Professional Documents
Culture Documents
ON
CASH FLOW ANALYSIS AND WORKING CAPITAL
OF YARN DIVISION
Submitted to
GAUAHATI UNIVERSITY,GUWAHATI
in partial fulfillment of the requirements
for the award of the Degree of
Pinky
100-200-17
2010-2013
CERTIFICATE
Prof.Shameena Gupta
Director
STUDENTS DECLARATION
I hereby declare that the Training Report conducted at
SATISH KUMAR MITTAL &CO.
Place:
Date:
17
Pinky
Reg. No.:100-200-
ACKNOWLEDGEMENT
Firstly, I would like to thank MR.BRIJESH SAINI (Account
Manager) and a sincere thanks to all other staff members of Satish
Kumar Mittal &Com. . who have helped me directly or indirectly in
my difficulties.
I wish to express my deepest and most sincere thanks to my
Faculty Guide,
Prof. SHAMEENA GUPTA for their invaluable
guidance & support throughout the completion of my project.
Last but not least, I am thankful to all my family for cooperating
with me at every stage of the project. They acted as a continuous
source of inspiration and motivated me throughout the duration of
the project helping me a lot in completing this project.
Pinky
CONTENTS
CHAPTER 1 INTRODUCTION
1.1
1.2
Industry profile
a)
b)
c)
Future of industry
CHAPTER 1
INTRODUCTION
sales
made
on
credit.
calculating
cash
flow
from
operations.
deducted from the total value of an asset that has previously been accounted
for. That is why it is added back into U for calculating cash flow. The only
time income from an asset is accounted for in CFS calculations is when the
asset
is
sold.
sales.
The same logic holds true for taxes payable, salaries payable and prepaid
insurance. If something has been paid off, then the difference in the value
owed from one year to the next has to be subtracted from net income. If there
is an amount that is still owed, then any differences will have to be added to
net
earnings.
INVESTING
Changes in equipment, assets or investments relate to cash from investing.
Usually cash changes from investing are a "cash out" item, because cash is
used to buy new equipment, buildings or short-term assets such as marketable
securities. However, when a company divests of an asset, the transaction is
considered
"cash
in"
for
calculating
cash
from
investing.
FINANCING
Changes in debt, loans or dividends are accounted for in cash from financing.
Changes in cash from financing are "cash in" when capital is raised, and
they're "cash out" when dividends are paid. Thus, if a company issues a bond
to the public, the company receives cash financing; however, when interest is
paid to bondholders, the company is reducing its cash.
Analyzing
an
Example
of
CFS
From this CFS, we can see that the cash flow for FY 2003 was $1,522,000.
The bulk of the positive cash flow stems from cash earned from operations,
which is a good sign for investors. It means that core operations are generating
business and that there is enough money to buy new inventory. The purchasing
of new equipment shows that the company has cash to invest in inventory for
growth. Finally, the amount of cash available to the company should ease
investors' minds regarding the notes payable, as cash is plentiful to cover that
future
loan
expense.
Of course, not all cash flow statements look this healthy, or exhibit a positive
cash flow. But a negative cash flow should not automatically raise a red flag
without some further analysis. Sometimes, a negative cash flow is a result of a
company's decision to expand its business at a certain point in time, which
would be a good thing for the future. This is why analyzing changes in cash
flow from one period to the next gives the investor a better idea of how the
company is performing, and whether or not a company may be on the brink of
bankruptcy or success.
Tying the CFS with the Balance Sheet and Income Statement
As we have already discussed, the cash flow statement is derived from the
income statement and the balance sheet. Net earnings from the income
statement is the figure from which the information on the CFS is deduced. As
for the balance sheet, the net cash flow in the CFS from one year to the next
should equal the increase or decrease of cash between the two consecutive
balance sheets that apply to the period that the cash flow statement covers.
Conclusion
A company can use a cash flow statement to predict future cash flow, which
helps with matters in budgeting. For investors, the cash flow reflects a
company's financial health: basically, the more cash available for business
operations, the better. However, this is not a hard and fast rule. Sometimes a
negative cash flow results from a company's growth strategy in the form of
expanding
its
operations.
By adjusting earnings, revenues, assets and liabilities, the investor can get a
very clear picture of what some people consider the most important aspect of a
company: how much cash it generates and, particularly, how much of that cash
stems from core operations.
