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INTRODUCTION
Finance is the lifeblood of every business activity without which the wheels of
modern business organization system cannot be greased. Finance management is
managerial activity, which is concerned with planning and controlling of the firm’s
financial Resources. Finance is a scarce resource and it has to be managed efficiency
for the successful functioning of any company. Several companies have come to grief
mainly because of inefficient management of finance, in spite of other favorable
conditions.
Funds flow statement is an important tool and is widely used in the hands of
financial analysts and managers for analyzing the financial management of a
company. Funds keep on moving in a business, which itself based on going concern
concept. In a narrow sense, it means inflow and out flow of cash only and a flow
statement prepared on this basis is called as ”cash flow statement”. Such a statement
enumerates net effects of the various business transactions on cash and takes into
account receipts and disbursement of cash. In a broader sense, the term fund refers to
money values in whatever form it may exists. Here, funds mean. All financial
resources. But in a popular sense, the term funds means working capital i.e., excess of
current assets over current Liabilities. The word fund here means net working capital.
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Definition:
“A statement of sources and Application of Funds is a technical device
designed to analyze the changes in the financial condition of a business enterprise
between two dates”. ---R.A.Foulk
EXISTING SYSTEM / PRACTICES IN THE ORGANIZATION
1. General : The financial statements are prepared under the historical cost
convention in accordance with the provisions of the Companies Act, 1956 and
materially comply with the mandatory Accounting Standards issued by the
Institute of Chartered Accountants of India except to the extent disclosed in
the following notes.
2) Fixed Assets and Depreciation:
a) Gross Block: Fixed Assets are stated at cost of acquisition inclusive of
inland freight, duties and taxes and incidental expenses related to
acquisition with due adjustments for cenvat /VAT credits.
b) Depreciation:
i) Depreciation is provided on fixed assets used during the year under
straight-line method at the rates specified in the schedule XIV of
the Companies Act, 1956.
j) Assets acquired and costing Rs.5, 000 or less are being depreciated
fully in the year of addition / acquisition.
3) Sales:
2
Sales include excise duty, wherever applicable and rebate, discounts, claims,
expenses incurred on consignment sales etc., are excluded there from. Sales
on consignment and expenses there against are being accounted for on receipt
of account sales from respective consignee.
4) Investments: Long-term investments are stated at cost less permanent
diminution, if any in value. Current investments are carried at lower of cost or
fair value.
5) Inventories:
c) Inventories are valued at lower of the cost or net realization value.
Cost in respect of raw materials, stores and spares have been
calculated on weighted average basis, which includes expenses
incidental to procurement of the same.
d) By-products are valued at net realizable value.
e) Cost in respect of finished goods includes manufacturing expenses,
factory and administrative overheads and excise duty.
f) Cost in respect of work in progress represents, cost incurred up to the
state of completion.
6) Revenue Recognition: All expenses and income to the extent considered
payable and receivable respectively unless specifically stated to be otherwise
are accounted for on mercantile basis.
7) Foreign Currency Transactions: Foreign currency assets and liabilities are
translated at exchange rates prevailing at the year-end or at forward contract
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rate, as applicable. The loss or gain thereon and also on exchange differences
on settlement of the foreign currency transactions during the year are adjusted
to the Profit and Loss Account under respective heads of accounts. The
difference between forward rate and exchange rate at the date of transaction is
recognized as income or expenses over the life of the contracts.
8) Retirement Benefits:
g) Provident & Family Pension Fund: The Company contributes to the
employee’s provident & family pension fund maintained under the
employees provident fund scheme by the Central Government.
h) Leave Encashment Benefits: Accruing liability towards leave
encashment benefit is provided on the basis of actual eligibility as per
the Company’s rules.
i) Gratuity: Accruing liability towards gratuity is provided on the basis
of the assumption that such benefits are payable to all eligible
employees at the end of the accounting year.
9) Miscellaneous Expenses: Preliminary expenses and expenditure in
connection with issue of shares are being written off over a period of ten
years.
10) Borrowing Costs: Borrowing costs that are attributable to the acquisition,
construction or production of a qualifying asset are capitalized as part of cost
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of such asset till such time as the asset is ready for its intended use or sale. A
qualifying asset is an asset that necessarily required a substantial period of
time to get ready for its intended use or sale. All other borrowing costs are
recognized as an expense in the period in which they are incurred.
11) Contingent Liabilities: Contingent liabilities are generally not provided for
and are disclosed by way of notes to the accounts.
12) Segment Reporting: The accounting policies adopted for segment reporting
are in line with the accounting policies adopted in financial statements.
13) Export Benefits: Export benefit arising on account of entitlement for duty
free imports is accounted for through import materials. Such benefits under
duty entitlement pass- books are accounted for on accrual basis.
14) Government Grants and Other Claims: Revenue grants including subsidy /
rebates, refunds, claims etc., are credited to Profit and Loss Account under
‘Other Income’ or deducted from the related expenses. Grants relating to
fixed assets are credited to capital Reserve Account or adjusted in the cost of
such assets as the case may be, as and when the ultimate reliability of such
grants etc., are established / realized.
15) Income Tax: Provision for tax is made for both current and deferred taxes.
Current tax is provided on the taxable income using the applicable tax rates
and tax laws. Deferred tax assets and liabilities arising on account of timing
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differences, which are capable of reversal in subsequent periods are
recognized using tax rates and tax laws, which have been enacted or
substantively enacted.
The basis for financial planning, analysis and decision-making is the counting
reports. Two basics financial statements prepared for the purpose of external
reporting to owners, investors and creditors are; balance sheet \annual report \
statement of financial position & profit and loss account \income statement) The
Balance sheet:-
The Balance sheet shows the financial condition or the state of affairs of a firm at a
particular point of time. More specifically the Balance sheet contains detailed
information about the firms Assets and Liabilities. Assets represents economic
resources possessed by the firm while the liabilities are the amounts payable by the
firm. The Balance sheet gives concise summary of firm resources and obligations and
measures the firm’s liquidity and solvency.
Profit and Loss Accounts:
The profit and Loss A\c shows the profitability of the firm by giving details about
income and expenses. It is simply income and expenditure account. Revenues are
benefits, which customers contribute to the firm in exchange of goods and services.
