A study on leverage analysis at Satish Sugar ltd
Chapter Contents Page no
1 Executive Summary
2 Objective of the study
3 Methodology of data collection
4 Profile of the Sugar Industry
5 Company Profile
6 Product Profile
7 Organization chart
8 SWOT analysis
9 Department wise study
Administration Department
Finance Department
Human Resource Department
Quality control Department
Stores department
Production Department
Marketing department
10 Analysis & interpretation of leverages and cost analysis
11 Findings
12 Suggestion
13 Conclusion
14 Bibliography
15 Annexure
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A study on leverage analysis at Satish Sugar ltd
EXCUTIVE SUMMARY
All round development of all communities is at the heart of the activities of Satish sugars Ltd. [SSL]. Established with the principal objective of serving the society the through economic development and the motto being “Growing with farmers” SSL Has today grown to become a dynamic group of companies that makes a fine case of youthful spirit and far-sighted vision. The Group has covered the path of success adopting innovative approach and has left in its wake rays of hope for the people of Gokak and the surrounding regions.
Mr. Satish L.Jarkiholi the man at the helm set the path of the group to widespread economic activities with an unwavering commitment and conviction Employment generation and community development were the primary goals behind the imitation to the activities of the group.
The Satish sugars Ltd was established in 2000-01 promoted by Mr.Satish.L.Jarkiholi The production capacity of the industries is 5000 TCD per day and it manufacture of sugar and by products like molasses and bagasse, generation of power, distillation.
SATISH SUGARS
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Objective of the study:
To study the organization.
1) To conduct the organization study and understand the practical aspects..
2) To know the effect on income of the firm due to change in sales volume
3) To provide the management with the information regarding financial result if a specified level of activity or volume fluctuates
4) To Understand the cost incurred on manufacturing, administration, selling and distribution of the company.
Methodology of information collected
1)Primary sources:
Primary sources include information collected through discussion with the concerned department persons and external gide.
2 Secondary sources:
The secondary data is collected for the three year from 2007/2008/2009. This data is collected from Annual report and published Data source data provided the company.
The relevant supporting data is collected from Broacher, websites of the company .
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Profile of Sugar Industry
INTRODUCTION
India is the second largest producer of sugar in the world. The
Indian sugar industry is the second largest agro industry located in the
rural India. The Indian sugar industry has a turnover of Rs.500 billion per
annum and it contributes almost Rs.22.5 billion to the central and state
exchequer as tax, and excise duty every year. It is the second largest agro
processing industry in the country.
There are 493 sugar mills operating in India with an aggregate
installed capacity of 16.2 million tones. Of these 152 are in private sector,
271 in the co-operative sector and 70 in public sectors.
About 50 million sugar cane farmers and a large number of
agricultural laborers are involved in sugar cane cultivation and ancillary
activities, constituting 7.5% of the rural population. The industry provides
employment to about 2 million skilled/semi-skilled workers and others
mostly from the rural areas.
The industry not only generates power for its own requirement but
surplus power for export to the grid based on by – product, Bagasse. It
also produces ethyl alcohol, which is used for industrial and potable uses,
and can be used to manufacture Ethanol, an eco friendly and renewable
fuel for blending with petrol.
The sugar industry in the country uses only sugar cane as input;
hence, sugar companies are established in large sugar cane growing states
like Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu and
Andhra Pradesh. In the year 2005-06, these six states contributed more
than 85% of total sugar production in the country
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BRAZIL
Sugar may gain as Brazil devotes more than 55% of its crops to
ethanol. Rising oil prices have increased demand for alternative fuels, such as
sugar based ethanol which can be mixed with gasoline to cut fuel costs. This
will continue to keep sugar prices at higher level.
EUROPE
EU is dismantling a preferential scheme for sugar improved from
ACP countries cutting the price t pays by 36% over the next four years
starting this month. This will be creating a level playing field for all and also
help n sustaining sugar prices in the world.
UNITED STATES OF AMERICA
The U.S. may allow 22% more refined sugar and specially sugar to be
imported. The supply will probably come from Central America or Brazil.
The import quota of raw sugar imported in 12 months is ending on September
30th of this year.
MEXICO
The United States and Mexico have ended a heated decade – long
dispute over sugar and sweetener trade lifting all barriers from 2008 under the
North American free trade agreement. The two countries agreed to reciprocal
free tariff free import quotes prior to 2008. The deal allows free trade from
2008 in the products that go to make coke and other soft drinks and is also
heavily used in the baking industry. It includes the U.S. accepting 500000
tones of sugar imported from Mexico tariff-free between 2006 and 2007 and
Mexico taking 500000 tones of hight – fructose core of syrup from U.S
producer.
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AUSTRALIA
The Queensland govt’s sugar industry innovation Fund (S11F) has been
successfully motivating sugar industry participant to adopt innovative
management system & technologies. It has enabled increased production of
value added product from sugar.
Fostered the development of more efficient supply chain & will help
secure a brighter future for cane farm families, Allied Business and
communities
SOUTH AFRICA
Concession made by the EU to cut back on its sugar exports & allow
imports From the world s poorest nations are sure to sweeten South African –
based sugar produced. Under the, which were announced last year, the EU is
to cut sugar production & export, and the continent on an unlimited on an
basis to the world s 48 poorest countries. However, also means that the profits
the made the profits made through sugar exports from Africa will benefit the
European food companies.
MALAYSIA
Refined sugar may be allowed to be imported soon to overcome a
shortage. The Govt has received proposals from several parties to import
refined sugar .The ministry has asked for more details like volume & most
important – the price.
PAKISTAN
Pakistan plan to keep raw/refined sugar imports duty free for another
year to avoid any price spiral, as the current sugarcane crop won’t meet
domestic demand. The country needs a harvest of over 53 million tones to
meet its annual sugar demand.
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VIETNAM
The Vietnam sugar & sugar–cane Association (VSA) has filed a pet ion with
the Govt, asking it to stop licensing sugar import because domestic demand is
more. The existing 36 sugar plants have output 1000000.
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Chapter 2
Company Profile.
