending power, it refers to the value embedded in assets. According to Bonneville and
Dewey, ‘funds’ constitute the prime importance in sharing and operating any business
enterprise. In the ordinary parlance. Funds mean cash only, but it has got several different
concepts as mentioned below.

Funds may mean:

a. Cash only
b. Net working capital i.e., current assets less current liabilities.
c. Total resources or total funds.
d. Internal resources only.
e. Net worth i.e., owner’s equity capital plus reserves.
f.
Current and Non Current Accounts:

To understand flow of funds it is essential to classify various accounts and balance sheet
items current and non-current 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 within a
short period of normally one accounting year.
Current liabilities are those liabilities which are intended to be paid in the ordinary course of
business with in a short period of normally one accounting year out of the current assets other
income of the business.

59
FUNDS FLOW STATEMENT
The following is the list of current or working capital accounts:

Current Liabilities Current Assets

1. Bills payable 1. Cash in hand
2. Sundry creditors or account payable 2. Cash at bank
3. Accrued or outstanding expenses 3. Bills receivable
4. Dividends payable 4. Sundry debtors or accounts receivable
5. Bank overdraft 5. Short term loans and advance
6. Short term loans advances and deposits 6. Temporary or marketable investments
7. Provision against current assets 7. Inventories or stocks such as
[a] Raw materials
[b] Work in progress.
[c] Stores and spares.
[d] Finished goods
8. Provision for taxation, if it does not 8.. Prepaid expenses
amount to appropriation of profits.
9. Proposed dividends (maybe a current 9. Accrued incomes
non-current Liability).

List of non-Current (or) Permanent Capital Accounts:

Non-current or permanent liabilities Non-current or permanent assets

1. Equity share capital 1. Good will
2. Preference share capital 2. Land
3. Redeemable preference share capital 3. Building
4. Debentures 4. Plant and Machinery
5. Long term loans 5. Furniture and Fittings
6. Share premium account 6. Trade Marks
7. Share forfeited account 7. Patent Rights
8. Profit and loss account (balance of 8. Long term investment
profit ie., credit Balance).
9. Capital reserve 9. Debit balance of profit and loss

60
 account.
10 Capital redemption reserve 10. Discount on issue of shares
11 Provision for depreciation against 11 Discount on issue of debentures
fixed assets
12 Appropriation of profits 12 Other Deferred expenses
[a] General reserve
[b] Dividend equalization Fund
[c] Insurance Fund
[d] Compensation fund
[e] Sinking fund
[f] Investment fluctuation fund
[g] Provision for taxation.
[h] Proposed dividend.

Funds Flow Statement

Funds flow statement is the statement of sources and application of funds. It is also called
‘funds where got and where gone statement’. Almond Coleman observed. “The funds
statement in a statement summarizing the significant financial changes which have occurred
between the beginning and the end of company’s accounting period”.

There are 4 steps involving in preparation of funds flow statement:

a. Ascertain the funds from operations.
b. Preparation of statement of changes.
c. Computation of any missing figures as to profit or loss on Sale of fixed assets
purchases or sale of fixed assets and the amount of depreciation on fixed
assets etc.
d. Finally preparation of funds flow statement.

Foulke defines this statement as “A statement of sources and application of funds in

technical device designed to analyze the changes in the financial condition of a business
enterprise between two dates”.

61
In the words of Anthony “the funds flow statement describes the sources from which
additional funds were derived and the use to which these sources were put”.
ICWA in glossary of management accounting terms defined “funds flow statement as a
statement either prospectus or retrospect’s, setting out the sources and applications of
the funds of an enterprise. The purpose of the statement is to indicate clearly the
requirement of funds and how they are proposed to be raised and the efficient
utilization and application of the same”.
Thus funds flow statement in a statement which indicates various means by which the funds
have been obtained during a certain period and the ways to which these funds have been used
during that period. The term funds used here means working capital i.e., the excess of current
assets over current liabilities.
Funds flow statement is called by various names such as sources and application of funds;
statement of changes in financial position, sources and uses of duns; summary of financial
operation, where came in and where gone out statement, where got, where gone statement,
movement of working capital statement, movement of funds statement, funds received and
disbursed statement; funds generated and expended statement; sources of increase and
application of decrease; funds statement etc.

Uses, Significance and Importance of Funds Flow Statement:

A funds flow statement is an essential 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 institutions and financial managers. The basic purpose of a
funds flow statement is to reveal the changes in working capital on the two balance sheets
dates. It also describes the sources from which additional working capital has been financial
and the uses to which working capital has been applied such a statement is particularly useful
in assessing the growth of the firm its resulting financing these needs. By making use of
projected funds flow statement, the management can come to know the adequacy or
inadequacy of working capital even in advance. One can plan the intermediate and long-term
financial of the firm, repayment of long-term debts, expansion of the business, allocation of
resources, etc., the significance or importance of a funds flow statement can be were followed
from its various uses given below:

62
(1)It helps in the analysis of financial operations:
The financial statements reveal the net effect of various transactions on the operational and
financial position of a concern. The balance sheet gives a static view of the resources of a
business and the uses to which these resources have been put at a certain point of time. But it
does not disclose the causes for changes in assets and liabilities between two different points
of time. The funds flow statement explains causes for such changes and also the effect of
these changes no the liquidity position of the company. Sometimes a concern may operate
profitably and yet its cash position may become more and more course. The funds flow
statement gives a clear answer to such a situation explaining what has happened to the profit
of the firm.

(2)It throws light on many perplexing questions of general interest which

otherwise may be difficult to be answered, such as:

a. Why were the net current assets lesser inspite of higher profits and vice-verse.
b. Why more dividends could not be declared inspite of available Profit?
c. How was it possible to distribute more dividends than the present earning?
d. What happened to the net profit? Where did they go?
e. What happened to the proceeds of sale of fixed assets or issue of Shares,
debentures etc?

(3)It helps in the formation of a realistic dividend policy:

Sometime a firm has sufficient profit available for distribution as dividend but yet it may not
be advisable to distribute dividend for lack of liquid or cash resources. In such causes, a
funds flow statement helps in the formation of a realistic dividend policy.

(4)It helps in the proper allocation of resources:

The resources of a concern are always limited and it works to make the best use of these
resources. A projected funds flow statement constructed for the future help in making
managerial decision. The firm can plan the deployment of its resources and allocate them
among various applications.