The cost of economics resources used in providing goods and services to the
customer are called expenses. Profit and Loss Account provides a concise summary
of firm’s revenues and expenses during the period of time and measures its
profitability.
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The above two statements provide useful information regarding the operations of the
firm. They fail to explain the financial data required for financing and investing
decisions by the management i e causes for changes in Assets and Liabilities and
Owner’s equities. They do not indicate the movement of funds between Sources and
uses from the end of the period to the end of next periods. It is therefore, necessary to
prepare an additional called Funds Flow Statements’ to overcome the above
difficulties.
Funds flow Statements:-
The statement showing the sources and Application of the funds known as Funds
Flow Statement’. It is a condensed report of the how the financial resources have
been used during the periods covered by the statement as it summarizes the financial
activities for period of time.
USES, SIGNIGNIFICANCE AND IMPORTANCE OF FUNDS
FLOWSTATEMENTS:-
7
Analysis of Financial Operation:- A Funds Flow Statement shows how the resources
have been obtained and the uses to which they are put.
The funds statements determining the financial consequences of business operation. It
also useful ion guiding whether the firm has expanded at too fast rate and whether
financing is strained, it also point out to the effectiveness with which the management
has handled working during the period under review.
Evaluation of the firms:- This statement can consist the financial manager in
planning intermediate and long-term finance for obtaining sources in the further and
determining how they are to be used. That is analysis of the major sources of funds in
the past reveals what positions of the firms growth was financed internally and what
position externally.
Comparison with the budget:- The statement defines the past flow of funds
and gives insight in to the evolution of the present situation. It provides certain useful
information about the firms. Financial policies to the outside world like bankers,
government, etc;
Funds Flow statement is becoming popular with; the management because it helps to
explain why in spite of earning sizable amount of profits, the company is
experiencing difficulty in making payments to creditors, the rate of dividend on
equity; shares can not be increased and the bank balance is getting thinner.
8
The Funds flow Statements has an analytical value and is an important planning tool.
It helps in guiding the destiny of the business by enabling the executives to visualize
the movements of funds that constantly takes place.
This statement also helpful in working capital requirements. It highlights the future
need for funds and provides sample time to work out suitable arrangements. The
funds flow statement shows what portion externally.
The analysis of funds flow statement for the future is externally available to the
executive in planning the intermediate and long term financing of the firm.
USES OF FUNDS FLOW STATEMENT:-
It helps in the analysis of financial operations of the company.
It reveals the financing and investing policies followed by the company.
It answers many un answered questions of general interests.
It helps in proper allocation of resources.
It is an important management tool for the financial planning.
It helps in knowing the overall credit worth users of the firm.
Procedure for Preparing Funds Flow Statement:-
The Fund Flow Statement consists of the following:-
1. Preparation of statement of changes in Working Capital.
2. Calculation of Funds / (loss) From operations.
3. Finding out the hidden transactions or changes in non-current assets and non-
current liabilities.
4. Preparation of statement showing Sources and Application of Funds.
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Statement of Changes of Working Capital:
The increase or decrease in Working Capital can be calculated by preparing the
schedule of changes in working capital.
Working Capital represents the excess of current assets over current liabilities.
Several items of all current assets and current liabilities are the components of
Working Capital. In order to ascertain the Working Capital at the beginning and at the
end of the period and to measure the increase or decrease therein it is necessary to
prepare a Statements or Schedule of Changes Working Capital.
While preparing a schedule of changes in Working Capital it should be noted that:
1. (a) An increase in Current Assets increase in Working Capital.
(b) A decrease in Current Assets decrease in Working Capital.
(c) A increase in Current Liabilities decrease in Working Capital
(d) A decrease in Current Liabilities increase in Working Capital.
(e) An increase in Current Assets and increase in Current Liabilities does not
affect Working Capital.
(f) A decrease in Current Assets and decrease in Current Liability does not
affect Working Capital.
(g) Changes in fixed (no-current) assets and fixed (non-current) liabilities
affect working capital.
2. The changes in all current assets and current liabilities are merged into one figure
only either an increase or decrease in working capital over the period for which
funds statements has been prepared. If the working capital at the end of the
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period is more than the working capital at the beginning thereof. The difference
is expressed as’ increase in working capital’. On the other hand, if the working
capital at the end of the period is less than at the commencement, the difference is
called ‘decrease in working capital’.
Working Capital = Current Assets – Current Liabilities
Current Assets:
The expression ‘current assets’ denotes those assets, which are continually on the
move. Since they are constantly in motion, they are also known as the circulating
capital of the business. These assets can or will be converted into cash during a
complete operating cycle of the business. Current Assets include.
a. Stock-in-trade or inventories;
b. Debtors;
c. Payments in advance or prepaid expenses;
d. Stores;
e. Bills receivable;
f. Cash at bank;
g. Cash in hand;
h. Work-in-progress, etc.
Current Liabilities:
‘Current liabilities’ are those liabilities, which are to be paid in the near future,
i.e., during a complete operating cycle of the business. Such liabilities include:
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a. Trade Creditors;
b. Accrued or outstanding expenses;
c. Bills Payable;
d. Income-tax payable;
e. Dividends declared;
f. Bank overdraft.
Note:-Some experts are of the opinion that as bank overdraft has a tendency to
become more or less permanent source of financing, and hence it need not be
included among current liabilities.
Statement of Sources and Application of Funds:
1. Funds from Operations: It is an internal source of funds. Funds from
operations are to be calculated as per the method stated above.
2. Funds from long-term loans:- Long-term loans such as debentures, borrowings
from financial institutions will increase the working capital and therefore,
there will be inflow of funds. However, if the debentures have been issued in
consideration of some fixed assets, there will be no inflow of funds.
3. Sale of fixed assets: Sale of land, buildings, and long-term investments will
result in generation of funds.
4. Funds from increase in share capital: Issue of shares for cash or for any other
current asset or in discharge of current liability is another sources of funds.
However, shares allotted in consideration of some fixed assets will not result
in funds. However, it is recommended that such purchase of fixed assets as
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well as issue of securities to pay for them be revealed in Funds Flow
Statement.
5. Decrease in Working Capital: Decrease in working capital is the result of
decrease in current asset or increase in current liabilities. In both the cases
inflow of funds takes place. Suppose stock, a current asset reduces from
Rs.15,000 to Rs.12,000 the decrease of Rs.3,000 is assumed to be due to the
disposal of stock which undoubtedly brings funds into the business. In the
same way, increase in current liabilities mean lesser payment, so retaining
funds is also a source.
