PREPARED BY: BHUMIT SHAH Page 1 A SUMMER TRAINING REPORT ON FINANCIAL PERFORMANCE REVIEW AT RUBAMIN LIMITED Submitted By: Guided By: BHUMIT SHAH MRS. KOMAL PATEL MBA- II ASST. PROFESSOR ACADEMIC YEAR 2010-2012 SUBMITTED TO: K.N.V. INSTITUTE OF BUSINESS MANAGEMENT RAJKOT AFFILIATED TO: GUJARAT TECHNOLOGICAL UNIVERSITY AHMEDABAD
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PREPARED BY: BHUMIT SHAH Page 1
A
SUMMER TRAINING REPORT
ON
FINANCIAL PERFORMANCE REVIEW
AT
RUBAMIN LIMITED
Submitted By: Guided By:
BHUMIT SHAH MRS. KOMAL PATEL
MBA- II ASST. PROFESSOR
ACADEMIC YEAR
2010-2012
SUBMITTED TO:
K.N.V. INSTITUTE OF BUSINESS MANAGEMENT
RAJKOT
AFFILIATED TO:
GUJARAT TECHNOLOGICAL UNIVERSITY
AHMEDABAD
PREPARED BY: BHUMIT SHAH Page 2
K.N.V INSTITUTE OF BUSINESS MANAGEMENT
B/H KHIRASARA POLICE STATION
KALAVAD ROAD, METODA
RAJKOT
CERTIFICATE
I hereby certify that Mr/Ms BHUMIT SHAH student of MBA Sem - III has completed project
work entitled at RUBAMIN LIMITED under my guidance.
As per my knowledge this is his original work based on available data and for partial
fulfilment of MBA programme.
Date: - Name: - MRS. KOMAL PATEL
(Project Guide Name)
Signature: -
PREPARED BY: BHUMIT SHAH Page 3
DECLARATION
I undersigned BHUMIT SHAH a student of MBA 3rd semester declare that I have prepared
this project report on “FINANCIAL PERFORMANCE REVIEW" at “RUBAMIN LIMITED”
under Mr/Ms (Name of person who guided you at company) and by Mr (Name of faculty) of
KNV Institute of Business Management - Rajkot
I also declare that this project report is my own preparation and not copied from anywhere
else.
This is in accordance with syllabus & guidelines of GTU.
(Signature)
___________
Student's Name: BHUMIT SHAH
Roll No.:2053
Date:
PREPARED BY: BHUMIT SHAH Page 4
ACKNOWLEDGEMENT:
Now, a day’s getting a practical knowledge is an important thing but more important
is the support, guidance and motivation provided by the different persons of different status
and section.
The successful completion of any task would be incomplete without acknowledging
people who helped me make it possible. I take this opportunity to express my appreciation
and gratitude to all these who helped me in completing this project.
I would like to heartily thankful Our Dean Mr. M. K Sharma Sir who has providing
opportunity and constant encouragement to prepare this project report.
I would like to thankful Mrs. Komal Patel for providing guidance to prepare this
project report.
I would like to thankful Mr. Rajesh Palkar Sir (Head of HR Department) for
permitting me for Sumer Internship Programme.
I would like to thankful Mr. Nilesh Mistry (Head of Finance Department) and Mr.
Ajay Upadhaya, for helping in the field work.
I would like to thankful Mr. Milind Thakkar (Head of Taxation Dept.), Mr. Sanjay
Shah and Mr. Kamlesh Ajmeri for giving us the Knowledge for the Company Profile.
Lastly, I would like to thankful Mr. Ruchir Patel for providing constant support and
guidance for making this report successful.
BHUMIT SHAH
MBA – II
PREPARED BY: BHUMIT SHAH Page 5
INDEX
SR NO.
PARTICULARS PAGE
1 Executive Summary
2 Introduction
(a) Overview of Industry
(b) Company Details
3 Organizational Study
� Marketing Department study
� Purchase Department
� Operations Department Study
� Human Resource Department Study
� Finance department
4 Chapter Based on Topic
� Ratio Analysis
� House Property
� Working Capital
5 Recommendation / Suggestion
6 Conclusion
7 Bibliography
8 Certificate
PREPARED BY: BHUMIT SHAH Page 6
PREPARED BY: BHUMIT SHAH Page 7
EXECUTIVE SUMMARY:
The Summary includes concise but complete description of the market, market
need how we propose to satisfy that need and the projected financial rewards.
