Professional Documents
Culture Documents
SUBMITTED BY
Bhagyapriya Sethi
Batch: 2009-11
Berhampur University
CERTIFICATE
PROJECT GUIDE
B. Senapati
Sr. Manager
(Accounts)
HAL, Engine
Division
Koraput
DECLARATION
Thanking you.
Date:
Place: Signature
ACKNOWLEDGEMENT
MBA
BERHAMPUR
UNIVERSITY
PREFACE
CHAPTER – 1
Introduction
Objective of the study
Purpose of the study
Research methodology
Limitation
CHAPTER – 2
Company profile
CHAPTER – 3
Organizational structure
CHAPTER – 4
Theoretical perspective
CHAPTER – 5
Analysis and Interpretations
CHAPTER – 6
Summary
Conclusion
Suggestion
Annexure
Bibliography
CHAPTER – 1
“INTRODUCTION”
INTRODUCTION TO THE STUDY
Financial management is that managerial activity which is
concerned with the planning and controlling of the firm’s financial
resources. Financial management provides immense knowledge to
the various people like the practioners, the outsiders, the
academicians etc.
The profit & loss account reflects the results of the operational
for a period of time. It contains a summary of the expenses incurred
and the revenue realized in an accounting period.
METHODOLOGY
The data which is presented in this report has been taken from
secondary source. The data of HAL, engine division, Koraput for the
year 2006–07, 2007–08, 2008–09, 2009–10 used in this report have
been taken from the financial statements i.e., the Income Statement,
Balance Sheet for the relevant year for comparison of two balance
sheets. The procedural details have been collected from respective
manuals, booklets etc. Some principles, procedures including various
aspects of analysis have been presented in this report by information
discussion with the concerned authority of this division.
RESEARCH DESIGN
The research design that has been adopted for the study offers
a basis of drawing conclusion from the data collected from a firm
which is a descriptive research.
COLLECTION OF DATA
Primary Data – The primary data has been collected from
finance officers and finance managers of the company through
personal interview.
LIMITATIONS
The data collected was purely a secondary source of data.
This study was restricted to the extent possible of data
received as HAL was a Defense Sector.
Detailed information about certain parameters could not
be obtained due to confidentiality.
Time factor was a limitation as only a stipulated period has
been ascertained to me while the personnel had little time
to my queries due to their daily busy schedule.
CHAPTER – 2
“COMPANY PROFILE”
Over the first five decades HAL has spread its wings to cover
the various activities in the area of design, development,
manufacture and maintenance of light aircraft, piston and jet engine
of imported category was delivered to HAL, Nasik division in the year
1978–79.
BANGALORE COMPLEX
Aircraft division – Manufacturing Jaguar Aircrafts.
Engine division – Manufacturing Jaguar Engines.
Helicopter division – Manufacturing Helicopters.
Forge and foundry division – Manufacturing high precision.
Overhaul division – Overhaul of Jaguar and other engine.
Space division – Manufacturing of launching of pads and
common satellites for common services to all divisions.
MIG COMPLEX
Nasik division – Manufacturing and overhauling of
airframes
Koraput division – Manufacturing and overhauling of MIG
engines
ACCESSORIES COMPLEX
Hyderabad division – Manufacturing of electronics and
navigational equipment
Kanpur division – Manufacturing of passenger aircraft and
gliders
Lucknow division – Manufacturing of hydraulic pumps, fuel
pumps and stator Generator
Korwa division – Manufacturing of advanced navigational
equipment
DESIGN COMPLEX
Bangalore division – Modification of any component or unit
of an engine
HEAD OFFICE
The head office of HAL is located at Bangalore and another at
New Delhi under the ministry of defense.
ENGINE DIVISION
Hindustan Aeronautics Limited (HAL), Koraput division is
located a very advantageous position. This company is situated at
Sunabeda in Koraput district, Odisha. HAL, Koraput division,
Sunabeda, moreover the factory is adjacent to the national highway
no: 43 linking Vishakhapatnam – Raipur. The nearest railway link is
at Koraput (16km from Sunabeda). An airfield is located at Jeypore,
39km from Sunabeda. There is a helipad facility at HAL Township and
also a proposed form is being constructed of a permanent airfield.
VISION
“To make HAL a dynamic, vibrant, value based learning
organization with human resources exceptionally skilled, highly
motivated and committed to meet the current and future challenges.