Funds Flow Statement
Sources Rs. Applications of Funds Rs.
Issue of Shares
Issue of Debentures
Long term
Borrowings
Sale of Fixed Assets
Operating Profit
Decrease in Working
Capital
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Redemption of Redeemable
Preference Shares
Redemption of Debentures
Payment of Other Long-term loans
Purchase of Fixed Assets
Operating Loss
Payment of Dividends taxes, etc.
Increase in Working Capital (*)
Xxx
xxx
xxx
xxx
xxx
xxx
xxx
(*) Only one will be there.
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METHODOLOGY AND DATABASE
The methodology employed for doing the present study is that the information is
collected from primary and secondary sources. The information was used to calculate
the funds flow on the basis of these analysis interpretations were made.
Sources of data
Sources of primary data
The primary data was collected mainly with the interactions and discussions with he
company’s Executives.
Sources of secondary Data
Most of the calculations are made on the financial statement of the company and the
company provided financial statements for 3 years.
Referring standards texts, reference books and Internet collected some of the
information regarding to the theoretical aspects.
PERIOD OF THE STUDY
It is proposed to study the sources & Application of funds in SUJALA PIPES,
Rachagunneri-517641, srikalahasthi for 3 years i.e., from the financial years 2009-
2010,2010-2011,and 2011-2012.
NEED FOR THE FUNDS FLOW STATEMENT
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The sources of funds for a business could be from both the long term and
short term. Any business to survive and growth in the competitive market, funds are
needed not only to meet its long-term financial needs but also short-term
requirements. The long-Term sources comprising of share capital, long term debt
inclusive of debentures etc., while the short term sources comprises of the short term
loans, working capital collection from commercial banks, loans from the call money
market and among these fall the sales which has two phases the cash sales and the
credit sales.
The study is aimed at analyzing the financial position of SUJALA PIPESand also
identifying the inflow and outflows of funds i.e., source and application of funds.
This study will evaluate the way of the firm’s financial condition how
effectively the funds are mobilized and utilized in the company for the financial year
ending 31.3.03, 31.3.04 and 31.3.05. This study will thus help the company in
maintaining better financial performance, which is followed by a blend of findings
and suggestions.
STATEMENT OF THE PROBLEM & HYPOTHESIS
It is proposed to analyze the liquidity position of the company and also the
timing of availability and requirement of funds to match or not.
The problem of the statement is difference between the two shows
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(i.e., sources and applications of study) the net change in the working capital during
the period.
It is assumed that bad payment collection system do not lead to
optimization of inflow & outflow of funds and profits in the company.
It is general principal followed by the financial managers all over the
world that the inflow of funds are classified as long- term and short –term. It is
imperative that the business enterprise uses long –term funds for long – term purpose
and short-term funds for short-term purposes. However a firm, which uses long –
term funds for log – term purposes will have lot of business problem. The reason for
this is the long – term funds proposed by the company generally as a fixed cost to it.
In case, if this funds are not utilized for long -term purpose to generate cash, the
company will have to pay interest without matching income and thus leading to
mismatch of inflow funds and outflows funds.
Scope of the study
This study refers to only individual enterprise i.e., SUJALA PIPES. In fact, an
examination of all components of Current Assets will enable to Asses the efficiency
of working capital management as all these components are interrelated.
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This study is on Funds Flow position in the company. It is based on two
statements namely (1) Schedule of changes in Working capital and (2) Funds Flow
statement. The scope of two statements is given below:-
(1) Schedule of changes in working capital: this statement is prepared with Current
Liabilities as appearing in the balance sheet of the Company.
Current Asses means: Cash in Hand. Cash at bank, Bills Receivables, Sundry
Debtors, Inventory, other short-term loans and advances etc.
Current Liabilities means: Bills Payable, Sundry creditors, bank over draft,
short –term loans, provision for taxation, proposed dividend, interest payable etc.
(2) Funds flow statement: this statement is also prepared with sources of funds &
application of funds as appearing in the balance sheet of the company.
Sources of funds means: issue of equity and preferance shares, funds from
operation, sale of fixed assets (plant, land & building, furniture and etc.), issue of
debentures, Decrease in working capital, sale of investment Etc.
Application of Funds means:-
Purchase of fixed assets (plant, land & building, furniture, and etc), increase in
working capital, redemption of preference share capital & debentures, Purchase of
Investment, Fund for operation, repayment of bank loan.
This study on Lanco’s schedule of changes in Working capital, Funds Flow statement
for the past 3 years.
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OBJECTIVES OF THE STUDY
1 To study and analyze the changes those have taken place in the
financial position of the company.
2 To analyze fund flow operation.
3 To changes in the amount of working capital of the company.
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4 To identify sources and application of funds.
5 To find out the operating efficiency of the organization.
6 To measure the overall financial performance of SUJALA PIPES.
7 To offer suitable suggestions for better performance of the company.
LIMITATIONS OF THE STUDY
1) DISCLOSURE OF OVERALL VARIATION ONLY: - the funds flows
statement shows overall change in working capital and not the variations in individual
items, including on most significant item cash, constituting the working capital.
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2) MANUPULATION BY MANAGERS: - since non monitory assets such as
inventories are included in working capital the management may manipulate the net
change in working capital and the resources of funds from operation of applying any
of the widely varying methods of inventory valuation most suited to it.
3) Grouping of heterogeneous items: - the concept of the working capital bundles
monetary and non –monetary current asset, together. Consequently it includes widely
dice gent items such as cash, receivables, inventories, prepayments etc and hence
lacks homogeneity. Particularly, stock of standard product ready for sale, may
reasonable be treated as a liquid resources, but often a large part of the inventory
represents work in progress throughout the various stages of production. This is not
proper to refer to inventories of repayments as “funds”.
COMPANY PROFILE
Origin
Sujala Pipes Private Limited manufacture of Ploy Vinyl Chloride Pipes under
the brand name of “Nandi Pipes.” The company was started in the year 1977 by a
Mechanical Engineer Mr. S.P.Y Reddy, at Nandyal, Kurnool District, who had
just left a Plumber’s job in BABA ATOMIC RESEARCH CENTER (BARC) and
wanted to do something on his own, and he did.