63
(5)It acts as a future guide :
A project funds flow statement also acts as a guide for future to the management. The
management can come to know the various problems it is going to funds can be projected
well in advance and also the timing of these needs. The firm can arrange to finance these
needs more effectively and avoid future problem.
(6)It helps in appraising the use of working capital :
A funds flow statement helps in explaining how efficiently the management has used its
working capital and also suggests way to improve working capital position of the firm.
(7)It helps knowing the overall credit worthiness fo a firm:
The financial institutions and banks such as state financial institutions, industrial
development corporation, industrial finance corporation of India, industrial development
bank of India etc., all ask for funds flow statement constructed for a number of years before
granting loans to know the credit worthiness and paying capacity of the firm. Hence, a firm
seeking financial assistance from these institutions has no alternative but to prepare funds
flow statements.
Limitations of Funds Flow Statement :
The funds flow statement has a number of uses; however, it has certain 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 cannot reveal continuous changes.
3. It is not a original statement but simply a re-arrangement of data given in the
financial statement.
4. It is essentially historic in nature and projected funds flow statement cannot be
prepared with much accuracy.
5. Changes in cash are more important and relevant for financial management than
the working capital.

64
Procedure for Preparing a Funds Flow Statement :
Funds flow statement is a method by which are study changes in 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 between the two balance sheet dates. This statement is prepared
with the help of current assets and current liabilities derived from the two balance sheets.
As working capital = current assets – current liabilities.
i. An increase in current assets increase working capital
ii. A decrease in current assets decreasing working capital.
iii. An increase in current liabilities decreasing working capital;
iv. A decrease in current liabilities increases working capita

65
 Statement (or) Schedule of Changes in Working Capital

Effect in working
Previous Current
Particulars Capital
Year Year
Increase Decrease
Current Assets
Cash in hand
Cash at Bank
Bills receivable
Sundry debtors
Temporary investment
Stock/inventories
Pre-paid expenses
Accrued incomes
Total current assets
Current Liabilities
Bills payable
Sundry creditors
Outstanding expenses
Bank over draft
Dividend payable
Proposed dividends
Provision for taxation Total
Current liabilities
Working capital (CA-CL)
Net increase/decrease in
Working capital

66
Statement of Sources and Application of Funds
Funds flow statement is statement which indicates various sources from which funds
(working capital) have been obtained during a certain period and the uses or applications to
which these funds have been put during the period. Generally, this statement is prepared in
two formats:
a. Report form
b. T form or an account form or self balance type.

Specimen report form of fund flows statement

Sources of Funds Rs.
Funds from operations XXX
Issue of share capital XXX
Issue of debentures XXX
Raising of long term loans XXX
Receipts from partly paid share, called up XXX
Sales of non current (fixed) assets XXX
Non-trading receipts such as dividends received XXX
Sale of investment (long term) XXX
Decrease in working capital (as per schedule of changes in working capital) XXX

Total XXX
Applications or uses of funds:
Funds lost in operations XXX
Redemption of preference share capital XXX
Redemption of debentures XXX
Repayment of long-term loans XXX
Purchase of non current (fixed) assets XXX
Purchase of long-term investments XXX
Non-trading payments XXX
Payments of dividends XXX
Payment of tax
Increase in working capital (as per schedule of changes in working capital
Total

67
Funds from Operations :
As a first step it would be convenient if the profit and loss appropriation account is prepared
and net profit after tax is ascertained as a balancing figure.
Then the funds from operations are worked out as follows:
Particulars Rs. Rs.
Net profit after tax - -
ADD: -
1. Non-cash expenses during the year - -
[a] Depreciation - -
[b] Writing off of goodwill, patents, trade - -
marks, deferred revenue expenditure, - -
Preliminary expenses etc. -
[c] Amortization of discount on issue of - -
debentures or share etc. - -
2. Loss on sale of fixed assets,. - -
3. Extra-ordinary (or) non recurring losses.
LESS: - -
4. Profit on sale of fixed assets. -
5. Amortization of share premium or debenture -
premium etc. - -

Funds from operations :

Funds from operation are a source of fund during period. If it is still a negative balance it is
loss from operations and is shown on the side of “Application of funds” but if it shows a
positive it is a source of funds.

68
P & L appropriation account

Particulars Amount Particulars Amount

To Interim Dividend - By balance b/d -
To Proposed equity - By excess provision written
Dividend back -
To Preference dividend - By income tax provision not -
To Transfer to reserve - required
To Balance c/d - By Dividend received -
By net profit after tax -
(balancing figure)
(transferred from P&L account

T form or an account form or self balancing type Funds Flow Statement

(for the year ended….)
Sources Rs Applications Rs
Funds from operations - Funds lost in operations -
Issue of share capital - Redemption of preference -
Issue of Debentures - Share capital -
Raising of long-term loans receipt - Repayment of long term loans -
from partly paid share called up - Purchase of non-current (fixed -
Sales of non current (fixed) - assets) -
Assets. - Purchase of long-term -
Non trading receipts such as - Investments -
dividends. - Non trading payment. -
Sale of long-term investment - Payment of dividends. -
Net decreasing in working capital - Payment of tax. -
Net increase in working capital -

69
 CHAPTER-V

DATA ANALYSIS
&
INTERPRETATION

70
Table No 5.1 Balance Sheets of VSP Ltd. from 2012-14 Sources of Funds
(Rs in Crores)

Particulars 31-03-2016 31-03-2015 31-03-2014 31-03-2013 31-03-2012

Share Holders Fund

Share Capital 5739.85 6346.82 7727.32 7827.32 7827.32

Reserve & surplus 6400.89 6130.50 5931.97 5401.90 5057.68

(A) 12140.74 12477.32 13659.29 13229.22 12885.00

Loan Funds

Secured Loans 1203.53 1241.56 274.89 407.28 907.72

Unsecured Loans 3150.49 2724.64 861.87 825.27 100.04

(B) 4354.02 3966.20 1136.76 1232.55 1007.76

Current liabilities

Liabilities 5484.05 4119.26 3271.43 2871.95 2560.79

Provisions 157.65 1090.17 1336.06 1435.89 1620.53

(C) 5641.70 5209.43 4607.49 4307.84 4181.32

Deferred Tax
419.01 229.21 60.98 79.97 97.82
Liability
(D) 419.01 229.21 60.98 79.97 97.82

Total (A+B+C+D) 22555.47 21882.16 19464.52 18849.58 18171.90

71
BALANCE SHEET AS AT 31st MARCH, 2016 AND 31st MARCH, 2015
As at As at
Note
Particulars 31stMarch 31st March
No
2016 2015
Equity and
liabilities
Share holders’
Funds
Share Capital
Reserves and 5739.85 6346.82

surplus 6400.89 6130.50

Non current
liabilities
Long-term
1203.53 1241.56
borrowings
Deferred tax
419.01 229.21
liabilities(net)
Other long term
165.56 105.00
liabilities
Long term
531.43 414.77
provisions
Current
Liabilities
Short term
3739.93 3658.44
borrowings
Trade payables 829.93 737.94
Other current
5484.05 5615.19
liabilities
Short term
157.65 173.10
provisions
Total 24671.83 24652.52