This will be driven by core values of the company fully embedded in
the culture of the organization”.
MISSION
Enable all those working for HAL to give out their best to ensure
there all round growth as well as that of the organization.
Money and Finance are of not one and the same things. Money
stored in vaults or kept in the shape of gold bars or an ornament is
not finance. Money is a static value expressed in currency of the
country, where as, finance is an expression of dynamic function of
money.
PAYROLL SECTION
The main functions of the Payroll cover the following:
Placement of time punching cards in the card rack for the
recording attendance.
Receipt of approval leave application, over time
authorization, attendance sheets & employees gate pass
etc.
Maintenance of leaves records & feeding of attendance
data to computer.
Disbursement of salary & wages.
Payment & recovery of advances.
Recovery of dues from employees.
Accounting of all Payroll transactions.
Maintenance of employees punching cards etc.
CASH OFFICE
This section is responsible for all receipt & payment of
cash/cheque & accounting of the same in the book. The main
functions are as follows:
Receipt of cash, cheque, bank draft & issue receipt for the
same.
Banking of all receipt.
Drawl of cash from bank to cater for daily needs.
Payment of vouchers by cash/cheque.
Writing cash/bank books.
Preparing of Bank Reconciliation Statement.
Safe Custody of cash, cheque books, bank guarantees,
fixed deposits receipts & other investments etc.
FINANCE SECTION
The main functions are: Security & Financial concurrent as per
the delegation of power of proposal for:
Capital expenditure
Revenue expenditure
Purchase of material, stores tools & other services
Manpower requirements
Incentives
Write off – of losses
Cases involving relaxation of rules
Sales of company assets
Contracts enter into with
suppliers/collaboration/subcontractors.
Estimates & errors of contracts in respect of Civil/
Electrical/ Plant order.
MATERIALS SECTION
This section covers the following:
Maintenance of material ledger cards for all materials held
in stores.
Accounting of receipts of all materials by various classes &
issue of all materials draws on work order & expenses
accounts.
Reconciliation of balance with general ledger.
Quality reconciliation of Bin Card balances with materials
ledge balances.
Accountings of inter divisional transfer of Materials & its
reconciliation.
Scrutiny of slow, non – moving inventories.
COSTING SECTION
The main functions of this section are:
Fixation of fixed cost quotation.
Fixation of standard man – hour rate.
Preparation of operating statement.
Accounting & adjustment of differed revenue expenditure.
Accounting of non – production of overhead.
Preparation of man – hour rate.
Accounting of work in progress.
Setting of sales.
Submission of monthly reports to various agencies.
SUNDRY DEBTORS
Disputed /time barred debts from the government departments
are generally not treated as doubtful debts.
INVENTORIES
Raw materials, components, stores and spare parts are
valued at cost.
Work in progress/stock in trade is valued at lower of cost
on realizable value.
Adjustment is not made for under/over observation of cost
on jobs, if the extent of under/over observation in a year
does not exceed 0.5% of the net operating expenses.
Customs duty where applicable is loaded to cost of goods
when cleared and passed through customs.
Stationary, uniform, medical and canteen, stores and
charged to revenue at the time of receipt.
Semi perishable, welfare and miscellaneous equipments
(other then fixed assets) costing individually Rs.20000/
and below are charged to revenue at the time of issue and
those costing above.
Rs.20000/ is written off to revenue in two years including
the year of issue.
Provision for redundancy is maintained at a suitable
percentage/ level of the value of closing inventory of Raw
Materials and components, stores and spares parts and
construction materials less the value of inventory to be
borne by the customer and the value of the inventory for
the initial phase of the new projects. Besides, where
necessary, adequate provision is made for redundancy of
such materials in respect of completed/ specific project
and other surplus/ redundant material pending transfer to
salvage stores.
Stores declared surplus/unserviceable/redundant are
charged to revenue.
Material issued from main stores and lying unused at the
end of the year is not reckoned as inventory.
RETIREMENT BENEFITS
Liabilities towards gratuity provided on yearly actuarial
valuation in respect of all employees is remitted to a trust
progressively.
Provision for vocation leave is made on accrual basis and
unutilized leave at the year end is restated as if such
benefits is payable at the close of the year.
Employer’s contribution of provident fund for the year is
provided for at the government stipulated rate and are
remitted to the trust.
INTEREST
Interest on loan/borrowing for different projects is charged to
Profit and Loss account as the revenue.
