Financial Report on nerolac paints ltd

Definition of finance and financial Management

Meaning of finance function :

Finance is like blood of co-operate enterprise. It can be said with

out of finance function it is not possible to imagine the business

operation. Financial Management is not a totally independent area

but it is an integral part of overall management. The scope of

finance is graded in the overall enterprise right from the beginning

up to the end i.e., starting from capital general for business up to

winding up of enterprise.

Definition of Finance :

“Finance is the art and science of managing money” definition

given by Khan & Jain.

Mr. A.L. Kingshott “Finance is the common denominator for a vast

range of co-operate objectives, and the major part of any co-

operate plan must be expressed in financial terms”

1

Finance Management :

Financial Management provides a conceptual and analytical

framework for financial decision making the finance function

covers both acquisitions of funds as well as their allocations. Thus,

apart the issues involved in acquiring external funds, the main

concern of financial management is the efficient and wise

allocation of funds to various uses. Defined in a broad sense, it is

viewed as an integral part of overall management.

The financial management framework is an analytical way of

viewing the financial problems of a firm. The main contents of the

approach are: What is the total volume of funds an enterprise

should commit? What specific assets should an enterprise acquire?

How the funds required be financed?

Financial Management in the modern sense and its functions are:

(i) The financing decision (ii) The dividend policy and (iii) the

investment decision.

2

Objectives of financial Management:

To make wise decision the firm has to think by two criteria’s which

is known as objectives of financial management. And the two

objectives are as follows:

(a) Profit Maximization.

(b) Wealth Maximization.

(a) Profit Maximization :

This objective is decision criterion of the firm regarding the

profitability according to this approach actions increasing

profit should be undertaken and which decrease profit should

be avoided. In other words profit maximization means try to

make maximum profit by using investment, financing and

dividend decisions.

The term profit can be used by two senses as the owner

oriented concept which refers to amt and share of national

income which is paid to owners of the business i.e. Profit by

total share capital of the company is another words it is known

as accounting profit i.e., excess of income over expenses the

rational behind profitability maximization is simple that the

economic efficiency is measured by profit the profit is yard

wick to measure the performance of the firm. The individual

treatment of profit is concern with efficient use of important

resource allocation.

3

(b) Wealth Maximization :

This is also known as value maximization or net-profit worth

maximization this objective is universally accepted because it

removes the technical limitations of profit maximization

objective.

The wealth maximization is superior to profit maximization.

As a decision criterion it involves a comparison of value

benefits to the cost bared by the firm. An action that has a

discounting value i.e., present value which reflects time and

risks, if that exceeds cost it can be said that the value is worth

of implementation, in case of mutually exclusive only 1 has to

be chosen. The alternatives with the greatest net present value

should be selected.

4

Way of calculation of net present worth :

(1) W = V – C

Where,

W = Net present worth

V = Gross Present worth

C = Investment required to acquire the asset or

purchase the course of action.

And V = E

K

Where,

E = Size of future benefits available to the suppliers

of the input capital.

K = the capitalization rate reflecting the quality and

timing of benefits attached to E

5

Importance of Financial Management :

1) Success of Promotion :

The success can be guessed on the basis of its financial plan. If

the plan is defective, it will fail to provide sufficient funds meet

the requirements of both fixed and working capital. Undue

optimism of the framers of financial plan will lead in

overcapitalization. A larger amount of finance than can be

absorbed in business will result into low profit and low rate of

return on capital invested. In that case, business is bound to fail.

2) Smooth running of the Enterprise :

Finance is required at each stage of an enterprise. Working

Capital is required for meeting day to day expenses. Money is

required for advertisement for payment of salaries of sales force

and also for various selling and distribution expenses. The

management will be constantly worrying if the financial planning

is defective.

6

3) Finance for Expansion :

Finance is required for schemes of modernization expansion and

development of the existing enterprises. How do meet this

requirement is one of the major problem of financial

management. A prudent financial planning will provide the

finance required for this purpose from retained profits of the

enterprise and, if need be, from outside sources at a reasonable

cost.

4) Cash Planning :

Among the factors, on which depends the success of a business

enterprise, liquidity is most important. An optimist business

organizer indulging in rosy dreams of success of his business will

lead his business to failure, if he ignores the importance of

liquidating.

7

Introduction to point sector : (India)

The paints industry in India is estimated at Rs.8800 Cr. and is

divided into decorative and industrial segments. The share of

unorganized sector in the industry has comedown from 50% to 35%

in the last decade due to stiff competition and constant price

reduction by organized sector. Moreover, the gradual reduction in

excise duly from 40% to 16% over the years has led to increase in

the organized sector’s share. The decorative segment constitutes

about 75% in the market whereas the industrial segment generates

the balance 25% of the sales. The industry is growing as about 8-

10% in volume terms and 7-8% in value firms

8

INTRODUCTION TO COMPANY

(1) History of the Company (Nerolac):

Established in the year 1920, Kansai Nerolac Paints Ltd. (KNP) is

headquartered in Mumbai; KNP is subsidiary of Kansai Paint Co.

Ltd. Japan (KPJ). KPJ holds 69.27% shares of KNP. KNP serves it

vast customer base through its four strategically located factories at

Jaipur in U.P., Locate in Mahatrastra, Perungudi in Tamil Nadu and

Bawal in Haryana as well as 65 sales locations. KNP is in the

process of putting up its fifth unit at Hosur in Tamil Nadu.

KNP is known for transformation, innovation and style and has

consistently been producing good results. Being the fore runner in

introducing new products finishes and new technologies to the

market, taking the platform of innovation, KNP product and finished

enjoy good brand image /recall and its brands, like ‘impressions’,

‘Beauty’, ‘Excel’, ‘Suraksha’ are well trusted by the consumers.

9

(2) Mission and Vision of the Company :

Development of Environment friendly products :

To reduce the usage of hazardous materials.

To create awareness about Environmental friendly products

among consumers.

Reduction of Environmental Burden :

Waste Reduction

Reduce Water Consumption

Preparation of Environment accounting.

Health, Safety and Environment Preservation :

Employee well being

Environment Preservation

10

(3) Board of Directors of the Company:

J.J. Irani Chairman

D.M. Kothari Vice-Chairman

H.M. Bharvuka Managing Director

S.M. Datta Director

P.P. Shah Director

N.M. Tata Director

P.D. Chaudhari Whole time Director

G.T. Govindarajan Company Secretary

P.D. Pai C.F.O.

11

(4) Products of the Company:

Decorative paints:-

1. Walls

(a) Interior

- Water based paints

(1) Emulsions

(2) Distemper

- Solvent based paints

(1) Luster

(2) Enamel

(3) Flat oid

(b) Exterior

- Emulsions

- Textured

- Cement

- Nerolac Impressions ever last

2. Woods

(1) 1k pu

(2) Mel’mine

(3) 2k pu

(4) Multisealer

(5) Water clear Lacquer

(6) Wood stains

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3. Metals:

i. Nerolac impression Hi-performance Enamel

ii. Nerolac Satin Enamel

iii. Nerolac Synthetic Enamel

Industrial paints:

Automotive coatings

General industrial coatings

Hi-performance coatings

Powder coatings

13

(5) Achievements of the Company :

Best Vendor award from Toyota Kirloskar Motors Ltd. (TKML) for

cost.