Non current

72
 assets
Tangible assets 4530.03 3787.07
Intangible
2.75 2.74
assets
Capital work-in
10669.47 9965.24
progress
Intangible
assets under 30.11 15232.36 22.20 13777.25
development

Non current
362.53 362.58
Investments
Long term loans
616.05 498.36
and advances

Other non
60.23 36.58
current assets

Current assets

Inventories 3863.04 3828.60

Trade
803.65 1009.65
receivables

Cash and bank

175.89 1625.02
balances

Short term
loans and 3461.35 3417.75
advances
other current
96.73 96.73
assets

Total 24671.83 24652.52

Table No 5.2 Application of Funds (Rs in Crores)

73
 Particulars 31st March 31st March 31st March 31st March 31st March
2016 2015 2014 2013 2012
Fixed Assets

Gross Block 13616.19 12588.34 10393.86 9794.60 9473.90

Less: Depreciation 9083 8798.52 347.66 8264.71 8008.55

Net Block 4533 3609.82 10046.20 1529.89 1465.35

Hold for Disposal 0.05 0.13 0.00 0.03 0.05

Capital work-in- 10669.47 9965.24 10596.08 9536.71 7506.90

progress
(A) 21,920.20 17,387.20 13,777.38 11,066.63 8,972.30

Investment (B) 362.53 362.58 362.58 361.60 0.25

Current Assets &

Advances
Inventories 3863.04 3828.60 3403.00 3254.71 2451.52

Sundry debtors 803.65 1009.65 824.26 330.61 181.18

Cash & Bank 175.89 1625.02 2068.34 1998.89 5415.54

Balance
Others Assets 96.73 96.73 252.22 75.96 137.40

Loans & Advances 3461.35 3417.75 2608.43 1965.04 1365.02

(C) 8400.66 9977.75 9156.25 7625.21 9550.66

Miscellaneous
Expenditure(D)
Profit & Loss
Account(E)
Total (A+B+C) 30683.39 27727.53 23050.55 19053.44 18523.21

74
 Table No.5.3 COMPARATIVE BALANCE SHEET OF VSP LTD FOR
THE YEARS 2016-15 and 2015-16
2016-15 2015-16 Increase/ Increase/
Particulars Rs.in Crs. Rs.in Crs. Decrease Decrease
Rs.in Crs. Percentage
ASSETS

Cash & Bank Balance 1625.02 175.89 +1449.13 +18.00

Sundry Debtors 1009.65 803.65 + 206.00 -18.13

Inventories (Stock) 3828.68 3863.04 -34.36 -76.91

Loans & Advances 3417.75 3461.35 -43.60 -68.79

Other Current Assets 96.73 96.73 00.00 00.00

Miscellaneous Expenditure

Profit & Loss Account

Investments 614.80 897.44 -282.64 -15.12

Fixed Assets 13777.25 15232.36 +1455.11 +290.09

Total Assets 24369.88 24530.46 -160.58 +65.88

LIABILITIES

Liabilities 4119.26 6458.12 -2338.86 -105.77

Provisions 414.77 531.43 +116.66 +9.46

Secured Loans 1827.78 1792.97 -34.81 -36.20

Unsecured Loans 3072.22 3150.49 +78.27 +62.22

Deferred Tax Liability 229.21 419.01 -189.8 -6.48

Reserves & Surplus 6130.50 6400.89 +270.39 +125.31

Share Capital 6346.82 5739.85 +606.97 +17.34

Total Liabilities 22140.56 24492.76 -3147.68 +65.88

75
 CHART FOR BALANCE SHEET FOR THE YEARS 2012-2013
TO 2013-2014
300
250
200
150
100
50
0

Profit & Loss Account

Share Capital
Inventories (Stock)

Other Current Assets

Investments

Secured Loans
Miscellaneous Expenditure
Sundry Debtors

Loans & Advances

Fixed Assets

Liabilities

Provisions

Unsecured Loans

Reserves & Surplus

Cash & Bank Balance

Deferred Tax Liability

-50
-100
-150

INTERPRETATION:
 The fixed assets for the period of 2015-16 is 15232.36& 2016-15 is 13777.25 which
has been increased to 1455.11s
 The total assets and total liabilities for the period of 2015-16 is 23050.55& 2016-15 is
24652.52 which has been decreased to 1601.97
 The liabilities for the period 2015-16 is 4119.26& 2016-15 is 6458.12 which has
been decreased to 2338.86

76
 Table No.5.3 COMPARATIVE BALANCE SHEET OF VSP LTD FOR
THE YEARS 2015-14 and 2016-15
Particulars 2015-14 2016-15 Increase/ Increase/
Rs.in Crs. Rs.in Crs. Decrease Decrease
Rs.in Crs. Percentage
ASSETS

Cash & Bank Balance 2068.34 1625.02 +443.32 +21.43

Sundry Debtors 427.15 1009.65 -582.5 -136.36

Inventories (Stock) 3403.11 3828.68 -425.57 -12.5

Loans & Advances 2366.54 3417.75 -1051.21 -44.41

Other Current Assets 226.97 96.73 +130.24 +57.38

Miscellaneous Expenditure

Profit & Loss Account

Investments 614.80 897.44 -282.64 -45.97

Fixed Assets 12397.93 13777.25 -1379.32 -11.12

Total Assets 21504.84 24652.52 -3147.68 -14.63

LIABILITIES

Liabilities 4119.26 6458.12 -2338.86 -56.77

Provisions 1090.17 587.87 +502.3 +46.07

Secured Loans 931.70 1827.78 -896.08 -96.17

Unsecured Loans 1643.44 3072.22 -1428.78 -86.93

Deferred Tax Liability 60.98 229.21 -168.23 -275.87

Reserves & Surplus 5931.97 6130.50 -198.53 -3.34

Share Capital 7727.32 6346.82 +1380.5 +17.86

Total Liabilities 21504.84 24652.52 -3147.68 -14.63

77
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:

 The fixed assets for the period of 2015-14 is 12397.93 & 2016-15 is 13777.25 which
has been decreased to 1379.32
 The total assets and total liabilities for the period of 2015-14 is 21504.84 & 2016-15
is 24652.52 which has been decreased to 3147.68
 The liabilities for the period 2015-14 is 4119.26 & 2016-15 is 6458.12 which has
been decreased to 2338.86