Mission statement:
The Enterprise:
The Rubamin is a closely held Private limited company the company commenced
operation in 1988 with manufacture of Zinc Oxide and has over the years, diversified in
cobalt and copper metals in 1988.we have been profitable in each of our first two years of
operation and have established a strong relationship with numerous distributors
throughout the south and India. We have established work ethic and pride in providing
high quality product at very competitive price. We have been quite successful at this by
concentrating on a relatively small number of components type. Financial result of the last
two years is as follows:
Financial History 2010 2011
Revenue 22197.31 27623.89
Profit Before Tax 85.26 902.10
PBT % 0.38% 3.27%
Net Profit 85.26 756.35
Rubamin is one of the Leading Producers of Zinc Oxide and Cobalt compounds in
the country with its product having wide application across varied user industries. The
company's management is well qualified and experienced and has developed strong
research and development team to continuously improve its process efficiency. Despite
established track record in the business, rubamin has little control on realization due to
commoditized nature of products.
Rubamin Limited has a two decade old successful track record of producing
metallurgical product. It has successfully serviced customers in India and across the globe
over this long period of time. A key success of the organisation has been its ability to
anticipate market needs and invest accordingly. At all times the quality and delivery of the
company has been continuously good, earning it the loyalty of large and important
customer.
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Inter National Operation: (UAE and Democratic republic of Congo):
• Rubaco SPRL, DR Congo and Rubamin SPRL are the wholly owned subsidiaries
of Rubamin FZC, UAE (trading unit) which in turn is a subsidiary of Rubamin
Limited. Rubaco SPRL, DR Congo, Rubamin SPRL are head quarter in
Lubumbashi, which is the capital of the Katanga province.
• Rubaco SPRL formed in the year 2004 is involved in Mineral exploration and
Mining of Minerals.
• Rubamin SPRL is the manufacturing company primarily focused on the
manufacturing operation based on pyrometallurgy technique.
• The group has strength of over 150 employees in DR Congo including Geologist,
This ratio signifies that the average stock is turned over four times during the year. If
figures for cost of goods sold are not available, then the ratio may be calculated on the
basis of the sales. The ratio is very important in judging the ability of management with
which it can move the stock. The higher the turnover ratio, the more profitable the
business would be. The firm in such a case will be able to trade on a smaller margin of
gross profit. A low turnover indicates accumulation of slow-moving, absolute and
low-quality goods, which is a danger signal to the management. Turnover is computed
by dividing the cost of goods sold
by the average inventory. The cost of goods sold means sales minus gross profit. The
ratio indicates how fast inventory is sold.
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YEAR SALES / INVENTORY ITR.
2010-11 27623.89 / 5105.80 5.41
2009-10 21839.71 / 5310 4.11
Interprétation :
In year 2010-11 the ratio is 5.41:1 which is more as compared to last year which is 4.11:1.
So it is considered that this time company has high inventories in store which signify that
inventory of this year sells slight frequently and efficiently as compared to last year.
[G] Debtor Turnover Ratio:
Debtor turnover ratio the analysais of This ratio suppléments the information Regarding
the liquidity of one item of Current assets of the firm. The ratios masures How rapidly
recevables are collected.
The ratio shows the number of days taken to collect the dues of credit sales. The firm
sells goods for cash & credit. Debtors are convertible into cash over long periods which
include current assets.
PREPARED BY: BHUMIT SHAH Page 71
The debtors’ turnover suggests the number of times the amount of credit sale is
collected during the year, while debtors ratio indicates the number of days during which
the dues for credit sales are collected. Suppose the debtors ratio is 60 days, it means
that debtors pay their dues for credit sales after 60 days of making the sales. It means
that during the year the collection for credit sales is made 6 times during the year (360
days /60 days) = 6.
SALES
DEBTOR TURNOVER RATIO = --------------------------------------
DEBTOR
Where Average Debtors = Opening Debtors + Closing Debtors / 2.
YEAR SALES / CD * DAYS DTR
2010-11 29190.75 / 5688.45 * 360 70 Days
2009-10 21839.71 / 4057.31 * 360 67 Days
PREPARED BY: BHUMIT SHAH Page 72
Interpretation:
In this ratio indicates the quality of debtors & the credit collection effort or the
experience. It indicates the speed which the debtors are converted into cash in a each
year. In the ratio is decrease so collection of money for debtors easily. In 2010-11
Debtor turnover ratio Is 70 Days per year which Is High as Compare to last year i.e., 67
Days per year. So Current year Debtor Turnover Is indicative of shorter time-lag
between credit sales and cash collection as compared to last year.
PREPARED BY: BHUMIT SHAH Page 73
INCOME FROM HOUSE PROPERTY:
From this we can understand the income which falls under the head Income from
the house Property”. The scope of the income charged under this head is defined by the
section 22 of the Income tax Act and the computation of income falling under this head is
governed by section 23 to 27.