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The initial investment is Rs. 5Lac and presently, the annual turnover of the
whole Nandi group is Rs.200 cores, out of which Rs.100crores is from Sujala
Pipes Pvt. Limited. The present production capacity is 22000 Metric Tones of
pipes per annum.
Nandi pipes are the largest selling PVC pipes brands in South India.
Growth
S.P.Y Reddy in the earlier days of establishment of the company, used to manufacture
Galvorised iron pipes and Cast iron pipes. Later he switched over to manufacturing of
PVC pipes. It has been a massive growth from 1988. The punch line of Nandi pipes is
“ENDURING THE QUALITY
THROUGH GENERATION”
NANDI GROUP OF ORGANSITIONS
1. Sujala Pipes Private Limited, Nandyal
Nandi Special Blue Casing Pipes
Nandi Electrical PVC pipes
Nandi SWR Pipes
Nandi Flux Pipes
Nandi Garden Tubes
Nandi Krishi Pipes
Nandi LDPE Pipes
Nandi HDPE Pipes
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2. Srikanth Water Containers, Nandyal
3. Mahanandi SWR Fitting, Nandyal
4. Nandi Solvent Cement, Nandyal
5. Mahanandi Mineral Water, Nandyal
6. . Nandi Milk Diary Products, Nandyal
Expansion of the Market Development
Nandyal Region(Polythene Pipes)
Rayalaseema Region(PVC Pipes)
Rayalaseema And Telengana
Karnataka And Andhra Pradesh
Karnataka, Andhra Pradesh, Tamilnadu
Karnataka, Andhra Pradesh,Tamilnadu,Kerala
Karnataka, Andhra Pradesh And Tamilnadu,Goa And Maharastra
THE FOLLOWING DATA SHOWS THE MARKET DEVELOPMENT FOR
PVC PIPES OF SUJALA PIPES PRIVATE LIMITED.
Apart from manufacturing of PVC Pipes, it also runs a partnership form of
Showmya Fittings, manufacturing PVC Pipes fitting at bidder.
Variety
Out of five varieties of products offered by the organization, Nandyal Pipes
has got excellent local popularity as it symbolizes the region of the sacred bull. The
remaining got their impact in other states.
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S.No Brand Name Level of Standard
1 NANDI On par with ISI Standards
2 RANI On par with ISI Standards
3 JALALess than of ISI
Standards
4 USHA Below ISI Standards
5 Blue Thread Pipes Least Quality
QualityQuality is the dominating factor for the growth of sales and Sujala Pipes
follow the world class Quality Control Management Techniques in quality control
laboratory to achieve the best quality pies. Stringent quality control tests are regularly
conducted to ensure top quality products for multifarious application like
1. Manufactured on par with IS 4985-2000
2. Conforms to tests on par with IS 12235-1986
3. Maximum Specific Gravity of 1.46
4. Maximum ash content of 8% when tested on par with ISO 3451
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SizesVarious sizes ranging form “1/2 to 10” inches offered to customers. But for
the purpose of cubic space utilization in trucks while transport organization is
adopting the technique like pipe in pipe.
Warranties
No written are given to customers except an assurance that the product is
reliable.
Payment periodThe company adopts zero credit policy and goods are not delivered unless
cash remittance is made.
CHANNELS OF DISTRIBUTION
Sujala Pipes Private Limited has got two levels of distribution.
1. Zero level Channel Distribution
2. Single level Channel Distribution
Zero Level Channel Distribution
MANUFACTURE CUSTOMER
Single Level Channel Distribution
MANUFACTUREDEALER CUSTOMER
Sujala Pipe Private Limited has an extensive network of 300 dealers to
Andhra Pradesh and who are directly serviced by company sales force 500 dealers in
South India who are directly served by the company.
Coverage
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At present Andhra Pradesh part of Southern States of Karnataka, Thailand and
Kerala are in ambit of Sujala Pipes Private Limited.
Transportation
The company’s major strength is its transportation vehicles. Huge investment
is made on transportation vehicles. A unique cash out flow justifies itself by
providing good reputation of the company through customer service. The unique
strength of the organization enables the delivery system to be efficient. This event
helps the dealer to reduce inventory levels to the minimum.
The company’s is equiped with sophisticated laboratory to carry on tests to
ascertain outgoing quality level of the pipes. Nandi pipes have got ISI Trademark,
which speaks for itself for the pipes.
A number of statistical quality control techniques are applied to sustain the quality
level of the product. As the company is located in Industrial Estate of Nandyal, it is
facilitated with good network, which network telex and fax machines. Company also
availing the Electrical Data Processing Technology.
Personnel Department
The personal department consists the details of the company of the organization and
all the managers and workers from production,
Marketing, finance, transportation, quality departments will report to the Managing
and Executive Director about all the dealings of the company.
Other than executives there are nearly 900 working in the organization.
The recruitment as selection of personnel is made by a panel consisting of
managing director in Executive Director, and managers of concerned departments.
Apart from the attractive salaries, company provides health care facilities etc.
Finance department
Though initially the company approached the external sources for financial
aid, now the financial status of the company is very sound and is being run only with
25
self-finance expecting for loans taken on hypothecation of machinery and stock from
SBI, Nandyal Branch.
The financial department is headed by the financial manager with the help of
four account officers and other clerks of the department. The company follows cash is
paid and these transactions are looked after by the Financial Department with the help
of marketing department.
Marketing Department
Marketing Manager Gets the information from Assistant Marketing Manager
is and he is headed by Sales representatives and salesman.
Marketing mix and advertising particular of Sujala Pipes Private Limited
shows the department effective management of the marketing department in the
organization.
INDUSTRY PROFILE
ABOUT PIPE INDUSTRY
The term plastic is derived from the Greek word “PLASTICKOS”, which
means, “to access rubber and the other natural product’. Resins are both natural and
synthetic. Natural resins range from pitch and asafetida to frankincense, myrrh and
amber synthetic resins replaced natural resins.
The first plastic “PRAKESINE’ later called XYLONITE, was invented by an
English chemist and inventor ALEXANDER PARNES in 6.
26
It was JOHN W. HYAH of the USA who recognized in 1869, the vital
palatalizing effect of camphor and named the product “CELLULOID”.