78
COMPARATIVE BALANCE SHEET OF VSP LTD FOR THE YEARS
2014-13 and 2015-14
2014-13 2015-14 Increase/ Increase/
Particulars Rs.in Crs. Rs.in Crs. Decrease Decrease
Rs.in Crs. Percentage
ASSETS

Cash & Bank Balance 1998.89 2068.34 +69.45 +3.47

Sundry Debtors 330.61 427.15 +96.54 +29.2

Inventories (Stock) 3254.71 3403.11 +148.4 +4.56

Loans & Advances 1965.04 2366.54 +401.5 +20.43

Other Current Assets 75.96 226.97 +151.01 +198.8

Miscellaneous Expenditure

Profit & Loss Account

Investments 361.60 614.80 +253.2 +70.02

Fixed Assets 11066.63 12397.93 +1331.3 +12.03

Total Assets 19053.44 21504.84 +2451.4 +12.87

LIABILITIES

Liabilities 3271.43 4119.26 +847.83 +25.92

Provisions 1336.06 1090.17 -245.89 -18.4

Secured Loans 274.89 931.70 +656.81 +238.94

Unsecured Loans 861.87 1643.44 +781.57 +90.68

Deferred Tax Liability 79.97 60.98 -18.99 -23.75

Reserves & Surplus 5401.90 5931.97 +530.07 +9.81

Share Capital 7827.32 7727.32 -100 -1.278

Total Liabilities 19053.44 21504.84 +2451.4 +12.87

79
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:

 The fixed assets for the period of 2015-14 is 12397.93& 2014-13 is 11066.63which
has been increased to1331.3
 The total assets and total liabilities for the period of 2014-13 is 19053.44& 2015-14 is
21504.84which has been increased to +2451.4

80
Table No 5.3 COMPARATIVE BALANCE SHEET OF VSP LTD FOR
THE YEARS 2013-12 and 2014-13
Particulars 2013-12 2014-13 Increase/ Increase/
Rs.in Crs. Rs.in Crs. Decrease Decrease
Rs.in Crs. Percentage
ASSETS:

Cash & Bank Balance 5415.54 1998.89 -3416.65 -63.08

Sundry Debtors 181.18 330.61 +149.43 +82.47

Inventories (Stock) 2451.52 3254.71 +803.19 +32.76

Loans & Advances 1365.02 1965.04 +600.02 +43.95
Other Current Assets 137.4 75.96 -61.44 +44.71

Miscellaneous
Expenditure
Profit & Loss Account
Investments 0.25 361.60 +361.35 +144.540

Fixed Assets 8972.30 11066.63 +2094.33 +23.34

Total Assets 18523.21 19053.44 +530.23 +2.86

LIABILITIES
Current Liabilities 2871.95 3271.43 +399.48 +13.90

Provisions 1435.89 1336.06 -99.83 -6.95

Secured Loans 407.28 274.89 -112.39 -29.02
Unsecured Loans 825.27 861.87 +16.64 +1.96
Deferred Tax Liability 97.82 79.97 -17.85 -18.24

Reserves & Surplus 5057.68 5401.90 +344.22 +6.80

Share Capital 7827.32 7827.32 -0.05 -0.0006

Total Liabilities 18523 19053.44 +530.23 +2.86

81
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:

 The fixed assets for the period of 2013-12 are 8972.30 & 2014-13 is 11066.63 it has
been increased23.34%.
 The total assets for the period of 2013-12 are 18523.21& 2014-13 is19053.44 which
is 100%.
 The current liabilities for the period 2013-12 are 2871.95 & 2014-13 is 3271 which
has been increased by 13.90%.

82
Table No 5.4 COMPARATIVE BALANCE SHEET OF VSP LTD. FOR
THE YEARS 2008-09 and 2013-12

2008-09 2013-12 Increase/ Increase/

Particulars Rs.inCrs. Rs.inCrs. Decrease Decrease
Rs.inCrs. Percentage
ASSETS:
Cash & Bank Balance 6624.17 5415.54 -1208.63 -18.24
Sundry Debtors 191.27 181.18 -10.09 -5.27
Inventories (Stock) 3215.28 2451.52 -763.76 -23.75
Loans & Advances 1569.69 1365.02 -204.67 -13.03
Other Current Assets 258.91 137.4 -121.51 -46.93
Miscellaneous Expenditure

Profit & Loss Account

Investments 0.05 0.25 +0.2 +4.00
Fixed Assets 5874.11 8972.30 +3098.19 +52.74
Total Assets 17733.48 18523.21 +789.73 +4.45
LIABILITIES
Current Liabilities 2560.79 2871.95 +311.16 +12.15
Provisions 1620.53 1435.89 -184.64 -11.39
Secured Loans 907.72 407.28 -500.44 -55.13
Unsecured Loans 100.04 825.27 +725.23 +724.94
Deferred Tax Liability 124.49 97.82 -26.67 -21.42

Reserves & Surplus 4592.59 5057.68 +465.09 +10.12

Share Capital 7827.32 7827.32

Total Liabilities 17733.48 18523 +789.73 +4.45

83
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:
 The fixed assets for the period of 2008-09 are 5874.11 & 2013-12 is 8972.30 it has
been increased to15.31%.
 The total assets for the period of 2008-09 is 17733.48 & 2013-12 is 18523.21 which
has been increased to 789.73
 The current liabilities for the period 2008-09 is 2560.79 i.e. 14.44% & 2013-12 is
2871.95 i.e. 15.50%, this has been increased to1.06%.

84
COMPARATIVE PROFIT & LOSS A/C OF VSP LTD. FOR THE
YEARS 2016-15 and 2015-16

Balance as at Balance as at Increase/ Increase/

31.03.2015 (Rs. 31.03.2016 Decrease Decrease
In crores) (Rs. In crores) (Rs. In crores) Percentage

INCOME
Sales 13463.10 13364.17 +98.93 +32.39
Other Revenue 222.09 126.94 +95.15 -181.73
TOTAL
13685.19 13491.11 +194.08 +28.74
INCOME
EXPENDITURE
Raw Material
8174.07 7156.23 +1017.84
consumed +4.4
Employee
1469.07 1751.10 -282.03
remuneration -0.16
Stores & Spares
529.88 556.98 -27.1
Consumed -2.23
Depreciation 186.88 271.48 -84.6 -45.8

Other Expenditure 516.08 474.98 +41.1

-3.22
TOTAL
10875.98 10210.77 +665.21
EXPENDITURE +0.44
PROFIT BEFORE
526.47 549.15 +22.68
TAX +52.57

Taxes 168.23 189.80 -21.57 -206.04

Profit After Tax 358.24 359.35 +1.11 +52.38

85
 INCREASE/DECREASE PERCENTAGE
100
50

0
les ue ed tio
n ed tio
n re Ta
x
xe
s ax
-50 Sa ven u m r a um ia d itu r e Ta erT
e s e s ec n o
rR Con un Con pr pe Bef t Aft
e m e x
-100 h
ial
s e es D E t ofi
Ot er eR p ar her ro
fi
Pr
t e S t P
-150 a oy O
w
M pl es&
m or
-200 Ra E
St
-250

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:
 Sales Value decreased
 Other Revenue decreased. Other revenue includes the interest on term deposits
(surplus funds). These surplus funds have been withdrawn to utilize in
expansion activities.
 Raw Material consumption decreased, this is due to:
 Increase in selling prices
 Increase in operational efficiency
 Use of high-quality of materials
 Employee remuneration increased
 Other expenditure decreased. This is due to:
 Stock increase against the stock accretion in the year 2008-09
 Decrease in the cost of power and fuel
 Decrease in depreciation
 Profit increased as a natural decrease in decrease of taxes and cumulative
profit.