Three conditions are to be satisfied for the property income to be taxable under this
head.
• The property should consist of building or land appurtenant thereto.
• The assesses should be the owner of the company.
• The property should not be used by the owner for the purpose of any business or
profession carried on by him, the profits of which are chargeable to income tax.
PROPERTY INCOME EXEMPT FROM TAX:
Some income form house properties are exempt tax. They are neither taxable nor
included in the total income of the assesses for the rate purpose. These are:
• Income from a farm house [ section 2(1A ) (C) and section 10 (1) ]
• Annual value of the place in the occupation of an ex-ruler [ section 10 (19 A)
• Property income of the local authority. [ section 10 (20) ]
• Property income of an approved scientific research association [ section 10 (21) ]
• Property income of an education institution and hospital [ section 10 (23 C) ]
• Property income of registered trade union. [ section 10 (24) ]
• Income from property held for charitable purpose. [ section 11 ]
• Property income of political party. [ section 13 A ]
• Income from property used for own business profession. [section 22 ]
• Annual value of self occupied property.
PREPARED BY: BHUMIT SHAH Page 74
1. Statement of Income from Let-out Property for any purpose.
Particular Rs.
Amount
(Rs.)
Step-1
Expected rent xxxx
Whichever is higher > Standard rent
(i) Municipal Value xxx
(ii) Fair rent xxx
Step-2
Actual rent received xxxx
Annual rent received xxx
Less: (i) Unrealized rent xxx
(ii) Vacancy loss xxx
Note: 1 If step-2 > step-1
Gross Annual value - Step-2
Note: 2 If step-2 < step-1
Step No 3 is applicable
Step-3
Expected rent xxx
Less: Vacancy loss xxx xxxx
Gross annual value xxxx
Less: Municipal tax paid by owner xxxx
Net Annual value xxxx
Less: Deduction under section 24
(i) Standard Deduction xxxx
( 30% of NAV )
(ii) Interest on Housing Loan [ No Limit ] xxxx
Income from Let-out Property xxxx
[ Answer nil, (-)ve, (+)ve. ]
PREPARED BY: BHUMIT SHAH Page 75
2. Statement of Income from Self Occupied Property for Own Residence.
Particular
Amount
(Rs.)
Net Annual value Nil
Less: Deduction Under section 24
Less: Interest on Housing loan xxx
Income from Self Occupied Property xxx
[ Answer nil, or Negative ]
INTEREST ON HOUSING LOAN:
• If Loan is taken before 1-04-99, Maximum Deduction = 30000
• If Loan is taken on or after 1-0499
o If loan is taken for purchase, Maximum Deduction =150000
o If Loan is taken for Repair, Renewal or Reconstruction, Maximum
Deduction = 30000
o If Loan is taken for construction and construction is completed within 3 years
from the date of Borrowing, Maximum Deduction = 150000 but if construction
is not completed within 3 years, Maximum deduction is 30000.
PREPARED BY: BHUMIT SHAH Page 76
3. Income from Deemed to be Let-out Property.
When assesses has more than one house for own Residence, one house is to be
considered as a Self Occupied and remaining house considered as deemed to be Let out
property.
Particular
Rs. Amount
(Rs.)
Expected rent xxxx
Whichever is Higher > Standard rent
(i) Municipal Value xxx
(ii) fair rent xxx
Gross Annual Value xxxx
Less: Municipal tax paid by Owner xxx
Net Annual Value xxxx
Less: Deduction under section 24
(i) standard Deduction Xxx
[ 30% of NAV ]
(ii) interest on Housing Loan Xxx
[ No Limit ]
Income from Deemed to be Let Out Property. xxxx
PREPARED BY: BHUMIT SHAH Page 77
4. Statement of income from partly let-out and partly self occupied property.
( one house is self occupied for few month and let-out for remaining period )
Particular
Rs Amount
(Rs)
Step 1
Expected Rent xxxx
Whichever is Higher > Standard rent
(i) Municipal value xxx
(ii) fair rent xxx xxxx
Step-2
Actual rent Received xxxx
Rent receivable excluding SOP xxx
Less: (i) Unrealized rent xxx
(ii) Vacancy Loss xxx
Note: 1 If Step-2 > Step-1
Gross Annual value is Step-2
Note: 2 If step-2 < Step-1
Step No 3 is applicable.