Tata Motors awarded the “Best Vendor Award for Quality” to KNP,

during its all India vendor meet.

Overall best performance award from Maruti Suzuki.

ABCI awards in four categories. The categories are – Brochure

Design – Color Styles 07-08 Book, Prestige publications – Shaadi

Style guide, Photo features spring summer collection, Environment

communication annual Environmental Report. Two Bronze and one

Silver in Marketing Communication and Gold for environmental

report.

Nerolac Beauty Flexi won product of the year award in paint category.

Gold Certificate of Merit in India Manufacturing Excellence Award

organized by frost and Sullivan.

Environment Excellence Gold award by Green Tech Foundation for

the Lote plant.

Qimpro Award for technical innovation. The paper selected was on

“Three coat – one Bake System”

14

Rated 415 in the last financial year by Karmayog for CSR activities.

One of the 10 companies to be rated so out of 1000 assessed.

ASAPP Media Information Group – Construction World Magazine

Ranked KNP First.

15

Financial Information of the Company:

SIGNIFICANT ACCOUNTING POLICY OF THE COMPANY

i) BASIS OF ACCOUNTING

The financial statements are prepared under historical cost convention on

an accrual basis and are in accordance with the requirements of the

Companies Act, 1956, and comply with the Accounting Standards

referred to in sub-section (3C) of Section 211 of the said Act.

(ii) FIXED ASSETS

Fixed assets are stated at their original cost including incidental expenses

related to acquisition and installation, less accumulated depreciation and

impairment losses if any. Cost comprises of the purchase price and any

other attributable cost of bringing the asset to its working condition for its

intended use.

(iii) BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition of

qualifying assets are capitalized for the period until the asset is ready for

its intended use. A qualifying asset is an asset that necessarily takes

substantial period of time to get ready for its intended use. Other

borrowing costs are recognized as an expense in the period in which they

are incurred. No borrowing costs are eligible for capitalization during the

year.

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(iv) DEPRECIATION

(a) Depreciation is provided on the written down value method at the

rates prescribed in Schedule XIV to the Companies Act, 1956, except that

in respect of Colour Dispensers the rate of depreciation applied is 45 per

cent, which management considers as being representative of the useful

economic life of such assets.

(b) No write off is made in respect of leasehold land as these are long

term leases.

(v) IMPAIRMENT

The carrying amount of assets are reviewed at each Balance Sheet date if

there is any indication of impairment based on internal / external factors.

Impairment loss is provided to the extent the carrying amount of assets

exceeds their recoverable amount. Recoverable amount is the higher of an

asset's net selling price and its value in use. Value in use is the present

value of estimated future cash flows expected to arise from the continuing

use of an asset and from its disposal at the end of its useful life. Net

selling price is the amount obtainable from the sale of an asset in an arm's

length transaction between knowledgeable, willing parties, less the cost

of disposal.

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(vi) INVESTMENTS

(a) Long term investments are stated at cost. A provision for diminution

is made to recognize a decline, other than temporary, in the value of long

term investments.

(b) Current investments, consist of investments in mutual funds, are

stated at lower of cost and fair value where net asset value declared by the

respective funds is considered as fair value.

(c) Dividend income is accounted when the right to receive payment is

established and known.

(vii) INVENTORIES

(a) Stores and spare parts are valued at cost less amounts written down.

(b) Stock-in-trade comprising of raw materials (including in-transit),

packing materials, stock-in-process and finished goods are valued at the

lower of cost and net realizable value after making such provisions as

required on account of damaged, unserviceable, inert and obsolete stocks.

(c) Cost has been arrived at on the basis of weighted average method.

(viii) SALES

(a) Sales are recognized in accordance with Accounting Standard 9 viz.

when the seller has transferred to the buyer, the property in the goods, for

a price, or all significant risk and rewards of ownership have been

transferred to the buyer without the seller retaining any effective control

over the goods.

(b) Sales are inclusive of excise duty, export incentive, exchange

fluctuation on export receivables, processing charges, sale of scrap and

income from services and are net of trade discount and product rebate.

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(ix) EMPLOYEE BENEFITS

(a) Short term employee benefits:

Short term employee benefits are recognized as an expense at the

undiscounted amount in the profit and loss account of the year in which

the related service is rendered.

(b) Post-employment benefits:

1. Provident and Family Pension Fund

2. Superannuation

3. Gratuity

(c) Other long-term employee benefits – compensated absences:

The Company provides for encashment of leave or leave with pay subject

to certain rules. The employees are entitled to accumulate leave subject to

certain limits for future encashment / availment. The Company makes

provision for compensated absences based on an actuarial valuation

carried out at the end of the year. Actuarial gains and losses are

recognized in the profit and loss account.

(x) RESEARCH AND DEVELOPMENT

Capital expenditure on Research and Development is treated in the same

way as expenditure on fixed assets. Revenue expenditure on Research

and Development is charged to the Profit and Loss Account in the year in

which it is incurred.

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(xi) FOREIGN CURRENCY TRANSACTIONS

(a) Transactions in foreign currencies are recorded at the exchange rate

that approximates the actual rate at the date of the transaction. In respect

of monetary items denominated in foreign currencies, exchange

differences arising out of settlement or on conversion at the closing rate

are recognized in the Profit and Loss Account.

(b) Premiums or discounts arising at the inception of the forward foreign

exchange contracts, other than contracts to hedge a firm commitment or a

highly probable forecast transaction, are amortized and recognized in the

Profit and Loss Account over the period of the contract. Such forward

foreign exchange contracts outstanding as at the Balance Sheet date are

converted at the exchange rates prevailing on that date. Exchange

differences are recognized in the Profit and Loss Account.

(xii) ACCOUNTING FOR DERIVATIVES

The Institute of Chartered Accountants of India had issued an

announcement on 'Accounting for Derivatives' inter alias requiring

provision for losses on all derivative contracts outstanding at the balance

sheet date by marking them to market keeping in view the principle of

prudence, other than for forward contracts to which Accounting Standard

(AS) 11 – 'The Effect of Change in Foreign Exchange Rates' is applicable

in respect of which accounting policy as stated in Note (xi) (b) above is

followed. The Company has entered into forward contracts to hedge a

firm commitment or a highly probable forecast transaction to which AS

11 is not applicable and hence, the Company has applied aforesaid

announcement. As assessed by the Company, there is no loss on the

outstanding forward contracts as at the balance sheet.

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(xiii) TAXATION

Tax expense comprises current, deferred and fringe benefit tax. Current

tax and fringe benefit tax are measured at the amount expected to be paid

to the tax authorities in accordance with the Income-tax Act, 1961.