LEO HENDRICK BAEKELAND, American Chemist, commerciality
produced the first computer synthetic plastic from phenol and formaldehyde in.
A significant property of most of the plastics is that they softy when hea
ted. So that they can be formed into shapes, they became rigid on cooling.
This property is derived from the physical structure of Poly Vinyl Chloride which
consists of a net work of very large molecules called polymers. Long chains that
separate under heat sufficiently to slide apart, but on cooling became firmly entangled
again.
All plastics are manufactured by some method of polymerization i.e. the
process of forming the long chains and networks of molecules.
The two major types of plastics are:--
1. Thermosetting resins
2. Thermoplastics resins.
1. Thermosetting resins
They became insoluble and infusible on heating. They are phonetic resins,
Furan resins, amino plastics, Alkyls and polyesters of unsaturated acids, Epoxy
resins. Polyethane’s and silicones.
2. Thermoplastics resins
These can be melted and solidified repeatedly, unlikely thermosetting resins.
They include cellulose derivatives and additional polymers. Others type4 of resins
include oil soluble or modified resins, plastics such as casein and lignin extract from
27
natural products and special application synthetics such as resins used as adhesives
and as additives to paper and textiles.
The raw materials for plastics include coal and cellulose, but the chief source
is petroleum. Plastics are formed by a variety of means, including extrusion blow
molding between rollers, thermosetting in hydraulic pressures.
INDUSTRIAL PLASTICS
Plastics are used for the industrial purpose is called industrial plastics. It is of
2 types
1. Structural foams
2. Sheets and films.
1. Structural foams
It is of 2 types
a) Rigid Foams
b) Flexible Foams
Rigid Foams
Rigid Polyether foams in sandwich foams have wide applications a building
component because of the stiffness imparted by the thick foam center for a given
Weight. They are also best insolvent known today and so have wide application in
fitted slabs and are formed into cavities at the building site. Very important se .of
rigid foam is for furniture parts to reproduce wood structures.
Flexible Foams
Flexible foams, usually polyether Urethane are made in slab roam up to 8 feet
(2.4 meters) in which and, as much as 5 feet (1 .5 meters) high, these are cut to
required shapes or sizes or molded. Used almost exclusively shapes or sizes or
28
molded. Used almost exclusively by the automobile industry for crash pads, arm sets
and dash board covers.
2. Sheets and FilmsThese include Vinyl’s Fluroplastics and cellulose acetate vinyl.
Plasticized Poly Vinyl Chloride by a calendaring process, can sawn, heat
sealed or electronically sealed, it is used for apparel, door curtains. Protective
clothing and the like.Made in many colors, transparent and translucent or opaque.
Poly Vinyl Chloride can be with pressure sensitive adhesives and printed with
decorative patterns. Thicker sheet is colored and embossed for women handbags,
luggage and seat covers.
This film is used for packaging, especially for meat and fruits. If biaxial
stretched, it forms a shrink film that retracts up to 60%. Another important use is a
laminate for printed paper. Flooring tiles, largely made of PVC are built up by
lamination and decorated either by printing or by rolling in color chips. The common
title is vinyl asbestos, pressed into sheets on calendars and ten embossed and cut into
titles. Rigid PVC sheet as high dimensional stability and flame redundancy and is
often used in corrugated form for building construction. Partitions, drainage gutters,
industrial lightening panels are the other uses. Styrene film is widely used for rigid
containers, especially packing, molding, laminating by press and casting.
Formed plastics are produced by forming gas bubbles in the molten material.
Plastic products are further shaped and finished by means of ranging from mechanical
through laser machining, ultrasonic welding and radiation processing.
Vinyl Chloride, discovered in 1815, is formed by the reaction of acetylene
with hydrochloride acid. The polymer Poly Vinyl Chloride (PVC) was first produced
in 1912. Plastic research and manufacture was proceeding on a considerable scale in
the US study of polymers in the laboratory of E.l DuPont De Nemours and company
from 1928 onwards, which led to the super polyamide or Nylon.
Vinyl Chloride is made from ethylene and chlorine. Though acetylene can
also be used. Then polymer is mainly processed in a highly Plasticized form with
varying degrees of flexibility, by a calendaring, extraction molding, often form of
29
“dry blends’, mixtures made below temperature from polymer plasticizer and
pigments. Plasticizers are chosen to maintain flexibility at low temperatures.
The range of applications of flexible Poly Vinyl Chloride is enormous and
covers flooring, wire insulation, home furnishing, piping etc.
Acrylonitrile - butanide - styrene possesses a wide range of properties notably
scuff resistance, high impact strength at lower temperatures, making it suitable for
high, quality luggage , refrigerator linings, food and detergent, containers because of
its chemical resistance to heat. Thick acroconitrale - butanide - styrene sheet is used
for sports car, bodies and automobile doors. Nylon films mostly from nylon-6.6 are
ideal for food packaging, because of strength, impermeability to oils and greases and
high meltin9 point. As such Nm is stream strippable: they find many uses in hospitals.
They are frequently used fl laminations. Acrylic films have resistance to ultra violet
light and external exposure, their prime use in surfacing laminations.
Present revolutionary trend in water management speaks about rip irrigation,
which is developed in Israel and is practiced by Agriculture Based Nation in the
world. Drip Irrigation greatly deals with water management techniques and uses pies
as core tools for implementation with the service of this sort, pipes leads the way in
strengthening the hands of country’s economy.
PVC PIPES IN INDIA
Chief occupation in India is agriculture. For the developing country like India,
modernization of the agriculture practices has a pivotal place in improving the
economy states and the process of modernization includes usage of high reductive
tools and agriculture practices. By using pipes, water can be transported efficiently
with lesser no wastages, from the place where there is plenty of water available to the
place where there is no less scarcity necessity of water.
Pipes have been manufactured in India from the 1960’s on imported lines and
thereafter indigenous plants were also established. There are few pip manufacture up
to 1978-1 979 and production capacity was increased drastically during 197-83.
Cement pipes were the conventional pipes used for irrigation in the lift
irrigation schemes. Now a days PVC pipe replaced the conventional pipes and they
30
constitute almost 90% in this respect (because of break downs, difficulty in
movability etc. The usage of poly vinyl chloride pipes in agricultural fields has
lessened the water seepage which was predominant in earlier days.