Step-3
Expected rent xxx
Less: Vacancy Loss xxx xxx
Gross Annual Value xxxx
Less: Municipal Tax paid by Owner xxx
Net Annual Value xxxx
Less: Deduction under section 24
(i) Standard Deduction xxx
[ 30% of NAV ]
(ii) Interest on Housing Loan xxx
[ No Limit ]
Income from Partly LOP and Partly SOP xxxx
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Interest on loan:
Interest for pre-Construction Period:
[A] Interest for Current year:
• If Loan is repaid in Last year Current year Interest is not applicable.
• If Loan is repaid in next year full current year interest is Applicable.
• If Loan is repaid in current previous year Interest for current year from 1-04-2008 to
date of repayment.
• If Loan is still outstanding full current year Interest is Applicable.
[B] Interest for Pre-Construction period:
When date of Borrowing, Amount of Borrowing, Rate of Interest and loan is taken for
construction of House.
• Date of Borrowing
• Date of Repayment
• Date of completion of construction
• 31-03 Prior
Pre-Construction period:
Date of Borrowing to Date of Repayment
Or
31-03 Prior
[Whichever is earlier]
Note: Deduction will be available in 5 year from the previous year in which Construction is
completed.
PREPARED BY: BHUMIT SHAH Page 79
EXAMPLE:
During the financial year 2011-2012 Mrs. Dalmia received sum of Rs. 25000 per month by
letting out the Premises at 29, Charotar Society, Office: Old Padra road Baroda.
CALCULATION OF INCOME FROM HOUSE PROPERTY:
Particular Amount (Rs.)
Rent received @25000 p.m 300000
Less: House Tax 4808
Annual Value 295192
Less: Deduction under section 24 88558
Net Taxable Property 206634
EXAMPLE:
Vishnu has two houses both of which are Self occupied Property. The particulars of the
house for the P.Y 2010-11 are as under.
Particular House-I House-II
M.V Per Annum 400000 600000
F.R Per Annum 300000 700000
S.R Per Annum 360000 740000
Date of Completion 31-03-05 31-03-08
Municipal tax paid 10% 9%
Interest on borrowed money 175000 250000
Compute Vishnu’s income from House Property for A.Y 2011-12 and suggest which house
should be opted by Vishnu to be assessed as SOP so that his tax liability is minimum.
PREPARED BY: BHUMIT SHAH Page 80
ANSWER:
Computation of Income from House Property of Vishnu for the A.Y 2011-12
Let us first calculate the income from each house property assuming that they are deemed
to be let out.
Particular House-I House-II
Step-1. M.V or F.R Whichever is Higher 400000 700000
Step-2. I or S.R Whichever is Lower 360000 700000
Step-3. II is GAV 360000 700000
Less: Municipal Tax Paid by Owner 40000 54000
Net Annual Value 320000 646000
Deduction:
30% of NAV 96000 193800
Int. on Borrowed Money 175000 250000
Income from House Property 49000 202200
Option-I (House-I is SOP and House-II is DLOP):
If House-I is opted as SOP, the income from House Property should be:
Particulars Amounts in Rs.
House-I SOP (Loss representing interest on
borrowed capital restricted to 150000)
(150000)
House-II DLOP 202200
Income from House Property 52200
Option-II (House-I is DLOP and House-II is SOP):
If House-II is opted as SOP, the income from House Property should be:
Particulars Amount in Rs.
House-I DLOP 49000
House-II SOP (Loss representing interest on
borrowed capital restricted to 150000)
(150000)
Income from House Property 101000
PREPARED BY: BHUMIT SHAH Page 81
Since Option-II is more beneficial, Vishnu should opt to treat House-II as a SOP and
House-I is DLOP. His Loss for house property would be Rs. 101000 for the A.Y 2011-12.
This Loss can be carried to the next year for set off against income from house property
for that year.
EXAMPLE:
Rajesh own a house in Hyderabad during the P.Y 2010-11. 3/4th portion of the property is
SOP and 1/4th portion was LOP for residential purpose at a rent of Rs. 12000 p.m. the
tenant vacated the property on February 28th, 2011. The property was vacant during
March, 2011 could not be realized in spite of the owner effort. All the condition prescribed
under the rule 4 is satisfied.
Municipal value of the property is Rs. 400000 p.a. Fair rent is Rs. 440000 p.a. and
standard rent is Rs. 480000. He paid Municipal tax @ 10% of M.V. during the year. A loan
of Rs. 3000000 was taken by him during the year 2005 for acquiring the property. Interest
on loan paid during the previous year 2010-111 was Rs. 148000. Compute Rajesh’s
income from House property for the A.Y 2011-12.
ANSWER:
There are two units of the house. Unit-1 with 3/4th area is used by Rajesh for SOP
throughout the year and no benefit is derived from that unit. Hence it will be treated as
SOP and its value is nil. Unit-2 with 1/4th area is LOP during the previous year and its
annual value has to be determined as per section 23 (1).