CASH FLOW STATEMENT CAN BE PREPARED BY THE
FOLLOWING METHODS
a) Direct method
b) Indirect method (AS-3)
Direct method
1) Profit and loss appropriations account (format)
Date
Particulars
Amount
Date
Parti
culars
By balance
b/d
(last
years credit
To transfer to
balance
1. general reserve
if
any)
2. sinking fund
3. capital
redemption
reserve
By gain on
sale of fixed
4. debenture
assets
redemption
reserve
By
5. dividend
equalization
fund
to interim dividend paid
to proposed dividend
to provision for income
tax
to
bonus
to
equity
shareholders a/c
to loss on sale of fixed
FFO
(funds from
operations)
Amount
assets
to goodwill written off
to depreciation
to preliminary expenses
written off
to
LFO
(loss
from
operations)
Particulars
amount
Date
particulars
To balance b/d
By depreciation
To
P/L
a/c
( profit on sale)
on sale)
By bank a/c (sale)
amount
To
bank
By balance c/d
(purchase)
Particulars
amount
Date
particulars
amount
To plant a/c
By balance b/d
To balance c/d
By
profit
and
loss a/c
Particulars
amount
Date
To bank a/c(tax
particulars
amount
By balance b/d
paid)
To balance c/d
By
profit
loss a/c
and
Amounts
Applications of funds
Issue of shares
Purchase of assets
Receipts of loans
Payment of loans
Sale of assets
Payment of tax
Amounts
Payment of dividend
CFO ( CASH FROM
OPERATIONS)
Purchase of goodwill
Redemption
preference shares
Operating activity:
Profit after taxes
+ proposed dividend
+ provision for tax
+ goodwill written off
+ preliminary expenses written off
+ premium paid on redmption of preference shares
+ transfer to general reserve
+ depreciation
of
+ interim dividends
+ loss on sale of fixed assets
- profit on sale of fixed assets
= profit before working capital change
+ decrease in current assets
+ increase in current liability
- increase in current assets
- decrease in current liability
= operating profit
- payment of taxes
= cash flow from (used) operating activity [A]
Investment activities
Sale of fixed assets
Sale of investments
(Purchase of fixed assets)
(Purchase of investments)
= cash flow from (used) investing activity [B]
Financing activities
Issue of equity shares
(Redemption of debentures)
(Redemption of preference shares)
issue of debentures
WORKING CAPITAL
short-term purposes as for the purchase of raw material, payment of wages &
other day to day expenses etc. these funds are known as working capital.
Before discussing about the working capital management of VARDHMAN
TEXTILES LIMITED, we should know the meaning, definition and different
concepts of working capital.
MEANING OF WORKING CAPITAL
In simple words, working capital refers to that part of the firms capital which
is required for financing short term or current assets such as, cash, marketable
securities, debtors, and inventories or in other words the working capital is the
excess of current assets over current liabilities.
CLASSIFICATON OR KINDS OF WORKING CAPITAL
Working capital may be classified in two ways:
a)
b)
Production policy.
Seasonal variation.
Credit policy
Business cycle.
Working Capital is the blood and the nerve centre of business. Just as the
blood circulation is essential in the human bodies for maintaining life, working
capital is very important to maintain the running of business. No business can
run successfully without an adequate amount of working capital.
The advantages are as follows:
FINISHED GOODS
WORK-IN-PROGRES
DEBTORS
RAW MATERIAL
CASH
banks
like
ICICI
BANK,
STATE
BANK
OF INDIA,
Bill Payable
Sundry creditors
Outstanding expenses
Dividend payable
Bank overdraft
Satish kumar mittal & com is a major integrated textile producer in India. The Group was
setup in 1965 at Ludhiana, Northern India. Since then, the Group has expanded manifold and
is today, one of the largest textile conglomerates in India. The Group portfolio includes
Manufacturing and marketing of Yarns, Fabrics, Sewing Threads, Fiber and Alloy Steel. The
group started its corporate journey with an installed capacity of 6000 spindles in 1965 under
the flagship company Satish kumar mittal & com Spinning & General Mills Limited (now
known as Satish kumar mittal & com Holdings Limited and is an investment arm of the
Group) in Ludhiana. Over the years the group has expanded its spinning capacities besides
adding new businesses. The group has also diversified into yarn processing, weaving, And
Sewing Thread, fabric processing, acrylic fiber manufacturing and into special/ alloy steels.