86
Table NO 5.2.1 COMMON SIZE BALANCE SHEET OF 2016-15 AND
2015-16
2016-15 2016-15 2015-16 2015-16
Particulars Rs. in Crs. PERCENTAGE Rs.in Crs. PERCENTAGE
ASSETS:
Cash & Bank Balance 1625.02 6.59 175.89 4.96

Sundry Debtors 1009.65 15.25 803.59 12.30

Inventories (Stock) 3828.60 25.53 3863.04 26.93

Loans & Advances 3417.75 19.86 3461.35 22.36

Other Current Assets 96.73 00.00 96.73 00.00

Miscellaneous
Expenditure
Profit & Loss
Account
Investments 362.58 28.93 362.53 28.93

Fixed Assets 13777.25 3.84 15232.36 4.52

Total Assets 24117.58 100 23995.49 100

LIABILITIES
Liabilities 7742.88 19.15 8212.49 26.19
Provisions 587.87 5.06 689.08 0.92
Secured Loans 1827.78 7.41 1792.97 4.33
Unsecured Loans 3072.22 7.64 3150.49 12.46
Deferred Tax 229.21 0.28 419.01 2.38
Liability
Reserves & Surplus 6130.50 24.86 6400.89 27.58

Share Capital 6346.82 35.93 5739.85 25.74

Total Liabilities 25937.28 100 26404.78 100

87
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:
 The fixed assets for the period of 2016-15 is 13777.25 & 2015-16 is 15232.36 where
the percentage is 3.84 & 4.52
 The total assets for the period of 2016-15 is 24652.52 & 2015-16 is 23995.49where
the percentage is 100
 The liabilities for the period is 2016-15 is 7742.88 & 2015-16 8212.49where the
percentage is 19.15 & 26.19

88
Table NO 5.2.1 COMMON SIZE BALANCE SHEET OF 2015-14 AND
2016-15
2015-14 2015-14 2016-15 2016-15
Particulars Rs.inCrs. PERCENTAGE Rs.in Crs. PERCENTAGE
ASSETS:
Cash & Bank Balance 2068.34 9.61 1625.02 6.59

Sundry Debtors 427.15 1.98 1009.65 4.09

Inventories (Stock) 3403.11 15.82 3828.68 15.53

Loans & Advances 2366.54 11 3417.75 13.86

Other Current Assets 226.97 1.05 96.73 0.39

Miscellaneous
Expenditure
Profit & Loss
Account
Investments 614.80 2.85 897.44 3.64

Fixed Assets 12397.93 57.65 13777.25 55.88

Total Assets 21504.84 100 24652.52 100

LIABILITIES
Liabilities 4119.26 19.15 6458.12 26.19
Provisions 1090.17 5.06 587.87 2.38
Secured Loans 931.70 4.33 1827.78 7.41
Unsecured Loans 1643.44 7.64 3072.22 12.46
Deferred Tax 60.98 0.28 229.21 0.92
Liability
Reserves & Surplus 5931.97 27.58 6130.50 24.86

Share Capital 7727.32 35.93 6346.82 25.74

Total Liabilities 21504.84 100 24652.52 100

89
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:
 The fixed assets for the period of 2015-14 is 12397.93 & 2016-15 is 13777.25 where
the percentage is 57.65 & 55.88
 The total assets and total liabilities for the period of 2015-14 is 21504.84 & 2016-15
is 24652.52 where the percentage is 100
 The liabilities for the period 2015-14 is 4119.26 & 2016-15 is 6458.12 where the
percentage is 19.15 & 26.15

90
COMMON SIZE BALANCE SHEET OF 2014-13 AND 2013-12

2014-13 2014-13 2013-12 2013-12

Particulars Rs.in Crs. PERCENTAGE Rs.inCrs. PERCENTAGE
ASSETS:
Cash & Bank Balance 1998.89 10.49 5415.54 29.23

Sundry Debtors 330.61 1.73 181.18 0.97

Inventories (Stock) 3254.71 17.08 2451.52 13.23

Loans & Advances 1965.04 10.31 1365.20 7.336

Other Current Assets 75.96 0.39 137.40 0.0007
Miscellaneous
Expenditure
Profit & Loss Account

Investments 361.60 1.89 0.25 0.0001

Fixed Assets 11066.63 58.08 88972.30 48.43

Total Assets 19053.44 100 18523.21 100

LIABILITIES
Current Liabilities 3271.43 17.16 2871.95 15.50

Provisions 1336.06 7.01 1435.89 7.75

Secured Loans 274.89 1.44 407.28 2.19

Unsecured Loans 861.87 4.52 8225.27 4.45

Deferred Tax Liability 79.97 0.41 97.82 0.52

Reserves & Surplus 5401.90 28.35 5057.68 27.30
Share Capital 7827.32 41.08 7827.32 42.25

Total Liabilities 19053.44 100 18523.48 100

91
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:

 The fixed assets for the period of 2013-12 are 8972.30 & 2014-13 is 11066.63 it has
been increased to10.77%.

 The Total assets for the period of 2013-12 18523.21 & 2014-13 is 19053.44 i.e.,
100%.

 The current liabilities for the period 2013-12 2871.95& 2014-13 are 3279.43 this has
been increased to1.66%.