Deferred tax reflects the impact of current year timing differences

between taxable income and accounting income for the year and reversal

of timing differences of earlier years. Deferred tax is measured based on

the tax rate and tax laws enacted or substantially enacted at the balance

sheet date. Deferred tax assets are recognized only to the extent that there

is reasonable certainty that sufficient future taxable income will be

available against which such deferred tax assets can be realized.

(xiv) PROVISIONS

A provision is recognized when an enterprise has a present obligation as a

result of past event and it is probable that an outflow of resources will be

required to settle the obligation, in respect of which a reliable estimate

can be made. Provisions are not discounted to their present values and are

determined based on management estimate required to settle the

obligation at the balance sheet date. These are reviewed at each balance

sheet date and adjusted to reflect the current management estimates.

(xv) LEASES

Leases where the lessor effectively retains substantially all the risks and

benefits of ownership of the leased assets are classified as operating

leases. Operating lease payments / receipts are recognized as an expense /

income in the Profit and Loss Account on a straight-line basis over the

lease term.

21

BALANCESHEET OF NEROLAC LTD. FOR THE LAST 3 YEARS

(2007/2008/2009)

Particulars Rs. In Lacks(2009)

Rs. In Lacks(2008)

Rs. In Lacks(2007)

(I)

(II)

*(I)

***

*

Share holder’s funds:a. Share capitalb. Reserves and surplus

Loans funds:a. Secured loansb. Unsecured loans

Total (I - II)Application of fundsFixed assets:a. Gross profitb. Less: depreciationc. Net blockd. Less: provision for w.d value of fixed

assetse. Capital work in progress at costf. Advances for capital expenditure

InvestmentsDeferred tax assetsCurrent assets loans and advances:a. Investmentsb. Sundry debtorsc. Cash & bankd. Loans and advancesLess: current liabilities and provisionsa. Liabilitiesb. Provisions

Net current assets

2694.6062750.2565444.85

1608.297754.339362.6274807.47

54198.4430336.4523861.99118.45

3094.36468.043562.4029442.551059.57

17063.3920957.297616.394170.7049804.7724423.498384.8732808.3616999.41

2694.6056674.41593.69.01

1918.117877.269795.3769164.38

48014.7227152.9720861.75141.31

2000.67662.88266355232141039.12

17341.1121293.303337.544814.8148786.7616889.508369.9925259.4921527.27

2694.6048478.4551173.05

3002.187997.5110999.6962172.74

42440.8723375.6419065.2383.10

1266.33496.991763.3215482.25650.77

1842.1719496.042149.275271.4644931.9415104.274533.4019637.6725394.27

Total 74807.47 69164.38 6,21,72.74

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PROFIT & LOSS ACCOUNT OF NEROROLAC LTD. FOR THE LAST

3 YEARS (2007/2008/2009)

Particulars Rs. In lacks(07)

Rs. In lacks(08)

Rs. In lacks(09)

(I)

(II)

(III)

(IV)(V)

(VI)

(VII)

(a).Sales Less: excise duty Net sales………(b)other income TOTAL (a & b)Expenditures:-a) Cost of materials b) Employees remuneration & benefitsc) Operating and other expensesd) Interest -other than fixed loans TOTAL (a, b, c & d)Profit before depreciation and taxes (a-b)Depreciation……….Profit before taxProvision for taxationa) Current taxb) Deferred taxc) Fringe benefit tax

Profit after taxAdd: balance brought forwardAdd: balance transferred on amalgamationBalance available for appropriationsLess: Appropriations:a) Interim dividendb) Additional income tax and distributed

profitc) General reserve TOTAL (a , b & c)

141643.4619405.36122238.102404.77124642.87

77832.905956.9021304.5496.15105190.4919452.383355.7416096.64

4935.37258.12137.255330.7410765.907565.691339.1819670.77

3098.79439.52

1076.594614.90

152866.8120891.80131975.012484.59134459.60

83704.706913.0522702.18140.60113460.5320999.073960.0517039.02

5328.35388.35120.005060.0011979.0215055.87

-27034.89

3233.52549.54

1197.904980.96

156776.7319324.81137451.922219.50139671.42

89958.287330.3024419.64183.80121892.0217779.403760.5014018.90

4060.4520.45120.004160.009858.9022053.93

-31912.83

3233.52549.54

985.894768.95

TOTAL 15055.87 22053.93 27143.88

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1. Introduction to Ratio Analysis :

The relationship of one item to another expressed in simple

mathematical form is known as ratio. A company keeps fit by

ensuring that among other things it various financial proportions

are kept healthy. In business performance can be measured with

help of ratio. In fact an analysis of financial statements is possible

only when figures are expressed as percentage or ratio. A ratio is a

mathematical relationship between two quantities. It is of major

importance to financial analysis. I engage qualitative measurement

and show precisely how adequate measurement and shows

precisely how adequate is one key item to another. To evaluate the

financial condition and the purposes of a firm the financial analyst

needs certain yardsticks. The yardstick frequently used is a ratio or

an index relating 400 pieces of financial data to each other. Not

only those who manage the company but also it shareholders and

creditors are interested in knowing about financial position and / or

earning capacity of that concern.

24

2. Classification of Ratios :

The ratio can be classified as follows:

(A) Traditional Classification (B) Functional Classification

(A) Traditional Classification:

The ratios are grouped into three categories on the basis of the

financial statement from which figures are taken for computing the

ratio.

(1) Revenue Statement Ratios :

These are the ratios computed on the basis of items taken

from revenue statement i.e., Profit and Loss account.

(2) Balance-sheet Ratio :

When two items or groups of items appearing in the balance-

sheet are compared the ratio so obtained is balance sheet

ratio.

(3) Composite Ratios :

A ratio showing the relationship between one item taken

from balance-sheet and another taken from profit and loss

account is a composite Ratio.

25

(B) Functional Classification:

Ratios are also grouped in accordance with certain tests on this

basic there are four categories of ratios.

(i) Liquidity Ratio

(ii) Profitability Ratio

(iii) Leverage Ratio or Structural Ratio.

(iv) Activity Ratio or Efficiency Ratio.

(i) Liquidity Ratio :

These ratios indicate the position of liquidity. They are

computed to ascertain whether the company is capable of

meeting its short-term obligation for its short term obligation

for its short term resources. For example, current ratio shows

the capacity of the firm to meet its current liabilities as and

when they mature for e.g.

(i) Current Ratio (ii) Liquid Ratio (iii) Acid – test Ratio.

(ii) Profitability Ratios :

A no. of ratios is designed to indicate the profitability of the

business and are grouped into the category of profitability

Ratios. e.g.

(i) Gross Profit Ratio

(ii) Net Profit Ratio

(iii) Operating Ratio. etc.

26

(iii) Leverage Ratios or Structural Ratios:

The composition of capital of business and the proportion of

owner’s capital and capital provided by outsiders are reflected by

leverage ratios for e.g.