Today, close to 20,000 people are the Organization is most important asset its human capital
The Satish kumar mittal & com. comprises of three listed and two unlisted companiesListed companies
Satish kumar mittal & com Textiles Limited (formerly Mahavir Spinning Mills
Limited)
Satish kumar mittal & com Holdings Limited1 (formerly Satish kumar mittal & com
Spinning & General Mills Limited)
Unlisted Companies
VMT Spinning Company Limited
Satish kumar mittal & com Threads Limited
HISTORY
The industrial city of Ludhiana, located in fertile Malwa region of central Punjab is known as
the MANCHESTER OF INDIA. Within the precincts of the city is located
The corporate head quarters of Satish kumar mittal & com., A household name in northern
India. The Satish kumar mittal & com. , born in 1965 under the entrepreneurship of late Lala
Rattan Chand Oswal has today blossoms into the one of the larger textile business houses in
India .
At its inception, satish kumar mittal & comhas installed capacity of 14000 spindles. Today: its
capacity has increase multifold to over 5.5 lacs spindles. In 1982 the group enters sewing
threads market in company, which was the forward integration of business. In 1990, it
undertook yet another diversification this time into the weaving business. The grey fabric
weaving unit at Baddi, commissioned in 1990 with a capacity of 20,000 meters per day , has
already made its mark as a quality producer of grey poplin, sheeting, shirting in the domestic
as well as foreign market . This was followed by entry into fabric processing by setting up of
AURO TEXTILES at BADDI, which currently has a processing of 1,00,000 meters per day.
In the year 1999, the group has added yet another feather to its cap with a setting of SATISH
KUMAR MITTAL & COM ACRYLICS LTD in. The company also has a strong presence in
the markets of JAPAN, HONG KONG, KOREA, and UK & EUROPE in addition to the
domestic market. Adherence to systems & true dedication to quality has resulted in obtaining
the coveted ISO 9002/ISO 14002 quality awards which is the first in textileindustry.
PHILOSHOPHY
Faith in bright future of Indian textile industry & hence continues expansion areas which we
know best.
Products to be of best available quality for premium market segments through TQM & ZERO
DEFECT implementation in all functional areas.
World class manufacturing facilities with most modern R&D & process technology
Faith in individual potential respect for human values
MISSION
SATISH KUMAR MITTAL & COMaims to be a WORLD CLASS TEXTILE organization
producing diverse range of products for the global textile market. SATISH KUMAR MITTAL &
COM seeks to achieve customer delight through excellence in manufacturing & customer
service based on creative combination of state- of the- art technology & human resources.
SATISH KUMAR MITTAL & COM is committed to be responsible corporate citizen
BOARD OF DIRECTORS
BANKERS
STATE BANK OF PATIALA,
ALLAHABAD BANK,
ICICI BANK LTD.,
PUNJAB NATIONAL BANK,
STATE BANK OF INDIA,
BANK OF BARODA
CORPORATION BANK,
UNION BANK OF INDIA
CANARA BANK,
STANDARD CHARTERED BANK
BANQUE NATIONALE DE PARIS
VICE PRESIDENT
MANAGERS (M1-M4)
EXECUTIVES (E1-E2)
OFFICERS (O1-O2)
STAFF (S1-S4)
SUBSTAFF
Satish kumar mittal & com Spinning and General Mills Ltd. was the 1st textile company to be
awarded ISO-9002 and ISO-14002 certificate in 1993.
ST
Steel
Yarn
Cotton Yarn
Fabric
PRODUCT RANGE
Yarns
The group is one of the largest spinning group of the country with a spindlier of over
5, 50,000. The group has 12 production plants located in the states of Punjab, Himachal
Pradesh and Madhya Pradesh. In many of the yarn market segments, Satish kumar mittal &
comholds the position of market leader besides being a large and reliable supplier in the
country.
Satish kumar mittal & comis also the largest exporter of yarn from India. The group yarn
exports amount to over US$ 100 million covering the most quality conscious markets in
theworld. The total export of Cotton yarn of the group is about 6% of total export of cotton
yarn from the country.