PREPARED BY: BHUMIT SHAH Page 82
Computation of Income from house property of Mr. Rajesh for the A.Y 2011-12
Particular Unit-1 (3/4th) SOP Amount in Rs.
Net annual Value NIL
Less: Deduction u/s 24
3/4th of 148000 111000
Income from Unit-1 (111000)
Particular Unit-II (1/4th) LOP Amount in Rs.
Step-1 M.V and F.R Whichever is higher 110000
Step-2 1 and S.R Whichever is Lower 110000
Step-3 Actual rent received
(12000 x 9)
108000
GAV: (Step-3 is lower than Step-2) 108000
Less: Municipal tax paid by owner
1/4th of (10% 400000)
10000
Net Annual Value 98000
Less: Deduction
30% of the NAV 29400
Interest on Loan 3700
Income from Unit-2 31600
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WORKING CAPITAL:
INTRODUCTION:
The term working capital is commonly used for the capital required for day-to-day working
in a business concern, such as for purchasing raw material, for meeting day-to-day
expenditure on salaries, wages, rents rates, advertising etc. But there is much
disagreement among various financial authorities (Financiers, accountants, businessmen
and economists) as to the exact meaning of the term working capital.
DEFINITION AND CLASSIFICATION OF WORKING CAPITAL:
Working capital refers to the circulating capital required to meet the day to day operations
of a business firm. Working capital may be defined by various authors as follows:
• According to Weston & Brigham - “Working capital refers to a firm’s investment in
short term assets, such as cash amounts receivables, inventories etc.
• Working capital means current assets. —Mead, Baker and Malott
• “The sum of the current assets is the working capital of the business” —J.S.Mill
Working capital is defined as “the excess of current assets over current liabilities and
provisions”. But as per accounting terminology, it is difference between the inflow and
outflow of funds. In the Annual Survey of Industries (1961), working capital is defined to
include “Stocks of materials, fuels, semi-finished goods including work-in-progress and
finished goods and by-products; cash in hand and bank and the algebraic sum of sundry
creditors as represented by (a) outstanding factory payments e.g. rent, wages, interest and
dividend; b) purchase of goods and services; c) short-term loans and advances and
sundry debtors comprising amounts due to the factory on account of sale of goods and
services and advances towards tax payments”.
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The term “working capital” is often referred to “circulating capital” which is frequently used
to denote those assets which are changed with relative speed from one form to another
i.e., starting from cash, changing to raw materials, converting into work-in-progress and
finished products, sale of finished products and ending with realization of cash from
debtors.
DETERMINANTS OF WORKING CAPITAL:
The factors influencing the working capital decisions of a firm may be classified as two
groups, such as internal factors and external factors.
The internal factors includes, nature of business size of business, firm’s product
policy, credit policy, dividend policy, and access to money and capital markets, growth and
expansion of business etc.
The external factors include business fluctuations, changes in the technology,
infrastructural facilities, import policy and the taxation policy etc. These factors are
discussed in brief in the following lines.
I. Internal Factors:
1. Nature and size of the business:
The working capital requirements of a firm are basically influenced by the nature and size
of the business. Size may be measured in terms of the scale of operations. A firm with
larger scale of operations will need more working capital than a small firm. Similarly, the
nature of the business - influence the working capital decisions. Trading and financial firms
have less investment in fixed assets. But require a large sum of money to be invested in
working capital. Retail stores, business units require larger amount of working capital,
whereas, public utilities need less working capital and more funds to invest in fixed assets.
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2. Firm’s production policy:
The firm’s production policy (manufacturing cycle) is an important factor to decide the
working capital requirement of a firm. The production cycle starts with the purchase and
use of raw material and completes with the production of finished goods. On the other
hand production policy is uniform production policy or seasonal production policy etc., also
influences the working capital decisions. Larger the manufacturing cycle and uniform
production policy – larger will be the requirement of working capital. The working capital
requirement will be higher with varying production schedules in accordance with the
changing demand.
3. Firm’s credit policy:
The credit policy of a firm influences credit policy of working capital. A firm following liberal
credit policy to all customers requires funds. On the other hand, the firm adopting strict
credit policy and grant credit facilities to few potential customers will require less amount of
working capital.
4. Availability of credit:
The working capital requirements of a firm are also affected by credit terms granted by its
suppliers – i.e. creditors. A firm will need less working capital if liberal credit terms are
available to it. Similarly, the availability of credit from banks also influences the working
capital needs of the firm. A firm, which can get bank credit easily on favourable conditions,
will be operated with less working capital than a firm without such a facility.