(i) Proprietary Ratio

(ii) Debt-Equity Ratio

(iii) Gearing Ratio

(iv) Fixed Capital – Fixed Assets Ratio

(v) Coverage Ratio

(iv) Activity Ratios:

The are the ratios showing effectiveness with which the resources

of the business are employed. It signifies the efficiency of the

management.

(i) Stock Turnover

(ii) Debtors Ratio

(iii) Current Assets Turnover

(iv) Fixed – Assets Turnover

(v) Total Assets Turnover.

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(iii) Advantages and Limitations of Ratios:

(a) Internal standards: Here the comparison is made with the

firms past performance.

Advantages:

It is possible to compare “like with like”

The methods by which figures are arrived at are consistent over a

certain period.

Disadvantages:

The standard achieved in the past may be poor and a comparison

with them may encourage a certain measure of complacency.

The level of activity in the economy as a whole is continually

changing.

The state of technology may be constantly advancing.

The reliability of the ratio is eroded by the effects of inflation.

28

(b) External Standards : There the firm’s performance is

compared with that of other firms.

Advantages:

It is possible to set up a good standard of comparison.

It is possible to compare results over similar periods to ensure

similar economic and technological conditions.

It avoids the difficulties associated with budgets, namely their

subjective elements.

Disadvantages :

The gaps between standards of similarity are sometime so wide

that it cannot be bridged by management action.

The information about other companies may not be easily

available.

29

(iv) Calculation of Ratios of the Company:

CURRENT RATIO

This most widely used ratio shows the

proportion of current assets to current liability. It is also known as

working capital ratio.

Current AssetsCurrent Ratio = ------------------------ Current Liabilities

Ratio 2007 2008 2009

Current Ratio

39660.48-------------- = 1.41:1 14215.61

41971.95-------------=1.39:1 16157.55

45637.07-------------- = 1.98:1 23001.12

30

Interpretation:-

The current assets of the company are increasing in the above three

years and the current liabilities of the company are also increasing. As

the current assets and liabilities have increase there is no increase seen

in the current ratio of the company rather the current ratio of the

company have reduced in 2007 the current ratio of the company was

2.79:1 while in 2008 it reduced to 2.59:1 and in 2009 it was the least

1.98:1. This ratio indicates that the firm capacity to meet short-term

obligations is decreasing.

31

LIQUID RATIO

To remove the defect of current ratio, liquid

ratio is used. It is a variant of current which is designed to show the

amount of funds available to meet immediate payments. It is obtained by

dividing the liquid assets by liquid liabilities.

Here, Liquid assets = Current assets – Stock (Inventory)

Liquid liabilities = Current liabilities – Bank overdraft

Liquid assetsLiquid ratio = ----------------------- Liquid liabilities

Ratio 2007 2008 2009

Liquid ratio 21618.31----------- = 1.52:1 14215.61

24630.75----------- = 1.52:1 16157.55

28573.68------------- = 1.24:1 23001.12

32

Interpretation:-

The current assets of the company are increasing in

the above three years and the current liabilities of the company are

also increasing but the stock of the company is decreasing. As the

current assets and liabilities have increase there is no increase seen in

the liquid ratio of the company, in 2007 the liquid ratio of the

company was 1.52:1 while in 2008 it remained constant 1.52:1 and in

2009 it was the least 1.24:1. This ratio indicates that the firm capacity

to meet immediate obligations is decreasing.

33

QUICK RATIO

To remove the defect of current ratio, quick ratio is used. It is a variant of current which is designed to show the amount of funds available to meet immediate payments. It is obtained by dividing the liquid assets by liquid liabilities.

Liquid assetsQuick ratio = ----------------------- Liquid liabilities

Here, Liquid assets = Current assets – Stock (Inventory) Liquid liabilities = Current liabilities – Bank overdraft

Ratio 2007 2008 2009

Liquid ratio 21618.31----------- = 1.52:1 14215.61

24630.75----------- = 1.52:1 16157.55

28573.68------------- = 1.24:1 23001.12

34

Interpretation:-

Quick ratio of the company was same in the year

2007-08 but ratio has decreased in the year 2009. In the year 2007-08 the

ratio was 1.52:1 and in 2009 it was 1.24:1. Company’s quick assets are

increasing respectively but liquid liabilities are also increasing

respectively.

35

PROPRIETARY RATIO:

The ratio shows the proportion of

proprietors’ funds to the total assets employed in the business. The

proprietors’ funds or shareholders’ equity consist of share capital and

reserves.

Liquid assetsPROPRITARY RATIO = ----------------------- Liquid liabilities

Ratio 2007 2008 2009

51173.05 x 10081159.64

= 63%

59369.01 x 10093384.75

= 64 %

65444.85 x 100106556.26

= 61%

36

Interpretation:-

The proprietor fund of the company has increased

for the last 3 years, the total assets of the company has also increased

respectively. By the above derived ratios in 2007 the proprietary ratio

it was 63% in 2008 it increased to 64% and in 2009 it decreased to the

least 61% the company should take adequate steps for increasing its

proprietary ratio.

37

DEBT-EQUITY RATIO

This ratio is only another form of

proprietary ratio and establishes relationship between the outside long-

term liabilities and owners’ funds. It shows the proportion of long-term

external equities and internal equities.

Total debtDebt-Equity ratio = ------------------ Owner’s fund

Ratio 2007 2008 2009Debt-Equity ratio 3002.18

------------ x 100 = 51173.05

5.87%

1918.11------------ x 100 = 59369.01

3.23%

1608.29-------------- x 100 = 65444.85

2.45%

38

Interpretation:-

The current assets of the company are decreasing

in the above three years while the share holder’s funds of the company

are increasing. By the above derived ratios in 2007 the debt- equity

ratio was 5.87% in 2008 it decreased to 3.23% and in 2009 it

decreased to the least 2.45% the company should take adequate steps

for increasing its debt- equity ratio.

39

LONGTERM FUNDS TO FIXED ASSETS Normally, the fixed assets of the

business must be purchased out of fixed capital only, which includes

share capital, reserves and long term liability. This ratio, therefore, shows

the relationship between fixed capital and fixed assets.

Long term funds = Share capital + Reserve& surpluses + Long term liabilities

40

Ratio 2007 2008 2009Long term funds to fixed assets

54175.23------------- = 2.6120745.45

61287.12------------ = 2.62 23383.99

67053.14-------------- = 2.46 27305.94

Interpretation:-

The fixed assets of the company are increasing from the

year 2007 to 2009. The long term funds of the company are also

increasing respectively. The ratio of the company in 2007 was 2.61 which

were increased to 2.62 and in 2009 it decreased to 2.46.

41

DEBTORS RATIO

The ratio shows the number of days taken to

collect the dues of credit sales. It shows the efficiency or otherwise of

collection policy of an enterprise.