INTRODUCTION
The Company was established with an all-encompassing view of
around development of all communities. Satish Sugars Ltd. (SSL) established
with the principal objective of serving the society through economic
development, SSL has today grown to become a dynamic company that
makes a fine case of youthful spirit and farsighted vision. The Company has
covered the path of success adopting innovative approach and has left in its
wake rays of hope for the people of Gokak and the surrounding region.
Mr. Satish.L.Jarkiholi, the man at the helm, set the path of the
Company to widespread economic activities with an unwavering commitment
and conviction. Employment generation and community development were
the primary goals behind the initiation to the activities of the Company.
Today, it provides employment to nearly 500 people and has transformed the
lives of thousands of families in the region. Indirectly has helped farmer
community to stand with pride & self-respect and lead to financial stability of
their families.
The journey of SSL spanning diverse activities such as sugar mill,
agriculture research, organic farming and community development makes a
impressive tale. For every major stride taken by the Company, the community
has taken a corresponding progressive step. Inspired by its success so far, the
SSL has charted out ambitious plans for the future. Its projects in the anvil
include a power generation unit, distillery unit, Aircraft charter and Aviation
Pilot training & maintenance center.
Most of these projects are community centric in nature and have the
objective of creating a vibrant social atmosphere in Gokak. It’s this vision of
community-oriented business model is what sets Satish Sugars Ltd. Apart
from the rest. It also spurs us to strive for people development even harder.
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The Satish Sugars Ltd. is one of the sugar producers in the state of Karnataka.
The Company was incorporated on 12th April, 2000 as Khandari Sugar plant
in the name of Gokak Power, Distilleries & Sugars (P) Ltd., (Annexure – II)
and name was modified to Satish Sugars Ltd. (Annexure – IV)
In 2004-05, the unit adopted Vacuum Pan Technology keeping in
view its economic viability, efficiency and higher return on investment. The
initial capacity of the reformed unit was 1250 TCD and in the trial season, the
unit processed 51,406 tons of sugarcane in 2004-05 and registered a profit of
Rs. 1.76 crore on a turnover of around Rs. 9.2crore. SSL has set a target of
two lakhs tones of cane crushing for the year 2005-06 with a turnover of
Rs.20.00crore and a net profit of Rs.2.50 crore.
SSL has distributed seeds and fertilizers to needy farmers on a credit
at low rate interest. This way, it has developed more than 2,500acres of land
in 2004-05 and is developing 5,000acres in 2005-06 under the Registered
cane Area Program. The Company has set an ambitious target of achieving a
processing capacity of 10lakhs tones in the next five years. The future plans
of the Company include generation of 20MW power from by-products and
setting up of 30KL distillery unit.
SSL is arduously working for the development of sugarcane
cultivators. It regularly sponsors the visit of farmers to various states and
National level agriculture fairs and organizes seminars and workshop on
improved methods of sugarcane cultivation. Free training on scientific
farming to children and encouragement to students with special talent in areas
of education, culture and sports are other prominent community development
activities undertaken by the company
In view of the above, Mr. Satish Jarkiholi has developed sufficient
exposure to become a successful entrepreneur. His foresight in the sugar and
allied industries enabled him to take the following steps well in advance, even
while executing the Khandsari Sugar Unit and keeping in mind the
Government of India’s incentive scheme of 1977 to Khandsari sugar units to
adopt vacuum pan technology, Mr. Jarkiholi had envisaged changing the
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technology along with suitable expansion even while implementing the Sugar
Unit.
BOARD OF DIRECTORS
Mr. Satish.L.Jarkiholli Chairman & M.D
Smt. S. S. Jarkiholli Director
Mr. Pradeep.M.Indi Director
Mr. Vittal.R.Parasannavar Director
Auditors:
Mr. B.B.Amanagi
Chartered Accountants
Belgaum
Bankers:
Indian Bank
Corporation Bank
VISION AND MISION
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Mission
Satish Sugars Group has set the goal of becoming a vibrant dynamic
and professionally managed group of companies having a turnover of over
Rs.1000 crore with a net profit of 5% by 2015, 25% of the net profit will be
spent on a board-spectrum of community development activities such as
Education, Healthcare, Culture, Sports and Social Welfare. This is in line
with the group’s motto of placing community before self and Social services
before.
Vision
“To become the most efficient processor of sugar & the largest marketer of
sugar and compete globally
PRODUCT PROFILE
SUGAR
The sugar produced in Satish Sugars Limited factory is both refined
confirming to EC II grade with negligible sulphur content as well as
plantation grade white sugar. The EC II grade sugar meets the European
standards of refined sugar (Color of less than 45 IU)
Sugar is a sweet, white or brown, usually crystalline substance
obtained mainly from sugar cane or sugar beets and used commonly in food
products. Sugar means something sweet in form of taste.
Formula: 12CO2 + 11H2O = C12 H22O11 + 12O2
Carbon dioxide + water = sucrose + oxygen
In chemistry, sugar refers to any of the class of carbohydrates to
which this substance belongs. The chemist knows as “sucrose” one of the
family of sugars otherwise known as saceharides as the name implies, contain
carbon and hydrogen plus oxygen in the same ratio as in water.
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The government controls sugar capacity additions through industrial
licensing determines the price of the major input sugar cane, decides the
quantity that can be sold in the open market, fixes the prices of the levy
quarter sugar and determines maximum stock levels for wholesalers etc.
BY- PRODUCTS OF SUGARCANE:
The sugar mill produces many by-products along with sugar. A
typical sugarcane complex of 3000 TCD capacity can produce 345 ton of
sugar, 6000 liters alcohol, 3 ton of yeast, 15 ton of potash fertilizer, 25 ton of
pulp, 15 ton of wax, 150 ton of press-mud fertilizer and 750KW of power
from Bagasse.
i. MOLASSES
Molasses is the final effluent obtained in the preparation of sugar by
repeated crystallization. It is the product from a refining process carried out
yield sugar. Sucrose and invert sugars constitute a major portion (40 to 60%)
of molasses. The yield of molasses per ton of sugarcane varies in the range of
3.5% to 4.5%.