The Government of India allowed the imports of sophisticated machinery of
technology, which are not available indigenously. The companies Europe and West
Germany have competition in machinery producing plastics and it is an essential need
for them to carry out continuous research for the up-to-date technology, which gives
higher output and good quality products.
The state Government of Andhra Pradesh is using rigid PVC pipes for
irrigation and water supplies for the past few years. The State Government is
producing PVC pipes through APSID (Andhra Pradesh State Irrigation Development
Corporation) for its lift irrigation schemes and other development schemes. The
Panchayatraj Department is procuring pipes for the public water supply schemes. The
main distributors, sub distributors and individual connections can use these Pipes
PIPES MANUFACTURES IN ANDHRA PRADESH
The major PVC manufactures in Andhra Pradesh,
Nandi Pipes
Finolex Pipes
Supreme Pipes
Monarch Pipes
Jam Sudhakar Pipes
Sri Lakshmi Venkataswara PVC Pipes
Hasthi pipes
FACTORS CONTRIBUTING TO THE BOOM OF PVC PIPES MARKET
Less weight
Non corrosiveness
Excellent pressure Resistance
Simple installation portability in handing
Super weathering and
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Economical
PRESENT MARKET SITUATION OF PVC PIPES
Existence of large number of firms
Product differentiation
Freedom of entry and exit of firms
Easy availability
BENEFITS OF PVC PIPES
Corrosion Resistance
Amuse to galvanic or electrolyte corrosion
Chemical Resistance
PVC pipes are not attacked by low or high concentration of acids. Oxidizing
agents, alkalis oils fats and halogens
Maintenance Free
No painting coating required
Fire Resistance
Self extinguishing
Flexibility
Flexibility in underground piping
Variety of Joining Methods
Cementing, heat fusing, threading, flanged compression fitting.
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Biological Resistance
Fit for high purity water applications and resistant to rodent attack.
LIQUIDITY RATIO
1. Current Ratio:Current assets include cash and those assets, which can be converted
into cash within a year, such as marketable securities, debtors and
inventories.
Current liabilities include creditors, bills payable, accrued expenses,
short-term bank loan, income tax liability and long term debt maturing in
current year.
The Current ratio is a measure of the firm’s short-term solvency. A
current ratio of 2 to 1 or more is considered satisfactory. The current ratio
represents a margin of safety, for creditors. The higher the current assets in
relation to current liabilities, the more the firm ability to meet its current
obligations.
33
Firms with less than 2 to 1 current ratio may be doing well, while
firms with 2 to 1 or even higher current ratios may be struggling to meet
their obligation. It is a test of quantity, not quality. The current ratio is a
crude and quick measure of the firm’s liquidity.
Current Assets
Current Ratio = ------------------------------------
Current Liabilities
Table: 1
Year Current Assets Current Liabilities Ratio
2008-09 11547.42 6472.17 1.78
2009-10 15475.74 8520.42 1.81
2010-11 19393.41 13086.24 1.48
2011-12 34459.30 18233.12 1.88
34
QUICK RATIOThis ratio establishes a relationship between quick, or liquid, assets and
current liabilities. An asset is liquid if it can be converted into cash immediately
reasonably soon without a loss of value. Cash is the most liquid and included in
quick assets are book debts and marketable securities. Inventories normally require
some time for realizing into cash. the quick ratio is found out by dividing quick
assets by current liabilities.`
Generally a quick ratio of 1:1 is considered to represent a satisfactory current
financial condition. A company with a high value of quick ratio can suffer from the
shortage of funds it is has slow paying, doubtful and long- duration outstanding book
debts. On the other hands a company with a low value of quick ratio may really be
35
prospering and paying its current obligation in time if it has been turning over its
inventories efficiently. The quick ratio remains can important index of the firm’s
liquidity
Liquid Assets
Quick Ratio = ---------------------------------
Current Liabilities
Liquid Assets = Current Assets – Inventories.
Table: 2
Year Liquid Assets Current Liabilities Ratio
2008-09 5732.07 6472.17 0.88
2009-10 8988.43 8520.42 1.05
2010-11 7024.18 13086.24 0.53
2011-12 18190.04 18233.12 0.99
36
37
3. ABSOLUTE LIQUID/CASH RATIO: It is suggested that it would be useful, for the management if the liquidity
measure also takes into account reserve borrowing power. As the firm’s real debt
paying ability depends not only on cash resources available with it but also on its
capacity on its capacity on borrow from the market at short notice. Absolute liquid
assets include cash in hand and at bank and marketable securities or temporary
investments. This ratio may be expressed as under:
Absolute liquid assets
ABSOLUTE LIQUID RATIO= ----------------------------------
Current liabilities
38
4. NETWORKING CAPITAL RATIO:-The difference between Current Assets and Current Liabilities
excluding short term bank borrowings is called Net working capital .It is sometimes
used as a measure of a firm’s liquidity. It is considered that, between two firms, the
one having the larger Net working capital has the greater ability to meet its current
obligations. This is no necessary so; the measure of liquidity is a relationship, rather
than the difference between Current Assets and Current Liabilities.
Net working capital
Net working capital ratio = -------------------------------------
Net Assets
Net working capital = Current Assets - Current Liabilities
39
Table:4
Year NET WORKING
CAPITAL
NET ASSETS Ratio
2008-09 5025.25 11547.42 0.43
2009-10 6955.32 15475.74 0.44
2010-11 6307.17 19393.41 0.32
2011-12 16226.18 34459.30 0.47
Interpretation:
It is inferred from the above table that the net working capital
should be increased in the manner for 5 years it means that the company can increase
the working capital in future also.