Debtors + Bills Receivables

Debtors ratio = ---------------------------------------

42

Credit sales

Ratio 2007 2008 2009 Debtors ratio 19469.04 x 365

141643.46

= 50 days

21293.30 x 365 152866.81

= 51 days

20957.29 x 365156776.73

= 49 days

Interpretation:-

In the ratio company’s credit sale is increasing

respectively as well as the debtors of the company are also increased in

2008 & 2009. The debtor’s ratio in the year 2007 is 50 days in 2008 it is

51 days and in 2009 it is 49 days which is a good sign for the company.

43

DEBTORS TURNOVER RATIO

The debtor’s turnover ratio suggests the number of

times the amount of credit sale is collected during the year, while debtor

44

ratio indicates the number of days during which the dues for credit sales

are collected.

Credit SalesDebtors turnover ratio = ----------------------------------- Average Debtors

Ratio 2007 2008 2009

Debtorsturnover ratio

141643.4616930.32

= 8.37 times

152866.8120381.17

=7.5 times

156776.7321125.3

= 7.42 times

Interpretation:-

The credit sales of the company are increasing from

the year 2007 to 2009 as well as average debtors of the company are also

45

increasing. The debtor turnover ratio in the year 2007 is 8.37 times which

decreased to 7.5 times in the year 2008 and it further decreased to 7.42

times in the 2009.

CREDITORS RATIO

46

The ratio shows the number of days within

which we can make a payment to our creditors for credit purchases is

obtained from creditor’s ratio.

Creditors + Bills payableCreditors Ratio = ----------------------------------- Purchases

Ratio 2007 2008 2009

Creditor’s ratio 14345.62 x 36587382.44

= 59 days

16157.55 x 36583193.52

= 71 days

23001.12 x 36590577.61

= 93 days

Interpretation:-

47

The creditors of the company are increasing from the

year 2007 to 2009 and the purchases of the company are also increasing

respectively. In the year 2007 the creditor’s ratio was 67days and it

increased to 71 days and 93 days in the year 2009 respectively. This is a

good thing for the company.

CREDITORS TURNOVER RATIO

48

Creditor turnover ratio is suggests the number of

times the amount of credit purchase is paid during year same as the

debtor’s turnover ratio.

Ratio 2007 2008 2009

77676.6914459.04

= 5.37 times

83193.5215186.6

=5.48 times

90577.6119579.34

= 4.63 times

Interpretation:-

49

The credit purchase of the company is increasing from

the year 2007 to 2009. The avg. creditors of the company are also increasing

respectively. The credit turnover ratio in 2007 was 5.27 times which

increased to 5.48 times in the year 2008 and in the year 2009 it decreased to

4.36 times.

GROSS PROFIT RATIO

50

It is the basic measure of profitability of business. It expresses relationship gross profit earned to net sale. It is also known as “gross margin”.

Gross profit = Sales – Cost of goods sold

Ratio 2007 2008 2009

73140.76 x 100141643.46

= 51.64%

78516.93 x 100152866.81

= 51.36%

76945.44 x 100156776.63

= 49.07%

Interpretation:-

51

Gross profit of the company was highest in the year

2008. Sale of the company is also increasing respectively. Gross profit ratio

of the company in the year 2007 was 51.64% which decreased to 51.36% in

the year 2008 and it decreased further to 49.07% in the year 2009.

NET PROFIT RATIO

52

This ratio measures the relation between the net profit and

sales of the firm. The net profit is obtained after charging operating

expenses, interest, depreciation and taxes to the gross profit

Ratio 2006-07 2007-08 2008-09

Net profit ratio10765.90 X 100122238.10

= 8.81%

11979.02 X 100131975.01

=9.076 %

9858.09 X 100137451.92

= 7.17%

Interpretation:-

53

The net profit and net sales of the company is increasing

from the year 2007 to 2009. The net profit ratio of the company in the year

2007 was 8.81% in the year 2008 it increased to 9.076% while in the year

2009 it was the lowest 7.17% which is not a good sigh for the company.

OPERATING RATIO

54

It is a ratio that shows relationship

between cost of goods sold plus operating expenses to sales. Operating

expenses include administrative and selling and distribution expenses.

They don’t include finance expenses.

Ratio 2006-07 2007-08 2008-09

77451.06 x 100122238.10

= 63.36 %

88154.08 x 100131975.01

= 66.8 %

90248.75 x 100137451.92

= 65.66 %

Interpretation:-

55

In this the cost of goods sold increased in the year 2007-2009 and net

sales of the company was also increased from the year 2007-2009. The

operating ratio of the company in the in the year 2007 was 63.36% in

2008 it increased to 66.8% while in 2009 it decreased to 65.66%. This is

a good sign for the company and company should take measures to

improve it.

EXPENSE RATIO

56

For the purpose of ascertaining relationship

between operating expenses and net sales, expense ratios are computed.

Ratio 2006-07 2007-08 2008-0917478.45 x 100122238.10

= 14.3%

18789.26 x 100131975.01

= 14.24%

20565.44 x 100 137451.92

= 14.96%

57

Interpretation :-

The expense increased by the company is increasing from the year 2007

to 2009 and the net sales of the company are also increasing respectively.

In 2007 the expense ratio of the company is 14.3% in 2008 it was 14.24%

while in the year 2009 it is 14.96%. There is an increase in the expense

ratio seen in the year 2009 company should take adequate measures to

improve Expenses ratio.

58

RETURN ON CAPITAL EMPLOYED RATIO

Perhaps the most widely used ratio for measuring the

profitability of any enterprise is return on capital employed. Profit is

considered in relation to capital employed.

Ratio 2006-07 2007-08 2008-09

16000.49 x 100 54175.23

= 29.53%

16898.42 x 100 61287.12

= 27.57%

13834.77 x 100 67053.14

= 20.63%

59

Interpretation:-

In this the Net Profit before Interest and taxes was increasing in the year

2007 to 2008 but there is decrease seen in the year 2009 while the Capital

Employed of the company is increasing from the year 2007 to 2009,. The

return on Capital employed ratio in 2007 was the highest which was

29.53 in the year 2008 it decreased to 27.53 and in 2009 it was 20.63%.

60

RETURN ON SHAREHOLDER’S FUND Profit is earned in business for the owners and they are

naturally interested in the return they get on their money invested in

company’s business. This is measured by return on shareholders’ fund.

Ratio 2007 2008 2009

10765.90 x 10051173.05

= 21.04%

11979.02 x 10059369.01

= 20.18%

9858.90 x 10065444.85

=15.06%

61

Interpretation:-

The shareholder’s fund of the company is increasing from the year 2007

to 2009 while profit after tax is increasing in 2007 and 2008 but

decreased in the year 2009. There turn on share holder’s fund was

21.64% in 2007 which decreased to 20.18% in the year 2008 which

further decreased to 15.06% in the year 2009.

62

RETURN ON EQUITY SHARE CAPITAL

The ratio is important, as it indicates profitability of a firm from the

viewpoint of real owner who are ordinary shareholders, who bear all the

risks of business. It signifies the success with which the management has

been able to earn enough returns on funds supplied by the proprietors.