5. Growth and expansion of business:
Working capital requirement of a business firm tend to increase in correspondence with
growth in sales volume and fixed assets. A growing firm may need funds to invest in fixed
assets in order to sustain its growing production and sales. This will, in turn, increase
investment in current assets to support increased scale of operations. Thus, a growing firm
needs additional funds continuously.
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6. Profit margin and dividend policy:
The magnitude of working capital in a firm is dependent upon its profit margin and dividend
policy. A high net profit margin contributes towards the working capital pool. To the extent
the net profit has been earned in cash, it becomes a source of working capital. This
depends upon the dividend policy of the firm. Distribution of high proportion of profits in the
form of cash dividends results in a drain on cash resources and thus reduces company’s
working capital to that extent. The working capital position of the firm is strengthened if the
management follows conservative dividend policy and vice versa.
7. Operating efficiency of the firm:
Operating efficiency means the optimum utilization of a firm’s resources at minimum cost.
If a firm successfully controls operating cost, it will be able to improve net profit margin
which, will, in turn, release greater funds for working capital purposes.
8. Coordinating activities in firm:
The working capital requirements of a firm are depend upon the co-ordination between
production and distribution activities. The greater and effective the co-ordinations, the
pressure on the working capital will be minimized. In the absence of co-ordination, demand
for working capital is reduced.
II. External Factors:
1. Business fluctuations:
Most firms experience fluctuations in demand for their products and services. These
business variations affect the working capital requirements. When there is an upward
swing in the economy, sales will increase, correspondingly, the firm’s investment in
inventories and book debts will also increase. Under boom, additional investment in fixed
assets may be made by some firms to increase their productive capacity. This act of the
firm will require additional funds. On the other hand when, there is a decline in economy,
sales will come down and consequently the conditions, the firm try to reduce their short-
term borrowings. Similarly the seasonal fluctuations may also affect the requirement of
working capital of a firm.
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2. Changes in the technology:
The technological changes and developments in the area of production can have
immediate effects on the need for working capital. If the firm wish to install a new machine
in the place of old system, the new system can utilize less expensive raw materials, the
inventory needs may be reduced there by working capital needs.
3. Import policy:
Import policy of the Government may also effect the levels of working capital of a firm
since they have to arrange funds for importing goods at specified times.
4. Infrastructural facilities:
The firms may require additional funds to maintain the levels of inventory and other current
assets, when there are good infrastructural facilities in the company like transportation and
communications
.
5. Taxation policy:
The tax policies of the Government will influence the working capital decisions. If the
Government follows regressive taxation policy, i.e. imposing heavy tax burdens on
business firms, they are left with very little profits for distribution and retention purpose.
Consequently the firm has to borrow additional funds to meet their increased working
capital needs. When there is a liberalized tax policy, the pressure on working capital
requirement is minimized.
Thus the working capital requirements of a firm are influenced by the internal and
external factors.
PREPARED BY: BHUMIT SHAH Page 88
STATEMENT OF WORKING CAPITAL:
PARTICULAR
Rs Amt.
(In Lacs)
CURRENT ASSETS:
Stock of Raw Material:
(For month’s consumption)
Xxx
Stock of work-in-progress:
(For month’s consumption)
Xxx
Raw material xx
Wages xx
Overhead xx
Stock of Finished Goods:
(For month’s consumption)
Xxx
Raw material xx
Wages xx
Overhead xx
Debtors:
(For month’s sales)
Xxx
Raw material xx
Wages xx
Overhead xx
Prepaid Expenses Xxx
Cash Xxx
Other Current Assets Xxx
TOTAL CURRENT ASSETS XXX
LESS CURRENT LIABILITIES:
Creditors
(For the purchase of raw material)
xx
Outstanding expenses xx
Bills payable xx
Bank Overdraft xx
TOTAL CURRENT LIABILITIES XXX
NET WORKING CAPITAL XXX
PREPARED BY: BHUMIT SHAH Page 89
STATEMENT SHOWING WORKING CAPITAL:
PARTICULAR 2010-11
(In Lacs)
2009-10
(In Lacs)
CURRENT ASSETS:
Inventories 5105.80 5310.86
Debtors 5688.44 4057.31
Cash and Bank 1787.79 4488.46
Loans and Advances 6379.12 6687.30
TOTAL CURRENT ASSETS 18961.15 20543.93
LESS CURRENT LIABILITIES:
Current Liabilities 2439.83 2064.64
TOTAL WORKING CAPITAL 16521.32 18479.29
NOTES:
INVENTORIES:
PARTICULAR 2010-11
(In Lacs)
2009-10
(In Lacs)
Raw Material 1588.25 1911.66
Work-In-Progress 2396.89 2152.02
Finished Goods 833.96 1120.80
Consumables Stores 286.70 126.39
TOTAL INVENTORY 5105.80 5310.86
2. CURRENT LIABILITIES:
PARTICULAR 2010-11
(In Lacs)
2009-10
(In Lacs)
Due to MSMED Units 0.89 1.89
Others 1584.74 1452.82
Subsidiary Companies NIL NIL
Advance from Customers 351.47 53.92
Others Liabilities 502.74 556.02
TOTAL CURRENT LIABILITIES 2439.83 2064.64
PREPARED BY: BHUMIT SHAH Page 90
Comments on Working Capital:
Raw Material:
The basic raw material required by RL are zinc Dross, Zinc Hydroxide and cobalt ore.