40
SUJALA PIPES BALANCE SHEET FOR THE YEAR 2008-09. (Rs.in. Lakhs)
31st mar’08(Rs. in lakhs)
31st mar’09(Rs. in lakhs)
I)Sources of Funds
1) Shareholder’s Fundsa) Share Capital 5191.23 5191.23
b) Reserves & Surplus 385.97 35.97
2) Loan fundsa) Secured Loans 3691.52 2855.27
b) Unsecured Loans 2004.22 1826.19
Total 11272.94 4681.46
II)Application of funds
1) Fixed Assetsa) Gross Block 7039.98 7069.46
b) Less: Depreciation 2373.82 2718.85
Net Block 4666.16 4350.61Capital Work in Progress 719.09
2) Investments 57.04 235.543) Current Assets, Loans and Advances.
a) Inventories 2752.56 1193.26b) Sundry Debtors 2619.99 2011.67
c) Cash & Bank Balances 1669.89 629.03d) Loans and Advances 332.21 338.81
Less: Current Liabilities & Provisions 7374.65 4172.77
a) Current Liabilities 3536.64 2828.57b) Provisions 40.39 66.55
Net Current Assets 3797.62 1277.654) Miscellaneous expenditure (to the extent
not written off or adjust)20.58 11.14
Profit & Loss Account 2731.54 3314.63Total 11272.94 9908.66
41
STATEMENT OF CHANGES IN WORKING CAPITAL 2008-09
Particulars 2008 2009 Increase (+)
Decrease (-)
A) Current Assets
Inventories 2752.55 1193.26 1559.29
Sundry Debtors 2619.99 2011.67 608.32
Cash and Bank 1669.88 629.04 1040.84
Loan and advances 332.22 338.81 6.59
Total of Current Assets (A) 7374.64 4172.78
B) Current Liabilities
Current Liabilities 3536.65 2828.58 708.07
Provisions 40.39 66.55 26.15
Total of Current Liabilities
(B)
3577.04 2895.13
Working Capital (A-B) 3797.6 1227.65
Decreasing in Working Capital 2519.95 2519.95
3797.6 3797.6 3234.61 3234.6
42
FUNDS FLOW STATEMENT
Sources Rs. Lakhs Application Rs. LakhsDecrease in Working Capital
2519.96 Purchase of Fixed Assets 29.49
Capital work in progress 719.09Payment of secured loans 836.25Payment of unsecured loans
178.02
Purchase of Investments 178.49Fund for operation 578.62
Total 2519.96 Total 2519.96
ADJUSTED PROFIT & LOSS A/C
Dr. Cr.Particulars Rs. Lakhs Particulars Rs. Lakhs
To Preliminary Expenses Written off
9.43 By Balance B/d 2731.54
To Depreciation 345.03 By Amount withdrawn from reserves
1516.17
To Fund for operation 578.62To Balance c/d 3314.63Total 4247.71 Total 4247.71
SUJALA PIPES BALANCE SHEET FOR THE YEAR 2009-10.
43
31st mar’09(Rs. in lakhs)
31st mar’10(Rs. in lakhs)
I) Sources of Funds1) Shareholder’s Fundsa) Share Capital 5191.24 3976.36b) Reserves & Surplus 35.97 2160.182) Loan fundsa) Secured Loans 2855.28 10723.23b) Unsecured Loans 1826.20 5404.59Total 9908.69 22264.36
II)Application of funds1) Fixed Assetsa) Gross Block 7069.47 17884.47b) Less: Depreciation 2718.85 4648.10Net Block 4350.62 13236.37Capital Work in Progress 719.09 2652.952) Investments 235.543) Current Assets, Loans and Advances.a) Inventories 1193.26 5294.05b) Sundry Debtors 2011.67 4098.66c) Cash & Bank Balances 629.04 447.49d) Loans and Advances 338.81 1462.76
4172.78 11302.96Less: Current Liabilities & Provisionsa) Current liability 2828.58 5052.57 b) Provisions 66.55 572.72Net current assets 1277.66 5677.674) Deferred tax assets - 683.485) Miscellaneous expenditure 11.15 13.89(To the extent not written off or adjusted) 3314.636) Profit &loss account 9908.69 22264.36
STATEMENT OF CHANGES IN WORKING CAPITAL 2009-10
44
Particulars 2009 2010 Increase (+)
Decrease (-)
A) Current AssetsInventories 1193.26 5294.05 4100.79
Sundry Debtors 2011.67 4098.66 2086.99
Cash and Bank 629.04 447.49 181.55
Loan and advances 338.81 1462.76 1123.95
Total of Current Assets
(A)
4172.78 11302.96
B)Current Liabilities
Current Liabilities 2828.58 5052.57 2223.99
Provisions 66.55 572.72 506.17
Total of Current
Liabilities (B)
2895.13 5625.29
Working Capital (A-B) 1277.65 5677.67
Increasing in Working
Capital
4400.02 4400.02
5677.67 5677.67 7311.73 7311.73
45
FUNDS FLOW STATEMENT
Sources Rs. Lakhs
Application Rs. Lakhs
Sale of Shares 1214.88 Increase in working capital
4400.02
Secured Loans 7866.95 Purchase of Fixed Assets
10815.00
Unsecured loans 3578.39 Capital work in progress
1933.86
Sale of Investment 235.54Deferred Tax Assets
683.48
Fund from operation
3569.64
Total 17148.88 Total 17148.88
46
ADJUSTED PROFIT & LOSS A/C Dr Cr
Particulars Rs. Lakhs
Particulars Rs. Lakhs
To Reserved amounts 4957.76 By Balance B/d 3314.63To Depreciation 1929.25 By Provision for
preliminary exp.2.74
To Balance c/d - Fund from operation 3569.64Total 6887.01 Total 6887.01
47
SUJALA PIPES BALANCE SHEET FOR THE YEAR 2010-11.