Ratio 2006-07 2007-08 2008-09

10765.90 x 1002694.6

= 399.54 %

11979.02 x 1002694.6

= 444.55 %

9858.90 x 1002694.6

= 365.88 %

Interpretation:-

63

Here, return on equity share capital ratio of the

company in the year 2007 was 399.54% which increased to 444.55% in the

year 2008 and it decreased to 365.88% in the year 2009. Share capitals of the

company remain the same in three year

EARNING PER SHARE

64

This ratio measures the profit available to equity shareholders on

per share basis. It is not the actual amount paid to shareholders as dividend

but is the maximum that can be paid to them. It is calculated by dividing the

profit available to equity shareholders by the number of equity share.

Ratio 2006-07 2007-08 2008-09

10765.90269.46

=39.95 Rs.

11979.02269.46

=44.46 Rs.

9858.90269.46

= 36.58 Rs.

Interpretation:-

65

The profit after tax is increasing in the year 2007 to

2008 and there is a decrease seen in the year 2009. The no. of shares

remains constant or same for all the 3 years. The earning per share

received by the company in the year 2007 was 39.95 Rs. In the year 2008

it was 44.46 Rs. In the year 2009 it was 36.58 Rs. The company was able

to earn the highest earning per share in the year 2008 while there is a

decrease seen in the year 2009 company should take necessary steps to

improve this.

DIVIDEND PER SHARE:

66

The earnings per share shows only

theoretically what a shareholder can get per share out of profit. But it is not

the actual amount that they receive. Most of the shareholders and even

potential investors are interested in actual dividend they receive in cash.

Dividend per share is the amount of actual dividend paid to equity

shareholders dividend by the number of equity shares outstanding.

Ratio 2006-07 2007-08 2008-09

5856.15269.46

= 21.73 Rs.

220.76269.46

= 0.82 Rs.

3240.07269.46

=12.02 Rs.

Interpretation:-

67

Total dividend paid to shareholder is decreasing

from 2007 to 2009. Numbers of equity shares remain the same in three

years. The ratio was 21.73 Rs. in the year 2007 which decreased to 0.82

Rs. in the year 2008 and it was 12.02 Rs. in the year 2009.

DIVIDEND PAYMENT RATIO

68

It is the proportion of actual dividend received to the earning per share or

the amount which belong to the equity shareholders. It is obtained by

dividing the actual dividend per share by the earning per share.

Ratio 2006-07 2007-08 2008-09

21.7339.95

= 0.54

0.8244.46

= 0.018

12.0236.58

= 0.33

69

Interpretation:-

Dividend per share is decreased up to 0.82 in

the year 2008.Earning per share is increased in the year 2008 but it

decreased in the year 2009. The ratio in the year 2007 was 0.54 which

decreased to 0.018 in the year 2008 and it was 0.33 in the year 2009.

70

INTEREST COVERAGE RATIO

The ratio indicates as to how many times

the profit covers the payment of interest on debentures and other long-

term loans. Hence, it is also knows as “times-interest earned ratio”. It

measures the debt service capacity of the firm in respect of fixed interest

before interest and taxes by fixed interest changes.

Ratio 2006-07 2007-08 2008-0916000.49

96.15

= 166.41 times

16898.42140.60

= 120.19 times

13834.77184.13

= 75.14 times

71

Interpretation:-

PBIT was highest in the year 2008.The interest is

decreasing from 2007 to 2009. The ratio was 166.41 times in the year

2007 which decreased to 12.19 times in the year 2008 and it was 75.14

times in the year 2009.

72

COMMONSIZE BALANCESHEET OF NEROLAC FOR THE YEAR 2007

Particulars Rs. In lacks Percentage (%)

73

(I)

(II)

*(I)

***

*

Share holder’s funds:c. Share capitald. Reserves and surplusLoans funds:c. Secured loansd. Unsecured loans

Total (I - II)Application of fundsFixed assets:g. Gross profith. Less: depreciationi. Net blockj. Less: provision for w.d value of fixed assetsk. Capital work in progress at costl. Advances for capital expenditure

InvestmentsDeferred tax assetsCurrent assets loans and advances:e. Investmentsf. Sundry debtorsg. Cash & bankh. Loans and advancesLess: current liabilities and provisionsc. Liabilitiesd. Provisions

Net current assets

2694.6048478.4551173.053002.187997.5110999.6962172.74

42440.8723375.6419065.2383.101266.33496.991763.3215482.25650.77

1842.1719496.042149.275271.4644931.9415104.274533.4019637.6725394.27

4.3377.9582.304.83

12.8517.69

100

68.26-37.6030.66-0.132.040.8

2.8424.91.05

29.0231.313.468.48

72.27-24.29-7.29

-31.5840.68

Total 44931.94 100


Particulars Rs. In lacks Percentage

74

(%)(I)

(II)

*(I)

***

*

Share holder’s funds:e. Share capitalf. Reserves and surplusLoans funds:e. Secured loansf. Unsecured loans

Total (I - II) Application of fundsFixed assets:m. Gross profitn. Less: depreciationo. Net blockp. Less: provision for w.d value of fixed assetsq. Capital work in progress at costr. Advances for capital expenditure

InvestmentsDeferred tax assetsCurrent assets loans and advances:i. Investmentsj. Sundry debtorsk. Cash & bankl. Loans and advancesLess: current liabilities and provisionse. Liabilitiesf. Provisions

Net current assets

2694.6056674.41593.69.011918.117877.269795.3769164.38

48014.7227152.9720861.75141.312000.67662.88266355232141039.12

17341.1121293.303337.544814.8148786.7616889.508369.9925259.4921527.27

3.9081.9485.84

2.811.3914.19

100

69.42-39.2630.16

-0.22.890.963.85

33.561.5

25.0730.794.836.96

67.65-24.42-12.10-36.5231.12

Total 69164.38 100


75

Particulars Rs. In lacks Percentage (%)

(I)

(II)

*(I)

***

*

Share holder’s funds:g. Share capitalh. Reserves and surplusLoans funds:g. Secured loansh. Unsecured loans

Total (I - II) Application of fundsFixed assets:s. Gross profitt. Less: depreciationu. Net blockv. Less: provision for w.d value of fixed assetsw. Capital work in progress at costx. Advances for capital expenditure

InvestmentsDeferred tax assetsCurrent assets loans and advances:m. Investmentsn. Sundry debtorso. Cash & bankp. Loans and advancesLess: current liabilities and provisionsg. Liabilitiesh. Provisions

Net current assets

2694.6062750.2565444.851608.297754.339362.6274807.47

54198.4430336.4523861.99118.453094.36468.043562.4029442.551059.57

17063.3920957.297616.394170.7049804.7724423.498384.8732808.3616999.41

3.6083.8887.482.15

10.3712.52

100

72.45-40.55

31.9-0.164.140.634.76

39.361.42

22.8128.0010.185.56

66.58-32.65-11.22-43.8522.72

Total 74807.47 100

INTERPRETATION:-

76

1. Here, company’s share capital in 2007 in 2008 in 2009 the

share capital of the company was same which is

2694.60(lacks) so, company’s share capital; remain constant

without any fluctuation but there change seen in percentage.