Molasses is mainly used for the manufacture of ethyl alcohol
(ethanol), yeast and cattle feed. Ethanol in turn used to produce portable
Liquor and downstream value added chemical such as acetone, acetic acid,
butonol, acetic anhydride, MEG, etc. Some of the alcohol based chemicals
like MEG, acetic acid, etc., face stiff competition from production through
the petrochemical route. The government controls the export of molasses
through export licenses issued for every quarter. Molasses and alcohol-based
industries were decontrolled in 1993 and are being controlled by respective
state government policies. Nearly 70% of molasses produced are consumed
by the industrial alcohol manufactures and the remaining 30% is consumed
by the portable alcohol sectors.
ii. BAGASSE
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Bagasse is a fibrous residue of cane stalk that is obtained after crushing
and extraction of juice. It consists of water, fiber and relatively small quantities of
soluble solids; the composition of Bagasse varies based on the variety of sugarcane,
maturity of cane, method of harvesting and the efficiency of the sugar mill, the
usual Bagasse composition is given as under:
Content Range %
Moisture 46-52
Fiber 43-52
Soluble solids 2-6
Bagasse is usually as a combustible in the furnaces to produce steam, which
in turn used to generate power; it is also used as raw material for production
of paper and as feedstock for cattle.
iii. ETHANOL
The company produces alcohol from the molasses (Molasses is the
brown colored residue after sugar has been extracted from the juice. Molasses
still contains some quantity of sugar, but this sugar cannot be extracted by
usual technology) left after the extraction of sugarcane juice, which can be
used both for potable purpose as well as an Industrial chemical. Further, this
alcohol can be purified to produce fuel grade ethanol that can be blended with
petrol.
iv. BIO-FERTILIZERS
The residue product from distillery operations blended with chemicals is sold
as bio-fertilizers.
Chapter 3
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Structure
Strategy System
StyleSkills
Staff
Shared
Values
A study on leverage analysis at Satish Sugar ltd
MC KINSEY 7S MODES
7-S MODEL
The 7-S model of Mc Kinsey is a Value Based Management (VBM)
model that describes how one can holistically and effectively organize a
company. Together these factors determine the way in which a corporation
operates.
The first three elements are strategy, structure and system are
considered as hardware of success, the meet four elements are style, staff,
skills and shared values/super ordinate goals are the software of any
company.
According to the 7’s MODEL
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1) STRATEGY
The way in which a business aims to improve its positions relation to
its competition is embodies in its strategy or the way of doing something in
an organization.
In SSL, introduce new technologies and products strategies importance
in time with national objective to improve quality reliability of products there
by attaining the international standards.
2) SYSTEM
System refers to how the production system, distribution, information
system and security system is maintained in its company.
Production System
The process of production consists of input as sugar cane and output
as the sugar. First the Cane will be crushed in five mills. Juice will be
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transferred to boiling Stations. In the boiling station, for the purpose of
purification Sulphur and lime powder will be added in proper proportion.
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Plantation White Sugar Process
Weighted and Prepared Cane
Cane Milling / Crushing
Sulphatation
ClarificationPress Mud
Bio Composing Juice Evaporation
Syrup
A Plan Boiling
A Massecuite
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Cetrifugation
Sugar
A Molasses Drying and Cooling
B Massecuite Packed as plantation white Sugar
Centrifugation
B Sugar used in a boiling as seedB Molasses
C Massecuite
Centrifugation
Final Molasses
C Sugar used in a boiling
A study on leverage analysis at Satish Sugar ltd
Distribution System
The distribution system of the sugar produced is in the following system.
Indirect sales are made outside the country and the depot sales are also
made.
The producers are also sold directly to the consumer or sold to the
wholesales.
Information System
Structure of Information System
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CHAIRMAN
MANAGING
SENIOR GENERAL
HEAD OF THE DEPARTMENT
SECTION
A study on leverage analysis at Satish Sugar ltd
Security System
The SSL has strict Security system. In the maintenance of accounts
after the record have closed, the records are kept in the room is opened only
with permission of higher authority. If the visitors went to inter they have to
take prior permission with the authority and after entering they are not
suppose to go any dept other them the department from whom they took the
permission.
3) STRUCTURE:
The following departments carry out the general admission of the company
and are in the order of downward communication in the company. The
information flows from the top level of management to the lower levels.
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ORGANIZATIONAL STRUCTURE
BOARD OF DIRECTORS
CHAIRMAN AND MANAGING DIRECTOR
EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR
GENERAL MANAGER
ASST.GENERAL MANEGER
MANAGER COMPANY MANAGER MANAGER MANAGER MANAGER CHIEF MANAGER
TECHNICAL SECRETARY CANE HRD ADMIN LEGAL DISTLR
ASST. MANAGER
C E C C (CANE) LAISIONING LAISIONING MANAGER
DY.CE DY.CE ZONAL INCHARGE BLR DELHI DISTLR
FIELD ASST GEN ADMIN EXECUTIVES
ENG CIVIL STORE VEHICLES
ETP
ASST MANAGER ASST MANAGER NEW PROJECT
(A/CS) (COMPRL) COORDINATOR ETP MARKETTING PROJECT CO
OFFICER
ORDINATOR
TRAINING HR WELFARE TIME OFFICE SECURITY GUEST HOUSE
4) STYLE
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The style, which is portrayed to outside world, is derived from the
style and behaviors exhibits inside organization. The internal style of the
organization effects new staff feels thinks and does their jobs. Therefore an
organization is reflection of its structure.
5) SHARED VALUES/SUPER ORDINATE GOALS.
Shared values are reefers to company policies. In Gokak Sugar Company
limited the following policies are maintained.
Safety Policy
Quality Policy
Environment policy
T.P.M Policy [ Total Productivity Management]
Safety Policy
We at SSL engaged to producing white crystal sugar will always aim
to providing absolute safety to every person employed in the company from
any risk and danger by adopting safe working methods.
Safety objectives
We believe that accidents are preventable.
We will fallow all the rules regarding safety.
Our policy is to maintain safety beyond compromise.
We believe that rules are sacred and must be observed.
Our Motto-No. accidents due to human failure.