DEPRECIATION
Depreciation on fixed assets is charged on “Straight Line
Method”. The rate of depreciation on assets acquired on prior to
01.04.1989 is on the basis of estimated life. The rate of
depreciation is as prescribed in such XIV act to the company’s act
1956 for assets capitalized after 01.04.1989. However, pro rata
depreciation charges to the assets from the first day of the month of
addition. Fixed assets costing Rs.10000/– and below are
depreciated fully in the year of purchase. Where cost of internal
partitions exceeds Rs.50000/–, they are depreciated within period of
five years or the lease period of premises, whichever is less.
DISPOSABLE SCRAP
Saleable/disposable scrap is valued at estimated realized value.
The balance sheet does not disclose the causes for changes in
the assets and liabilities between two different points of time. The
profit & loss account also does not disclose some transaction that
operates through an undertaking. Therefore, another statement is to
be prepared to show the changes in the assets and liabilities
between two balance sheet dates. This statement is called as the
statement of changes in financial position or funds flow statement. It
indicates that where from these funds were obtained and the ways in
which these funds were employed. It can also be said as the
statement of sources and application of funds.
When the current asset in the current year is more than in the
previous year, it is a case of increase in working capital and it is
recorded in the increase column. But if a current liability in the
current year is more than in the previous year, the effect is decrease
in working capital and it will be recorded in the decrease column or
vice versa.
After this the total increase and decrease columns are
compared and the difference shows the net increase and decrease in
the working capital. A form of statement of schedule of changes in
working capital is as follows:
Total
Current
liabilities
Bills payable
Sundry
creditors
Outstanding
exp
Bank overdraft
Short term adv.
Dividend
payable
Proposed
dividend
Provision for
tax.
Total
Working capital
Net increase/
decrease in
W.C
Total
SOURCES OF FUNDS
Sources of funds means from where generally funds flow come
into the business. The following are the sources:
But it is not only that funds from operations are not the real
profit as shown by the profit & loss account, because there many non
fund or non operating items which may have been either debited or
credited to profit & loss account. The items of such type at the debit
side are: amortization of fictitious and intangible assets such as
goodwill, preliminary expenses and discount on issue of shares and
debentures written off; appropriation of retained earnings, such as
transfers to reserves, depreciation and depletion; loss on sale of
fixed assets; payments of dividends, etc.
The non fund items are those which may be operational
expenses but they do not affect funds of the business, e.g. for
depreciation charged to profit & loss account, funds really don’t
move out of business. Non operating items are those which although
may result in the outflow of funds but are not related to the trading
operations of the business, such as loss on sale of machinery or
payment of dividends. The methods for calculating funds from
operations are as follows:
CHAPTER 5
“ANALYSIS AND
INTERPRETATION”
218352.00 257777.51
500.00 986.58
29632.00 30833.55
INTERPRETATION
From the above statement, we analyze that the net working
capital of HAL engine division for the year 2006 – 07 is negative.
Here, it suggests that HAL could not utilize its fixed assets efficiently
due to non availability of liquid funds which in other ways affects the
profitability or the rate of return of the concern.
ANALYSIS
A comparison of sources and applications reveals that the main
sources of funds HAL, Koraput is liable to pay to the head office
control account and the secured loan of amount of (Rs. 38599) &
(Rs. 572) lakhs are respectively payable to the outsiders for some
of the security.
The funds applied are mainly invested in fixed assets and
special tools and equipments of the amount of (Rs. 35394.19) & (Rs.
93136.28). The management can come to know the adequacy of
inadequacy of working capital in advance and can plan the
intermediate and long term financing of the firm, repayment of long
term debts etc.
Current
Liabilities 23334.40 23474.48 140.08
Sundry creditors
Non interest 257777.52 327940.16 70162.64
bearing
Advances from 986.58 942.52 44.06
other customers 30833.55 35435.18 4601.63
Other liabilities 7906.59 17758.51 9851.92
Provisions
320838.64 405550.85
Total
(187848.17) (253031.88)
Net working
capital 65183.71 65183.71
Decrease in W.C
Total (187848.1 (187848.1 84756.2 84756.27
7) 7) 7
INTERPRETATION
From the above statement, we can say that the working capital
is again negative value which signs bad to the concern that the
funds are not available to pay its short term liabilities that are
creditors, other liabilities etc. So, the concern must have a full
sufficient balance for covering the short term obligations in time
without using any reserves or provisions. Here, the cash and bank
balance is very low as compared to the obligations. So, it says that
the financial position of the company is very low.