I)Sources of Funds
31st mar’10(Rs. in lakhs)
31st mar’11(Rs. In lakhs)
1) Shareholder’s Fundsa) Share Capital 3976.36 3976.36b) Reserves & Surplus 2160.18 3804.742) Loan fundsa) Secured Loans 10723.23 10886.36b) Unsecured Loans 5404.59 9588.743) Deferred tax liability (net) - 424.17Total 22264.36 28680.37
II) Application of funds
1) Fixed Assetsa) Gross Block 17884.47 20021.36b) Less: Depreciation 4648.10 5417.03Net Block 13236.37 14604.33Capital Work in Progress 2652.95 6015.092) Investments - 589.833) Current Assets, Loans and Advances.a) Inventories 5294.05 7075.18b) Sundry Debtors 4098.66 7197.89c) Cash & Bank Balances 447.49 247.72d) Loans and Advances 1462.76 1616.75
11302.96 16137.54Less: Current Liabilities & Provisionsa) Current Liabilities 5052.57 8090.45b) Provisions 572.72 586.14 Net Current Assets 5677.67 7460.954)deferred tax asset 683.48 -5) Miscellaneous expenditure ( to the extent not written off or adjust)
13.89 10.17
Total 22264.36 28680.37
48
STATEMENT OF CHANGES IN WORKING CAPITAL 2010-11
Particulars 2010 2011 Increase (+)
Decrease(-)
A) Current AssetsInventories 5294.05 7075.18 1781.13Sundry Debtors 4098.66 7197.89 3099.23Cash and Bank 447.49 247.72 199.77Loan and advances 1462.76 1616.75 153.99Total of Current Assets (A)
11302.96 8090.45
B)Current LiabilitiesCurrent Liabilities 5052.57 586.14 3037.88Provisions 572.72 8676.59 13.42Total of Current Liabilities (B)
5625.29 7460.95
Working Capital (A-B) 5677.67 629.5Increasing in Working Capital
1783.28 1783.28
7460.95 7460.95 5034.35 5034.35
49
PROFIT AND LOSS ADJUSTMENT ACCOUNT FOR THE YEAR ENDED 2010-11Dr. Cr.
Particulars Rs. Particulars Rs. To General Reserve 1500.00 By Balance b/d 604.21To Depreciation 768.93 By Funds from operation 3524.86To deferred tax(424.17+683.48)
1107.65
To Miscellaneous Expenditure
3.72
To Balance c/d 748.77 Total 4129.07 Total 4129.07
FUNDS FLOW STATEMENT
Sources Rs. lakhs Applications Rs. lakhs
Secured Loans 163.13 Purchase of fixed assets 2136.89Unsecured Loans 4184.15 Capital Work in
Progress3362.4
Funds from operation 3524.86 Purchase of investments
589.83
Increase in working capital
1783.28
Total 7872.4 Total 7872.4
50
SUJALA PIPES BALANCE SHEET FOR THE YEAR 2011-12.
I)Sources of Funds
31st mar’11(Rs.in. Lakhs)
31st mar’12(Rs.in. Lakhs)
1) Shareholder’s Fundsa) Share Capital 3976.36 3976.36b) Reserves & Surplus 3804.74 3993.062) Loan fundsa) Secured Loans 10886.36 9244.82b) Unsecured Loans 9588.74 15069.11Deferred tax liability(net) 424.17 618.06Total 28680.37 32901.40
II)Application of funds1) Fixed Assetsa) Gross Block 20021.36 25035.39b) Less: Depreciation 5417.03 6510.29Net Block 14604.33 18525.70Capital Work in Progress 6015.09 5604.022) Investments 589.83 -3) Current Assets, Loans and Advances.a) Inventories 7075.18 9194.04b) Sundry Debtors 7197.89 6706.59c) Cash & Bank Balances 247.72 350.67d) Loans and Advances 1616.75 2070.42
16137.54 18321.76Less: Current Liabilities & Provisionsa) Current Liabilities 8090.45 9202.11b) Provisions 586.14 354.42 Net Current Assets 7460.95 8765.234) Miscellaneous expenditure (to the extent not written off or adjust)
10.17 6.45
Total 28680.37 32901.40
51
STATEMENT OF CHANGES IN WORKING CAPITAL 2011-12
Particulars 2011 2012 Increase (+)
Decrease (-)
A) Current AssetsInventories 7075.18 9194.08 2118.90Sundry Debtors 7197.89 6706.59 - 491.30Cash and Bank 247.72 350.67 102.95 -Loan and advances 1616.75 2070.42 453.67 -Total of Current Assets (A)
16137.54 18321.76
B) Current LiabilitiesCurrent Liabilities 8090.45 9202.11 1111.66Provisions 586.14 354.42 231.72Total of Current Liabilities (B)
8676.59 9556.53
Working Capital (A-B) 7460.95 8765.23Increase in Working Capital
1304.28 - 1304.28
8765.23 8765.23 2907.24 2907.24
52
PROFIT AND LOSS ADJUSTMENT ACCOUNT FOR THE YEAR ENDED 2011-12Dr. Cr.
Particulars Rs.in. Lakhs
Particulars Rs.in lakhs
To General Reserve 188.32 By Balance b/d 748.77To Depreciation 1093.26 By Funds from operation 1479.19Preliminary expensesWritten off
3.72
To Balance c/d 942.662227.96 2227.96
FUNDS FLOW STATEMENT
Sources Rs. Applications Rs. Unsecured Loans 5480.37 Purchase of Fixed Asset 1641.55Capital Work in Progress 411.07 Investment 5014.63Sale of investment 589.83 Increase in Working
Capital1304.28
Funds from operation 1479.197960.46 7960.46
53
FINDINGS:
Working Capital
1 In 2008-09, the company has generated Rs.2519.96 lakhs as internal sources of
funds, which worked out to be 100%of the total sources of funds.
2 During 2009-10 the company utilized Rs.4400.02 lakhs towards finance of the
working capital which worked out to be 35.65%
3 During 2010-11the companies utilized RS.1783.28 lakhs towards finance, which
worked out to be 22.65%of the total application of funds utilized.
During the study period, it is observed that the first (2007-08) year working
capital generated funds and in their latter two latter two years it has utilized funds to
met its working capital requirements.
54
FUNDS FROM OPERATION:
1 In 2008-09 the company had generated loss on funds for operation amounted
Rs. 578.62 lakhs. This consisted 22.96%of t0tal funds.
2 In 2009-10 the company had generated funds from operation amount to
Rs.3569.64 lakhs. This consisted 20.81% of total funds.
3 During the year 2010-11 lf analyses, the company had generated funds from
operation amount Rs.3524.86 lakhs.
55
SUGGESTIONS:
1) A fresh look into the extension of product line.
2) Steps should be initiated in order to cut down the expenses of the
company which are found to affect to the maximum in all the
years of study.
3) Efficient of assets utilization for revenue generation is suggested.
4) Improving the sales performance is desirable. For this, a dynamic
team should be designed, which; can project the company by its
extensive and result oriented marketing activities enabling the
company to complete internal markets.
5) Better utilization of sources of funds is suggested for getting
maximum benefits.
56
BIBLIOGRAPHY
1) Financial Management – I.M. Pandey
2) Financial Management –S.N.Maheswari
3) Financial journals
WWW.GOOGLE.COM
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