Sewing Threads
Satish kumar mittal & comentered the Sewing thread business in 1982 as a forward
integration to its yarn business. The group had to struggle for survival being pitted against a
large multinational organization. Today with approximately 25 metric tonne/per day of sewing
thread manufacturing capacity in its plant at Hoshiarpur, Ludhiana, Baddi & Perundurai.
Satish kumar mittal & comthreads have emerged as second largest sewing thread brand in the
country.
Processed Fabric
In its quest for further value addition Satish kumar mittal & comstarted fabric processing in
1999.
Satish kumar mittal & comestablished a modern fabric process house in 1999 with a capacity
of 30 million meters per annum. This capacity has been expanded to 42 meters per annum in
FY 2005-06. A Satish kumar mittal & com fabric is dedicated to meet customer demand for
top quality finished fabric through product innovation, world class quality, state-of-art
technology and excellence in service.
Fibre
In 1999 the group set up an Acrylic staple fibre plant at Bharuch in Gujarat in collaboration
with Marubeni and Japan Exlan of Japan. The plant has annual capacity of 18500 metric
tonnes per annum.
Steel
The steel business was setup in 1973 as diversification with a capacity of 35000 million tones
per annum. Later on group acquired a steel plant from Mohta Group of Industries in 1988 and
converted this loss making unit into a profitable business in first year of operation with the
Group. Subsequently the steel mill has been modernized and expanded to a capacity of
100000 million tonnes per annum. Catering to high technology Quality conscious alloy steel
segment, the unit has a reputation of being a dependable source of supply of special and alloy
steel to Indian/International standards.
YARN
The SATISH KUMAR MITTAL & COM range of yarn was a humble beginning. Tree decades
of hard work, commitment and constant innovation have resulted in well earn trust and
goodwill of our customers across the globe.
At SATISH KUMAR MITTAL & COM we move with a notion that customer serves is a way
of life. We strive to provide our customers delight with 3P service PROMPT, POLITE
&PERSONALIZED
It today have a capacity of over half a million spindles along with two dyeing plants bearing a
capacity of more than 27 tones yarn & 22 tones fibers per day. Our goal, therefore calls for
serving our customers with multiple of products meeting the most diverse of requirement.
This, infect has position SATISH KUMAR MITTAL & COM as a SUPER MARKET of high
quality yarn.
YARN OPERATIONS
The unique combination of man & machine, competing & supplementing each other with
continuos increase in productivity has enable SATISH KUMAR MITTAL & COMto
dexterously ripe the fruit of economies of scale & process variety of raw material required for
variety of end products to textiles. Evenness results falls in 5% to 15% of user standards
achieved through
Proper selection of raw materials
/
World class Pre spinning and Spinning Facilities
/
Techincal Know How
/
Human Skills
/
100% Quality Assurance System
Domestic collections
DOMESTIC COLLECTION
Domestic collection means collection, which are collected by Ludhiana branch and corporate
centralized market yarns department. in this system they collect the cheque or demand draft
from the yarns customers and handed over it over to the centralized accounting cell for the
depositing the same in to the bank on daily basis. After receiving all cheque on a particular
day the e centralized accounting cell deposit the instruments in to the bank for clearing.
After depositing the collections into the bank, the ACR section account for the same in
respective customers accounts on basis of advise sent to bank on day -to -day basis.
performance tracking.
by suggesting remedies for the problem areas identified, it can truly fit into the
fundamental and critical area of financial reform which focuses on outcomes,
of objectives being achieved at a reasonable cost. It will integrate internal
auditing with the ongoing public financial management reforms.
different from what exists in the private sector, and is a significant reason for
the difference between the two. The government audit is carried out in an
environment determined by legal rules and a great deal of importance is
attached to lawful and rightful conduct within the governments flowing from
the need for governments to act in accordance with laws and regulations laid
down by the government itself
In the public sector moreover, the auditors opinion serves the interest
of the public in general and is not confined to only providing a full and fair
view to the stakeholders as is the case with the private sector audit.
more complex when compared to the private sector where decisions are
predominantly determined by technical and scientific factors concerning the
primary processes of the entity and the economically limiting conditions .
bottom line of income and expenditure account but rather needs other criteria
as a measure of performance.
important not only as a track to the financial report but also because the
accounts contain important information which is vital for the process of
decision making which in the government sector, by its very nature, has wider
implications.