2. The percentage in share capital of the company in the year

2007 was the highest and there is reduction seen in the

percentage for the coming two years.

3. Company’s reserves & surplus are increasing and the

secured loans and unsecured loans are decreasing which is a

good sign for company.

4. The current liabilities and provisions are decreasing which is

also a good sign for the company.

77

COMMONSIZE PROFIT & LOSS ACCOUNT OF NEROLAC FOR THE YEAR

2007

Particulars Amount in lacks Rs.

Percentage (%)

(I)

(II)

(III)

(IV)(V)

(VI)

(VII)


Profit after taxAdd: balance brought forwardAdd: balance transferred on amalgamationBalance available for appropriationsLess: Appropriations:a) Interim dividendb) Additional income tax and distributed profitc) General reserve TOTAL (a , b & c)

141643.4619405.36122238.102404.77124642.87

77832.905956.9021304.5496.15105190.4919452.383355.7416096.64

4935.37258.12137.255330.7410765.907565.691339.1819670.77

-3098.79439.521076.594614.90

100.00-13.7086.301.7087.99

54.954.2115.040.0774.2613.732.3711.36

3.480.180.0973.767.605.340.9513.89

-2.190.310.763.26

TOTAL 15055.87 10.63

78


2008


Percentage (%)

(I)

(II)

(III)

(IV)(V)

(VI)

(VII)



152866.8120891.80131975.012484.59134459.60

-83704.706913.0522702.18140.60113460.5320999.073960.0517039.02

-5328.35388.35120.005060.0011979.0215055.87

-27034.89

-3233.52549.541197.904980.96

100.00-13.6786.331.6387.96

-54.764.5214.850.0974.2213.742.5911.15

-3.490.250.0783.37.849.85

-17.69

-2.160.360.783.26

TOTAL 22053.93 14.43

79


2009


Percentage (%)

(I)

(II)

(III)

(IV)(V)

(VI)

(VII)

a).Sales Less: excise duty Net sales………(b)other income TOTAL (a & b)Expenditures:-a) Cost of materials b) Employees remuneration & benefitsc) Operating and other expensesd) Interest -other than fixed loans TOTAL (a, b, c & d)Profit before depreciation and taxes (a-b)Depreciation……….Profit before taxProvision for taxationa) Current taxb) Deferred taxc) Fringe benefit tax


156776.7319324.81137451.922219.50139671.42

-89958.287330.3024419.64183.80121892.0217779.403760.5014018.90

-4060.4520.45120.004160.009858.9022053.93

-31912.83

-3233.52549.54985.894768.95

100.00-12.3387.671.4289.00

-57.384.6815.580.1277.7511.342.408.94

-2.590.010.082.656.2914.07

-20.36

-2.060.350.633.04

TOTAL 27143.88 17.31

80

INTERPRETATION:-

1. Here, the company is able to increase its sales in the year

2009 which is a good sign for the company.

2. The excise duty has been decreased and other income have

also decreased.

3. The material cost is increased in 2009 and operating cost is

also increased which is not good sign for the company. So,

company has to control material cost & operating cost.

4. The company has maintained employee’s remuneration &

benefits which is a good sign for the company.

5. Company’s depreciation policy is also good & proper.

6. Current tax has been decreased due to tax planning, which is

good for the company’s point of view.

7. The earning for equity shareholder is increasing due to decrease in

general reserve & proposed dividend.

81

COMPARATIVE BALANCESHEET OF NEROLAC LTD. FOR THE LAST

3 YEARS (2007/2008/2009)

Particulars Percentage(%)2007

Percentage(%)2008

Percentage(%)2009

(I)

(II)

*(I)

***

*

Share holder’s funds:a. Share capitalb. Reserves and surplusLoans funds:a. Secured loansb. Unsecured loans Total (I & II)Application of fundsFixed assets:a. Gross profitb. Less: depreciationc. Net blockd. Less: provision for w.d value of fixed assetse. Capital work in progress at costf. Advances for capital expenditure

InvestmentsDeferred tax assetsCurrent assets loans and advances:a. Inventoriesb. Sundry debtorsc. Cash & bankd. Loans and advancesLess: current liabilities and provisionsa. Liabilitiesb. Provisions Total (a & b)Net current assets-------------------------------------

4.3377.95

4.8312.85

100

68.26-37.6030.66-0.132.040.8

2.8424.91.05

29.0231.313.468.48

72.27-24.29-7.29

-31.5840.68

3.9081.94

2.811.39

100

69.42-39.2630.16

-0.22.890.963.85

33.561.5

25.0730.794.836.96

67.65-24.42-12.10-36.5231.12

3.6083.88

2.1510.37

100

72.45-40.55

31.9-0.164.140.634.76

39.361.42

22.8128.0010.185.56

66.58-32.65-11.22-43.8522.72

Total 100 100 100

82

INTERPRETATION:-

1. The share capital of the company is increasing which can be

seen in the percentage of 2007, 2008, 2009 and the reserve &

surpluses have also increased.

2. The company’s secured loan has been decreased i.e. well for

the company. But there is a small change in company’s

unsecured loan.

3. The current liabilities and the provision have decreased in the

year 2009 in comparison of 2008-07.

4. The company has increased gross block in the year 2009 as

compared to the year 2008. Depreciation policy of the company

is high so the depreciation is increased in the year 2009.

5. Investment of the company is increasing, in 2007 it is 24.9%,

2008 it is 33.56% and in 2009 it is 39.36%.

6. The inventories have also decreased.

83

COMPARATIVE PROFIT & LOSS ACCOUNT OF NEROLAC LTD. FOR

THE LAST 3 YEARS(2007/2008/2009)

Particulars Percentage (%)2007

Percentage (%)2008

Percentage (%)2009

(I)

(II)

(III)

(IV)(V)

(VI)

(VII)

(a).Sales Less: excise duty Net sales………(b)other incomeExpenditures:-e) Cost of materials f) Employees remuneration & benefitsg) Operating and other expensesh) Interest -other than fixed loans

Profit before depreciation and taxes (a-b)Depreciation……….Profit before taxProvision for taxationd) Current taxe) Deferred taxf) Fringe benefit taxProfit after taxAdd: balance brought forwardAdd: balance transferred on amalgamationBalance available for appropriationsLess: Appropriations:a) Interim Dividendb) Proposed Dividendc) Additional income tax and distributed

profitGeneral reserve

100.00-13.7086.301.7087.9954.954.2115.040.0774.2613.732.3711.36

3.480.180.0977.605.340.9513.89

-2.19

-0.31

0.76

100.00-13.6786.331.6387.9654.764.5214.850.0974.2213.742.5911.15

3.490.250.0787.849.85

-17.69

--

2.160.36

0.78

100.00-12.3387.671.4289.0057.384.6815.580.1277.7511.342.408.94

2.590.010.086.2914.07

-20.36

--

2.060.35

0.63TOTAL 10.63 14.43 17.31

84

INTERPRETATION:-

1. Here, the sales are considered as a base for calculation of

percentages.