Quality Policy
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We at SSL, engaged in producing while crystal Sugar will always
strive for product, Quality by adopting latest technology disciplined quality
management system. continuous improvement in working methods etc. it
wants to be market leader in its field of operation following innovative
techniques.
Quality Objectives
Production of best quality sugar satisfying domestic and international
norms.
Strive to conduct the operation by preserving the quality of the
environment.
Motivation of employees through training and retraining for
improving Operational performance.
Environment Policy
The SSL is committed to comply with the requirement of relevant
environment regulation and the standards by implementing environment
management system and continually improve its effectiveness.
Total Productive Management Policy
The SSL is committed in maximizing limited is committed in maximizing
over all plants effectiveness to make Gokak Sugar Company a World class
company through total productive manufactured by.
Prompting automates maintains culture.
Involving all employees and building culture.
Minimizing the losses and reduced the cost.
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6) STAFF
Good hard working citizens play essential role in the development of
nation. The employee is responsible for the success or failure of company.
The company has totally 650 workers are working is the company.
They are categorized as following.
1) Permanent workers 400
2) Seasonal workers 110
3) Probationary worker 40
4) Daily wage worker 100
650
Company is paying salary of Rs. 25 lakhs per month to its workers.
7) SKILLS
Skills here refer to how the training will be given to the employees
and employees. The training will be given in 2 months they are.
a) On the job:
This is one of the oldest method, under this method, the individual place is on
the regular job and taught the skill necessary to perform that job on the job
training has the advantage of giving first hand knowledge and experience
under the actual working conditions. This is given to employees.
b) Off the job:
In this methods trainee is separated from the job situations and his attention is
focused upon learning the material related to his future job performance.
There is an opportunity for the trainees.
Chapter 33
FUNCTIONAL DEPARTMENTSFUNCTIONAL DEPARTMENTS
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FINANCE DEPARTMENT
ENGINEARING DEPARTMENT
ACCOUNTS DEPARTMENT
CANE DEPARTMENT
PROCESS DEPARTMENT
HRD DEPARTMENT
MAINTENANCE DEPARTMENT
PURCHASE DEPARTMENT
STORE DEPARTMENT
PERSONAL AND ADMINISTRATIVE DEPARTMENT
FINANCE DEPARTMENT
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Finance department is very important in an organization. It is not just
confined to raising funds, but extends beyond it to control the over utilization
of funds and helps to monitor the utilization of funds raised. This function
influences the operation of other essential functioning areas of the firm such
as production, marketing and personal.
FUNCTIONS OF FINANCE DEPARTMENT:
Preparation of finance reports
Preparation of annual budgets
Budgetary control
Scrutinizing of purchase bills and proposals
Passing of all payment bills
Maintenance of sales ledger
Maintenance of all subsidiary books under the co-operative
societies acts like cashbook, debtors, and salary register.
Preparing of cost sheet
Direction of internal auditing.
There is an important section in finance department, which is the
computer section. Computer section is newly modernized and has expert
computer operators, which does the following functions:
Maintaining records of sundry debtors of sugar
Preparation of daily raw cane purchase bills
Preparation of pay bills
Daily generation of sales Cheque remittance etc.,
PREPARATION OF FINAL ACCOUNTS
The profit and loss account is prepared every month by highly
experienced accountants. This enables effective monitoring of financial
position and preparation of final accounts after the accounting year.
A BRIEF OUT LOOK OF THE FINANCIAL STATUS
Share capital 40.50 Crores
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Member deposits 3.25 Crores
Raw material consumed year 24.24 Crores
Every year sales 17.70 lakhs
Profit for the year ended was lakhs rupees…
The balance sheet and the profit and loss account of the firm for the
past few years are shown as below in the table.. From which we analyze the
growth and development of the firm and also we obtain information regarding
sources of funds and their allocation
ENGINEERING DEPARTMENT
In SSL the engineering department looks after mechanical,
civil construction, improving production method. Simplifying of work
and power generation and also deals with good working condition
maintains of go down, installation of machinery etc.
ACCOUNTS DEPARTMENT
The SSL Gokak Sugar Company’s growth in terms of
turnover and profitability besides investment in the block of assets and
working capital has been satisfactory over a period of time. Unless proper
accounting of the various transitions of the company’s taking place out
systematically, the real control on the various functional areas of the
company will be lost to the management.
All the transactions of the company will be accounted on accrual
basis only except where deviations are permitted by the management
through its accounting policies.
Main Functions are as follows
Registration and scrutiny of sale orders pertaining to equipment and
spare parts.
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Preparation and submission of invoice to customers for payment.
Accounting of sales and sales realization.
Receipt of cash, cheque and bank drafts etc and issue of official
receipts for the same.
Follow up or watch of transfer or receipt of funds to and from regions
or district offices.
Operation of bank accounts.
Maintenance of journal, expense ledger and balance sheet.
Preparation of trail balance, profit and loss account and balance sheet.
CANE DEPARTMENT
In SSL cane department deals with registration of Sugar Cane
with growers, good quality maintains, developing high yields and also
term loans and subsides to the farmers who are growing sugar cane for
this company and now giving seeds of sugar cane to grow variety sugar
cane and this department has consultant to consult sugar cane and I/P.
SSL has some Developmental Programmes for Cane
The unit is undertaking cane development programmes which will
be a part of its activities.
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They are.
1. Loans are provided to formers to take up new variety of
cane activities.
2. Subsides are provided to farmers.
3. Press mud and by products is supplied to farmer on
fertilizers free to work
PROCESS DEPARTMENT
Process department is given integral part of the organization. It
looks afterward of different process of sugarcane into the consumer sugar.
Process of Cane
Cane will be crushed in five mills. Juice will be transferred to
boiling Stations. In the boiling station for the purpose of purification
Sulphur and lime powder will be added proportionality.
By- products obtained and used for
The following by products are obtained from the process.
1. Molasses: This is the mother licker obtained of the sugar mesquite
crystals.
2. Press mud: The product gains in the settlers.
3. Bagasse: Bio product obtains after the crushing of cane in the mill
without Juice.