Financial reporting in the public sector is also different from that in the
private sector because the laws and regulations regarding financial reporting in
the public sector are different on account of the need for transparency on part
of the government regarding the governments plans and the resource
allocations. Therefore the laws and regulations on financial reporting in the
public sector start with regulating the procedure of the budgeting process and
the structure of the presentation of information in the budget documents.
not to earn a profit over and above the cost of production as is the case with
private entities. Rather the goal of government is to realize the maximal
possible usefulness for society from a limited amount of resources and the
performance indicators are also different since the success of government
entities is not expressed only in financial terms.
Tools And Techniques
Journal voucher.
Ledger
Subsidiary Books (sales book, purchase book, cash book, and many
more)
Trial Balance.
Financial Statement (Trading and P&l A/c, Balance Sheet)
Ratio Analysis
Cash Flow and Fund Flow Analysis
Working Capital Statement.
Cost Analysis
Budgeting
And Many More
Key Learning:
Organizational independence.
A formal mandate.
Unrestricted access.
Sufficient funding.
Competent leadership.
Competent staff.
Stakeholder support.
Professional audit standards
RESEARCH METHODOLOGY
Research comprises of defining & redefining problems, formulating
hypothesis or suggested solutions, collecting, organizing & evaluating data,
making deductions & reaching conclusions. In research design we decide
about:
Type of data
DATA TYPE
LIMITATIONS OF STUDY
In the due course time, the main limitation was with searching the data. The
data was not completed in the main files of SATISH MITTAL& COM. The
training period of six weeks was to short to study the organization in detail. In
some cases budgets are available but actual figures are not available for
comparison.
CHAPTER 5 ANALYSIS
1. FINANCIAL RESULTS:
The Financial Results for the year are as under :- (Rs. in Crore)
PARTICULARS
2009-2010
2008-
2009
Turnover
2,767.22
2495.38
594.63
371.37
86.73
102.34
507.89
269.03
Depreciation
220.87
207.32
287.02
61.71
56.75
0.17
PBDIT
Interest and Financial expenses
- 0.91
- Deferred Tax
(Net of Adjustment)
Profit after Tax
16.51
33.28
213.76
27.35
1.95
1.25
60.85
57.34
- 113.42
-
276.56
199.36
Appropriations:
Proposed Dividend on:
- Equity shares
17.33
11.55
2.88
1.96
20.21
13.51
125.00
125.00
131.35
60.85
276.56
199.36
- Basic
37.00
24.37
- Diluted
31.83
18.48
3.00
2.00
World economy has shown initial indications of recovery after a severe spell
of recession. The world economy is expected to grow by 4.2 percent in 2010
and projected to maintain the growth momentum in the next 5 years. However,
the consumer confidence in major importing countries like USA and EU has
been lagging behind economic growth projections and may
take some more time before showing any convincing revival. Though some
growth has been seen in the world trade of textile and clothing especially post
Sept. 2009. The USA textile and clothing imports, which declined by 13
percent in 2009 over 2008 has increased by 1 percent during Jan-Feb 2010.
The partial
explanation of increase in textile and clothing imports may be attributed to the
pressure on retailers caused by very low inventory levels. It has resulted into
creation of demand for textile and clothing products in international market.
The domestic market is also showing some signs of improvement leading to
overall increase in textile manufacturing in the country. The industry has
attracted investment to the tune of Rs. 2 lacs crore under TUF for capacity
expansion and modernization, which has started paying yield. It is evident
from the increased textile manufacturing in the country in the form of
increased spun yarn production. The spun yarn production is expected to
increase at about 4200 mn kg in 2009-10 and expected to grow by about 8%
to 4500 mn kg in 2010-11. The domestic deliveries of spun yarn has also been
growing consistently showing increased activities in the entire textile value
chain.
B) Steel business:
Our steel business is dependent on demand for auto and other related users.
The demand in auto industry which was suppressed because of global
economic slow down has now revived since third quarter of 2009-10.
Simultaneously, their has been a steep rise in raw material cost like shredded
scrap, sponge iron etc. because of which there is more market driven
a). Yarn:
The production of Yarn increased from 115,888 MT to 126,146 MT during
2009-2010.The sales revenue of yarn increased from Rs. 1,324.72 crore to Rs.