92
Table NO 5.2.2 COMMON SIZE BALANCE SHEET OF 2013-12 AND
2008-09
2013-12 2013-12 2008-09 2008-09
Particulars Rs.in Crs. PERCENTAGE Rs.inCrs. PERCENTAGE
ASSETS

Current & Bank 5415.54 29.23 6624.17 37.35

Balance
Sundry Debtors 181.18 0.97 191.27 0.01

Inventories 2451.52 13.23 3215.28 18.13

Loans & Advances 1365.02 7.36 1569.69 8.85

Other Current Assets 137.4 0.741 2587.91 1.46

Miscellaneous
Expenditure
Profit & Loss
Account
Investments 0.25 0.0001 0.05 0.0002

Fixed Assets 8972.30 48.43 5874.11 33.12

Total Assets 18523.21 100 17733.48 100

LIABILITIES

Current Liabilities 2871.95 15.50 2560.79 14.44

Provisions 1435.89 7.75 1620.53 9.13

Secured Loans 407.28 2.19 907.72 5.11

Unsecured Loans 825.27 4.45 100.04 0.56

Deferred Tax 97.82 0.52 124.49 0.70

Liability
Reserve & Surplus 5057.68 27.30 4592.59 25.89

Share capital 7827.32 42.25 7827.32 44.13

Total Liabilities 18523.21 100 17733.48 100

93
 INCREASE/DECREASE PERCENTAGE
50
45
40
35
30
25
20
15
10
5
0
ce ors ) s s re nt nts s es ns ns ns y s l
ck ce et et lit lu ita
la an ebt (Sto van Ass ditu ccou tme Ass biliti visio Loa Loa iabi urp Cap
B t n a d d L S
nk ry
D
rie
s Ad ren xpe ss A ves ixed t Li o
Pr cure cure Tax s & har
e
Ba und nto ns & Cur E Lo In F en e e e S
us t & ur
r S s ed rv
sh
& S
In ve Loa
h er neo fi C Un ferr ese
Ca o R
Ot ella Pr De
si c
M

INCREASE/DECREASE PERCENTAGE

INTERPRETATION:

 The fixed assets for the period of 2008-09 is 5874.11 & 2013-12 is 8972.30 it has
been increased to 12%

 The Total assets for the period of 2008-09 is 17733.48 & 2013-12 is18523.21 i.e., is
100%

 The current liabilities for the period 2008-09 is 2560.79 & 2013-12 is 2871.95 this
has been increased by 1.2%

94
CASH FLOW ANALAYSIS

CASH FLOW STATEMENTS FOR 2015 -2016 AND 2014-2015

(Rs. In Crs)
A. Cash flow from Operating activities 2015-16 2016-15
Net Profit / (Loss) before taxation 549.15 526.47
Add / (Less) Adjustments for:
Depreciation 271.48 187.68
Interest and Finance Charges 338.12 359.25
Provisions 33.84 (17.20)
Unrealized Foreign Exchange (Gain) /Loss (0.07) 1.01
(Profit)/Loss on sale of fixed assets (0.56) (0.45)
Interest Income (120.01) (151.26)
Dividend Income (0.11) (0.13)

Operating Profit Before working capital changes 1071.84 905.37

Adjustments for
(Increase) / Decrease in Inventories (34.44) (425.49)
(Increase) / Decrease in Trade Receivables 206.00 (582.50)
(Increase) / Decrease in Loans & Advances (130.45) (212.87)
(Increase) / Decrease in Other Non-Current assets (23.65) (26.24)
(Increase) / Decrease in Other current assets (1.68) 96.65
Increase/ Decrease in Liabilities 183.13 639.53
Cash generated from Operations
Less: Income Tax paid (103.46) (143.60)
Net cash from / (used in) Operating activities 1167.29 250.83

B. Cash flow from Investing activities

Purchase of Fixed Assets (1664.91) (1351.96)
Proceeds from/(Purchase of) Investments 0.05 152.59

95
 Dividend received 0.11 0.13
Proceeds from sale of Fixed Assets 0.77 0.59
Interest received 125.57 206.42
Net cash from / (used in) Investing activities (1538.41) (992.23)

C. Cash flow from Financing activities

Proceeds from/(Repayment of) Long-term loans (38.03) 1241.56
Proceeds from/(Repayment of) Short-term loans 81.49 1083.30
Proceeds from Prime Minister's Awards Fund 0.56 1.44
Proceeds from/(Repayment of)Share capital (606.97) (1380.50)
Interest and Finance charges (396.16) (333.03)
Dividend Paid (101.64) (270.79)
Dividend Tax Paid (17.26) (43.91)
Net proceeds from other Bank balances 0.00 5.00
Net cash from / (used in) Financing activities (1078.01) 303.08

Net Increase / (decrease) in Cash & Cash

equivalents (A+B+C) (1449.13) (438.32)

Opening Balance of Cash & Cash equivalents 1625.02 2063.34

Closing Balance of Cash & Cash equivalents 175.89 1625.02
(Represented by Cash & Bank Balances - Note B
18.00 )

INTERPRETATION:

 In 2015-16 there was an decrease in inventories, increase of current assets as

compared to the previous year.
 Interest received from the investments also placed an important quantum of inflow.
 Net profit decreased as compared to previous year

96
CASH FLOW ANALAYSIS
CASH FLOW STATEMENTS FOR 2014 -2015 AND 2013-2014
(Rs. In Crs)
A. Cash flow from Operating activities 2016-15 2015-14
Net Profit / (Loss) before taxation 526.47 1110.01
Add / (Less) Adjustments for:
Depreciation 187.68 347.66
Interest and Finance Charges 359.25 190.60
Provisions (17.20) 9.95
Unrealized Foreign Exchange (Gain) /Loss 1.01 1.10
(Profit)/Loss on sale of fixed assets (0.45) (1.75)
Interest Income (151.26) (198.92)
Dividend Income (0.13) (0.48)

Operating Profit Before working capital changes 905.37 1458.17

Adjustments for
(Increase) / Decrease in Inventories (425.49) (148.40)
(Increase) / Decrease in Trade Receivables (582.50) (96.88)
(Increase) / Decrease in Loans & Advances (212.87) 52.50
(Increase) / Decrease in Other Non-Current assets (26.24) (2.36)
(Increase) / Decrease in Other current assets 96.65 (36.46)
Increase/ Decrease in Liabilities 639.53 262.46
Cash generated from Operations
Less: Income Tax paid (143.60) (495.85)
Net cash from / (used in) Operating activities 250.83 993.18

B. Cash flow from Investing activities

Purchase of Fixed Assets (1351.96) (1791.64)
Proceeds from/(Purchase of) Investments 152.59 (156.87)
Dividend received 0.13 0.48
Proceeds from sale of Fixed Assets 0.59 2.95