FLOWCHART OF SUGAR MANUFACTURING
Weighted cane – Hauled to crushing yard
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Cane unloaded on to the carrier
Cane cut into pieces
Crushed in successive mills
Juice treated with lime and Dry chaff fed into boilers
Surplus & heated as fuel
Subsider
Scum Clear juice
Evaporat
Concentrated Syrup
Filter cake used As manure Clear juice Surplus syrup to vacuum pans
Boiler to mane cite
Centrifugal
Sugar Molasses
Bagging
Dispatching Power Alcohol Portable Alcohol
HUMAN RESOURCE DEVELOPMENT DEPARTMENT
The activities carried out are planning for human resources,
requirements, welfare, and safety, training and legal matters. It even helps in
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providing necessary manpower and skills towards successful implementation
of quality system. It also organizes the training activities of the employees.
Security and Administration is for overall security maintenance of
school, hospital and village administration. SSL caters for education up to
class X (10th) both State Syllabus and CBSE for the benefits of employee’s
children. They have started the officer’s club, social club, and welfare center,
playground and parks, gardens, open era theaters etc. and many more.
AREA OF FUNCTION OF SATISH SUGARS LTD
Man power planning
Recruitment and selection
Placement, training and development
Wage and salary administration
Performance appraisal industrial relations
Health and safety measures
Employees state insurance benefits
Disciplinary actions
Promotions, demotion and dismissal
FUNCTIONS:
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1. Selection and recruitment of trainee workman, clerical staff and
supervisory staff.
2. Induction of clerical supervisor staff.
3. Issue and badly of workman.
4. Issue of punching cards.
5. Attendance recording.
6. Leave Management.
7. Wage administration.
8. Bonus calculations and payments.
9. Performance appraisal of supervisory staff.
10. Promotion and transfer of workman and clerical staff.
11. Sanitation of management.
12. Carry out safety promotional activities.
13. Reporting of accidents.
14. Checking canteen activities.
MAINTENANCE DEPARTMENT
Totally there are 27 workers
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The members of filters are 12
The numbers of helpers are 13
There is only one welder.
Maintenance department is a Mechanical department in which all the
machines of this firm are repaired. If there are any major problems the
machines are repaired by General-Shift-Workers. General-shift-workers are
fixed for only one major problem, the general shift workers and other workers
work in shift wise
PURCHASE DEPARTMENT
Purchasing procedure very considerably according to the needs of
the organization and authority delegated to purchase managers the success of
organization is based on effective inventory management system and UN
interrupted production schedule. This is achieved with adequate purchasing
function.
OBJECTIVES
1) To receive purchase requisition from the stores department
production centers or any other authorized sources.
2) To invite quotation from a number of suppliers.
3) To make arrangements for the purchase of appropriate quantities
at any given times.
4) To ensure the purchase of the correct quality under trade or brand
name by sample, description.
5) To follow up the orders placed.
6) To receive incoming suppliers, verity quantity tests and inspects
them.
7) To arrange for the storage and issue of materials.
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STORES DEPARTMENT
In this department all types of materials are stored. The purchase
department purchases the materials and these materials are sending to stores
department. Storekeepers send the sample of material to the lab for testing
purpose. If the material satisfies all the tests specifications then the material
will be stored and the transactions, which are related to this, are done in this
department. Otherwise the goods will be rejected and sent back. The
explanation should be given for the rejection of goods.
The purpose officer receives the order slip from the marketing
officer and this order slip will be sent to store department to check the raw
material essential; to fulfill the order for a particular product of produce it.
Further the stock statement is sent to the purpose department, which contents
the quantity that is the raw materials required for a particular product or
produce it. From this the purpose officer will come to know that how much
quantity is required. And whenever there is not much stock in stores
department the store keeper will inform the purpose officer and in turn he will
give instruction to purchase that particular materials.
PERSONNEL AND ADMINISTRATION DEPARTMENT
PERSONNEL DEPARTMENT:
Objectives:
1. To look after the welfare of the employees.
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2. It deals with appointments, job training to new employees.
3. They deal with safety health measures of the employees.
4. They provide necessary help or aid to the employees.
5. Control over the day to day activities.
Workers get their week off but the staff gets holidays on
Sunday. This department sanctions leaves to the employees. The
employees get leave on national festival .
Different wages are paid to the different labors depending on their
experience, skill, performance and work. Wages are paid promptly and
the incentives are also paid during the festivals. This department has
direct contact with labors and sometimes personnel department acts like a
bridge between the labor and the management.
ADMINISTRATION DEPARTMENT
The Administration Department looks after the administration of the
company.
This department consists of the top-level management.
1. Administration Department has an aerial lockout over all the
departments.
2. Progress of the entire department is sent to this department. So
that the administration department prepares the progress sheet
after the end of certain period.
3. Administration function includes training of administrative
staff.
4. This department looks after the wages and salaries of the staff.
5. This department has to answer for any Enquire done by the
Govt.
6. This department controls over the flow of funds along with the
accounts department.
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Chapter 5
SWOT ANALSIS
STRENGTHS:
Raw material is available easily in near locations.
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Well established since long time.
Strong network from all aspects-location, transport and
infrastructure.
Good financial supports whenever needed are provided by
both State and Central Governments.
Location in the heart of the city.
Concept of Multi joint-products
New power plant, which is constructing now, is needed for
future growth.
Sound Management.
WEAKNESS:
There is less power to management to take decisions
directly.
Absent of motivating incentives.
Lot of training required for all levels of employees.
Company has been facing stress-related issues.
Decrease in the production of row materials due to natural
calamities like, Flood etc.
OPPORTUNITIES:
Implement change in technology.
Establishment of New Units.
Frame proper policies and procedures.
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THREATS:
Competition by other units
Decrease in Sugar growth.
Diversified resources such as raw materials due to many
sub unit initializations.
Government Regulations.
Future planes:
The company has to improve its canteen facility; it must
arrange a good building to canteen.
It looks pretty awesome if company makes uniform for all
workers.
The company has to consider internal experienced employee
also while making a higher postings.
Making of company shares as LISTED is good decision in
today’s competitive world.