1,476.99 crore during the year under review.
b). Steel:
During the year, the production of steel ingots/billets has been 62,110 MT
compared to 53,078 MT of the previous year and that of Rolled products has
been 56,581 MT compared to 51,471 MT of the previous year. The sales
revenue of the division has been Rs. 276.38 crore (Previous Year Rs. 321.74
crore).
c). Fabric:
During the year, the production of processed fabric increased from 51.35
million meter to 60.78 million meter, showing an increase of 18.36% over the
previous year. The sales revenue of the processed fabric also increased from
Rs. 482.17 crore to Rs. 556.52 crore showing an increase of 15.42% over the
previous year.
PROFITABILITY:
The Company earned profit before depreciation, interest and tax of Rs. 594.63
crore as against Rs. 371.37 crore in the previous year. After providing for
depreciation of Rs. 220.87 crore, (Previous year Rs. 207.32 crore), interest of
Rs. 86.73 (Previous Year 102.34 crore), provision for current tax Rs. 56.75
crore (Previous year Rs. 0.17 crore), provision for deferred tax (net of
adjustments), Rs. 16.51 crore (previous year Rs. 33.28 crore), and provision
for Fringe Benefit Tax of Rs NIL (Previous Year Rs. 0.91 crore) the net profit
from operations worked out to Rs. 213.76 crore as compared to Rs. 27.35
crore in the previous year.
RESOURCES UTILISATION:
a). Fixed Assets:
The gross fixed assets (including work-in-progress) as at 31st March, 2010
were Rs. 3,611.65 crore as compared to Rs. 3,414.27 crore in the previous
year.
b). Current Assets:
Debtors outstanding for more than six months were Rs. 13.00 crore as
compared to Rs. 22.87 crore in the previous year. The net current assets as on
31st March, 2010 were Rs. 1,769.52 crore as against Rs. 1370.30 crore in the
previous year. Inventory
level was at Rs. 1,107.46 crore as compared to the previous year level of Rs.
620.10 crore.
FINANCIAL CONDITIONS & LIQUIDITY:
The Company enjoys a rating of "AA-" with stable outlook and "P1+" from
Credit Rating Information Services of India (CRISIL) for long term and short
357.21
62.70
End of the year
222.07
357.21
Net cash provided (used) by:
Operating Activities
(79.72)
447.04
Investing Activities
(97.06)
(125.53)
Financial Activities
41.64
(26.99)
review, the gross sales of this Company were Rs. 377.16 crore and the Profit
after tax was Rs. 41.37 crore.
DIVIDEND:
The Board of Directors of your Company has recommended a dividend of Rs.
3/- per share on the Fully Paid-up Equity Shares of the Company.
LIMITATIONS
Working capital is powerful tool of determining companys strength and
weakness. But the analysis is based on the information available in the
financial statements, which are as follows:
It is only a study of interim report.
Working capital study is only based upon monetary information and
non-monetary factors are ignored.
It does not consider change in price level.
As working capital is prepared on the basis of going concern, it does
not give extract position. Thus accounting concept and conventions
causes a serious limitation to financial analysis.
Analysis is only a mean and not an end in itself. The analyst has to
make interpretation and draw his/her conclusion. Different people may
interpret the same analysis in different ways.
SUGGESTIONS
The prices should be less to re-establish the market for Yarn.
Since the customer is very specific in terms of value so the company can
introduce new and alternative products whenever possible by adjusting
the raw-material mixing as a result achieve better profitability.
As far as accounting is concerned, although the entire system is
computerized, but there still involves lots of paperwork. So this should
be minimized b acquiring more advanced accounting software
Not only for yarn customers but for other product customer dealing
under letter of credit should done
L/C period should also increased
Company should put more efforts to improve its liquidity position
Company should stretch the credit period given by the suppliers.
Company should improve the inflow and outflow of cash.
Company should use the capital in efficient manner.
Strengths
Positive Attitude
Flexibility.
Opportunities
Weaknesses
Emotional Behaviour.
Lake of Concentrate.
Change of place.
Threats
Growing Sector
Learning Opportunities.
BIBLIOGRAPHY
REFERENCE TO A BOOK
between
working
capital
management
and
WEB PAGES
www.google.com
http://en.widipedia.org/wiki/Letters_of_credit