2. Other income is decreasing which is not good sign for the

company.

3. Cost of materials is increasing and operating and other

expenses are also increasing. Interest (payment) is also

increasing.

4. Profit before tax is decreased in 2009 as compared to 2008.

The current tax is also decreased in 2009 and deferred tax is

also decreased in 2009.

5. General reserves & proposed dividend is decreasing. The

earning per share is also decreasing.

85

1. Introduction to Cash flow statement:

Cash is the most liquid asset of a business. All business transactions

ultimately result into cash inflow or cash outflow. Hence, a statement

that shows cash flow is considered to be an important one. It can be said,

therefore, that cash is both the beginning and the end of the business

operations. The business should have sufficient cash on hand, so that the

liabilities can be paid as and when they fall due. The cash on hand should

not be excessive, otherwise the cash would remain idle, reducing the over

all profitability. Looking to the importance3 of liquidity, the cash

statements assume all the more significance for management. There are

two such statements viz. Cash budget for the3 definite future time period,

which shows that would be the expected cash position during the next

year. The second is the cash flow statement, which is a historical

statement and shows what was the cash inflow and cash outflow during

the last year and what was the actual cash balance on hand at the end of

the last year.

The fund flow statement shows the changes in the net working capital,

while the cash flow statement shows that inflow and outflow of cash

only. The statement shows the amount of cash re3ceived and cash paid

due to each transaction of business. The total cash inflow is added to the

opening balance of cash and the total cash outflow deducted therefrom.

This gives the final cash balance.

86

CASHFLOW OF NEROLAC PVT.LTD

Particulars

2006-2007Rs.(in lacs)

2006-2007Rs.(in lacs)

2007-2008Rs.(in lacs)

2007-2008Rs.(in lacs)

2008-2009Rs.(in lacs)

2008-2009Rs.(in lacs)

Cash flow from operating activities Net Profit before tax 16096.64 17039.02 14018.9adjustments for: depreciation 3355.74 3960.05 3760.5 foreign exchange loss/(gain)unrealized 10.18 4.85 46.1 loss on sale of fixed assets 0.07 3.33 loss on fixed assets written off 0.77 6.35 15.95 provision for write down in value of fixed assets 69.73 provision for write down in value of fixed assets written for 13.23 11.52 22.86 profit on sale of fixed assets 83 4.96 1.86 loss on sale/redemption of investments 0.39 17.86 29.2 provision for diminution in value of investments no longer 80.7 profit on sale 514.08 1413.92 395.04 interest expenditure 96.15 140.6 183.8 interest income 114 95.81 271.01 dividend income 718.3 1919.63 829 1334.15 1844.23 2013.96operation profit before working capital changes 18016.27 18883.25 16032.86increase in trade and other receivable 1180.38 1286.73 decrease in trade and other receivable 1019.57 decrease 695.5 701.06 271.72 increase(decrease)in trade payables 1021.41 1506.29 2211.28 1625.61 7316.18 8613.47cash generated from operation 16509.98 20508.86 24646.23 direct taxes paid(net of refunds) 5518.72 5518.72 4185.06 net cash flow from operating activities 10991.26 15008.17 20461.27

Particulars

2006-2007Rs.(in

2006-2007Rs.(in

2007-2008Rs.(in

2007-2008Rs.(in

2008-2009Rs.(in

2008-2009Rs.(in

87

lacs) lacs) lacs) lacs) lacs) lacs)Cash flow from investing activities purchase of fixed assets(including adjustment of capital work in progress capital 6306.38 6855.73 7470.19

sales of fixed assets 193.66 12.74 3.15

purchase of investments 42457.7 58113.21 91585.64proceeds from sale of investments in subsidiary company 2168.86proceeds from sale / redemption of investments 45229.15 51777.52 83554.07

interests received 121.8 95.81 220.27

dividend received 715.63 829 1334.15net cash used in investing activities 2503.84 12253.87 11775.33Cash flow from financing activities

proceeds from borrowings 97.35 206.36

repayment of borrowing 744.7 822.35 512.62increase / decrease in cash credit from banks 308.7 588.68 79.27

interest paid 308.51 140.6 184.13

dividend paid 6168.15 220.76 3240.07additional income - tax on distributed profit 894.69 549.54net cash used in financial activities 8114.85 1566.03 4407.09net increase in cash and cash equivalents 372.57 1188.27 4278.85Cash & cash equivalents at beginning of the year the components

cash on hand 11.39 14.87 4.92 balances with banks on currents, margins & fixed deposit 1567.23 2134.4 2149.27 3332.62 3337.54Add: cash & cash equivalents of polycoat powders ltd. As at 1st April 198.08 Cash and cash equivalents at end of the year the components

cash on hand 14.87 4.92 4.69 balances with banks on currents, margins & fixed deposit 2134.4 3332.62 7611.7

2149.27 3337.54 7616.39net increase as disclosed above 372.57 1188.27 4278.85

CASHFLOW OF NEROLAC PVT.LTD

INTERPRETATION:-

88

1. Here in the operating activity we can see that loss on sales of

fixed assets is increasing, loss on fixed assets written off is also

increasing, loss on sale is also increasing & interest expenditure

is also increasing. Thus it is not a good for the company.

2. The net cash flow from operating activities is increasing.

3. After operating activities, in the investing activity the sale of

fixed assets is decreasing. The interest and dividend increased

in the year 2008-09.

4. Purchase of investments is increasing which is good for

company. Net cash flow from the investing activity decreases in

all the three year respectively.

5. In the financing activity the proceeds from borrowings is

nothing in the year 2008-09. Interest is increasing, dividend is

also increasing, and cash on hand is decreasing.

6. The net cash flow from the financing activity has decreased at

high rate.

CONCLUSION

89

Nerolac covers over 28 countries globally and Nerolac is present in paint

sector for about 20 years. Nerolac is also one of the leading companies in

paint sector of India. Nerolac has earned its place in the hearts of people

and in the market. Nerolac is an innovative company and has done

sufficient changes to overcome the financial obstacle arising in the

company. Neerolac has introduced eco-friendly products which is of

superor quality and does not pollute the environment. Nerolac has

changed the face of paint sector in India and has helped in economic

development of India.

BIBLOGRAPHY

90

BOOKS:

Financia l Management by Khan and Ja in 5 t h

Edi t ion .

Advanced Accounts Volume I I : by M.C.

Sukla , T .S . Grewal , S .C. Gupta & S.Chand

& Co.

Financia l Management by P .V. Kulkarni &

B.G. Satya Prasad.

WEBSITES:

www.Google .com

www.Nerolac .com

www.Economict imes .com

91

Annexure

92

Documents

Financial Report on nerolac paints ltd