Leverage analysis
Leverage means: Is the employment of an asset/sources of a finance for which firm pays fixed cost/ fixed return. Leverage may be defined as relative change in profit due to the change in sales. A high degree of leverage
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implies that that a large change in profit occurs due to a relatively small change in the sales if earnings less the variable cost exceeds the fixed return requirement the leverage is called “favorable” when they do not the result is “unfavourable”leverage.
Important of leverages:
1.Leverages is to set forth a framework for the financing decision of firm.
2 The sources may be for the purposes of exposition, classified into those which carry a fixed of return.
3The ordinary shareholders is affected by the magnitude of debt in the capital structure of the firm.
4 The fixed returns on some source of finance have implication for those who are entitled to variable return.
Types of leverage:
1)Operating leverage
2)Financial leverage
3)Combined leverage
Income statement
Particulars 2006/7(Amt in Rs.)
2007/08(Amt in Rs.)
2008/09(Amt in Rs.)
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Sales 5,34,094,000.00 9,28,124,000.00 1,41,841,5149.00
Less: variable cost 5,77,590,00.00 1,19,614,000.00 9,68,234,69.00
Contribution 4,76,335,000.00 8,08,510,000.00 1,32,159,16.00
Less: fixed cost 4,23,695,000.00 6,40,888,000.00 1,00,878,9979.00
EBIT 5,26,400,00.00 1,67,622,000.00 3,12,801,701.00
Less: interest 2,00,500,00.00 7,33,780,00.00 1,43,377,399.00
EBT 3,25,900,00.00 9,42,440,00.00 1,69,424,302.00
Less: Tax 3,87,2000.00 1,09,090,00.00 1,13,300,00.00
Net profit 2,871,80,00.00 8,33,350,00.00 1,58,094,302.00
1)Operating leverage: The operating leverage affects a firm operating profit. It result from the existence of fixed operating expenses in the firms income stream.
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The degree of the leverage is defined as the percentage of change in the earnings before interest and taxes relative to given percentage change in sales.
Operating leverage refers to the use of fixed cost in the operation of a firm from will not have operating leverage. if its ratio a firm given sales produce same percentage change in operating profit. if the firm has fixed cost the percentage change in operating profit would be more for given percentage change in sales. Operating profit of a highly levered firm would increase at a faster rate for any given increase in sales. However if sales falls it will suffer a more loss.
Formula: Degree of operating leverages=Contribution/EBIT
Here EBIT indicates earning before interest and taxes
Degree of Operating leverage
Year Contribution EBIT DOL=contribution/EBIT
2006/07 4,76,335,000.00 5,26,400,00.00 9.04
2007/08 8,08,510,000.00 1,67,622,000.00 4.82
2008/09 1,32,159,1680.00 3,12,801,701.00 4.22
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s
INTERPRETATION:
Table reveals:
The degree of operating leverage very much greater than first for all years of the study period. This high degree of OL indicates higher indicates high senility of EBIT to change in sales. The DOL is very much higher indicating a very high operating risk. In view of this there is need to reduce operating risk by reducing fixed costs ,increasing sales changing sales mix etc.
2)Financial leverage: The use of the fixed charges sources of funds such as debt and preference capital along with the owner’s equity in the capital structure as financial leverage.
The financial leverage employed by a company is intended to earn more return on fixed charge funds more than their costs. The surplus will increase on the return on the owners equity.
The role of the financial leverages in magnify the return of the shareholders is based on the assumption that the fixed charge
funds can be obtained at a cost lower than the firms rate of return on net assets.
Degree of financial leverage can be calculated by using the following formula.
DFL=EBIT/EBT
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Where:
DFL=Degree of financial leverage
EBIT=Earning before interest and tax
EBT=Earning before tax.
Degree of Financial leverage
Year EBIT EBT DFL=EBIT/EBT
2006/07 5,26,400,00.00 3,25,900,00.00 1.61
2007/08 1,67,622,000.00 9,42,440,00.00 1.77
2008/09 3,12,801,701.00 1,69,424,302.00 1.84
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INTERPREATION:
Table 2 reveals that:
The DFL is slightly higher 1 for all the years of the study. This low degree of financial leverage indicates a low sensitivity if EBT to change in EBIT. It also indicates low financial risks. in view of this the firm needs to maintain this so as to keep this level of low financial risk constant.
3)Combined leverages: The operating leverage has its effects on operating risk and measured by the percentage change in EBIT due to percentage change in sales. The financial leverage has its effects on financial risk and is measured by the percentage change in EPS due to percentage change in EBIT.
The degree of combined leverage can work in either direction. It will be favorable if sales increase and unfavorable when sales decrease because change in sales will result in more than proportionate returns in the form of EPS.
Formula: Degree of combined leverage =Operating leverage* financial leverage.
Degree of combined leverage
Year DCL=DOL*DFL TOTAL
2006/07 9.0489*1.615219 14.61595
2007/08 4.82341*1.778595 8.578892
2008/09 4.22501436*1.846262 7.8004828
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Leverages objectives:
1) To ascertain the minimum sales to cover the cost and avoid losses.
2)To ascertain the sales volume necessary for the business to achieve the profit.
3) To study the operating leverage to evaluate the investment in debts through the financial leverage.
Findings of leverages
1 In this organization the operating leverage is very much higher than first year compared to all the periods of the study2)It was 9.04 in the year 2006/07 which has decreased to 4.82 in the year.2007/08 and again decreased to 4.22 in the year of 2008/09.3 )The financial leverage is slightly higher than first in all the years of the study. It was 2006/07 -1.61, 2007/08-1.77 and 2008/09-1.84.
Suggestions
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The firm should maintain the sales to total cost proportion as it was maintained in the year 2007-08 and 2008-09.
The firm should maintain the it’s operating leverage at the current level.
Firm’s financial leverage is fluctuating year by year in the periods of the study, so it should manage it’s fixed financial obligation at the required level,so that it is favorably financial levered.
Cost analysis
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Introduction of cost Accounting
Introduction : There is a quick deriving worlds of economic activity in this modern world. When the competition is the deciding fate of commercial and industrial units. Price of commodity or a service is the instrument to measure its success or failure. if price is a policy cost is the determent of this price. It is the cost which makes a unit to flourish or kiss the dust. That is why every management should keep abreast of its cost structure.