The former is easily available in domestic as well as international market while the later is
being completely imported by the company. Presently, RL procures Zinc Dross from Saan
Scrap Trading Co. ltd., Indian Steel Corporation limited and Rahul Enterprise. As far as
Cobalt Ore is concerned the company procures it from the International market mainly
from its subsidiary rubamin FZC, UAE and Glencode Inds AG. The suppliers of the
company are reliable and the company is dealing them for the past 4 to 5 years.
During F.Y’10 the company maintained holding levels at 1.30 months for imported RM and
1.59 months for indigenously procured RM, which may be considered acceptable. During
F.Y’11, higher sales towards year end resulted into lower inventory levels.
For the year 2011- 12 with increased level of activity and for smooth functioning company
is estimating to maintain holding levels for imported raw material at 1.50 months and for
raw material procured indigenously at about 1.25.
Stock in Process:
The SIP level was at 1.00 months which is considered normal; the same is estimated /
projected to continue at 1.00 month. Considering the stage of manufacturing the average
SIP holding estimated at 1.00 month is considered reasonable and acceptable.
Finished Goods:
Finished goods level was at 0.34 month as on 31. 03. 2011 but for our assessment we has
considered at level of 0.50 month as company is about to open their depots warehouse at
chilli, Baltimore (USA) and Rotterdam. Thus the estimated levels are acceptable.
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Receivables:
The receivables level has been assumed 2.00 months for export receivables and 2.75
months for domestic receivables. The company proposed to give 2.50 months time to
attract buyers for the same. Higher receivables level has become norm of the business,
which is intended by the unit to stay in competition. In view of these receivables holding
levels has been estimated at 2.00 months in lien with its business trends.
During the year 2011-12 the company has estimated export and domestic receivables at
2.00 months and 2.75 months level respectively which is acceptable in consideration with
past trends.
Sundry Creditors:
As per the past trends, the company gets 0.70 to 0.80 months time to make payment to its
suppliers. Earlier the company was producing RM through usance LC. However, since
2008-09 it has started procuring raw material through sight LCs. It may be mentioned that
approximately 50% of the total raw material requires is imported. Out of the imported RM
portion, 85-90% is proposed to be procured under sight LC. As far as the domestic RM
procurement is concerned the company either has to furnish advance payment or procure
it on cash basis. Hence, the average sundry creditors holding level has been estimated
projected at 0.75 month, which is considered reasonable.
PREPARED BY: BHUMIT SHAH Page 92
SIGNIFICANCE OF ACCONTING POLICY:
Basis of Accounting:
The financial statement has been prepared under the historical cost convention on accrual
basis of accounting and in accordance with Generally Accepted Accounting Principal in
India (GAAP) and the provision of the Companies Act, 1956.
Revenue Recognition:
Revenue is recognized when it is earned and no significant uncertainty exists as to its
realization or collection.
Gross Sales are inclusive of income from Job work and excise duty, net of trade discount
and value added tax. Excise duty is presented as a reduction from Gross Sales in the
Profit & Loss Account.
Fixed Asset:
Fixed asset are stated at cost net of CENVET credit if any after reducing accumulated
depreciation until the date of the Balance Sheet. Direct cost are capitalized until the assets
are ready for use and include financing costs relating to any borrowing attributable to
acquisition. Capital work in progress include the cost of fixed asset that are not yet ready
for the intended use, advances paid to acquire fixed assets and the cost of assets not put
to use before the balance sheet date.