Total
INTERPRETATION
The above statement shows the net working capital of HAL for
the year 2008 – 09 has been showing negative. This means that the
company has not sufficient funds for covering its short term
obligations. It has no sufficient balance of cash for payment and has
utilized the advances from the outsiders and the non interest bearing
debts.
(B) Statement of Sources and Application
Sources Amounts Application Amounts
(Rs.) (Rs.)
Head office control Purchase of:
Account 4712.75 Fixed 44074.16
Funds from 11968.86 assets
operations 259.75 Special 113380.82
Secured loans 0.44 tools
Deferred tax liability & Equipments 32564.15
Increase in intangible
ass (173077.3
16941.8 ets 3)
Total 0 Change in current 16941.80
ass
ets
Total
Current
Liabilities 32264.15 27001.20
Sundry creditors 5262.95
Non interest 335557.38 437453.56 101896.1
bearing 8
Advances from 2566.81 12.20
other customers 38157.80 44205.28 2554.61
Other liabilities 22538.14 26051.52 6047.48
Provisions 3513.38
431084.28 534723.76
Total
(173077.33) (159056.01)
Net working 14021.32
capital 14021.32
Decrease in W.C
Total (159056.0 (159056.0 125478. 125478.3
1) 1) 36 6
INTERPRETATION
From the above statement, we can say that the working capital
of HAL for the year 2009 –10 has been showing negative. Here the
cash and bank balance is very low as compared to the obligations.
CHAPTER 6
SUMMARY
CONCLUSION
SUGGESTIONS
ANNEXURE
BIBLIOGRAPHY
SUMMARY
With the doors of liberalization opened up in the Indian
economy, the country is witnessing rapid changes on all its spheres
of activity.
For this, HAL also took their step in the growth of the economy. They
had geared up in the mobilizing the steps in lending operation such
as hire purpose, leasing etc.
SUGGESTION
The company has to improve its utilization of current assets and
be well acquainted with investment purpose to improve their
investment decision. The company has to improve the latest
technology to monitor the market. To use new investment purposes
it must use its long term funds and also maintain good relations with
their customers. The company has to maintain a proper cash balance
to maintain its day to day operation with out fail.
CONCLUSION
From this above analysis we may conclude that the reserves
and surplus of the division has grown up. So, the company has to
utilize its reserve and surplus in the payment of dividends and any
other long term obligations.
ANNEXURE
Balance Sheet for the year ended 2006-07 and 2007-08, HAL,
Koraput Division (Rs. In Lakhs)
Particulars 2006-07 2007-08
Sources of funds
Share holders fund: Head office (38598.67) (89880.19)
control a/c 8180.42 12630.29
Reserve & surplus (30418.25) (77249.90)
Loan funds: Secured loans 571.64 468.56
Unsecured loans 0 0
571.64 468.56
Deferred liabilities (Net) 1.51 0.74
Deferred tax liabilities 0 0
Total sources of funds (29845.09) (76780.61)
Application of funds
Fixed assets: Gross block 42940.07 46430.09
Less: Depreciation 17447.67 19817.23
Net block 25492.40 26612.86
Capital work in progress 9902.12 9145.97
35394.52 35758.83
Special tools & equipments 93138.28 110774.82
Investments 0 0
Deferred tax assets 0 0
Current assets, loan & advances:
Inventories 94149.29 94998.36
Sundry debtors 5028.61 5883.47
Cash & bank balance 14.36 19.98
Loans & advances 33798.19 51617.16
132990.47 152518.97
Less: Current liabilities & provisions
Liabilities 312932.05 387792.35
Provisions 7906.59 17758.50
320838.65 405550.85
Net current assets (187848.17) (253031.88)
Intangible assets: Gross carrying 35200.95 38257.78
amount
Less: Cumulative amortization & 5730.68 8540.16
impairment loss
Net carrying amount 29470.27 29717.62
Total application of funds (29845.09) (76780.61)
PROFIT & LOSS A/C for the year ended 2006-07 and 2007-08,
HAL,
Koraput Division (Rs. In Lakhs)
BIBLIOGRAPHY
WEBSITE
www.halindia.com
www.defensediscovery.com
www.google.com