Cost accounting defined as the “Cost Accounting is defined as the body of concepts methods and procedures used to measure analyses or estimate the cost profitability and performance of individual products department and other segments of a company’s operations for either internal or external use of both and to report on these questions to the interested parties. Is called cost Accounting.
Advantages to the management:
1 It discloses profitability of activities.
2 It helps in cost control.
3 It helps In inventory control.
4 It aids in formulating policies.
5 It helps In decision making.
Scope of cost Accounting: Means what exactly we study in cost accounting. So the scope of the cost a accounting is wide. It covers the following aspects.
1)Cost ascertainment2)Cost presentation
3)Cost control.
Costing means: Techniques and process of ascertaining costs. These techniques are the rules and regulations to govern or regulate the process of ascertaining the costs or services. Therefore these rules and regulations are carried from unit to unit immediately to the industry and to the formation of the policy.
Cost Accountancy: Cost Accountancy as the application of costing and cost accounting principles methods and ascertainment of profitability as well as presentation of information for the purpose of managerial decision making. Is called cost Accountancy.
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Advantages of cost Accountancy:
1) The cost accountancy are to ascertain the cost of production profitability of the industry and help in controlling the cost.
2) It is widely used term which includes costing cost accounting and cost accountancy.
Importantances of cost Accountancy:1) The main purpose of the cost accounting is to provide detailed
cost information to the management.2) Maintains of cost accounts is voluntary.3) It is estimated price.4) Costs are classified into direct and indirect or element wise.5) It shows the detailed profit and loss of each product, department
process etc.
Cost analysis means: Cost means the essential parts or components of goods or services or jobs. In otherworld’s elements of cost is part of the total cost and includes the main item of expenditure incurred for production of goods services and jobs.
Importance of cost analysis:1)It helps the management for implementing cost control and decision making.2)It helps for calculation of cost of production.3)It helps for valuation of work in progress.
Cost Sheet: Cost sheet is a document which provides for the presentation of the estimated detailed cost in respect of a cost cadre or a cost unit. The statement summaries the cost of manufacturing a particular list of product and discloses,1 The prime cost 2.Work cost 3.Cost of production 4 Total cost.
Purposes of cost sheet:1)It gives the breakup of total cost by element and sub divisions.2)It discloses the total cost as well as the cost per unit of production.
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3)It helps for comparison’s4)It helps for preparation of tenders and quotations.5)It helps for fixing selling price.
Specimen of cost sheet for the period of 31 st march 2007
Particulars Total cost per unit
Direct materials:
Opening stock of raw materials 3,54,930,00.00 _
Add: Purchases of raw material 1,80,550,00.00 _
Carriage inwards - -
Less: Closing stock 2,80,0000.00 -
Material consumed 5,63,480,00.00
Add: Factory over heads:
1)Consumption of chemicals
3,29,1000.00
2)Power, fuel and water 4,73,7000.00
3)Repairs and Maintenance 6,89,9000.00
4)Industrial tour exp 1,72,000.00
Add: Opening work in progress 3,71,5000.00 1,88,140,00.00
Less: Closing stock - 2,80,0000.00
Work cost =1,601,4000.00
Add: Administrative overhead - -
1)insurance 1,38,000.00
2)Rent 1,50,1000.00
3)Rates,Taxes&other fees 7,92,000.00
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4)Printing and stationery 1,40,2000.00
5)Director fees 4,20,000.00
6)Auditors fees 25,000.00
Cost of production = 4,27,8000.00
Add: Opening stock of goods 4,89,5000.00
Less: closing stock =9,17,3000.00
Add:Purchage of manufactured goods
_ 1,07,20000.00
=1,54,7000.00
Less:Clo-stock -
Cost of goods sold =1,54,7000.00
Add: Selling distribution overheads
1)Advertisement - 9,06,000.00
Cost of sales: - =2,45,3000.00
Profit and loss
Sales 5,34,097,000.00
Specimen of cost sheet for the period 31st march 2008
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Particulars Total cost per unit
Direct materials
Add: Purchases of raw materials
3,021,7000.00
2,35,65000.00
Prime cost 5,37,82000.00 5,378,2000.00
Less:Clo-Stock - 7,40,6000.00
Total - =4,63,76000.00
Add: Factory Over head.
1)Consumption exp
2)Power &fuel
3)Repairs
4)Industrial exp
Total
-
1,24,330,00.00
7,07,700,00.00
2,88,05000.00
4,36,8000.00
=9,90,59000.00 9,90,.0059000
Add: Opening Progress - 2,80,.000000
Total 1,018,59000.00
Less:Clo-stock in progress 7,40,6000.00
Work cost - =9,44,53000.00
Add: Administrative exp.
1)Insurance
2)Rent
3)Rates
4)Printing and stationery
5)Director fees
6)Audit fees
8,75,000.00
1,43,9000.00
6,36,1000.00
1,14,3000.00
90,000.00
64,000.00
Total 1,15,720,00.00
Add: Opening stock of goods 6,16,1000.00 1,77,33000.00
Add:Purchage of manufacture exp - 3,096,9000.00
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Particulars Total cost per unit
Direct materials
Add: Purchases of raw materials
3,021,7000.00
2,35,65000.00
Prime cost 5,37,82000.00 5,378,2000.00
Less:Clo-Stock - 7,40,6000.00
Total - =4,63,76000.00
Add: Factory Over head.
1)Consumption exp
2)Power &fuel
3)Repairs
4)Industrial exp
Total
-
1,24,330,00.00
7,07,700,00.00
2,88,05000.00
4,36,8000.00
=9,90,59000.00 9,90,.0059000
Add: Opening Progress - 2,80,.000000
Total 1,018,59000.00
Less:Clo-stock in progress 7,40,6000.00
Work cost - =9,44,53000.00
Add: Administrative exp.