97
 Interest received 206.42 193.97
Net cash from / (used in) Investing activities (992.23) (1751.10)

C. Cash flow from Financing activities

Proceeds from/(Repayment of) Long-term loans 1241.56 0.00
Proceeds from/(Repayment of) Short-term loans 1083.30 1439.26
Proceeds from Prime Minister's Awards Fund 1.44 0.39
Proceeds from/(Repayment of)Share capital (396.16) (100.00)
Interest and Finance charges (101.64) (196.77)
Dividend Paid (17.26) (271.47)
Dividend Tax Paid 0.00 (44.04)
Net proceeds from other Bank balances (1078.01) 0.00
Net cash from / (used in) Financing activities 827.37
(1449.13)
Net Increase / (decrease) in Cash & Cash
equivalents (A+B+C) 69.45
1625.02 1993.89
Opening Balance of Cash & Cash equivalents 175.89 2063.34
Closing Balance of Cash & Cash equivalents
(Represented by Cash & Bank Balances - Schedule
12 )

INTERPRETATION:

 In 2016-15 there was an decrease in inventories, current assets as compared to the

previous year.
 Interest received from the investments also placed an important quantum of inflow.
 Net profit decreased as compared to previous year

98
CASH FLOW STATEMENT FOR 2014-13 AND 2013-12
(Rs. In Crs)
2014-13 2013-12
A. Cash flow from Operating activities
Net Profit / (Loss) before taxation 1247.65 2026.59
Add / (Less) Adjustments for:
Depreciation 277.17 240.78
Interest and Finance Charges 77.55 87.47
Provisions -107.14 -371.37
Unrealized Foreign Exchange (Gain) /Loss -11.21 47.85
(Profit)/Loss on sale of fixed assets -1.02 -0.47
Finished goods consumed for capital jobs -94.90 -80.87
Interest Income -534.71 -787.21
Operating Profit Before working capital
changes 853.39 1162.77
Adjustments for
(Increase) / Decrease in Inventories 763.76 -1454.13
(Increase) / Decrease in Sundry debtors 10.09 -97.86
(Increase) / Decrease in Other Current
assets 0.00 0.00
Decrease in Loans & Advances 204.67 388.80
Increase in Liabilities 281.99 382.23

Cash generated from operating

activities 2113.90 381.81
Less: Income Tax paid including Fringe
Benefit Tax -491.00 -716.04
Net cash from / (used in) operating
activities 1622.90 -334.23

B. Cash flow to Investing activity

99
 Purchase of Fixed Assets -3276.58 -2038.63
Investments -0.20 0.00
Proceeds from sale of Fixed Assets 35.28 2.29
Interest received 656.22 820.73
Net cash from / (used in) investing activity -2585.28 -1215.61

C. Cash flow to Financing Activity

Proceeds from/(Repayment of) Secured
Loans -500.44 574.94
Proceeds from/(Repayment of) unsecured
Loans 725.23 -7.91
Interest and Finance charges -74.22 -92.13
Dividend Paid -339.18 0.00
Dividend Tax Paid -57.64 0.00
Net cash from / (used in) Financing
Activity -246.25 474.90

Net Increase / (decrease) in Cash & Cash

equivalents (A+B+C) -1208.63 -1074.94

Opening Balance of Cash & Cash

equivalents 6624.17 7699.11
Closing Balance of Cash & Cash
equivalents 5415.54 6624.17

100
TABLE SHOWING YEAR-WISE WORKING CAPITAL TURNOVER
RATIO(Rs. In crores)

Chart Title
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
s S: e s ) s ts e t ts ts ts S s s s s y s al s
u lar SET lanc btor tock nce sse itur oun en sse sse ITIE ilitie sion oan oan bilit rplu pit ilitie
c S a S a A d c m A A I L i L L a a
rti A k B y De es ( Adv nt pen s Ac est ed tal IAB Liab rov red red x Li & Su re C Liab
Pa n r r i r e x s nv i x To L t P u u T a s ha tal
Ba nd to s & ur E Lo I F re
n c c
Se nse red erve S To
& Su ven oan r C ous t & r
sh In L the ane rofi Cu U fer es
R
Ca O ell P De
si c
M

2010-11 2010-11 2009-10 2009-10

101
 Particulars 2013-12 2014-13 2015-14 2016-15 2015-16
Sales 10634.6 11516.99 14461.87 13463.10 13364.17
Net working capital 5242.82 3017.72 1270.50 1477.42 1603.98

Working capital turnover Ratio

2.02 3.81 8.33
11.38 times 9.53 times
times times Times

16000

14000

12000

10000
2009-10
2010-11
8000
2011-12
2012-13
6000 2013-14

4000

2000

0
Sales Net working capital

INTERPRETATION:
 The working capital turnover ratio during the year 2015-16 is 8.33 times which shows
that there is low working capital ratio and it indicates that there is efficient utilization
of working capital.
 The aim of this ratio is that it indicates the velocity of its utilization of working
capital.

FUNDS FLOW ANALYSIS

FUNDS FLOW STATEMENTS
102
 PARTICULARS 2015-16 2016-15 2015-14 2014-13 2013-12
Sources of Funds
Funds from Operation 828 703 1432 1094 878
Increase in share capital/share
money pending allotment
Prime ministers trophy award fund 0.56 1.44 0 1 1
Sales of fixed assets. 9 11 2 3 1
Increase in borrowings 43 2325 1243 151
Increase in deferred tax liability. 190 168 19 18
Decrease in working capital 1508 212 2369 2469
2579
TOTAL 3421 2696 3485 3500

Utilization of funds
Redemption of preference share 607 1381 100
Decrease in borrowings 261
Increase in investing activities 1749 1582 2405 2585
Decrease in deferred tax liability 27
Increase in Misc expenditure
(to the extent not written off)
Increase in working capital. 194
Dividend and tax on dividend. 119 315 316 333 397
Income tax paid. 103 144 496 486 491

TOTAL 2579 3421 2696 3485 3500

WORKING CAPITAL OPERATIONS:

103
 PARTICULARS As-on 2016 2015 2014

A. CURRENT ASSETS
Inventories 3863.04 3828.60 3,403.1
1
Trade Receivables 803.65 1009.65 427.15
Cash and Bank balance 175.89 1625.02 2,068.3
4
Short term Loans and Advances 3461.35 3417.75 2,366.5
4
Other Current assts 96.73 96.73 226.97

Sub total A 8400.66 9977.15 8,492.1

1

B.CURRENT LIABILITIES
Short term borrowings 3739.93 3658.44 2,575.1
4
Trade payables 829.93 737.94 390.19
Other current liabilities 5484.05 5615.19 3,645.8
4
Short term provisions 157.65 173.10 610.44

Sub total B 10211.56 10184.6 7,221.6

7 1

C.Working Capital (A-B) 1810.90 (206.92) 1,270.5

0

D. Increase/Decrease of Working Capital (1603.98 (1,477.4 (1,013.

over previous year ) 2) 33)

Working Capital schedules in funds flow:

104
 PARTICULARS As- 2016 2015 2014 2013 2012
on
A. Current assets, Loans and Advances
Semi finished goods /finished goods 2065.05 2083. 1779. 1825. 1293.01
70 96 33
Raw materials 1311.31 1283. 1225. 1137. 865.03
35 76 66
Stores and spares at cost 486.68 461.5 397.3 291.7 293.48
5 9 2
Sundry debtors 803.65 1009. 427.1 330.6 181.18
65 5 1
Cash and Bank balances 175.89 7625. 2068. 1998. 5415.54
02 34 89
Loans and Advances 3461.35 3417. 2366. 1965. 1365.02
75 54 04
Other currents Assets 96.73 96.73 226.9 75.96 137.40
7

Sub total A 8400.66 9977. 8492. 7625. 9550.66

75 11 21

B.Current Liabilities and Provisions

Sundry creditors 1474.9 1484.0 937.9 1144.5 1265.2
1 3 9 5 5
Advances received 133.35 183.85 172.8 137.8 140.9
7
Security and other deposits 361.35 303.97 271.6 239.22 207.96
2
Interest accrued but not due 5.28 6.12 5.3 1.99 2.38
Interest payable to GOI
Interest accrued and due
Other liabilities 4192.7 4152.0 2467. 1699.9 12.53.

105
 9 6 03 58
Other advances 0.18 0.14 0.04 0.26 1.88
Provisions(excl.prov.for Gratuity) 146.12 222.96 181.1 67.48 1363.6
8 8
Short term borrowings 3739.9 3658.4 2575. 1135.8
3 4 14 8
Short term provisions 157.65 173.10 610.4 690.77
4

Sub total B 10211. 10184. 7221. 5117.8 4235.6

56 67 61 5 3

C.Working Capital A-B - - 1270. 2507.3 5315.0

1810.9 206.92 50 6 3
0

D. Increase/Decrease of Working - (1236. (2807. (2397.

Capital over previous year 1603.9 86) 67) 52)
8

NOTE: Figures in parenthesis indicate negative values.

106
 CHAPTER-VI

SUMMARY,
SUGGESTIONS,
FINDINGS & CONCLUSION

107
 SUMMARY

RINL is the first shore-based integrated steel plant in the country in large scale public
sector. It is incorporated on 18th February 1982 under the company Act 1956.
 It has an annual production capacity of 3.3 million tons/annum of hot metal, 3
million tons of 100% continuous liquid steel casting capacity.
 VSP is going ahead to expand its production to 6.3 MT
 The organizational manpower has been rationalized to operate it at international
levels of efficiency and to attain international labor productivity.
 VSP branded products are exported to about 20 countries like Japan, Singapore,
China etc.
 The production, commercial and financial performance has been improving with
the passage of years. The financial analysis of VSP by the use of various
techniques i.e. Comparative statements, Common size statements

 Financial management is that managerial activity which is concerned with the

planning and controlling of the firm’s financial resources. As a separate activity or
discipline is of recent origin it was a branch of economics till 1890. Still today it
has no unique body of knowledge of its own, and it draws heavily on economics
for its theoretical concepts.
 The growth of the steel industry in India is also dependent, to a large extent, on the
level of consumption of steel in the domestic market. Steel consumption is
significant in housing and infrastructure. In recent years the surge in housing
industry of India has led to increase in the domestic demand for steel.
 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 facets as shown in a series of statement. The purpose of
financial analysis is to diagnose the information contained in financial statements
so as to judge the profitability and financial soundness of the firm.
 The funds statement in a statement which shows the movement of funds and is a
report funds were obtained during a particular period and the way to which these
funds were employed. .

108
 FINDINGS:

 During the year, RINL contribute Rs.2092Crs to the national exchequer in form
of dividend, taxes and duties to various government agencies as against
Rs.2145Crs during the previous year.

 As per records, the company has not issued debentures during the year. The
company has not raised money by public issues during the year.

 The operating margins have shown an increasing trend for most of years and the
income also increased for many years. This is the major reason for VSP’s
Turnaround.

 The net cash generated from operating activities are showing a positive trend and
finance conditions of the company are excellent.

 The main source of the funds of RINL where arranged by about 20 financial
institutions. Among these, the major sources are IDBI Bank Ltd., State Bank of
India etc

 The debt capital is less than the share capital so, it reveals that the company in the
high liquidity position.

 Working capital position of the company is in satisfactory position.

 Debt capital is less than the equity and it shows the economical strength of the
company.
.

109
 SUGGESTIONS:

 The profit margins strained during the current year due to steep increase of raw
material prices especially basic raw materials such as coal & Iron Ore. However,
due to increase in input costs, the profit is adversely affected. So, we have to make
the input cost cheaper either by importing the material with less travelling
expenses or the company has to take over the input company.

 Expansion of capacities by the competitors and entry of international players has

taken place. So, we have to do some innovativeness in manufacturing of steel.

 Capital work in progress is increasing year after year which is due to the reason of
expansion plan of the company.
 High profit realization by selling the products at higher margins will eventually
result in higher cash accrual and hence higher credit rating.

 Since the firm performance is largely dependent on availability of raw materials. In

order to avoid the uncertainties in acquiring the raw materials, new and innovative
steps has to be taken to effectively utilize the surplus funds.

 The other main area where RINL has tremendous scope for improvement in
manufacturing value added products. This will result in better sales realization and
higher profits.

110
  Standardization of general stores material and spares will reduce the number of
items

CONCLUSION

The Visakhapatnam Steel Plant has been dedicated to nation in 1992 and it is
one of the major steel plants in the Asia and having much more capital investment. We know
that the Visakhapatnam Steel Plant as a large organization might have long gestation period
and while establishing the Visakhapatnam Steel Plant so much of lands were taken from the
local people and provided the jobs to them in VSP thought they may not skillful. But the top
management of VSP conducts so many training and development programs to improve their
performance, not only this but also frequent technological changes due to the above factors in
the initial stage.
This study concentrated on the financial state of affairs of the company RINL. It
111
involved study of, Balance sheets, comparative balance sheet and also their comparison over
the last two years in the industry. It has presented a broader picture of the financial position
of the company. The study analyzed the company’s success in being able to effectively
manage its day to day requirements pertaining to positions and effectively channelizing the
short term and long term sources of the company to meet the requirement

BIBLIOGRAPHY

Financial management : I. M.pandey

Financial management : Prasanna

Chandra

Cost management accounting : I.M. Pandey

Annual Reports Of RashtriyaIspat Nigam Limited

112
General Articles And Magazines Of RashtriyaIspat Nigam
Limited
Website: www.vizagsteel.com,
www.indianinfoline.com,

Newspapers: Deccan Chronicle, The Hindu.

113