Inventories:
Inventories are valued at cost or net realizable value, whichever is lower. The basis of
determining cost for various categories of inventories is as follows:
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1 Raw Material At cost on Moving Average Price basis
2 Other Raw Material, Fuel
and Packing Material
At cost on Moving Average Price basis
3 Material in transit Actual Cost
4 Work in Progress At cost on Moving Average Price basis, Cost
include material cost plus appropriate share
of labor and manufacturing overheads
5 Finished Goods At cost on Moving Average Price basis, Cost
include material cost plus appropriate share
of labor and manufacturing overheads and
excise duty
6 Consumables, Store and
spares
At cost on Moving Average Price basis
Investments:
Investments are classified as long term or current in accordance with Accounting Standard
13 on Accounting for Investments. Long term Investments are shown at cost. However,
when there is decline other than temporary in the value of a long term investments the
carrying amounts is reduced to recognize the decline.
Borrowing Cost:
Borrowing cost that is the acquisition, construction or production of qualifying assets is
capitalized as part of such assets. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use.
Foreign Exchange Transaction:
Transaction in foreign currencies is accounted at the prevailing rate of exchange on the
date of the transaction.
Monetary items denomination in foreign currencies is restated at the prevailing rate of
exchange at the balance sheet date. All gain and Loss arising out of fluctuation in
exchange rates are accounted for in the Profit and Loss Accounts.
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Employee Benefit:
Short term employee benefit (which are payable within twelve month) are measured at
cost.
Long term employee benefit (After the end of Twelve month) and post employment benefit
(payable after the completion of the employment) are measured on a discounted basis by
the Projected Unit Credit Method on the basis of annual third party actuarial valuation.
Contribution to the Provident Fund are made in accordance with the rule of the
government Provident fund as required by statutes
Taxes on Income:
Income taxes are accounted for in accordance with Accounting Standard AS-22 on
Accounting for taxes on income. Income taxes comprise both current and deferred tax
.
Current taxes is measured at the amount expected to be paid to/recovered from the
revenue authorities, using applicable tax rates and laws.
The carrying amount of deferred tax assets at each balance sheet date is reduced to the
extent that it is no longer reasonably certain that sufficient future taxable income will be
available against which the deferred tax assets can be realized.
Provision and contingent Liabilities:
The company recognizes a provision when there is a present obligation as a result of a
past event that probably requires an outflow of resources and a reliable estimate can be
made of the amount of the obligation. A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may but probably will not require
an outflow of resources. Where there is possible obligation or a present obligation that the
likelihood of outflow of resources is remote, no provision or disclosure is made.
Government Grant:
Central and State Subsidy and Laboratory Subsidy received for setting up unit in the
specified backward area is credited to Capital Reserve Account.
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Prior Period Adjustments:
All identifiable items of income and expenditure pertaining to prior period are accounted
through “Prior Period Adjustments Account”.
Impairment of Assets:
The company assesses at each Balance Sheet date whether there is any indication that
an assets may be impaired. If any such indication exists, the company estimates the
recoverable amount of the assets. If such recoverable amount of the assets or the
recoverable amount of cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the Profit and Loss Account. If at the
Balance Sheet date, there is an indication that if a previously assessed impairment loss no
longer exists, the recoverable amounts are reassessed and the assets is reflected at the
recoverable amount.
PREPARED BY: BHUMIT SHAH Page 96
PREPARED BY: BHUMIT SHAH Page 97
RECOMMENDATIONS / SUGGETIONS:
The Major expenses of the company were manufacturing experiences which includes Consumption of raw material, freight and duties and repairs and Maintenance. Out of this costs Repair and Maintenance is one of the controllable cost which can be reduced by the company. By proper utilization of its Plant and Machineries it can not only reduce its cost but also avoid shutdowns.
Many types of machinery were put down as an idle. They can be utilized by giving it to other companies on rent or other consideration. By this way company can earn some more amount of profit.
• Should try to reduce raw materials and finished goods period by reducing inventory level. Should try having to collect debtors quickly.
• Control the inventory level. It should increase CA and decreases the level of CL, because the quick ratio taking too much time. Organization should examine the quick ratio because it is more than 1:1.
• Should concentrate more on inventory or we can say that stock, because in the CA, inventory's demand has higher position.
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PREPARED BY: BHUMIT SHAH Page 99
CONCLUSION:
� It was great experience for me to have training at the company like RUBAMIN
LIMITED. I learned those skills, which are needed in any management student.
� Management of RUBAMIN LIMITED is good and having capable employees to make it
number one Cobalt and Zinc oxide manufacturing company in India.
� All the departments are doing their work in a professional manner and all the
employees are of cooperative in nature. I have not faced any difficulties in getting any
data. They are always ready to help you.
� At this stage, now I am having clear picture of what are the activities of the different
departments.
� During my training period I have visited the Different Departments of the Company but
the Survey Completed on Finance Department.
� Lastly, it was the great experience for me. I learned many things during this training
period, which I might not learn if I was not at RUBAMIN LIMITED.