1)Insurance
2)Rent
3)Rates
4)Printing and stationery
5)Director fees
6)Audit fees
8,75,000.00
1,43,9000.00
6,36,1000.00
1,14,3000.00
90,000.00
64,000.00
Total 1,15,720,00.00
Add: Opening stock of goods 6,16,1000.00 1,77,33000.00
Add:Purchage of manufacture exp - 3,096,9000.00
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Particulars Total cost per unit
Direct materials
Add: Purchases of raw materials
6,42,035,489.00
Less: Closing stock of raw materials
6,24,148,423.00
Materials consumed - 1,26,618,3912.00
Add: Factory over head
1)Power and fuel
2)Canteen Exp
3)Factories boiler charges
4)Insurance to Factory
3,14,588,50.00
8,36,716.00
1,10,170.00
1,04,9067.00
Total: prime cost - 3,34,548,03.00
Add: Opening work in progress - -
Less: Closing work in progress - -
Works cost - 3,34,548,03.00
Add: Administrative overhead:
1)Audit fees
2)Building maintains exp
3)Computer Repairs
4)consultation fees
5)Credit Rating fees
6)Director sitting fees
7)Employees accident insurance
8)Govt fees
9)incentive to employees
10)Legal charges
50,000.00
1,47,223.00
2,00,935.00
6,42,000.00
3,87,497.00
50,000.00
1,50,000.00
A study on leverage analysis at Satish Sugar ltd
Findings of leverages and cost sheet:1) In this organization the operating leverage is very much higher in the first year compared to all the periods of the study2) It was 9.04 in the year 2006/07 which has decreased to 4.82 in the year.2007/08 and again decreased to 4.22 in the year of 2008/09.3) The financial leverage is slightly higher in first year compare to other years. It is 1.61 in the year of 2006-07, 1.77 in the year of 2007/08 and 1.84 in the year of 2008/09.
4) The Administrative expenses have been increasing trend in every year from 2007 to 2009 at the years.
5) The cost of material consumed is very high compared to previous year, in the year 2009 is showing very high and in the year 2007 is showing low.
.
Suggestions : The fixed cost is very much higher it constitute the major part in total cost.
The firm should maintain the it’s operating leverage at the current level.
Firm’s financial leverage is fluctuating year by year in the periods of the study, so it should manage it’s fixed financial obligation at the required level, so that it is favorably financial levered.
In the year 2009 the administrative cost is very much
4
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Particulars Total cost per unit
Direct materials
Add: Purchases of raw materials
6,42,035,489.00
Less: Closing stock of raw materials
6,24,148,423.00
Materials consumed - 1,26,618,3912.00
Add: Factory over head
1)Power and fuel
2)Canteen Exp
3)Factories boiler charges
4)Insurance to Factory
3,14,588,50.00
8,36,716.00
1,10,170.00
1,04,9067.00
Total: prime cost - 3,34,548,03.00
Add: Opening work in progress - -
Less: Closing work in progress - -
Works cost - 3,34,548,03.00
Add: Administrative overhead:
1)Audit fees
2)Building maintains exp
3)Computer Repairs
4)consultation fees
5)Credit Rating fees
6)Director sitting fees
7)Employees accident insurance
8)Govt fees
9)incentive to employees
10)Legal charges
50,000.00
1,47,223.00
2,00,935.00
6,42,000.00
3,87,497.00
50,000.00
1,50,000.00
A study on leverage analysis at Satish Sugar ltd
high ,so it should be control.
Conclusion
This project helps to know that the company
operating in significant manner and the sales of the company increased
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from year to year and considerably profit also increased and some year
the fixed cost is more so it needs to reduce its fixed cost.
The firm is favorably financial levered since it managed to keep its
fixed financial obligations at the required level but its operating risk is
very high because of high fixed costs and high operating leverage.
This study helps to ascertain the cost per unit total cost production and
to know the administrative expense. Cost sheet is the very important
tool that analyses the cost of the company. Through this cost sheet we
can improve in estimated cost sheet.
Bibliography
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Financial Management by books used from which I have taken help
for the theory part of the study:
M.V. Khan & P.K. Jain
www.satishsugars.co.org
www.google.co.in
PART 8
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Annexury
Profit and Loss Account 2007-08
PARTICULARS YEAR 2007
YEAR 2008
SALES 5,340.97 9,281.24
EXPENDITURE
COST OF RAW MATERIAL 4,143.67 6,089.77
MANUFAFACTURE EXP. 577.59 1,196.14
PROFIT BEFORE INTEREST 619.70 1995.32
INTEREST 200.50 733.78
DEPRICIATION 93.28 319.11
PROFIT BEFORE TAX 325.90 942.42
TAXATION 38.72 109.09
PROFIT AFTER TAX 287.18 833.33
ADD PROFIT FORWARD EARLIAR YEAR 14.99 302.17
PROFIT AVAILABLE FOR APPRPPRITION
302.17 1135.51
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BALNCE SHEET 2007-08
PARTICULAR YEAR2007 YEAR2008
SHARE HOLDERS FUNDS
a) Share Capital
b) Share Application Money
c) Reserves and Money
Total
2871.39
44.80
302.17
3218.36
2871.39
406.80
1135.51
4413.71
Loans nad Funds
a) Secured Loans
b) Unsecured Loans
Total
4405.86
20.10
4425.96
8291.64
950.67
9242.32
Total Funds 7644.33 13656.03
APPLICATION FUNDS
1) Fixed Assets
a) Gross Block
b) Less Depreciation
c) Net Block
d) Work In Progress
5632.90
180.06
5452.84
00
9514.47
499.17
9015.29
224.31
Total 5452.84 9239.61
2) Investments 3.17 53.75
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CURRENT ASSETS LOANS ADVANCES
A) Inventaries
B) Sendry Debtors
C) Cash and Bank Balance
D) Other current Assets
E) Loans and Advances
Total
Less Current Liabilities and Provisions
a) Current Liabilities
b) Provisions
Total
3334.40
338.44
263.59
147.75
510.36
4594.56
2443.44
37.09
2480.53
6114.67
402.69
882.96
129.23
530.45
8060.02
3671.46
155.82
3827.28
Net Current Assets 2114.02 4232.73
4)MISC. ASSETS 74.28 129.93
5) TOTAL ASSETS 7644.33 13656.03
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